UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2023
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-41476
Treasure
Global Inc
(Exact name of registrant as specified in its charter)
Delaware | | 36-4965082 |
(State or other jurisdiction of
incorporation
or organization) | | (I.R.S. Employer
Identification No.) |
276 5th Avenue, Suite 704 #739,
New York, New York 10001
+6012 643 7688
(Address, including zip code, of registrant’s
principal executive offices and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | | Trading Symbol | | Name of each exchange on which
registered |
Common Stock, par value $0.00001 per share | | TGL | | The Nasdaq Stock Market LLC |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes: ☐ No: ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes: ☐
No: ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐
Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company, in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging Growth Company | ☒ | | |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes: ☐ No: ☒
The aggregate market value of the Registrant’s common stock,
held by non-affiliates of the Registrant as of December 30, 2022 (which is the last business day of Registrant’s most recently completed
second fiscal quarter) based upon the reported closing price of $1.71 on The Nasdaq Capital Market on that date, was approximately $10.7
million.
The number of shares outstanding of the Registrant’s common stock,
par value $0.00001 per share, on September 25, 2023 was 20,317,579.
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual
Report”) contains “forward-looking statements.” Forward-looking statements reflect the current view about future
events. When used in this Annual Report, the words “anticipate,” “believe,” “estimate,” “expect,”
“future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate
to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in
this Annual Report relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking
statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because
forward–looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances
that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They
are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying
on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking
statements include, without limitation:
| ● | Our
ability to effectively operate our business segments; |
| ● | Our
ability to manage our research, development, expansion, growth and operating expenses; |
| ● | Our
ability to evaluate and measure our business, prospects and performance metrics; |
| ● | Our
ability to compete, directly and indirectly, and succeed in a highly competitive and evolving industry; |
| ● | Our
ability to respond and adapt to changes in technology and customer behavior; |
| ● | Our
ability to protect our intellectual property and to develop, maintain and enhance a strong brand; and; |
| ● | Other
factors (including the risks contained in the section of this Annual Report entitled “Risk Factors”) relating to our industry,
our operations and results of operations. |
Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results,
levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform these statements to actual results.
PRESENTATION OF INFORMATION
Except as otherwise indicated by the context,
references in this Annual Report to the “Company,” “TGL,” the “registrant,” “we,”
“our,” or “us” in this Annual Report mean Treasure Global Inc. and its subsidiaries, which include the collective
operations of Treasure Global Inc and its consolidated subsidiaries.
This Annual Report includes our audited consolidated financial statements
as of and for the fiscal years ended June 30, 2023 and 2022. These financial statements have been prepared in accordance with generally
accepted accounting principles in the United States (“U.S. GAAP”). All financial information in this Annual Report is presented
in U.S. dollars, unless otherwise indicated, and should be read in conjunction with our audited consolidated financial statements and
the notes thereto included in this Annual Report.
SUMMARY OF RISK FACTORS
Our business is subject to a number of
risks. You should be aware of these risks before making an investment decision. These risks are discussed more fully in Item 1A:
Risk Factors in this Annual Report. These risks include, among others, that:
| ● | There is substantial doubt about our ability to continue as a going concern; |
|
● |
We have a limited operating history in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful; |
|
● |
If we fail to raise capital when needed it will have a material adverse effect on the Company’s business, financial condition and results of operations; |
|
● |
None of our material contracts are long term and if not renewed could have a material adverse effect on our business; |
|
● |
We rely on email, internet search engines and application marketplaces to drive traffic to our ZCITY platform, certain providers of which offer products and services that compete directly with our products. If links to our applications and website are not displayed prominently, traffic to our ZCITY platform could decline and our business would be adversely affected; |
|
● |
The ecommerce market is highly competitive and if the Company does not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive basis our business could be adversely affected; |
|
● |
The market for our ZCITY platform is new and unproven; |
|
● |
If we are unable to expand our systems or develop or acquire technologies to accommodate increased volume or an increased variety of operating systems, networks and devices broadly used in the marketplace our ZCITY platform could be impaired; |
|
● |
As we increase our reliance on cloud-based applications and platforms to operate and deliver our products and services, any disruption or interference with these platforms could adversely affect our financial condition and results of operations; |
|
● |
The Company’s failure to successfully market its ZCITY platform could result in adverse financial consequences; |
|
● |
The Company may not be able to successfully develop and promote new products or services which could result in adverse financial consequences; |
|
● |
A decline in the demand for goods and services of the merchants included in the ZCITY platform could result in adverse financial consequences; |
|
● |
The effective operation of the Company’s ZCITY platform is dependent on technical infrastructure and certain third-party service providers; |
|
● |
There is no assurance that the Company will be profitable; |
|
● |
Illegal use of our ZCITY platform could result in adverse consequences to the Company; |
|
● |
Malaysia is experiencing substantial inflationary pressures which may prompt the governments to take action to control the growth of the economy and inflation that could lead to a significant decrease in our profitability; |
|
● |
The economy of Malaysia in general might not grow as quickly as expected, which could adversely affect our revenues and business prospects; |
|
● |
Fluctuations in exchange rates in the Malaysian Ringgit could adversely affect our business and the value of our securities; |
|
● |
Regulation of gift cards or “E-vouchers” could have adverse consequences on our business; |
|
● |
Litigation is costly and time consuming and could have a material adverse effect our business, results or operations and reputation; |
|
● |
Our financial statements have been prepared on a going-concern basis and our continued operations are in doubt; |
|
● |
We face potential liability and expense for legal claims based on the content on our Platform; |
|
● |
Our intellectual property rights may be inadequate to protect us against protect us others claiming violations of their proprietary rights and the cost of enforcement could be significant; |
|
● |
Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets; |
|
● |
Our failure to maintain effective internal controls over financial reporting could have an adverse impact on us; |
|
● |
We are an “emerging growth company” under the JOBS Act and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors; |
|
● |
The elimination of personal liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors, officers and employees may result in substantial expenses; |
|
● |
We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock. |
PART I
Item 1.
Business
Our Mission
Our mission is to bring together the worlds of
online e-commerce and offline physical retailers; widening consumer choice and rewarding loyalty, while sustaining and enhancing our earning
potential.
Our Company
We have created an innovative online-to-offline
(“O2O”) e-commerce platform business model offering consumers and merchants instant rebates and affiliate cashback programs,
while providing a seamless e-payment solution with rebates in both e-commerce (i.e., online) and physical retailers/merchant (i.e., offline)
settings.
Our proprietary product is an internet application
(or “App”) branded “ZCITY App,” which was developed through our wholly owned subsidiary, ZCity Sdn. Bhd. (formerly
known as Gem Reward Sdn. Bhd, name change effected on July 20, 2023) (“ZCITY”). The ZCITY App was successfully launched in
Malaysia in June 2020. ZCITY is equipped with the know-how and expertise to develop additional/add-on technology-based products and services
to complement the ZCITY App, thereby growing its reach and user base.
Through simplifying a user’s e-payment gateway
experience, as well as by providing great deals, rewards and promotions with every use, we aim to make the ZCITY App Malaysia’s
top reward and payment gateway platform. Our longer-term goal is for the ZCITY App and its ever-developing technology to become one of
the most well-known commercialized applications more broadly in Southeast Asia and Japan.
As of September 25, 2023, we had 2,642,404 registered users and 2,025 registered merchants.
Corporate Structure
Treasure
Global Inc is a Delaware corporation that was incorporated on March 20, 2020. We issued 10,000,000 shares to Kok Pin
“Darren” Tan, our founder and former Chief Executive Officer on July 1, 2020, who as a result became our sole
shareholder.
ZCity Sdn. Bhd. (formerly known as Gem Reward
Sdn. Bhd, name change effected on July 20, 2023), a Malaysia private limited company was incorporated on June 6, 2017. Prior to the incorporation
of ZCITY, Kok Pin “Darren” Tan entered into a Beneficial Shareholding Agreement (“Beneficial Shareholding Agreement
1”) with two individuals, one of which is a vice president of the Company (the “Initial ZCITY Shareholders”), which
provided for the Initial Shareholders to hold the ZCITY shares issued to them in equal amounts and for the sole benefit of Kok Pin “Darren”
Tan and provided Kok Pin “Darren” Tan with control over the voting and disposition over such shares as well as control over
the issuance of additional ZCITY shares in consideration for equity in a company that had not been determined on the date of Beneficial
Shareholding Agreement 1. On November 10, 2020, Kok Pin “Darren” Tan instructed the Initial ZCITY Shareholders to issue one
million additional ZCITY shares to Chong Chan “Sam” Teo, currently our Chief Executive Officer, and as a result each Initial
ZCITY Shareholder and Chong Chan “Sam” Teo held one million shares of ZCITY. On November 10, 2020. Chong Chan “Sam”
Teo entered into a Beneficial Shareholding Agreement with Kok Pin “Darren” Tan with terms similar to Beneficial Shareholding
Agreement 1 (“Beneficial Shareholding Agreement 2” and together with the Beneficial Shareholding Agreement 1, the “Beneficial
Shareholding Agreements”). As a result of Kok Pin “Darren” Tan’s 100% ownership of our common stock and the Beneficial
Shareholding Agreements, TGL and ZCITY were both under the sole control of Kok Pin “Darren” Tan.
TGL and ZCITY were reorganized into a parent subsidiary
structure pursuant to a Share Swap Agreement, dated March 11, 2021, as amended on March 11, 2021 among TGL, the Initial ZCITY Shareholders
and Chong Chan “Sam” Teo (the “Share Swap Agreement”), in which TGL exchanged 321,585 shares of its common stock
(the “Swap Shares”) for all equity of ZCITY. Pursuant to the Share Swap Agreement, the purchase and sale of the Swap Shares
was completed on March 11, 2021, but the issuance of the Swap Shares did not occur until October 27, 2021 when TGL amended its certificate
of incorporation to increase the number of its authorized common stock to a number that was sufficient to issue the Swap Shares. As a
result of the Share Swap Agreement, (i) ZCITY became the 100% subsidiary of TGL and Kok Pin “Darren” Tan no longer had any
control over ZCITY’s ordinary shares; and (ii) Kok Pin “Darren” Tan, the Initial ZCITY Shareholders and Chong Chan “Sam”
Teo owned 100% of the TGL common stock (Darren Tan owning 97%). Subsequent to the date of the Share Swap Agreement, Kok Pin “Darren”
Tan transferred 9,529,002 of his 10,000,000 shares of TGL common stock to 16 individuals and entities and currently owns less than 5%
of our common stock.
We operate solely through our subsidiaries: (i)
ZCITY; (ii) AY Food Ventures Sdn Bhd; (iii) Morgan Global Sdn. Bhd; and (iv) Foodlink. ZCITY owns all intellectual property rights to
copyrightable, patentable, and other protectable intangible assets relating to our business, including trademarks.
Corporate Information
Our principal executive offices are located at
276 5th Avenue, Suite 704 #739, New York, New York 10001 and No.29, Jalan PPU 2A, Taman Perindustrian Pusat Bandar Puchong,
47100 Puchong, Selangor, Malaysia.
Business Developments
The following highlights recent material developments
in our business:
|
● |
In November 2022, we announced that we signed a Memorandum of Understanding with iPay88 Holding Sdn Bhd (“iPay88”), a leading payment company that offers e-commerce, retail, online banking, e-wallets solutions and more to its merchants in Southeast Asia, to become TGL’s exclusive payment gateway partner for ZCITY, as well as a partner for TGL’s digital food and beverage (“F&B”) management platform, TAZTE. |
|
● |
In January 2023, we announced that we signed a Memorandum of Understanding to discuss a new strategic partnership in Malaysia with Boost, a regional full spectrum fintech player. |
|
● |
In March 2023, we announced that our Board of Directors (“Board”) appointed Ho Yi Hui as a member of the Board effective on March 20, 2023. |
|
● |
In May 2023, we announced that we entered into a licensing agreement with Morganfield’s Holding Sdn Bhd (“Morganfield’s”), a restaurant chain specializing in comfort food and American-style barbecue, in which Morganfield’s granted TGL an exclusive worldwide license to grant sub-licensees to third parties to use Morganfield’s trademarks for the restaurant business. |
|
● |
In May 2023, we announced that we entered into an exclusive partnership with enogy, a health and wellness brand, to expand the range of products available on our e-commerce marketplace, Zstore, targeting the large and growing health and wellness industry. |
|
● |
In June 2023, we announced that we entered into a licensing agreement with Sigma Muhibah Sdn Bhd (“Abe Yus”), a fast-growing Malaysian group of F&B brands, in which Abe Yus granted TGL the exclusive worldwide right to grant sub-licensees to third parties to use Abe Yus’ trademarks for the F&B business chain, in line with our strategic plan to become a leading franchisor of F&B companies in Southeast Asia. |
|
|
|
|
● |
In July 2023, we announced that we signed a Memorandum of Understanding for a collaboration agreement with the Malaysia Retail Chain Association for TAZTE to become its exclusive partner as the recommended digital F&B management solution to its members in Malaysia. |
|
|
|
|
● |
In July 2023, we entered into a Collaboration Agreement (the “Collaboration Agreement”) with VCI Global Limited (NASDAQ: VCIG) (“VCI Global”), a multi-disciplinary consulting group focused on business and technology, in which VCI Global and us shall collaborate to develop an artificial intelligence (“AI”)-powered travel platform (“Platform”) which utilizes advanced technology, including high-tech and predictive technology, to assist its users in discovering the best places to visit, explore, dine and engage in various activities during their travel in Malaysia. |
|
● |
In July 2023, we announced that we will collaborate with Borderland Music Festival 2023 to provide the first cashless and ticketing platform-powered music festival in Malaysia. |
|
|
|
|
● |
In August 2023, we announced that we signed a letter of intent to form an e-commerce venture in Indonesia, PT Harmoni Bagi Dunia (“HBD”) with industry pioneers Ariadi Anaya and Budihardjo Iduansjah, in which we will hold a 70% major stake in HBD. |
Recent Developments
|
● |
In July 2023, we engaged WWC, P.C. to serve as our independent registered public accounting firm, effective July 3, 2023. |
|
|
|
|
● |
In August 2023, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) therein stating that for the 30 consecutive business day period between July 6, 2023 through August 16, 2023, the common stock of the Company had not maintained a minimum closing bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until February 13, 2024 (the “Compliance Period”), to regain compliance with the Bid Price Rule. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive trading days, unless extended by Nasdaq under Nasdaq Rule 5810(c)(3)(H), prior to February 13, 2024. The notice from Nasdaq has no immediate effect on the listing of the Company’s common stock and its common stock will continue to be listed on The Nasdaq Capital Market under the symbol “TGL.” The Company is currently evaluating its options for regaining compliance. There can be no assurance that the Company will regain compliance with the Bid Price Rule or maintain compliance with any of the other Nasdaq continued listing requirements. |
Market Opportunity
We expect that continued strong economic expansion,
robust population growth, rising level of urbanization, the emergence of the middle class and the increasing rate of adoption of mobile
technology provide market opportunities for our Company in Southeast Asia (“SEA”). SEA is a large economy and, as of 2022,
its gross domestic product (“GDP”) was US$3.66 trillion.1 In comparison, the respective GDP for both the European
Union (“EU”) and the United States (“US”) totaled EUR$15.8 trillion and US$25.5 trillion2 in 2022.
SEA has experienced rapid economic growth rates in recent years, far exceeding growth in major world economies such as Japan, the EU
and the US. According to the International Monetary Fund (“IMF”), Malaysia’s GDP growth averaged more than 4.5% from
2016 to 2019. However, it experienced a deficit of -5.5% in 2020 due to the COVID-19 pandemic. Nevertheless, it rebounded to 3.1% and
8.7% in 2021 and 2022 respectively, and it is expected to maintain an average annual growth rate of 4.5% for the next five years, including
2023.3 The GDP of Malaysia amounted to US$337 billion in 2020 and is projected to reach approximately US$500 billion by 2025.4
Malaysia registered a strong post-pandemic recovery in 2022. Its strong macroeconomic policy frameworks, including a track record of
fiscal prudence and a credible monetary policy framework, have served the country well.
SEA continues to enjoy robust population growth.
The United Nations Population Division estimates that the population of the SEA countries in 2000 was approximately 525 million people,
growing to 681 million in 2022. According to the World Bank, Malaysia had a population of approximately 33 million people in 2022 compared
to 23 million people in 2000.5
1 |
https://www.statista.com/statistics/796245/gdp-of-the-asean-countries/ |
2 |
https://www.statista.com/statistics/279447/gross-domestic-product-gdp-in-the-european-union-eu/ https://www.statista.com/statistics/263591/gross-domestic-product-gdp-of-the-united-states/ |
3 |
https://www.imf.org/en/News/Articles/2023/05/31/pr23191-malaysia-imf-executive-board-concludes-2023-article-iv-consultation-with-malaysia |
4 |
IMF Staff Report March 2021 |
5 |
https://www.worldometers.info/world-population/south-eastern-asia-population/ |
| https://data.worldbank.org/indicator/SP.POP.TOTL?locations=MY |
A high percentage of Malaysians have lived in
cities for the last decade and that percentage is increasing. Since 2011, Malaysia’s urbanization has increased from approximately
71.61% to approximately 77.7% in 2022.6 By comparison, in 2021 the urbanization rates for China, Vietnam and India were approximately
62.51%, 37% and 35%, respectively.7
Urbanization is highly correlated with the size
and growth of the middle class. Simply put, urbanization drives middle class consumption demand. According to the World Bank, Malaysia
is likely to transition from an upper-middle-income economy to a high-income economy between 2024 and 2028, a reflection of the country’s
economic transformation development trajectory over the past decades.8 In fact, Malaysia’s gross national income per
capita is at US$11,200 according to latest estimates, only US$1,335 short of the current threshold level that defines a high-income economy.9
And despite the ongoing effects from the COVID-19
pandemic, the Internet economy continues to boom in SEA. According to a Google Temasek e-Conomy SEA 2022 Report (the “Google Report”),
internet usage in the region increased with 20 million new users added in 2022 for a total of 460 million compared to 360 million in 2019
and 440 million in 2021. An additional 100 million internet users have come online in the last three years since 2020.10 In
year 2022, 94% of Malaysia’s population is now online, compared to approximately 62% in 2013.11 It is forecasted to continuously
increase between 2024 and 2028, totaling a growth of 0.4 percentage points. 81% and 80% of Malaysia and SEA’s internet users, respectively,
have made at least one purchase online. E-commerce, online media and food delivery adoption and usage surged with the total value of goods
and services sold via the Internet, or gross merchandise value (“GMV”), in SEA, expected to reach approximately US$200 billion
by year end 2022 according to the Google Report. In fact, according to the Google Report, the SEA Internet sector GMV is forecast to grow
to over US$360 billion by 2025 up from the $300 billion forecast in the Google, Temasek, Bain SEA Report 2022.12
Malaysia’s internet economy has grown from
$14 billion in 2020 to $21 billion in 2021 (47% growth) and is expected to grow to $35 billion in 2025.13
As consumers in these markets gradually shift
towards the online platform model, the total value of internet-based transactions has grown tremendously and is expected to keep doing
so. According to the Google Report, total the GMV of South Asia’s Internet economy is expected to skyrocket from US$174 billion
in 2021 to US$363 billion in 2025.
We believe that these ongoing positive economic and demographic trends
in SEA and South Asia propel demand for our e-commerce platform.
6 |
https://www.statista.com/statistics/455880/urbanization-in-malaysia/ |
7 |
https://www.statista.com/ |
8 |
https://www.worldbank.org/en/country/malaysia/overview#1 |
9 |
The World Bank Press Release dated March 16, 2021, https://www.worldbank.org/en/news/press-release/2021/03/16/aiminghighmalaysia |
10 |
https://services.google.com/fh/files/misc/e_conomy_sea_2022_report.pdf |
11 |
https://www.statista.com/statistics/975058/internet-penetration-rate-in-malaysia/ |
12 |
https://www.bain.com/globalassets/noindex/2021/e_conomy_sea_2021_report.pdf
https://services.google.com/fh/files/misc/e_conomy_sea_2022_report.pdf |
13 |
https://www.digitalnewsasia.com/digital-economy/e-conomy-sea-report-2021-malaysias-internet-economy-crosses-us21-bil |
About the ZCITY App
SEA consumers have access to a plethora of smart
ordering, delivery and “loyalty” websites and apps, but in our experience, SEA consumers very rarely receive personalized
deals based on their purchases and behavior.
The ZCITY App targets consumers through the provision
of personalized deals based on consumers’ purchase history, location and preferences. Our technology platform allows us to identify
the spending trends of our customers (the when, where, why, and how much). We are able to offer these personalized deals through the application
of our proprietary artificial intelligence (or “AI”) technology that scours the available database to identify and create
opportunities to extrapolate the greatest value from the data, analyze consumer behavior and roll out attractive rewards-based campaigns
for targeted audiences. We believe this AI technology is currently a unique market differentiator for the ZCITY App.
We operate our ZCITY App on the hashtag: “#RewardsOnRewards.”
We believe this branding demonstrates to users the ability to spend ZCITY App-based Reward Points (or “RP”) and “ZCITY
Cash Vouchers” with discount benefits at checkout. Additionally, users can use RP while they earn rewards from selected e-Wallet
or other payment methods.
ZCITY App users do not require any on-going credit
top-up or need to provide bank card number with their binding obligations. We have partnered with Malaysia’s leading payment gateway,
iPay88, for secure and convenient transactions. Users can use our secure platform and enjoy cashless shopping experiences with rebates
when they shop with e-commerce and retail merchants through trusted and leading e-wallet providers such as Touch’n Go eWallet, Boost
eWallet, GrabPay eWallet and credit card/online banking like the “FPX” (the Malaysian Financial Process Exchange) as well
as more traditional providers such as Visa and Mastercard.
Our ZCITY App also provides the following functions:
|
1. |
Registration and Account verification |
Users may register as a ZCITY App user
simply, using their mobile device. They can then verify their ZCITY App account by submitting a valid email address to receive new user
“ZCITY Newbie Rewards”.
|
2. |
Geo-location-based Homepage |
Based on the users’
location, nearby merchants and exclusive offers are selected and directed to them on their homepage for a smooth, user-friendly
interaction.
Our ZCITY App is affiliated with more
than five local services providers such as Shopee and Lazada. The ZCITY App allows users to enjoy more rewards when they navigate from the
ZCITY App to a partner’s website.
|
4. |
Bill Payment & Prepaid service |
Users can access and pay utility bills,
such as water, phone, internet and TV bills, while generating instant discounts and rewards points with each payment.
Users can purchase their preferred e-Vouchers
with instant discounts and rewards points with each checkout.
|
6. |
User Engagement through Gamification |
Users can earn daily rewards by playing
our ZCITY App minigame “Spin & Win” where they can earn further ZCITY RP, ZCITY e-Vouchers as well as monthly grand prizes.
ZCITY has collaborated with the Ministry
of Domestic Trade and Cost of Living (KPDN) for the launch of the ‘Payung Rahmah’ program (ZCITY RAHMAH Package). This program
offers a comprehensive package of living essential e-vouchers on the ZCITY app for items such as petrol, food, and bills. ZCITY users
will be able to purchase vouchers for these items at reduced prices, thereby assisting low-income Malaysians and helping to address this
societal challenge.
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8. |
TAZTE Smart F&B system |
ZCITY App offers a “Smart F&B”
system that provides a one stop solution and digitalization transformation for all registered Food and Beverage (“F&B”)
outlets located in Malaysia. It also allows merchants to easily record transactions with QR Digital Payment technology, set discounts
and execute RP redemptions and rewards online on the ZCITY App.
By utilizing our CRM analytics software
to attract and retain consumers through personalized promotions, we believe that data-driven engagement can be more efficiently harnessed
to generate greater profitability.
Zstore is ZCITY App’s e-mall service
that offers group-buys and instant rebate to users with embedded AI and big data analytics to provide an express shopping experience.
The functionality and benefit of users to use the Zstore can be summarized within the chart below:
Set out below is an illustration of some of our
key partnerships by category:
Retail
Merchant Agreements. We have retail merchant agreements with Morganfield’s Holdings Sdn. Bhd, and the Alley which together
own more than 100 offline food and beverage franchises in Malaysia. Each of these retail merchants have signed our standard retail merchant
agreement which allow merchants to sell their products on the ZCITY App for which we receive a commission ranging from 1% to 10% depending
on the category of goods or services being purchased on the ZCITY App. These agreements also provide that each party may use the intellectual
property marks of the other party without charge. These agreements may be terminated by either party with 30 days’ notice. On June
6, 2023, TGL entered into a licensing agreement with the fast-growing Malaysian F&B brand, Abe Yus. This agreement grants TGL the
exclusive worldwide right to sublicense third parties to use Abe Yus’ trademarks for their F&B business chain. Serving as the
master franchisor, TGL will oversee brand loyalty and raw material supply. Additionally, all Abe Yus F&B outlets will be required
to adopt TAZTE, TGL’s digital F&B management system, across all their operations and generating more revenue through monthly
licensing fees, start-up fees for new location and supply chain management.
Services
Partners Agreements. We have service provider agreements with Coup Marketing Asia Pacific Sdn. Bhd. D/B/A Pay’s Gift
and MOL Access Portal Sdn. Bhd. D/B/A Razer Gold in which Pay’s Gift and Razer Gold provide us with e-vouchers for use on the
ZCITY App that provide users with discounts on goods and services of many top multinational and lifestyle brands, including gas,
clothing, fast food, movie theaters and others. We pay the service partner for the cost of the e-voucher plus a service fee. These
contracts provide for the use by us of the trademarks of the service providers and may be terminated at any time with 30 days’
notice. ZCITY has also entered into an agreement with Apigate Sdn Bhd, a wholly-owned subsidiary of Axiata Digital, branded as Boost
Connect. This agreement was entered into on July 28, 2023, and commenced on the same date, July 28, 2023. It shall continue until
March 1, 2024. Apigate Sdn Bhd is a global digital monetization and customer growth platform ecosystem provider, which offers us the
services for the reselling of digital vouchers.
Local Strategic Partner Agreements.
We have local strategic partner agreements with iPay88. The agreements we enter into with these local strategic partners provide us with
payment gateways (i.e, online “checkout” portals) used to enter credit card information for payment of goods and services.
The iPay88 agreement was entered into on August
6, 2021 and provides our users with payment gateways that include credit card processing, online banking services from certain banks in
Malaysia and eWallet payment processing such as Touch’ N Go eWallet, Grabpay, ShopeePay, Boost eWallet etc for which iPay88 receives
a fee ranging from 1.0% to 1.6% of the processed transaction depending on the credit card used or if the transaction is online banking
or eWallet.
ZCity
Sdn Bhd (formerly known as Gem Reward Sdn Bhd), has entered into a business partner agreement with CIMB Bank to establish a payment gateway.
This agreement enables users to conveniently make payments using their CIMB Bank credit and debit cards. Additionally, users have the
added benefit of enjoying rewards for their spending at ZCITY through this partnership.
Local Demands Agreements. We
have local demand agreements with Digi Telecommunication Sdn. Bhd. (“Digi”) and ATX Distribution Sdn. Bhd. (“ATX”)
which provide ZCITY App users bill payment services.
The Digi agreement was entered on December 16, 2021 and provides our
users with bill payment services for all of its telecommunication products and services to postpaid subscribers. We receive a commission
from Digi of 0.5% for each transaction. ZCITY App users may also use Digi’s prepaid automatic internet payment service for which
we receive a commission from Digi of 2.5% for each reload. The Digi agreement may be terminated by either party with 30 days’ notice.
CelcomDigi kicked off full-scale integration of Digi & Celcom network in December 2022. This marks one of the largest telecommunications
network deployment projects in Malaysia.
The ATX agreement was entered into on November
8, 2021 whereby ATX and provides our users with bill payment services for many companies in Malaysia, including but not limited to, certain
utilities, telecommunication companies, insurance companies, entertainment companies and charities. We receive a commission on each transaction
from ATX at different rates depending on the company for which the bill is being paid. The ATX agreement may be terminated by either party
with 30 days’ notice.
The Company has both direct and indirect
relationships with merchants and service providers. In terms of the Company’s indirect relationships, through the service
partner’s agreement the Company is able to offer e-vouchers for leading brands including, among others, Shell, Lazada
FamilyMart and Watsons; while via the iPay88 agreement, the Company gains access to other e-wallet providers, such as Boost and
Grabpay. Additionally, through the Company’s agreement with ATX Distribution, it is able to gain access to bill payment
services provided by Malaysia’s telco service provider such as, among others, CelcomDigi, U Mobile, Astro and Air
Selangor.
Download ZCITY App
ZCITY App is free to download from the Google Play Store, Apple iOS
Store, and Huawei AppGallery.
ZCITY Apps’s Reward Points Program
Operating under the hashtag #RewardsOnRewards,
we believe the ZCITY App reward points program encourages users to sign up the app, as well
as increasing user engagement and spending on purchases/repeat purchases and engenders user loyalty.
Furthermore, we believe the simplicity of the
steps to obtaining Reward Points (or “RP”) is an attractive incentive to user participation in that participants receive:
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200 RP for registration as a new user; |
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100 RP for referral of a new user; |
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Conversion of Malaysian ringgit spent into RP; |
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50% RP of every user paid amount; and |
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25% RP of every referred user paid amount as a result of the referral. |
The key objectives of our RP are:
| ○ | RP are offered to users
for increased social engagement. |
| ○ | RP incentivizes users
with every MYR spent in order to increase the spending potential and to build users loyalty. |
| ○ | Drives loyalty and greater
customer engagement. Every new user onboarded will get 200 RP as welcoming gift. |
| ○ | Rewards users with RP
when they refer a new user. |
Offline Merchant
When using our ZCITY App to make payment to a
registered physical merchant, the system will automatically calculate the amount of RP to deduct. The deducted RP amount is based on the
percentage of profit sharing as with the merchant and the available RP of the user.
Online Merchant
When using our ZCITY App to pay utility bills
or purchase any e-vouchers, our system shows the maximum RP deduction allowed and the user determines the amount of discount deducted
subject to maximum deductions described below and the number of RP owned by such user.
Different features have different maximum deduction
amounts. For example, for bill payments, the maximum deduction is up to 3% of the bill amount. For e-vouchers, the maximum deduction is
up to 5% of the voucher amount.
In order to increase the spending power of the
user, our ZCITY App RP program will credit RP to the user for all MYR paid.
Merchant Facing Business
At present, our ZCITY merchants are concentrated
in the F&B and lifestyle sectors. Moving forward, we plan to expand our product/service offering to include grocery stores, convenience
stores, “micro-SME” (“small to medium size enterprises”) loan programs, affiliate programs
and advertising agencies.
We believe that ZCITY’s TAZTE Smart F&B
System, launched in the fourth quarter of 2022, provides merchants with a one-stop automated solution to digitalize their business. It
offers an innovative and integrated technology ecosystem that addresses and personalizes each merchant’s technological needs and
aims to be at the forefront of creating a smart consumer experience, thereby eliminating conventional and outdated standalone point of
sale (or “POS”) systems.
TAZTE allows merchants to effortlessly record
transactions with online payment or QR digital payment technology, set discounts and execute RP redemptions and rewards online, all via
our ZCITY App. It utilizes ZCITY App’s CRM analytics software to attract and retain consumers through personalized, data-driven
engagement to generate greater profitability.
TAZTE Smart F&B System also features a ‘Deviceless
Queue System’ that reduces staff headcount and a private domain delivery service that will allow merchants access to multiple dedicated
delivery partners to ensure outstanding delivery service to consumers.
Licensing Agreements
Abe Yus
On June 6, 2023, AY Food Ventures Sdn Bhd (“AYFV”),
one of our wholly owned subsidiaries entered into a licensing agreement with Sigma Muhibah Sdn Bhd, a food & beverage company, in
which Abe Yus granted AYFV the exclusive worldwide right to grant sub-licensees to any third parties to use Abe Yus’ trademarks
for its food & beverage business chain (the “Abe Yus Licensing Agreement”). As the master franchisor, AYFV will manage
brand loyalty and raw material supply. Under the Abe Yus Licensing Agreement, all the Abe Yus F&B outlets will be obligated to adopt
TAZTE, our digital F&B management system, across all our businesses.
Morganfield’s
On May 1, 2023, through our subsidiary, Morgan
Global Sdn. Bhd. and Morganfield’s Holdings Sdn. Bhd., a restaurant chain specializing in comfort food and American-style barbecue,
entered into a Worldwide Master License Agreement (the “Morganfield’s License Agreement”), in which Morganfield’s
granted us an exclusive worldwide license to grant sub-licensees to third parties to use Morganfield’s trademarks for the restaurant
business. Pursuant to the Morganfield’s License Agreement, Morganfield’s will also adopt our digital food & beverage management
system, TAZTE, in its nine franchisees in Malaysia, China and Singapore, accelerating the rollout of TAZTE in the region.
The term of the Morganfield’s License Agreement
is for a period of five years, from May 1, 2023 to May 1, 2028, and will automatically renew for another five years upon expiration of
the initial term unless the Morganfield’s License Agreement is terminated. We will be entitled the right to collect payment of the
total monthly collections from our sub-licensees, namely current licensees and the newly-appointed sub-licensees provided that we pay
to Morganfield’s the monthly management fees, the amount of which will range depending on our total monthly collection from our
sublicensees in any given period, with a minimum monthly payment of RM 90,000 in year 1, RM 100,000 in year 2, RM 110,000 in year 3, RM
120,000 in year 4 and RM 130,000 in year 5.
Foodlink
As we became closer to the F&B industry and
increased our understanding, we saw a significant opportunity that would not only support the distribution of TAZTE, but establish several
new revenue streams for us. Our strategic plan is to establish synergies with our technology solutions by becoming a master licensor of
F&B companies in Southeast Asia. We will adopt TAZTE into new restaurants, while also receiving revenue from monthly licensing fees
and start-up fees with little barrier to entry.
Under the subsidiary named “Foodlink”
that TGL has established to house F&B master franchisor activity, the subsidiary will manage all brand royalties and related IP through
lease, ownership or JV agreements; and provide F&B consulting including market & product optimization as well as supply chain monetization.
TAZTE Smart F&B System shall be adopted in Morgan Global and AY Food Venture licensee holder.
Marketing Strategy - Consumer
With the number of available apps for download
from the world’s leading app stores totaling over four million, we believe that structured and innovative user marketing strategy
is the only way to stand out in today’s app market. Aside from focusing on app development and building our app features properly,
we believe we need to get our app featured on the leading platforms to most successfully extend our reach and user base.
We believe that our ZCITY App marketing strategy
covers the user from when they first learn about our ZCITY App, to when they become a regular repeat user. The marketing strategy for
the ZCITY App involves defining our target audience, learning how best to reach them, how best to communicate with them, and analyzing
their “in-app” behavior to make continuous AI driven improvements as users move through the recruitment funnel.
Ultimately, the goal of our ZCITY App marketing
strategy is to acquire users that will not only drive repeat engagement, but will also become loyal advocates for the ZCITY App.
At the initial launch of the ZCITY App in June
2020, we combined both online and offline strategies in branding and marketing, which we believed would effectively communicate our objectives,
reaching a prospective target audience and turning that target audience into users of our ZCITY App.
Other than just user experience and features offered
in the app itself, we believe consumers are choosing brands whose messaging, marketing and values go beyond the product, and have a potentially
deeper meaning to the user. For example, they may consider brand trustworthiness and identity to be major influences on their market decisions.
As a result, we have focused on building brand loyalty to drive on going marketing success, increase repeat users and attain greater market
share.
In this regard, we have chosen to adapt various
marketing strategies, such as re-targeting users and enticing current users to use our app on multiple occasions, by providing what users
look for when they choose our app in order to increase engagement and retention. The diagram below reflects the strategies we engage in
to promote marketing success and avoid missed opportunities.
We adopt a multi-pronged approach to user outreach
through outdoor digital billboards, radio commercials, third party editorials and advertorials, social media postings on platforms such
as Facebook, Instagram, TikTok, YouTube, as well as the targeting of users through Google ads and direct email marketing to encourage
downloads and promote various campaigns.
Since the outbreak of the COVID-19 pandemic, we
have been very focused on reaching our target audience through digital media due to movement restrictions and retail closures. Advertisements
especially on social media have become more routine.
Social media-based advertising can be very targeted,
helping to convert new users into repeat users and building brand loyalty. We reach potential users based on criteria, including, among
others, job title, interests, marital status, and recent locations. We believe that it is much easier to measure and optimize social media
campaigns while they are active. If an advertisement isn’t producing the expected results, we can suspend the campaign or reallocate
funds on demand.
Another key media vehicle that we utilize is Universal
App Campaign (or “UAC”) by Google. UAC helps promote our ZCITY App across Google’s
largest properties including Google Search, Google Play Store, YouTube, and the Google Display
Network. It combines information Google has on users’ tendencies and perceived intents outside of the app (such as what they have
searched for, what other apps they have downloaded and what they watched on YouTube) with advertisers’ information on user actions
in the app.
UAC then
uses machine learning technology to make decisions for each ad by analyzing potential data signal combinations in real-time, including
the platform where users are most likely to engage with our ad (such as YouTube or Gmail), the right ad format (whether video, text, or
combination of the two) and keywords that will perform best for our marketing goals.
In addition,
in order to obtain more accurate data for analysis, AppsFlyer SDK is installed in our ZCITY App, where it provides conversion data of
user acquisition and retention campaigns. Through AppsFlyer SDK, we can monitor digital media activities to optimize our marketing budget.
The data can be utilized and turned into actionable insights (to run campaigns and promotions
which users are more favorable to) that will share our strategic and tactical business decisions, while boosting the ZCITY App
brand presence.
Marketing Strategy - Merchants “6Cs”
Strategy
In order to roll out our system, we plan to implement
our 6Cs marketing strategy: clients, convenience, competition, consistency with creative content, corporate social responsibilities and
credibility.
Clients (Soon-to-be F&B Owners). We
have forecast potential merchants by category, which will enable us to create a marketing plan that will attract them by aligning our
promotional content with their business interests and ideals. We will initiate advertisements that connect with their preferences and
generate brand loyalty. We have developed “The PILOT” program where we plan offer prospective merchant F&B owners a free
TAZTE Smart F&B system to facilitate their O2O business.
Convenience. We plan to demonstrate the
convenience provided by our ZCITY App by launching a digitalization initiative which can get a merchant up and running on our platform
within 24 hours. We believe this strategy emphasizes the ease of onboarding potential merchants and the potential positive transformation
of their business in the shortest amount of time.
Competition. To further differentiate our
system from our competitors, we expect to identify, compare and discover issues within their business model of operations against our
own business model. The “SWITCH 180” program is where we plan to offer F&B owners not only a free TAZTE Smart F&B
system, but we will also offer additional support such as artificial intelligence inventory management system and discount vouchers.
Consistency with Creative Content. We plan
to maintain a consistent brand image across all our current marketing approaches with creative and innovative content. We strive to make
our brand recognizable to stand out among competitors to increase brand awareness and recognition.
Corporate Social Responsibilities. We expect
to integrate social and environmental concerns in our business operations to gain positive publicity and recognition and greater market
exposure. For example, our “Love Delivery” program under TAZTE will allow consumers to donate food through our merchant family
to charitable establishments such as orphanages and senior centers and similar charitable organizations. Our “Green Oil” program
will allow our merchants to contribute to zero pollution by recycling used cooking oil with one of our strategic partners.
Credibility. We expect to prove our credibility
by presenting our expertise to potential merchants who are seeking alternative business strategies in the ever-expanding technological
age. We believe that promoting a credible and reliable system for merchants will increase referrals and positive reviews. Our “TAZTE
Cares <3” program offers F&B owners free business operations “health checks” and offers troubleshooting solutions
by introducing TAZTE Smart F&B System into their business.
Revenue Model
ZCITY’s revenues are generated from a diversified
mix of:
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e-commerce activities for users; |
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services to merchants to help them grow their businesses; and |
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membership subscription fees. |
The revenue streams consist of “Consumer
Facing” revenues and “Merchant Facing” revenues.
The revenue streams can be further categorized
as following: (1) product and loyalty program revenue, (2) transaction revenue, and (3) agent subscription revenue. Please see “Management’s
Discussion and Analysis ̶ Revenue Recognition.”
Our Competitive Strengths
Powerful, Unique and Integrated App. We
have designed an application – the ZCITY App – which serves both consumers and merchants in ways that concurrently maximize
value creation and enhance the shopping experience. Furthermore, through the application of our proprietary developed AI technology, we
can offer consumers a more personalized and targeted rewards offering/experience.
Unique Loyalty Program. Operating under
our hashtag #RewardsOnRewards, we believe our RP program increases user engagement and loyalty. Through consumer redemption and platform
issuance of RP, we believe our system is advantageous to both consumers and merchants.
Attractive Markets. We currently operate
in Malaysia, which according to the IMF is expected to average annual growth rate of 4.5% GDP growth over the next five years.14
See Part I, Item 1.“Business—Market Opportunity.”
As we scale our operations, we intend to expand
to other countries in Southeast Asia, which possesses solid economic fundamentals, fast growing middle classes, favorable demographic
trends and accelerating adoption of mobile technology.
Experienced Management Team. Our executives
and directors combine decades of on-the-ground local e-commerce operations and social media marketing experience, as well as professional
expertise in the global finance field.
Our Growth Strategy
Our main goal is focused on the recruitment of
new consumers and the registration of as many TAZTE merchants as possible in the most efficient way in the shortest amount of time. We
believe that this approach establishes a cycle where more consumers lead to more merchants and more merchants lead to more consumers.
External partnerships play an important part in our business, as we will continue sourcing more delivery partners to offer our merchants
greater flexibility.
Consumer Growth. We strive to provide consumers
with a smarter shopping experience from ordering to receiving goods and services as one seamless process. Our marketing efforts will focus
on attracting consumers by awarding RP upon the execution of successful transactions (where they can redeem instant rebates).
Merchant Growth. We believe that our TAZTE
program is an example of an O2O platform focusing on transforming traditional ways of operating F&B business with digitalized smart
ecosystems which better streamline merchant business operations and directly contribute to higher revenues. We feel TAZTE has the potential
for our ZCITY App to pioneer a generation of technologically astute “Smart Merchants,” effectively encouraging more merchants
to join the technological trend. Apart from the technological advantages, merchants would be able to gain access to a significant consumer
database of nearly one million registered users currently for their own brand marketing.
Partner Growth. We are continuously enhancing
the ZCITY App through adding further strategic partnerships. We believe that collaborations will enable merchants and consumers to have
more options to choose from and the delivery speed and rates related to transparency will benefit all parties.
Expansion Growth. With our proven systems
and by leveraging our large network, leading technology, operational excellence, and product expertise, we expect the ZCITY App to launch
and scale our expansion plans to neighboring countries such as Indonesia, Thailand, and Japan, by partnering with or acquiring local establishments.
Acquisition Growth. In order to complement
our organic growth strategy, we will continue to evaluate investment and acquisition opportunities that will enable us to become market
leaders. Our anticipated investments and acquisitions of other e-commerce platforms in different verticals are expected to expand our
service offerings and attract new consumers and merchants. We expect negotiations with acquisition targets in the e-Commerce industries.
Furthermore, we would expect to finance such acquisitions through internal and potential financings from the stock market.
14 |
IMF: https://www.imf.org/en/News/Articles/2023/05/31/pr23191-malaysia-imf-executive-board-concludes-2023-article-iv-consultation-with-malaysia |
Strategic Partnerships
We have entered into agreements with various Malaysian
companies i.e.: Touch’nGo e-wallet marketing, iPay88, Boost eWallet, Digi and Grabpay eWallet to provide essential services to our
ZCITY App platform.
Strategic partnerships are vital to our strategy
and operations, as they enable the ZCITY App to offer more value-added services to both our consumers and merchants. Through our partnerships,
we intend to gain low-cost access to our partners’ users, where possible, to drive user conversion. Our marketing approach to acquire
strategic partners focuses on the benefits of brand awareness, stressing the ability to access a larger pool of consumers and clients
while reducing marketing expenses via joint marketing efforts like crossover marketing campaigns, digital marketing and affiliate programs.
Competitive Outlook
We compete with other online platforms and apps
for merchants, who can sell their products/services on other online shopping marketplaces and other food ordering platforms. We also compete
with other e-commerce platforms and apps, fashion and lifestyle retailers and restaurants for the attention of consumers. Consumers have
the choice of shopping with any online or offline retailer, large marketplaces or restaurant chain. We compete for consumers and merchants
based on our ability to deliver a personalized e-commerce experience with an easy-to-use mobile app, unique cross-business reward system,
instant rebate & cashback, and a trusted payment gateway which is both secure and convenient.
Within the Malaysian market, we believe the principal
competitors to the ZCITY App to include, but not limited to Fave and Shopback. We have set out below how we perceive the ZCITY App differentiates
our offering from these competitors in the Malaysian market both downstream (services provided to consumers) and upstream (services provided
to merchants).
The information with respect to Fave was obtained
from Fave’s website at https://help.myfave.com/hc/en-us/articles/115000181194-How-do-I-pay-with-FavePay-.
The information with respect to Shop Back was
obtained from Shop Back’s website at https://support.shopback.my/hc/en-us/articles/360037382453-Is-there-a-payment-method-not-eligible-for-Cashback-.
We expect to be able to successfully compete for
merchants based on our unique cross-business reward system, reward points module, instant rebate and cashback program,
upcoming new features, which we expect will build lasting customer loyalty for our merchants, as well as our personalized, data-driven
approach to customer engagement, both of which ensure that our success is aligned with that of our merchants.
Intellectual Property Matters
Our technology and ZCITY App are comprised of
copyrightable and/or patentable subject matter licensed by our Malaysian subsidiaries, ZCITY. Our intellectual property assets include
trade secrets associated with our software platform. We have successfully carried out development of our multilayer cloud-based software
platform based upon our reliance on third parties for payment and reward points deployment. As a result, we can monetize our software
by making it available in locations such as the Apple iOS Store, Google Play Store, Huawei AppGallery and compatible with existing payment
systems depending on the country’s regulatory requirements. We are currently focusing on using our intellectual property in Malaysia
and plan to expand further into Southeast Asia as part of our strategy. The loss of all of these third-party payment facilitators could
not be easily replaced and therefore could materially affect our business and results of operations.
Trademarks.
ZCITY has filed one trademark application stylized as “” with the trademark offices of Malaysia. The name and mark, ZCITY
App and other trade names and service marks of ZCITY in this prospectus are our property.
Patents. ZCITY has filed one patent application
entitled “A Revenue Allocation System” with the Patents Registration Office of Malaysia.
We manage all our intellectual property matters
in Malaysia including the registration of patents, trademarks, trade names, and service marks in the name of ZCITY, our subsidiary in
Malaysia. While we have not delineated each of our trademarks, the foregoing constitutes our material trademarks. Without prejudice to
the generality of foregoing, ZCITY is, inter alia, the direct owner of the registered trademark “ZCITY” in connection with
artificial intelligence software, electronic payment services, loyalty programs, SaaS platforms, and other subsets of our business.
Information Technology Protection. All
of our software development professionals are required to sign and are bound by the IT Infrastructure, Security, Email, Intranet Usage
Policy Manual (the “IT Policy Manual”), which governs use of our hardware, software, code, source code, data, computational
data, screen data, analytics dashboards, data displayed on screens, emails, intranet and internet. This IT Policy Manual establishes standard
practices and rules for responsible, safe, and productive use of our intellectual property, information and assets and is expected to
ensure the protection of information and prevention of any misuse.
We have internally implemented the “Active
Directory and VPN” to manage access to our assets in order to prevent any intentional or unintentional leaks of sensitive data,
documentation or information, as well as to prevent users from installing irrelevant software or malware viruses.
Our ZCITY App’s server is hosted on the
AWScloud and is compliant with SOC2, which we believe securely manages our data across six aspects:
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Security – protects the system resources against unauthorized access. Apply security group rules as security control. Enabled AWS WAF rule for more protection. AWS WAF (Web Application Firewall) is a managed security service provided by Amazon Web Services (AWS) that helps protect web applications from various web-based attacks. It acts as a protective layer between your web applications and the internet, allowing you to control and monitor incoming traffic to your web applications. |
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Availability – makes sure the server accessibility meets the SLA. Regularly review and report on server availability metrics to track performance against SLA targets. Provide transparent reporting to stakeholders, including customers, about server uptime and downtime. Moreover, continuously monitor and analyze server performance data (AWS) to identify areas for improvement. Implement optimizations to enhance server availability and performance over time. |
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Processing integrity– data process monitoring couple with quality assurance procedures can help ensure processing integrity. |
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Confidentiality – data is encrypted during network transmission. Subscripted to the cloud flare service, which offers a range of services to protect websites, applications, and company data. |
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Privacy – data collection, use, retention,
disclosure and disposal of personal information in conformity.
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Backup – Enabled AWS Backup service. It helps you centralize and automate the backup of data across various AWS services and on-premises resources. AWS Backup is designed to be efficient, scalable, and reliable. |
We practice Disaster Recovery SOP to easily overcome
disaster events efficiently. We have in place a “Disaster Recovery” (“DR”) initiative, which we rely on the “AWS”
cloud facilities to ensure as described below:
The architecture diagram shows how “AWS”
cloud architect is powered by distributed servers and database services across multiple zones to ensure disaster recovery on deployment
across multiple data centers, once the Application Load Balancer (ALB) detects the primary unavailable then it will direct all traffic
to other in-service data centers.29
29 |
Disaster Recovery – First-in-class automated disaster recovery mechanism with multi-AZ support https://docs.aws.amazon.com/whitepapers/latest/disaster-recovery-workloads-on-aws/disaster-recovery-options-in-the-cloud.html |
The controls for restricting user access to our
system and data, include:
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User authorization |
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Maintaining the user access log |
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Periodic review user access |
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Revoking user access |
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Managing Privileged User access |
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Separation of Duties to reduce the risk of misuse of client code and assets |
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Change management, risk management and issue management are exercised as part of Management Reviews |
Litigation
From time to time, we may become involved in legal
proceedings arising in the ordinary course of our business. We believe that we do not have any pending or threatened litigation which,
individually or in the aggregate, would have a material adverse effect on our business, results of operations, financial condition, and/or
cash flows.
Properties
We lease and maintain our offices at located at
276 5th Avenue, Suite 704 #739, New York, New York 10001 and No.29, Jalan PPU 2A, Taman Perindustrian Pusat Bandar Puchong,
47100 Puchong, Selangor, Malaysia.
Human Capital Resources
As of June 30, 2023, we had a total of 103 full-time
employees and a total of [*] independent contractors and consultants. We engage consultants on an as-needed basis to supplement existing
staff. Since the onset of the COVID-19 pandemic, we have taken an integrated approach to helping our employees manage their work and personal
responsibilities, with a strong focus on employee well-being, health, and safety.
Our human capital resources objectives include,
as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based
and cash-based compensation awards, in order to increase stockholder value and the success of our Company by motivating such individuals
to perform to the best of their abilities and achieve our objectives.
Available Information
Our corporate website address is https://treasureglobal.co.
Our ZCITY website address is https://zcity.io. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, any amendments to those reports, and registration statements filed or furnished with the SEC, are available free of charge through
our website. We make these materials available through our website as soon as reasonably practicable after we electronically file such
materials with, or furnish such materials to, the SEC. The reports filed with the SEC by our executive officers and directors pursuant
to Section 16 under the Exchange Act are also made available, free of charge on our website, as soon as reasonably practicable after
copies of those filings are provided to us by those persons. These materials can be accessed through the “Investors” section
of our website. The information contained in, or that can be accessed through, our website is not part of this Annual Report on Form
10-K.
Item
1a. Risk Factors.
Investing in our common stock is highly speculative
and involves a significant degree of risk. Before you invest in our securities, you should give careful consideration to the following
risk factors, in addition to the other information included in this Annual Report on Form 10-K, including our financial statements and
related notes, before deciding whether to invest in our securities. The occurrence of any of the adverse developments described in the
following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that
case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our
Business
There is substantial doubt about our ability
to continue as a going concern.
We have incurred substantial operating losses since our inception.
For the year ended June 30, 2023, we had approximately $4.6 million cash on hand, an accumulated deficit of approximately $31.4 million
at June 30, 2023, a net loss of approximately $11.7 million for the year ended June 30, 2023, and approximately $9.6 million net cash
used by operating activities for the year ended June 30, 2023. The accompanying consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
We anticipate incurring additional losses until such time, if ever, that we will be able to effectively market our products.
Also,
we will seek to obtain additional capital through the sale of debt or equity financing or other arrangements to fund operations; however,
there can be no assurance that we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity
may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding
shares of common stock. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions
to stockholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.
Due to these factors, management believes that there is substantial doubt in our ability to continue as a going concern for twelve months
from the issuance of these consolidated financial statements.
If we have insufficient capital to operate our business under our current
business plan, we have contingency plans for our business that include, among other things, the delay of the introduction of new products
and a reduction in headcount which is expected to substantially reduce revenue growth and delay our profitability. There can be no assurance
that our implementation of these contingency plans will not have a material adverse effect on our business.
We have a limited operating history in an
evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a limited operating history on which to
base an evaluation of our business and prospects. We are subject to all the risks inherent in a small company seeking to develop, market
and distribute new services, particularly companies in evolving markets such as the internet, technology and payment systems. The likelihood
of our success must be considered, in light of the problems, expenses, difficulties, complications and delays frequently encountered in
connection with the development, introduction, marketing and distribution of new products and services in a competitive environment.
Such risks for us include, but are not limited
to, dependence on the success and acceptance of our services, the ability to attract and retain a suitable client base and the management
of growth. To address these risks, we must, among other things, generate increased demand, attract a sufficient clientele base, respond
to competitive developments, increase the “ZCITY” brand names’ visibility, successfully introduce new services, attract,
retain and motivate qualified personnel and upgrade and enhance our technologies to accommodate expanded service offerings. In view of
the rapidly evolving nature of our business and our limited operating history, we believe that period-to-period comparisons of our operating
results are not necessarily meaningful and should not be relied upon as an indication of future performance.
We are therefore subject to many of the risks
common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and
other resources and lack of revenues.
If we fail to raise capital when needed
it will have a material adverse effect on our business, financial condition and results of operations.
We have limited revenue-producing operations and
will require the proceeds from our recently concluded offering to execute our full business plan. We believe the proceeds from our previous
offering will be sufficient to cover our funding needs until part way through the first calendar quarter of 2024. Further, no assurance
can be given if additional capital is needed as to how much additional capital will be required or that additional financing can be obtained,
or if obtainable, that the terms will be satisfactory to us, or that such financing would not result in a substantial dilution of shareholder
interest. A failure to raise capital when needed would have a material adverse effect on our business, financial condition and results
of operations. In addition, debt and other equity financing may involve a pledge of assets and may be senior to interests of equity holders.
Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital or to pursue business opportunities, including
potential acquisitions. If adequate funds are not obtained, we may be required to reduce, curtail or discontinue operations.
None of our material contracts are long
term and if not renewed could have a material adverse effect on our business.
We have entered into material contracts with a
number of companies that directly or indirectly provide the goods and services that appear on our ZCITY App. The majority of these contracts
can be terminated by any party with 30 days’ notice. The contract with iPay88 (the “iPay88 Agreement”), which provides
the payment gateway for many of the brands that can be accessed through the ZCITY App, has no termination clause which means that iPay88
could terminate the iPay88 Agreement without any notice. If one or more of these contracts were not renewed or were terminated and
we were not able to enter into agreements with others that could replace these services, the ZCITY App could lose material features and
in turn we could find it harder to maintain and grow our user base, which would have a material adverse effect on our business. For a
description of these material contracts See “Business—About ZCITY App.”
We rely on email, internet search engines
and application marketplaces to drive traffic to our ZCITY App, certain providers of which offer products and services that compete directly
with our products. If links to our applications and website are not displayed prominently, traffic to our ZCITY App could decline and
our business would be adversely affected.
Email continues to be a verification source of
organic traffic for us. If email providers or internet service providers implement new or more restrictive email or content delivery or
accessibility policies, including with respect to net neutrality, it may become more difficult to deliver emails to our users or for user
verification process. For example, certain email providers, including Google, categorize our emails as “promotional,” and
these emails are directed to an alternate, and less readily accessible, section of a users’ inbox. If email providers materially
limit or halt the delivery of our emails, or if we fail to deliver emails to users in a manner compatible with email providers’
email handling or authentication technologies, our ability to contact users through email could be significantly restricted. In addition,
if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, marketing
campaigns and business updates could be substantially harmed.
We rely heavily on Internet search engines, such
as Google, to drive traffic to our ZCITY App through their unpaid search results and on application marketplaces to drive downloads of
our applications. Although search results and application marketplaces have allowed us to attract a large audience with low organic traffic
acquisition costs to date, if they fail to drive sufficient traffic to our ZCITY App, we may need to increase our marketing spend to acquire
additional traffic. We cannot assure you that the value we ultimately derive from any such additional traffic would exceed the cost of
acquisition, and any increase in marketing expense may in turn harm our operating results.
The amount of traffic we attract from search engines
is due in large part to how and where information from and links to our website are displayed on search engine result pages. The display,
including rankings, of unpaid search results can be affected by a number of factors, many of which are not in our direct control, and
may change frequently. Search engines have made changes in the past to their ranking algorithms, methodologies and design layouts that
may have reduced the prominence of links to our ZCITY App and negatively impacted our traffic, and we expect they will continue to make
such changes from time to time in the future. Similarly, marketplace operators may make changes to their marketplaces that make access
to our products more difficult. For example, our applications may receive unfavorable treatment compared to the promotion and placement
of competing applications, such as the order in which they appear within marketplaces.
We may not know how or otherwise be in a position
to influence search results or our treatment in application marketplaces. With respect to search results in particular, even when search
engines announce the details of their methodologies, their parameters may change from time to time, be poorly defined or be inconsistently
interpreted. For example, Google previously announced that the rankings of sites showing certain types of app install interstitials could
be penalized on its mobile search results pages. While we believe the type of interstitial we currently use is not being penalized, we
cannot guarantee that Google will not unexpectedly penalize our app install interstitials, causing links to our mobile website to be featured
less prominently in Google’s mobile search results and harming traffic to our ZCITY App as a result.
In some instances, search engine companies and
application marketplaces may change their displays or rankings in order to promote their own competing products or services or the products
or services of one or more of our competitors. For example, Google has integrated its local product offering with certain of its products,
including search and maps. The resulting promotion of Google’s own competing products in its web search results has negatively impacted
the search ranking of our website. Because Google in particular is the most significant source of traffic to our website, accounting for
a substantial portion of the visits to our website, our success depends on our ability to maintain a prominent presence in search results
for queries regarding local businesses on Google. As a result, Google’s promotion of its own competing products, or similar actions
by Google in the future that have the effect of reducing our prominence or ranking on its search results, could have a substantial negative
effect on our business and results of operations.
The ecommerce market is highly competitive
and if we do not have sufficient resources to maintain research and development, marketing, sales and client support efforts on a competitive
basis our business could be adversely affected.
The internet-based ecommerce business is highly
competitive and we compete with several different types of companies that offer some form of user-vendor connection experience, as well
as marketing data companies. Certain of these competitors may have greater industry experience or financial and other resources than us.
To become and remain competitive, we will require
research and development, marketing, sales and client support. We may not have sufficient resources to maintain research and development,
marketing, sales and client support efforts on a competitive basis which could materially and adversely affect our business, financial
condition and results of operations. We intend to differentiate ourselves from competitors by developing a payments platform that allows
consumers and merchants to accept and use bonus points.
The market for consumer’s lifestyle is rapidly
evolving and intensely competitive, and we expect competition to intensify further in the future. There is no guarantee that any factors
that differentiate us from our competitors will give us a market advantage or continue to be a differentiating factor for us in the foreseeable
future. Competitive pressures created by our direct or indirect competitors could have a material adverse effect on our business, results
of operations and financial condition.
The market for our ZCITY App is new and
unproven.
We were founded in 2020 and ZCITY was founded
in 2017 and since our inception have been creating products for the developing and rapidly evolving market for API-based software platforms,
a market that is largely unproven and is subject to a number of inherent risks and uncertainties. We believe that our future success will
depend in large part on the growth, if any, in the market for software platforms that provide features and functionality to create the
entire lifestyle ecosystem. It is difficult to predict customer adoption and renewal rates, customer demand for our solutions, the size
and growth rate of the overall market that our ZCITY App addresses, the entry of competitive products or the success of existing competitive
products. Any expansion of the market our ZCITY App addresses depends upon a number of factors, including the cost, performance and perceived
value associated with such solutions. If the market our ZCITY App addresses does not achieve significant additional growth or there is
a reduction in demand for such solutions caused by a lack of customer acceptance, technological challenges, competing technologies and
products or decreases in corporate spending, it could have a material adverse effect on our business, results of operations and financial
condition.
If we are unable to expand our systems or
develop or acquire technologies to accommodate increased volume or an increased variety of operating systems, networks and devices broadly
used in the marketplace our ZCITY App could be impaired.
We seek to generate a high volume of traffic and
transactions through our technologies. Accordingly, the satisfactory performance, reliability and availability of our website and platform,
processing systems and network infrastructure are critical to our reputation and our ability to attract and retain large numbers of users
who transact sales on our platform through a variety of operating systems, networks and devices while maintaining adequate customer service
levels. Our revenues depend, in substantial way, on the volume of user transactions that are successfully completed. Any system interruptions
that result in the unavailability of our service or reduced customer activity would ultimately reduce the volume of transactions completed.
Interruptions of service may also diminish the attractiveness of our company and our services. Any substantial increase in the volume
of traffic on our ZCITY App, the number of transactions being conducted by customers or substantial increase in the variety of operating
systems, networks or devices that are broadly used in the market will require us to expand and upgrade our technology, transaction processing
systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases,
if any, in the use of the ZCITY App or timely expand and upgrade our systems and infrastructure to accommodate such increases or increases
in the variety of operating systems, networks or devices in a timely manner. Any failure to expand or upgrade our systems could have a
material adverse effect on our business, results of operations and financial condition.
We use internally developed systems to operate
our service and for transaction processing. We must continually enhance and improve these systems in order to accommodate the level of
use of our products and services and increase our security. Furthermore, in the future, we may add new features and functionality to our
services that would result in the need to develop or license additional technologies. Our inability to add new software and hardware to
develop and further upgrade our existing technology, transaction processing systems or network infrastructure to accommodate increased
traffic on our platforms or increased transaction volume through our processing systems or to accommodate new operating systems, networks
or devices broadly used in the marketplace or to provide new features or functionality may cause unanticipated system disruptions, slower
response times, degradation in levels of customer service, impaired quality of the user’s experience on our service, and delays
in reporting accurate financial information. There can be no assurance that we will be able in a timely manner to effectively upgrade
and expand our systems or to integrate smoothly any newly developed or purchased technologies with our existing systems. Any inability
to do so would have a material adverse effect on our business, results of operations and financial condition.
As we increase our reliance on cloud-based
applications and platforms to operate and deliver our products and services, any disruption or interference with these platforms could
adversely affect our financial condition and results of operations.
We rely on cloud-based applications and platforms
for critical business functions. We also are migrating a significant portion of our computing infrastructure to third party hosted cloud-based
computing platforms. If we are not able to complete this migration on our expected timeline, we could incur additional costs. Further,
these migrations can be risky and may cause disruptions to the availability of our products due to service outages, downtime or other
unforeseen issues that could increase our costs. We also may be subject to additional risk of cybersecurity breaches or other improper
access to our data or confidential information during or following migrations to cloud-based computing platforms. In addition, cloud computing
services may operate differently than anticipated when introduced or when new versions or enhancements are released. As we increase our
reliance on cloud-based computing services, our exposure to damage from service interruptions may increase. In the event any such issues
arise; it may be difficult for us to switch our operations from our primary cloud-based providers to alternative providers. Further, any
such transition could involve significant time and expense and could negatively impact our ability to deliver our products and services,
which could harm our financial condition and results of operations.
Our failure to successfully market our ZCITY
App could result in adverse financial consequences.
We believe that continuing to strengthen our ZCITY
App is critical to achieving our widespread acceptance, particularly in light of the competitive nature of our market. Promoting and positioning
our ZCITY App will depend largely on the success of our marketing efforts and our ability to provide high quality services. In order to
promote our ZCITY App, we will need to increase our marketing budget and otherwise increase our financial commitment to creating and maintaining
brand loyalty among users. There can be no assurance that ZCITY App promotion activities will yield increased revenues or that any such
revenues would offset the expenses incurred by us in building our ZCITY App. Further, there can be no assurance that any new users attracted
to us will conduct transactions over the ZCITY App on a regular basis. If we fail to promote and maintain our brand or incur substantial
expenses in an attempt to promote and maintain our brand or if our existing or future strategic relationships fail to promote the ZCITY
App or increase awareness, our business, results of operations and financial condition would be materially adversely affected.
We may not be able to successfully develop
and promote new products or services which could result in adverse financial consequences.
We plan to expand our operations by developing
and promoting new or complementary services, products or transaction formats or expanding the breadth and depth of services. There can
be no assurance that we will be able to expand our operations in a cost-effective or timely manner or that any such efforts will maintain
or increase overall market acceptance. Furthermore, any new business or service launched by us that is not favorably received by consumers
could damage our reputation and diminish the value of our brand. Expansion of our operations in this manner would also require significant
additional expenses and development, operations and other resources and would strain our management, financial and operational resources.
The lack of market acceptance of such services or our inability to generate satisfactory revenues from such expanded services to offset
their cost could have a material adverse effect on our business, results of operations and financial condition.
In addition, if we are unable to keep up with
changes in technology and new hardware, software and services offerings, for example, by providing the appropriate training to out account
managers, sales technology specialists, engineers and consultants to enable them to effectively sell and deliver such new offerings to
customers, our business, results of operations or financial condition could be adversely affected.
A decline in the demand for goods and services
of the merchants included in the ZCITY App could result in adverse financial consequences.
We expect to derive most of our revenues from
fees from successfully completed transactions on our consumer facing platforms. Our future revenues will depend upon continued demand
for the types of goods and services that are offered by the merchants that are included on such platforms. Any decline in demand for the
goods offered through our services as a result of changes in consumer trends could have a material adverse effect on our business, results
of operations and financial condition.
The effective operation of our platform
is dependent on technical infrastructure and certain third-party service providers.
Our ability to attract, retain and serve customers
is dependent upon the reliable performance of our ZCITY App and the underlying technical infrastructure. We may fail to effectively scale
and grow our technical infrastructure to accommodate these increased demands. In addition, our business will be reliant upon third party
partners such as financial service providers and cash-out providers, payment terminals and equipment providers. Any disruption or failure
in the services from third party partners used to facilitate our business could harm our business. Any financial or other difficulties
these partners face may adversely affect our business, and we exercise little control over these partners, which increases vulnerability
to problems with the services they provide.
There is no assurance that we will be profitable.
There is no assurance that we will earn profits
in the future or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the funds
required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations, we
may be required to reduce our sales and marketing efforts or forego certain business opportunities.
We could lose the right to the use of our
domain names.
We have registered domain names for our website
that we use in our business. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable
registration, or any other cause, we may be forced to market our products under a new domain name, which could cause us substantial harm,
or to incur significant expense in order to purchase rights to the domain name in question. In addition, our competitors and others could
attempt to capitalize on our brand recognition by using domain names similar to ours, especially in light of our expected expansion in
SEA countries and East Asia. Domain names similar to ours may be registered in the United States and elsewhere. We may be unable to prevent
third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or
our trademarks or service marks. Protecting and enforcing our rights in our domain names may require litigation, which could result in
substantial costs and diversion of management’s attention.
We may be required to expend resources to
protect ZCITY App information or we may be unable to launch our services.
From time to time, other companies may copy information
from our ZCITY App, through website scraping, robots or other means, and publish or aggregate it with other information for their own
benefit. We have no assurance other companies will not copy, publish or aggregate content from our ZCITY App in the future. When third
parties copy, publish or aggregate content from our ZCITY App, it makes them more competitive, and decreases the likelihood that consumers
will visit our website or use our mobile app to find the information they seek, which could negatively affect our business, results of
operations and financial condition. We may not be able to detect such third-party conduct in a timely manner and, even if we could, we
may not be able to prevent it. In some cases, particularly in the case of websites operating outside of the United States, our available
remedies may be inadequate to protect us against such practices. In addition, we may be required to expend significant financial or other
resources to successfully enforce our rights.
Breaches of our online commerce security
could occur and could have an adverse effect on our reputation.
A significant barrier to online commerce and communications
is the secure transmission of confidential information over public networks. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography and cybersecurity or other events or developments will not result in a compromise or breach
of the technology used by us to protect customer transaction data. If any such compromise of our security were to occur, it could have
a material adverse effect on our reputation and, therefore, on our business, results of operations and financial condition. Furthermore,
a party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of transactions conducted on the Internet and other online services and the privacy
of users may also inhibit the growth of the Internet and other online services generally, and the Web in particular, especially as a means
of conducting commercial transactions. To the extent that our activities involve the storage and transmission of proprietary information,
security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. There can be no assurance
that our security measures will prevent security breaches or that failure to prevent such security breaches will not have a material adverse
effect on our business, results of operations and financial condition.
We may not have the ability to manage our
growth.
We anticipate that significant expansion will
be required to address potential growth in our customer base and market opportunities. Our anticipated expansion is expected to place
a significant strain on our management, operational and financial resources. To manage any material growth of our operations and personnel,
we may be required to improve existing operational and financial systems, procedures and controls and to expand, train and manage our
employee base. There can be no assurance that our planned personnel, systems, procedures and controls will be adequate to support our
future operations, that management will be able to hire, train, retain, motivate and manage required personnel or that our management
will be able to successfully identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth
effectively, our business, prospects, financial condition and results of operations may be materially adversely affected.
We rely on the performance of highly skilled
personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.
We are, and will be, heavily dependent on the
skill, acumen and services of our management and other employees. Our future success depends on our continuing ability to attract, develop,
motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs
to attract them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability
to execute our business plan, and we may not be able to find adequate replacements. All of our officers and employees are at-will employees,
which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would
be extremely difficult to replace. We cannot ensure that we will be able to retain the services of any members of our senior management
or other key employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our
business could be harmed.
Illegal use of our ZCITY App could result
in adverse consequences to us.
Despite measures we will implement to detect and
prevent identify theft or other fraud, our ZCITY App remains susceptible to potentially illegal or improper uses. Despite measures we
will take to detect and lessen the risk of this kind of conduct, we cannot assure that these measures will succeed. Our business could
suffer if customers use the ZCITY App for illegal or improper purposes.
If merchants on our ZCITY App are operating illegally,
we could be subject to civil and criminal lawsuits, administrative action and prosecution for, among other things, money laundering or
for aiding and abetting violations of law. We would lose the revenues associated with these accounts and could be subject to material
penalties and fines, both of which would seriously harm our business.
We are subject to certain risks by virtue
of our international operations.
We operate and expand internationally. We expect
to expand our international operations significantly by accessing new markets abroad and expanding our offerings in new languages: not
less than all languages in SEA countries and Japan. Our platform is now available in English and several other languages. However, we
may have difficulty modifying our technology and content for use in non-English-speaking markets or fostering new communities in non-English-speaking
markets. Our ability to manage our business and conduct our operations internationally requires considerable management attention and
resources, and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages,
cultures, customs, legal systems, alternative dispute systems, regulatory systems and commercial infrastructures. Furthermore, in most
international markets, we would not be the first entrant, and our competitors may be better positioned than we are to succeed. Expanding
internationally may subject us to risks that we have either not faced before or increase our exposure to risks that we currently face,
including risks associated with:
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recruiting and retaining qualified, multi-lingual employees, including customer support personnel; |
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increased competition from local websites and guides and potential preferences by local populations for local providers; |
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compliance with applicable foreign laws and regulations, including different privacy, censorship and liability standards and regulations and different intellectual property laws; |
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providing solutions in different languages for different cultures, which may require that we modify our solutions and features to ensure that they are culturally relevant in different countries; |
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the enforceability of our intellectual property rights; |
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credit risk and higher levels of payment fraud; |
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compliance with anti-bribery laws; |
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currency exchange rate fluctuations; |
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foreign exchange controls that might prevent us from repatriating cash earned outside the United States; |
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political and economic instability in some countries; |
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double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate; and |
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higher costs of doing business internationally. |
We do not have liability business interruption,
litigation or natural disaster insurance.
We do not have any business liability, disruption
insurance or any other forms of insurance coverage for our operations in Malaysia because our business is still in planning and early
stage. Any potential liability, business interruption, litigation or natural disaster may result in our business incurring substantial
costs and the diversion of resources.
The economy of Malaysia in general might
not grow as quickly as expected, which could adversely affect our revenues and business prospects.
Our business and prospects depend on the continuing
development of the economy in Malaysia. We cannot assure you that the Malaysian economy will continue to grow at the same pace as in the
past. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of absolute certainty.
In the event that the Malaysian economy suffers, demand for the services and/or products of our wholly owned subsidiaries may diminish,
which would in turn result in decreased likelihood of profitability. This could in turn result in a substantial need for restructuring
of our business objectives and could result in a partial or entire loss of an investment in our Company.
We face the risk that changes in the policies
of the Malaysian government could have a significant impact upon the business we may be able to conduct in Malaysia and the profitability
of such business.
Policies of the Malaysian government can have
significant effects on the economic conditions of Malaysia. A change in policies by the Malaysian government could adversely affect our
interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on
currency conversion, imports or sources of supplies or the expropriation or nationalization of private enterprises. We cannot assure you
that the government will continue to pursue current policies or that such policies may not be significantly altered, especially in the
event of a change in leadership, social or political disruption, or other circumstances affecting Malaysia’s political, economic
and social environment.
We are subject to foreign exchange control
policies in Malaysia.
The ability of our subsidiaries to pay dividends
or make other payments to us may be restricted by the foreign exchange control policies in the countries where we operate. For example,
there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to
preserve its financial and economic stability. The foreign exchange policies are administered by the Foreign Exchange Administration,
an arm of Bank Negara Malaysia (“BNM”), the central bank of Malaysia. The foreign exchange policies monitor and regulate both
residents and non-residents. Under the current Foreign Exchange Administration rules issued by BNM, non-residents are free to repatriate
any amount of funds from Malaysia in foreign currency other than the currency of Israel at any time (subject to limited exceptions), including
capital, divestment proceeds, profits, dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding
tax. In the event BNM or any other country where we operate introduces any restrictions in the future, we may be affected in our ability
to repatriate dividends or other payments from our subsidiaries in Malaysia or in such other countries. Since we are a holding company
and rely principally on dividends and other payments from our subsidiaries for our cash requirements, any restrictions on such dividends
or other payments could materially and adversely affect our liquidity, financial condition and results of operations.
Malaysia is experiencing substantial inflationary
pressures which may prompt the governments to take action to control the growth of the economy and inflation that could lead to a significant
decrease in our profitability.
While the Malaysian economy has experienced rapid
growth over the last two decades, they have also experienced inflationary pressures. As governments take steps to address inflationary
pressures, there may be significant changes in the availability of bank credits, interest rates, limitations on loans, restrictions on
currency conversions and foreign investment. There also may be imposition of price controls. If our revenues rise at a rate that is insufficient
to compensate for the rise in our costs, it may have an adverse effect on our profitability. If these or other similar restrictions are
imposed by a government to influence the economy, it may lead to a slowing of economic growth, which may harm our business, financial
condition and results of operations.
If inflation increases significantly in
SEA countries, our business, results of operations, financial condition and prospects could be materially and adversely affected.
Should inflation in SEA countries, including Malaysia,
increase significantly, our costs, including our staff costs are expected to increase. Furthermore, high inflation rates could have an
adverse effect on the countries’ economic growth, business climate and dampen consumer purchasing power. As a result, a high inflation
rate in SEA countries, including Malaysia, could materially and adversely affect our business, results of operations, financial condition
and prospects.
Any potential disruption in and other risks
relating to our merchants’ supply chain could increase the costs of their products or services to consumers, potentially causing
consumers to limit their spending or seek products or services from alternative businesses that may not be registered as a merchant with
us, which may ultimately affect the total number of users using our platform and harm our business, financial condition and results of
operations.
Our offline and online merchants obtain their
products, or the raw materials comprised of their products or used in their services, from manufacturers and distributors located around
the world, and may have entered into long-term contracts or exclusive agreements that would ensure their ability to acquire the types
and quantities of products or raw materials they desire at acceptable prices and in a timely manner. Any potential disruption in and other
risks relating to the offline or online merchants’ supply chain as a result of the COVID-19 pandemic or Russia’s invasion
of Ukraine, could increase the costs of their products or services to consumers, potentially causing consumers to limit their spending
or seek products or services from alternative businesses that may not be registered as a merchant with us, which may ultimately affect
the total number of users using our platform and harm our business, financial condition and results of operations.
Our business will be exposed to foreign
exchange risk.
We derive most of our revenue from the operations
of our ZCITY App in Malaysia and expect to derive our revenue from Malaysia, other SEA countries and Japan in the future. Our functional
currencies will by necessity be the currencies of the countries of SEA and Japan. Our reporting currency is the U.S. dollar. We translate
our results of operations using the average exchange rate for the period, unless the average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the
dates of the transactions, and we translate our financial position at the period-end exchange rate. Accordingly, any significant fluctuation
between the currencies of countries of SEA and Japan on the one hand and the U.S. dollar on the other could expose us to foreign exchange
risk.
Some of the currencies of the countries of SEA
are not freely convertible. The foreign exchange management regime of many SEA countries has transitioned from a system of fixed multiple
exchange rates controlled by the state banks to a system of flexible exchange rates regulated largely by market forces, though transfers
of currency is regulated and controlled in some countries. A significant depreciation in many of the currencies of countries of SEA against
major foreign currencies may have a material adverse impact on our results of operations and financial condition because our reporting
currency is the U.S. dollar. There can be no assurance, that the governments will continue to relax their foreign exchange regulations,
that they will maintain the same foreign exchange policy or that there will be sufficient foreign currency available in the market for
currency conversions. If, in the future, the regulations restrict our ability to convert local currencies or there is insufficient foreign
currency available in the market, we may be unable to meet any foreign currency payment obligations.
Fluctuations in exchange rates in the Malaysian
Ringgit (“RM”) could adversely affect our business and the value of our securities.
The value of the RM against the U.S. dollar and
other currencies may fluctuate and is affected by, among other things, changes in Malaysia’s political and economic conditions.
The value of our common stock will be indirectly affected by the foreign exchange rate between U.S. dollars and RM and between those currencies
and other currencies in which our revenue may be denominated. Appreciation or depreciation in the value of the RM relative to the U.S.
dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business
or results of operations. As we rely entirely on revenues earned in Malaysia, any significant revaluation of RM may materially and adversely
affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars we receive from
an offering of our securities into RM for our operations, appreciation of the RM against the U.S. dollar could cause the RM equivalent
of U.S. dollars to be reduced and therefore could have a material adverse effect on our business, financial condition and results of operations.
Conversely, if we decide to convert our RM into U.S. dollars for the purpose of making dividend payments on our common stock or for other
business purposes and the U.S. dollar appreciates against the RM, the U.S. dollar equivalent of the RM we convert would be reduced. In
addition, the depreciation of significant U.S. dollar denominated assets could result in a change to our operations and a reduction in
the value of these assets.
We may not be able to maintain the listing
of our common stock on Nasdaq, which could adversely affect our liquidity and the trading volume and market price of our common stock
and decrease or eliminate your investment.
On August 17, 2023, we received a letter from Nasdaq notifying us that
we were no longer in compliance with the $1.00 minimum bid price requirement for continued listing on Nasdaq under Nasdaq Listing Rule
5550(a)(2). Although Nasdaq has granted us 180 calendar days, or until February 13, 2024, to regain compliance with the Bid Price Rule,
there can be no assurance that we will regain such compliance and Nasdaq could make a determination to delist our common stock.
Any delisting determination by Nasdaq could seriously decrease or eliminate
the value of an investment in our common stock and other securities linked to our common stock. While a listing on an over-the-counter
exchange could maintain some degree of a market in our common stock, we could face substantial material adverse consequences, including,
but not limited to, the following: limited availability for market quotations for our common stock; reduced liquidity with respect to
and decreased trading prices of our common stock; a determination that shares of our common stock are “penny stock” under
the SEC rules, subjecting brokers trading our common stock to more stringent rules on disclosure and the class of investors to which the
broker may sell the common stock; limited news and analyst coverage for our Company, in part due to the “penny stock” rules;
decreased ability to issue additional securities or obtain additional financing in the future; and potential breaches under or terminations
of our agreements with current or prospective large stockholders, strategic investors and banks. The perception among investors that we
are at heightened risk of delisting could also negatively affect the market price of our securities and trading volume of our common stock.
Geopolitical conditions, including acts
of war or terrorism or unrest in the regions in which we operate could adversely affect our business.
Most of our operations and business activities
are conducted in Malaysia, whose economy and legal system remain susceptible to risks associated with an emerging economy and which is
subject to higher geopolitical risks than developed countries. Social and political unrest could give rise to various risks, such as loss
of employment and safety and security risks to persons and property. Additionally, our operations could be disrupted by acts of war, terrorist
activity or other similar events, including the current or anticipated impact of military conflict and related sanctions imposed on Russia,
Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations by the
United States and other countries due to Russia’s invasion of Ukraine in February 2022. It is not possible to predict the broader
consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and
other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including,
for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts,
and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. Any such event
may in turn have a material and adverse effect on our business, results of operations and financial position.
Because our principal assets are located
outside of the United States and all of our directors and all our officers reside outside of the United States, it may be difficult for
you to enforce your rights based on U.S. Federal Securities Laws against us and our officers and directors or to enforce a judgment of
a United States court against us or our officers and directors.
All of our directors and officers reside outside
of the United States. In addition, substantially all of our assets are located outside of the United States. It may therefore be difficult
for investors in the United States to enforce their legal rights based on the civil liability provisions of the U.S. federal securities
laws against us in the courts of either the U.S. or Malaysia and, even if civil judgments are obtained in U.S. courts, to enforce such
judgments in Malaysian courts.
Our failure to maintain effective internal
controls over financial reporting could have an adverse impact on us.
We are required to establish and maintain appropriate
internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could
adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management’s
assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal
controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions
that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal
controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment
of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
In preparing our consolidated financial statements
as of and for the year ended June 30, 2023, we and our independent registered public accounting firms identified 2 material weaknesses
and other control deficiencies including significant deficiencies in our internal control over financial reporting, as defined in the
standards established by the Public Company Accounting Oversight Board. A “material weakness” is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified included the
following: (1) Inadequate U.S. GAAP expertise. The current accounting staff is inexperienced in applying U.S. GAAP standard as they are
primarily engaged in ensuring compliance with International Financial Reporting Standards (“IFRS”) accounting and reporting
requirement for our consolidated operating entities, and thus require substantial training. The current staff’s accounting skills
and understanding as to how to fulfill the requirements of U.S. GAAP-based reporting, including subsidiary financial statements consolidation,
are inadequate; and (2) Inadequate internal
audit function. We lack of a functional internal audit department or personnel that monitors the consistencies of the preventive internal
control procedures and lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures
have been carried out as planned.
Following
the identification of the material weaknesses and control deficiencies, we plan to take remedial measures including (i) hiring more qualified
accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function
and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting
training programs for our accounting and financial reporting personnel; (iii) establishing internal audit function by engaging an external
consulting firm to assist us with assessment of Sarbanes-Oxley Act compliance requirements and improvement of overall internal control;
and (iv)
strengthening corporate governance. However, the implementation of these measures may not fully address the material weaknesses in our
internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any
other material weaknesses or control deficiencies could result in inaccuracies in our consolidated financial statements and could also
impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a
result, our business, financial condition, results of operations and prospects, as well as the trading price of our common stocks, may
be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability
to prevent fraud.
A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit
of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override
of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over
time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate.
Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
If we fail
to have effective controls and procedures for financial reporting in place, we could be unable to provide timely and accurate financial
information which could result in an investigation by the SEC and civil or criminal sanctions; investors losing confidence in the accuracy
of our periodic reports filed under the Exchange Act; and a decline in our stock price.
We
are an “emerging growth company” under the JOBS Act and we cannot be certain if the reduced disclosure requirements applicable
to emerging growth companies will make our common stock less attractive to investors.
We are
an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting
requirements that are not applicable to other public companies that are not “emerging growth companies” including, but not
limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some
investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock
price may be more volatile.
In addition,
Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised
accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. We have chosen to take advantage of the extended transition period
for complying with new or revised accounting standards.
We will remain an “emerging growth company”
until the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an
effective registration statement under the Securities Act, although we will lose that status sooner if our revenues exceed $1.235 billion,
if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held
by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.
The elimination of personal liability against
our directors and officers under Delaware law and the existence of indemnification rights held by our directors, officers and employees
may result in substantial expenses.
Our certificate of incorporation, as amended (“Certificate
of Incorporation”) eliminates the personal liability of our directors and officers to us and our stockholders for damages for breach
of fiduciary duty as a director or officer to the extent permissible under Delaware law. Further, our bylaws (“Bylaws”) provide
that we are obligated to indemnify each of our directors or officers to the fullest extent authorized by the Delaware law and, subject
to certain conditions, advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its
final disposition. Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage
awards against our directors or officers, which we may be unable to afford. Further, those provisions and resulting costs may discourage
us or our stockholders from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary
duties, even if such actions might otherwise benefit our stockholders.
We have not paid dividends in the past and
do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.
We have never paid cash dividends on our common
stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain any future
earnings to support the development of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment
of any future dividends will be at the discretion of our Board after taking into account various factors, including, but not limited to,
our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to
at the time. In addition, our ability to pay dividends on our common stock may be limited by Delaware state law. Accordingly, investors
must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their
investment. Investors seeking cash dividends should not purchase our common stock.
Regulatory Risks
Failure to comply with laws and regulations
applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.
Our business is subject to regulation by various
governmental agencies in Malaysia, including agencies responsible for monitoring and enforcing compliance with various legal obligations,
such as privacy and data protection-related laws and regulations, intellectual property laws, employment and labor laws, workplace safety,
governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. These laws and
regulations impose added costs on our business. Noncompliance with applicable regulations or requirements could subject us to:
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investigations, enforcement actions, and sanctions; |
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mandatory changes to our network and products; |
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disgorgement of profits, fines, and damages; |
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civil and criminal penalties or injunctions; |
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claims for damages by our customers or channel partners; |
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termination of contracts; |
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failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and |
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temporary or permanent debarment from sales to public service organizations. |
If any governmental sanctions are imposed, or
if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be
adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention
and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations
and financial condition.
Any reviews by regulatory agencies or legislatures
may result in substantial regulatory fines, changes to our business practices and other penalties, which could negatively affect our business
and results of operations. Changes in social, political and regulatory conditions or in laws and policies governing a wide range of topics
may cause us to change our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory
issues. These factors could negatively affect our business and results of operations in material ways.
Moreover, we are exposed to the risk of misconduct,
errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject
to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance
with applicable laws and regulations, which could harm our reputation and business.
Regulation of the internet generally could
have adverse consequences on our business.
We are also subject to regulations and laws in
Malaysia specifically governing the internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet,
e-commerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes,
taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications,
consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing
laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the internet and e-commerce.
Unfavorable resolution of these issues may harm our business and results of operations.
Privacy regulations could have adverse consequences
on our business.
We receive, collect, store, process, transfer
and use personal information and other user data. There are numerous international laws and regulations regarding privacy, data protection,
information security and the collection, storing, sharing, use, processing, transfer, disclosure and protection of personal information
and other content, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries, or
conflict with other laws and regulations. We are also subject to the terms of our privacy policies and obligations to third parties related
to privacy, data protection and information security. We strive to comply with applicable laws, regulations, policies and other legal
obligations relating to privacy, data protection and information security to the extent possible. However, the regulatory framework for
privacy and data protection worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible
that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent
from one jurisdiction to another and may conflict with other rules or our practices. Further, any significant change to applicable laws,
regulations, or industry practices regarding the collection, use, retention, security or disclosure of our users’ data, or their
interpretation, or any changes regarding the manner in which the express or implied consent of users for the collection, use, retention
or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in
a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services
and features.
We also expect that there will continue to be
new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various
jurisdictions.
Any failure or perceived failure by us to comply
with our posted privacy policies, our privacy-related obligations to users or other third parties or any other legal obligations or regulatory
requirements relating to privacy, data protection or information security may result in governmental investigations or enforcement actions,
litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause
our users to lose trust in us, and otherwise have an adverse effect on our reputation and business. Furthermore, the costs of compliance
with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our users may limit the
adoption and use of, and reduce the overall demand for, our ZCITY App.
Additionally, if third parties we work with violate
applicable laws, regulations or agreements, such violations may put our users’ data at risk, could result in governmental investigations
or enforcement actions, fines, litigation, claims or public statements against us by consumer advocacy groups or others and could result
in significant liability, cause our users to lose trust in us and otherwise have an adverse effect on our reputation and business. Further,
public scrutiny of or complaints about technology companies or their data handling or data protection practices, even if unrelated to
our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies
to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs
and risks.
Regulation of gift cards or “E-vouchers”
could have adverse consequences on our business.
Our platform’s payment system inevitably
provides our customers with reward points that may or may not be deemed gift certificates, store gift cards, general-use prepaid cards
or other vouchers or “gift cards,” subject to, various laws of multiple jurisdictions. Many of these laws include specific
disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. Various companies
that provided deal products similar to ours around the world are currently or were defendants in purported class action lawsuits.
The application of various other laws and regulations
to our products is uncertain. These include laws and regulations pertaining to unclaimed and abandoned property, partial redemption, revenue-sharing
restrictions on certain trade groups and professions, sales and other local taxes and the sale of alcoholic beverages. In addition, we
may become, or be determined to be, subject to United States federal or state laws or laws in Malaysia or other countries where we operate
regulating money transmitters or aimed at preventing money laundering or terrorist financing, including the Bank Secrecy Act, the USA
Patriot Act and other similar future laws or regulations in the United States and in the applicable SEA or East Asia countries.
If we become subject to claims or are required
to alter our business practices as a result of current or future laws and regulations, our revenue could decrease, our costs could increase
and our business could otherwise be harmed. In addition, the costs and expenses associated with defending any actions related to such
additional laws and regulations and any payments of related penalties, fines, judgments or settlements could harm our business.
The requirements of being a public company
are complex and have increased costs.
As a public company, we are subject to the reporting
requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform
and Consumer Protection Act, and other applicable securities rules and regulations. Compliance with these rules and regulations increases
our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems
and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business
and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures
and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and
internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a
result, management’s attention may be diverted from other business concerns, which could harm our business and operating results.
We may need to hire more employees in the future to maintain compliance with these requirements, which will increase our costs and expenses.
In addition, changing laws, regulations and standards
relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance
costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in
many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated
by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and
standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time
and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards
differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may
initiate legal proceedings against us and our business may be harmed.
We also expect that being a public company and
these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required
to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for
us to attract and retain qualified members of our board of directors (“Board”), particularly to serve on our audit committee
and renumeration committee, and qualified executive officers.
As a result of disclosure of information in this
Annual Report on Form 10-K and in our prior SEC filings, our business and financial condition has become more visible, which we believe
may result in increased threatened or actual litigation, including by competitors and other third parties. If such claims are successful,
our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these
claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating
results.
Failure to comply with the U.S. Foreign
Corrupt Practices Act and Malaysia anti-corruption laws could subject us to penalties and other adverse consequences.
We are required to comply the Malaysia’s
anti-corruption laws and the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery
or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to
maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign
companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and
other fraudulent practices occur from time-to-time in Malaysia. If our competitors engage in these practices, they may receive preferential
treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who
might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices
are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible.
If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences
that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation,
our sales activities or the price of our ordinary shares could be adversely affected if we become the target of any negative publicity
as a result of actions taken by our employees or other agents.
Litigation is costly and time consuming
and could have a material adverse effect our business, results or operations and reputation.
We and/or our directors and officers may be subject
to a variety of civil or other legal proceedings, with or without merit. From time to time in the ordinary course of our business, we
may become involved in various legal proceedings, including commercial, employment and other litigation and claims, as well as governmental
and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources
and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions
may have a material adverse effect on our business, operating results or financial condition.
Even if the claims are without merit, the costs
associated with defending these types of claims may be substantial, both in terms of time, money, and management distraction. In particular,
patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict and may require
us to stop offering certain features, purchase licenses or modify our products and features while we develop non-infringing substitutes
or may result in significant settlement costs.
The results of litigation and claims to which
we may be subject cannot be predicted with certainty. Even if these matters do not result in litigation or are resolved in our favor or
without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our
business, results or operations and reputation.
We face potential liability and expense
for legal claims based on the content on our ZCITY App.
We face potential liability and expense for legal
claims relating to the information that we publish on our website and our ZCITY App, including claims for copyright or trademark infringement,
among others. These claims could divert management time and attention away from our business and result in significant costs to investigate
and defend, regardless of the merits of the claims. In some instances, we may elect or be compelled to remove content or may be forced
to pay substantial damages if we are unsuccessful in our efforts to defend against these claims. If we elect or are compelled to remove
valuable content from our website or mobile app, our ZCITY App may become less useful to consumers and our traffic may decline, which
could have a negative impact on our business and financial performance.
Our intellectual property rights may be
inadequate to protect us against others claiming violations of their proprietary rights and the cost of enforcement could be significant.
The future success of our business is dependent
upon the intellectual property rights surrounding our technology, including trade secrets, know-how and continuing technological innovation.
Although we will seek to protect our proprietary rights, our actions may be inadequate to protect any proprietary rights or to prevent
others from claiming violations of their proprietary rights. There can be no assurance that other companies are not investigating or developing
other technologies that are similar to our technology. In addition, effective intellectual property protection may be unenforceable or
limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate designation of our technology.
Any of these claims, with or without merit, could subject us to costly litigation. If the protection of proprietary rights is inadequate
to prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished. Any
of these events could have an adverse effect on our business and financial results.
Effective trade secret, copyright, trademark and
domain name protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and expenses
and the costs of defending our rights. We are seeking to protect our trademarks and domain names in an increasing number of jurisdictions,
a process that is expensive and may not be successful or which we may not pursue in every location. Litigation may be necessary to enforce
our intellectual property rights, protect our respective trade secrets or determine the validity and scope of proprietary rights claimed
by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management
and technical resources, any of which could adversely affect our business and operating results. We may incur significant costs in enforcing
our trademarks against those who attempt to imitate our brand. If we fail to maintain, protect and enhance our intellectual property rights,
our business and operating results may be harmed.
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position could be harmed.
In addition to patent protection, we also rely
upon copyright and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees,
consultants and third parties, to protect our confidential and proprietary information. In addition to contractual measures, we try to
protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Such
measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access,
provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating
our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy
to protect our interests fully. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our product that
we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive
and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, trade secret violations
are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions. In addition,
trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential
or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently
developed by a competitor, our business and competitive position could be harmed.
Third parties may assert that our employees
or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
We employ individuals who previously worked with
other companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not
use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary
information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we fail in defending
any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose valuable intellectual
property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
Item 1B. Unresolved
Staff Comments
None.
Item 2. Properties.
Our principal executive offices are located at
276 5th Avenue, Suite 704 #739, New York, New York 10001 and
No.29, Jalan PPU 2A, Taman Perindustrian Pusat
Bandar Puchong, 47100 Puchong, Selangor, Malaysia.
We lease and maintain our offices, and we
currently do not own any real estate.
Item 3. Legal Proceedings
We may be subject to legal disputes and subject
to claims that arise in the ordinary course of business. We are not a party or subject to any pending legal proceedings the resolution
of which is expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is trading on the Nasdaq Capital
Market under the symbol “TGL.”
Holders
As
of June 30, 2023, there were 28 stockholders of record of our common stock. Because many of our shares of common stock are held
by brokers and other institutions on behalf of stockholders, this number is not representative of the total number of beneficial owners
of our stock.
Dividends
We have never declared or paid any cash dividend
on our common stock. We intend to retain any future earnings to finance the operation and expansion of our business and fund our share
repurchase program, and we do not expect to pay cash dividends in the foreseeable future.
Securities Authorized
for Issuance under Equity Compensation Plans
We
have not adopted any equity compensation plans as of June 30, 2023. The Board and the Compensation Committee of the Board of Directors
of the Company (the “Compensation Committee”) approved the Treasure Global Inc 2023 Equity Incentive Plan on August 30, 2023
(the “2023 Plan”), and the Company intends to submit the approval of the 2023 Plan to the stockholders of the Company.
Notwithstanding the foregoing, because the Company has limited cash resources at this time, it may issue shares or options to or enter
into obligations that are convertible into shares of common stock with its employees and consultants as payment for services or as discretionary
bonuses.
Recent Sales of Unregistered Securities
During the fiscal year ended June 30, 2023, the
registrant has granted or issued the following securities of the registrant that were not registered under the Securities Act, as amended.
(a) Issuance of Capital Stock.
In March 2023, we issued 285,714 shares of common
stock to Voon Him “Victor” Hoo upon his resignation from Board.
The issuance of the capital stock listed above
was deemed exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance
of securities were made to an accredited investor and did not involve a public offering. The recipient of such securities represented
its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution
thereof.
(b) Warrants.
None.
(c) Option Grants.
None.
(d) Issuance of Notes.
On February 28, 2023, we entered into the Securities
Purchase Agreement with YA II PN, Ltd. (the “Selling Stockholder”), pursuant to which the Selling Stockholder agreed to purchase
the Convertible Debentures, in the aggregate principal amount of up to $5,500,000 in a private placement for a purchase price with respect
to each Convertible Debenture of 92% of the initial principal amount of such Convertible Debenture. The purchase by the Selling Stockholder
of the First Convertible Debenture which has an initial issuance principal amount of $2,000,000 occurred on February 28, 2023 for a purchase
price of $1,840,000 and the closing of the purchase of the Second Convertible Debenture which has an initial issuance a principal amount
of $3,500,000 occurred shortly after the registration statement related to the prospectus for the shares of common stock issuable upon
the conversion of the Convertible Debentures (the “Selling Stockholder Registration Statement”) was declared effective by
the SEC for a purchase price of $3,220,000. The total purchase price paid to us by the Selling Stockholder for the Convertible Debentures
in the Private Placement was $5,060,000.
Each Convertible Debenture accrues or will
accrue interest on its full outstanding principal amount at 4% per annum and has a 12-month term. Assuming no conversions,
prepayments or events of default have been made on or occurred with respect to the First and Second Convertible Debenture, on the
maturity date thereof, interest of $220,000 shall have accrued and be payable on the First and Second Convertible Debenture. Upon
the occurrence and continuance of an Event of Default (as defined below) with respect to any Convertible Debenture, its per annum
interest rate will increase to 15%. As of September 25, 2023, no Event of Default has occurred under the First Convertible
Debenture. Upon the occurrence and continuance of an Event of Default under the Second Convertible Debenture, its per annum interest
rate will increase to 15%.
“Event of Default” means with respect
to any Convertible Debenture: (i) the Company’s failure to pay to amounts due under such Convertible Debenture; (ii) the
Company or any subsidiaries of the Company is subject to bankruptcy or insolvency proceeding or similar proceeding and such proceedings
remain undismissed for a period of sixty one (61) days; (iii) the Company or any subsidiaries of the Company shall default in any
of its payment obligations under any debenture, mortgage, credit agreement or other facility, indenture agreement, factoring agreement
or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money
or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $100,000 and such default shall
result in the full amount of such indebtedness becoming or being declared due and payable and such default is not thereafter cured within
five (5) Business Days; (iv) the Company’s common stock shall cease to be quoted or listed for trading, as applicable, on any
national exchange for a period of ten (10) consecutive trading days; (v) the Company shall be a party to certain change of control transactions
(unless in connection with such change of control transaction such Convertible Debenture is retired; (vi) the Company’s (A) failure
to deliver required number of shares of common stock as required under such Convertible Debenture or (B) notice, written or oral, to any
holder of such Convertible Debenture of the Company’s intention not to comply with a request for conversion of such Convertible
Debenture; (vii) the Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined in the Convertible
Debenture) within five (5) Business Days after such payment is due; (viii) the Company’s failure to timely file with the SEC
any of its periodic reports and such default is not thereafter cured within five (5) business days; (ix) any representation or warranty
made or deemed to be made by or on behalf of the Company in or in connection with such Convertible Debenture or any of the other documents
related to the Private Placement, or any waiver hereunder or thereunder, shall prove to have been incorrect in any material respect (or,
in the case of any such representation or warranty already qualified by materiality, such representation or warranty shall prove to have
been incorrect) when made or deemed made; (x) any material provision of any Transaction Document, at any time after its execution
and delivery and for any reason other than as expressly permitted hereunder or thereunder, ceases to be in full force and effect; or the
Company or any other person or entity contests in writing the validity or enforceability of any provision of any Convertible Debenture
or any of the other documents related to the Private Placement; or the Company denies in writing that it has any or further liability
or obligation under any Convertible Debenture or any of the other documents related to the Private Placement, or purports in writing to
revoke, terminate (other than in line with the relevant termination provisions) or rescind any Convertible Debenture or any of the other
documents related to the Private Placement; (xi) the Company uses the proceeds of the issuance of such Convertible Debenture, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of
Regulations T, U and X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations
thereunder or thereof), or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness
originally incurred for such purpose; or (xii) any Event of Default (as defined in the other Convertible Denture or in any other
documents related to the Private Placement) occurs with respect to any other Convertible Debenture, or any breach of any material term
of any other debenture, note, or instrument held by the holder of such Convertible Debenture in the Company or any agreement between or
among the Company and such holder; or (xiii) the Company shall fail to observe or perform any material covenant, agreement or warranty
contained in, or otherwise commit any material breach or default of any provision of such Convertible Debenture (except as may be covered
by another Event of Default) or any other any other document related to the Private Placement) which is not cured or remedied within the
time prescribed or if no time is prescribed within ten (10) business days of notification thereof.
If any Event of Default occurs under a Convertible
Debenture (other than an event with respect to a bankruptcy or insolvency), at the Selling Stockholder election, all amounts owing in
respect thereof, to the date of acceleration shall become immediately due and payable in cash; provided that, in the case of a bankruptcy
or insolvency of the Company, all amounts owing in respect thereof, to the date of acceleration shall automatically become immediately
due and payable in cash, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived
by the Company. The Selling Stockholder will also have the right to convert such Convertible Debenture at the applicable conversion price.
The Convertible
Debentures provide a conversion right, in which any portion of the principal amount of the Convertible Debentures, together with any accrued
but unpaid interest, may be converted into our common stock at a conversion price equal to the lower of (i) $1.6204 (the “Fixed
Price”) or (ii) 93% of the lowest daily volume weighted average price (the “VWAP”) of the common stock during the ten
(10) trading days immediately preceding the date of conversion (but not lower than a floor price of $0.25).
If a Trigger Event occurs, then the Company shall
make monthly payments beginning on the 10th calendar day after the date on which a Trigger Event occurs and then on the same
day of each successive calendar month. Each monthly payment shall be in an amount equal to the sum of (i) the lesser of (x) $1,000,000
and (y) the outstanding principal of the Convertible Debentures (the “Triggered Principal Amount”), plus (ii) a redemption
premium of 7% of such Triggered Principal Amount, plus (iii) accrued and unpaid interest hereunder as of each payment date. The obligation
of the Company to make monthly payments shall cease if any time after the Trigger Date the daily VWAP is greater than the Floor Price
for a period of 5 of 7 consecutive Trading Days in the event of a Floor Price Trigger unless a new Trigger Event occurs.
“Trigger Event” means the daily VWAP
is less than the $0.25 for five Trading Days during a period of any 5 of 7 consecutive trading days.
Under the Convertible Debentures, the Company
has the right, but not the obligation, to redeem (“Optional Redemption”) early a portion or all amounts outstanding under
the Convertible Debentures; provided that (i) the closing price of the Company’s common stock on the date of such Optional
Redemption is less than $1.6204 and (ii) the Company provides the Holder with at least 5 business days’ prior written notice (each,
a “Redemption Notice”) of its desire to exercise an Optional Redemption. The “Redemption Amount” shall be equal
to the outstanding Principal balance being redeemed by the Company, plus a 10% premium on the principal amount being redeemed, plus all
accrued and unpaid interest. If we elect to redeem the full $5,500,0000 principal amount of the Convertible Debentures, such premium payable
will equal to $550,000.
The Selling
Stockholder Registration Statement registers the resale by the Selling Stockholder of up to 22,880,000 shares of common stock that can
be issuable upon the conversion of the Convertible Debentures. The number of shares that were registered was calculated by dividing (x)
the sum of the aggregate principal amount of Convertible Debentures ($5,500,000) plus one year of accrued interest on the Convertible
Debentures ($220,000) by (y) the conversion floor price ($0.25), which is the lowest possible conversion price pursuant to the terms of
the Convertible Debentures.
We sold
an aggregate of $5,500,000 of the Convertible Debentures and received a purchase price of $5,060,000 from the Selling Stockholder.
As of September 25, 2023, a total of $3,835,954
is due under the Convertible Notes, net of unamortized discounts of $114,046.
The notes and loan described above was deemed
exempt from registration in reliance on Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance
of securities were made to an accredited investor and did not involve a public offering. The recipients of such securities represented
its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution
thereof.
Transfer Agent
The transfer agent for the common stock is Vstock
Transfer, LLC, 18 Lafayette Place, Woodmere, New York, telephone (212) 828-8436.
Item 6.
[Reserved]
Not applicable.
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following discussion
and analysis of our results of operations and financial condition should be read together with our consolidated financial statements and
the notes thereto and other financial information, which are included elsewhere in this Report. This discussion contains forward-looking
statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below
and those discussed in other sections of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the
results that may be expected for any period in the future. Our financial statements have been prepared in accordance with U.S. GAAP.
In addition, our financial statements and the financial information included in this Report reflect our organizational transactions and
have been prepared as if our current corporate structure had been in place throughout the relevant periods.
Overview
Treasure Global Inc (“TGL,” “we,”
“our” or the “Company”) is a holding company incorporated on March 20, 2020, under the laws of the State of Delaware.
TGL has no substantive operations other than holding all of the outstanding shares of Gem Reward Sdn. Bhd. (“GEM”), which
was established under the laws of the Malaysia on June 6, 2017, through a reverse recapitalization.
Prior
to March 11, 2021, TGL and GEM were separate companies under the common control of Kok Pin
“Darren,” which resulted from Mr. Tan’s prior 100% ownership of TGL and
his prior 100% voting and investment control over GEM pursuant to the Beneficial Shareholding
Agreements. For a more detailed description of the Beneficial Shareholding Agreements and
Mr. Tan’s common control over TGL and GEM see Part
I, Item 1. “Business – Corporate Structure.”
On March 11, 2021, TGL and GEM were reorganized
into a parent subsidiary structure pursuant to the Share Swap Agreement in which TGL exchanged the swap shares for all of the issued and
outstanding equity of GEM. Pursuant to the Share Swap Agreement, the purchase and sale of the swap shares was completed on March 11, 2021,
but the issuance of the swap shares did not occur until October 27, 2021 when TGL amended its certificate of incorporation to increase
the number of its authorized common stock to a number that was sufficient to issue the swap shares. As a result of the Share Swap Agreement,
(i) GEM became the 100% subsidiary of TGL and Kok Pin “Darren” no longer had any control over the GEM ordinary shares and
(ii) Kok Pin “Darren,” the Initial GEM Stockholders and Chong Chan “Sam” Teo owned 100% of the shares of
TGL common stock (Kok Pin “Darren” owning approximately 97%). Subsequent to the date of the Share Swap Agreement, Kok Pin
“Darren” transferred 9,529,002 of his 10,000,000 shares of TGL common stock to 16 individuals and entities and currently owns
less than 5% of our common stock.
On August 15, 2022, we had closed our initial
underwritten public offering of 2,300,000 shares of common stock, par value $0.00001 per share, at $4.00 per share. Meanwhile we received
net proceeds of approximately $8.2 million, net of underwriting discounts and commissions and fees, and other estimated offering expenses
amounted to approximately $1.0 million.
We have created an innovative online-to-offline
e-commerce platform business model offering consumers and merchants instant rebates and affiliate cashback programs, while providing a
seamless e-payment solution with rebates in both e-commerce (i.e., online) and physical retailers/merchant (i.e., offline) settings.
Our proprietary product is an application branded
“ZCITY App,” which was developed through GEM. The ZCITY App was successfully launched in Malaysia on June 2020. GEM is equipped
with the know-how and expertise to develop additional/add-on technology-based products and services to complement the ZCITY App, thereby
growing its reach and user base.
Through
simplifying a user’s e-payment gateway experience, as well as by providing great deals, rewards and promotions with every use,
we aim to make the ZCITY App Malaysia’s top reward and loyalty platform. Our longer-term goal is for the ZCITY App and its ever-developing
technology to become one of the most well-known commercialized applications more broadly in Southeast Asia and Japan.
As of September 13, 2023, we had 2,642,404 registered users and 2,025 registered merchants.
Southeast Asia (“SEA”) consumers
have access to a plethora of smart ordering, delivery and “loyalty” websites and apps, but in our experience, SEA consumers
very rarely receive personalized deals based on their purchases and behavior.
The ZCITY App targets consumer through the provision
of personalized deals based on consumers’ purchase history, location and preferences. Our technology platform allows us to identify
the spending trends of our customers (the when, where, why, and how much). We are able to offer these personalized deals through the application
of our proprietary artificial intelligence (or “AI”) technology that scours the available database to identify and create
opportunities to extrapolate the greatest value from the data, analyze consumer behavior and roll out attractive rewards-based campaigns
for targeted audiences. We believe this AI technology is currently a unique market differentiator for the ZCITY App.
We operate our ZCITY App on the hashtag:
“#RewardsOnRewards.” We believe this branding demonstrates to users the ability to spend ZCITY App-based Reward Points
(or “RP”) and “ZCITY Cash Vouchers” with discount benefits at checkout. Additionally, users can earn rewards from
selected e-Wallet or other payment methods.
ZCITY App users do not require any on-going credit
top-up or need to provide bank card number with their binding obligations. We have partnered with Malaysia’s leading payment gateway,
iPay88, for secure and convenient transactions. Users can use our secure platform and enjoy cashless shopping experiences with rebates
when they shop with e-commerce and retail merchants through trusted and leading e-wallet providers such as Touch’n Go eWallet, Boost
eWallet, GrabPay eWallet and credit card/online banking like the “FPX” (the Malaysian Financial Process Exchange) as well
as more traditional providers such as Visa and Mastercard.
On May 1, 2023, we entered into a worldwide master
license agreement (“License Agreement 1”) with Morganfield’s Holdings Sdn Bhd (“Licensor 1”), an unrelated
third party. Pursuant to the License Agreement 1, the Licensor 1 agreed to grant us the exclusive worldwide license for the right to use
the Morganfield’s Trademark (“Trademark 2”) for a period of five years. During the five-year license period, we agree
to pay Licensor 1 for monthly license fee throughout the license period, with minimum aggregate payments of approximately $1.5 million
or 40% of the total monthly collections from our sub-licensees, whichever is higher.
On June 6, 2023, we entered into a worldwide master
license agreement (“License Agreement 2”) with Sigma Muhibah Sdn Bhd (“Licensor 2”), an unrelated third party.
Pursuant to the License Agreement 2, Licensor 2 agreed to grant the AY Food Ventures Sdn Bhd with the exclusive worldwide license for
right of use in Abe Yus’s Trademark (“Trademark 2”) for a period of five years. During the five years license period,
we agree to pay the licensor 2 for monthly license fee throughout the license period, with minimum aggregate payments of approximately
$1.2 million or 40% of the total monthly collection from our sub-licensees, whichever is higher.
Key Factors that Affect Operating Results
We believe the key factors affecting our financial
condition and results of operations include the following:
Our Ability to Create Value for Our Users
and Generate Revenue
Our ability to create value for our users and
generate our revenues from merchants is driven by the factors described below:
Number and volume of transactions completed
by our consumers.
Consumers are attracted to ZCITY by the breadth
of personalized deals/rewards and the interactive user experience our platform offers. The number and volume of transaction completed
by our member consumers is affected by our ability to continue to enhance and expand our product and service offerings and improve the
user experience.
Empowering data and technology.
Our ability to engage our member consumers and
empower our merchants and their brands is affected by the breadth and depth of our data insights, such as the accuracy of our members’
shopping preferences, and our technology capabilities and infrastructure, and our continued ability to develop scalable services and upgrade
our platform user experience to adapt to the quickly evolving industry trends and consumer preferences.
Our Investment in User Base, Technology,
People and Infrastructure
We have made, and will continue to make, significant
investments in our platform to attract consumers and merchants, enhance user experience and expand the capabilities and scope of our platform.
We expect to continue to invest in our research and development team as well as in our technology capabilities and infrastructure, which
will lower our margins but deliver overall long-term growth.
Inflation
Although Malaysia is experiencing a high inflation
rate, we do not believe that inflation has had a material adverse effect on our business as June 30, 2023, but we will continue to monitor
the effects of inflation on our business in future periods.
Supply Chain Disruptions
Although there have been global supply chain disruptions
as a result of the COVID-19 pandemic and Russia’s February 2022 invasion of Ukraine that may have affected the operations of some
of our online and offline merchants, these disruptions have not had a material adverse effect on our business as of June 30, 2023, but
we will continue to monitor the effects of supply chain disruptions on our business in future periods.
Key Operating Metrics
Our management regularly reviews a number of metrics
to evaluate our business, measures our performance, identifies trends, formulates financial projections and makes strategic decisions.
The main metrics we consider, and our results for each quarter since we launched ZCITY platform, are set forth in the table below:
| |
For
the quarters ended | |
| |
June 30, | | |
September 30, | | |
December 31, | | |
March 31, | | |
June 30, | | |
September 30, | | |
December 31, | | |
March 31, | | |
June 30, | |
| |
2021 | | |
2021 | | |
2021 | | |
2022 | | |
2022 | | |
2022 | | |
2022 | | |
2023 | | |
2023 | |
Number
of new registered user (1) | |
| 262,784 | | |
| 245,582 | | |
| 288,540 | | |
| 364,218 | | |
| 466,534 | | |
| 234,179 | | |
| 143,654 | | |
| 98,248 | | |
| 98,087 | |
Number
of active
users (2) | |
| 347,596 | | |
| 362,805 | | |
| 421,287 | | |
| 448,247 | | |
| 443,430 | | |
| 488,358 | | |
| 458,177 | | |
| 449,435 | | |
| 378,414 | |
Number
of new participating merchants | |
| 270 | | |
| 44 | | |
| 15 | | |
| 14 | | |
| 7 | | |
| 13 | | |
| - | | |
| 10 | | |
| 2 | |
(1) Registered are persons who have registered on the ZCITY App.
(2) Active users are users who have logged into the ZCITY App at least
once.
| |
As
of | | |
As
of | | |
As
of | | |
As
of | | |
As
of | | |
As
of | | |
As
of | | |
As
of | | |
As
of | |
| |
June 30, | | |
September 30, | | |
December 31, | | |
March 31, | | |
June 30, | | |
September 30, | | |
December 31, | | |
March 31, | | |
June 30, | |
| |
2021 | | |
2021 | | |
2021 | | |
2022 | | |
2022 | | |
2022 | | |
2022 | | |
2023 | | |
2023 | |
Accumulated
registered users | |
| 603,122 | | |
| 848,704 | | |
| 1,137,244 | | |
| 1,501,462 | | |
| 1,967,996 | | |
| 2,202,175 | | |
| 2,345,829 | | |
| 2,444,077 | | |
| 2,542,164 | |
Accumulated
Participating merchants | |
| 1,905 | | |
| 1,949 | | |
| 1,964 | | |
| 1,978 | | |
| 1,985 | | |
| 1,998 | | |
| 1,998 | | |
| 2,008 | | |
| 2,010 | |
We have experienced substantial growth in registered
users and active users since we launched ZCITY platform in June 2020. As of June 30, 2023, we recorded 2,542,164 registered users and
378,414 active users from ZCITY platform. Our average percentage of growth of register and active users from the establishment of
the ZCITY platform to the year ended June 30, 2023 was approximately 93.7% and 179.3%, respectively.
However, the average percentage of growth of registered
and active users decreased in the last ten quarters up to June 30, 2023 which was a result of decrease in purchasing of E-voucher from
our vendor, eventually reduce the E-voucher available for sales, and attract less new registered and active user to join our ZCITY platform.
Since our product and loyalty program revenue mainly consist of sales of E-voucher which bear a low profit margin, reduce in purchasing
of E-voucher will allow us to reserve more working capital in developing our TAZTE Smart F&B system (“TAZTE”), which is
a system that provides a one stop solution and digitalization transformation for all registered food and beverage (“F&B”)
outlets located in Malaysia. As TAZTE is a merchant-oriented program, we intend to utilize our user data to help our merchant customers
to achieve higher business growth as well as increase our transaction revenue while we launch TAZTE in late December 2022. As we provided
extended 365 days free trial for merchant participate in TAZTE, we have not generated any revenue from TAZTE for the year ended June 30,
2023. For 2023 and beyond, we do not expect to experience exponential growth rate in our registered and active users as we intend to maintain
our E-voucher for sales in a steady level and increase our user’s retention rate.
We continuously monitor the development and participation
of active users as a proportion of its total registered user base to ensure the effectiveness of our marketing and feature implantation
strategies. Accordingly, the proportion of total registered users that we consider active users at the end of each quarter is as follows:
Starting | |
Ending | | |
Total registered users | | |
Total active users | | |
Total active users to total registered users | |
July 1, 2020 | |
| September 30, 2020 | | |
| 14,336 | | |
| 2,945 | | |
| 20.5 | % |
October 1, 2020 | |
| December 31, 2020 | | |
| 58,868 | | |
| 42,225 | | |
| 71.7 | % |
January 1, 2021 | |
| March 31, 2021 | | |
| 340,338 | | |
| 300,270 | | |
| 88.2 | % |
April 1, 2021 | |
| June 30, 2021 | | |
| 603,122 | | |
| 347,596 | | |
| 57.6 | % |
July 1, 2021 | |
| September 30, 2021 | | |
| 848,704 | | |
| 362,805 | | |
| 42.7 | % |
October 1, 2021 | |
| December 31, 2021 | | |
| 1,137,244 | | |
| 421,287 | | |
| 37.0 | % |
January 1, 2022 | |
| March 31, 2022 | | |
| 1,501,462 | | |
| 448,247 | | |
| 29.8 | % |
April 1, 2022 | |
| June 30, 2022 | | |
| 1,967,996 | | |
| 443,430 | | |
| 22.5 | % |
July 1, 2022 | |
| September 30, 2022 | | |
| 2,202,175 | | |
| 488,358 | | |
| 22.2 | % |
October 1, 2022 | |
| December 31, 2022 | | |
| 2,345,829 | | |
| 458,177 | | |
| 19.5 | % |
January 1, 2023 | |
| March 31, 2023 | | |
| 2,444,077 | | |
| 449,435 | | |
| 18.4 | % |
April 1, 2023 | |
| June 30, 2023 | | |
| 2,542,164 | | |
| 378,414 | | |
| 14.9 | % |
We continuously monitor the development of the
churn and retention rates of the active user base. Active users churn rate is the percentage of customers who had stop subscribing in
our platform while retention rate is the percentage of customers who is retained in our platform. Accordingly, our churn and retention
rates of the active user base at the end of each quarter is as follows:
Starting | |
Ending | | |
Total active users | | |
New active users (registered within the quarter) | | |
Existing active users | | |
Active users churn rate | | |
Active users retention rate | |
July 1, 2020 | |
| September 30, 2020 | | |
| 2,945 | | |
| 2,879 | | |
| 66 | | |
| N/A | | |
| N/A | |
October 1, 2020 | |
| December 31, 2020 | | |
| 42,225 | | |
| 41,142 | | |
| 1,083 | | |
| 63.3 | % | |
| 36.7 | % |
January 1, 2021 | |
| March 31, 2021 | | |
| 300,270 | | |
| 281,432 | | |
| 18,838 | | |
| 55.4 | % | |
| 44.6 | % |
April 1, 2021 | |
| June 30, 2021 | | |
| 347,596 | | |
| 262,780 | | |
| 84,816 | | |
| 71.8 | % | |
| 28.2 | % |
July 1, 2021 | |
| September 30, 2021 | | |
| 362,805 | | |
| 245,580 | | |
| 117,225 | | |
| 66.3 | % | |
| 33.7 | % |
October 1, 2021 | |
| December 31, 2021 | | |
| 421,287 | | |
| 288,536 | | |
| 132,751 | | |
| 63.4 | % | |
| 36.6 | % |
January 1, 2022 | |
| March 31, 2022 | | |
| 448,247 | | |
| 361,143 | | |
| 87,104 | | |
| 78.5 | % | |
| 21.5 | % |
April 1, 2022 | |
| June 30, 2022 | | |
| 443,430 | | |
| 368,390 | | |
| 75,040 | | |
| 83.3 | % | |
| 16.7 | % |
July 1,2022 | |
| September 30, 2022 | | |
| 448,358 | | |
| 146,036 | | |
| 342,322 | | |
| 22.8 | % | |
| 77.2 | % |
October 1, 2022 | |
| December 31, 2022 | | |
| 458,177 | | |
| 104,191 | | |
| 353,986 | | |
| 27.5 | % | |
| 72.5 | % |
January 1, 2023 | |
| March 31, 2023 | | |
| 449,435 | | |
| 81,921 | | |
| 367,514 | | |
| 19.8 | % | |
| 80.2 | % |
April 1, 2023 | |
| June 30, 2023 | | |
| 378,414 | | |
| 93,516 | | |
| 284,898 | | |
| 36.6 | % | |
| 63.4 | % |
The retention rate and churn rate for our active users are calculated
as follows:
Retention rate of active users for any quarter |
= |
Existing active users |
Total active users in the past quarter |
Churn rate of active users for any quarter |
= |
Total active users from past quarter minus current quarter existing active users |
Total active users in the past quarter |
Over the last 24 months, we have used different
strategies to build and maintain our users and increase their engagement. Initially, we focused on mass marketing strategies to attract
registered users. Subsequently, we have shifted to a more targeted approach focused on increasing user engagement and user spending.
Results of Operation
For the Years ended June 30, 2023 and 2022
Revenue
Our breakdown of revenues by categories for the
years ended June 30, 2023 and 2022, respectively, is summarized below:
| |
For the Years Ended June 30, | | |
Change | |
| |
2023 | | |
% | | |
2022 | | |
% | | |
% | |
| |
| | |
| | |
| | |
| | |
| |
Product and loyalty program revenue | |
$ | 68,899,687 | | |
| 99.3 | % | |
$ | 79,409,756 | | |
| 99.7 | % | |
| (13.2 | )% |
Transaction revenue | |
| 75,274 | | |
| 0.1 | % | |
| 53,667 | | |
| 0.1 | % | |
| 40.3 | % |
Agent subscription revenue | |
| - | | |
| 0.0 | % | |
| 15 | | |
| 0.0 | % | |
| (100.0 | )% |
Member subscription revenue | |
| 383,538 | | |
| 0.6 | % | |
| 211,441 | | |
| 0.2 | % | |
| 81.4 | % |
Sublicence revenue | |
| 49,820 | | |
| 0.1 | % | |
| - | | |
| 0.0 | % | |
| 100.0 | % |
Total revenues | |
$ | 69,408,319 | | |
| 100.0 | % | |
$ | 79,674,879 | | |
| 100.0 | % | |
| (12.9 | )% |
Total revenues decreased by approximately $10.3 million
or 12.9% to approximately $69.4 million for the year ended June 30, 2023 from approximately $79.7 million for the year ended June
30, 2022. The decrease was mainly attributable to decrease in product and loyalty program revenue.
Product and loyalty program revenue
Product revenue was generated through sales of
our e-voucher, health care products, and other products through our ZCITY platform while loyalty program revenue was recognized when our
customers redeem their previously earned reward points from our loyalty program or upon expiration of the reward point. In addition, we
also engage in sales of food and beverage products through our newly acquired subsidiaries, Morgan Global Sdn. Bhd (“Morgan”)
and AY Food Ventures Sdn. Bhd. (“AY Food”). The product and loyalty program revenue decrease by approximately $10.5 million
or 13.2% to approximately $68.9 million for the year ended June 30, 2023 from approximately $79.4 million for the same period in 2022.
The decrease was mainly attributable to decrease in E-voucher purchasing which resulted in less E-voucher available for sales during the
year ended June 30, 2023. Such decrease in purchasing activities was due to our management’s decision to reserve more working capital
for developing TAZTE within the ZCITY platform as discussed in the key operating metrics section above.
Transaction revenue
The transaction revenue primarily consists of fees charged to merchants
for participating in our ZCITY platform upon successful sales transaction and payment service taken place between the merchants and their
customers online. Our transaction revenue increased by 40.3% to approximately $75,000 for the year ended June 30, 2023 from approximately
$54,000 for the same period in 2022. The increase was mainly attributable to the fact that we engaged with 2,010 local merchants to connect
them with their customers through our ZCITY platform as of June 30, 2023 compared to 1,985 as of June 30, 2022. Our average percentage
of growth of new merchants was approximately 25.3% throughout the quarters as of June 30, 2023 since the establishment of ZCITY platform.
Despite of the slowdown in adding new merchants to our platform during the last eight quarters ended as of June 30, 2023, we expect our
transaction revenue to increase as soon as the free trial period from TAZTE expires in December 2023.
Agent subscription revenue
Agent subscription revenue primarily consists
of fees charged to the agents in exchange for rights by introducing merchants to join our merchant network and to earn a future fixed
percentage of commission fees upon completion of each sales transaction between the referred merchants and their customers. We did not
recognize any agent subscription revenue for the year end June 30, 2023 mainly due to our shift of business strategies to Zmember subscription
revenue which is a member oriented program designated to attract more customer to engage with our ZCITY platform. As we abandoned the
agent subscription program, we will not generate any agent subscription revenue going forward.
Member subscription revenue
Member subscription revenue primarily consists
of fees charged to customers who signed up for Zmember, a membership program that includes exclusive saving, bonus, and referral
rewards. Member subscription revenue increased by 81.4% to approximately $0.4 million for the year end June 30, 2023 as compared
to approximately $0.2 million for the same period in 2022 as we launched the Zmember program for the quarter ended in March 31, 2022
to enhance our customer engagement with our ZCITY platform. As of June 30, 2023, we had 22,861 customers who subscribed to our Zmember
program.
Sublicense revenue
As we acquired exclusive worldwide license for
right of use in Morganfield’s Trademark on May 1, 2023 for a period of five years, we have generated sublicense revenue consist
of fee charged to the customers who sublicensed the right of use of the Trademark from us. For the year ended June 30, 2023, sublicense
revenue was amounted to approximately $50,000 while as of June 30, 2023 we engaged 7 customers as sublicensees who operated their restaurant
under Morganfield’s Trademark in Singapore, Malaysia, and China.
Cost of revenue
Our breakdown of cost of revenue by categories for the years ended
June 30, 2023 and 2022, respectively, is summarized below:
| |
For the Years Ended June 30, | | |
Change | |
| |
2023 | | |
2022 | | |
% | |
| |
| | |
| | |
| |
Product and loyalty program revenue | |
$ | 68,857,916 | | |
$ | 79,198,691 | | |
| (13.1 | )% |
Sublicense revenue | |
| 27,119 | | |
| - | | |
| 100.0 | % |
Total cost of revenue | |
$ | 68,885,035 | | |
$ | 79,198,691 | | |
| (13.0 | )% |
Cost of revenue mainly consists of the purchases
of the gift card or “E-voucher” pin code, health care product, and food and beverage products which is directly attributable
to our product revenue. Cost of revenue also consists of monthly license payment made to our licensor to maintain our good standing for
the right of use in Trademark which is attributable to our sublicense revenue. Total cost of revenue decreased by approximately $10.3
million or 13.0% for the year ended June 30, 2023 compared with the same period in 2022. The decrease was in line with our decreased of
revenue.
Gross profit
Our gross profit from our major revenue categories
is summarized as follows:
| |
For the year Ended June 30, 2023 | | |
For the year Ended June 30, 2022 | | |
Change | | |
Percentage Change | |
| |
| | |
| | |
| | |
| |
Product and loyalty program revenue | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | 41,771 | | |
$ | 211,065 | | |
$ | (169,294 | ) | |
| (80.2 | )% |
Gross margin | |
| 0.1 | % | |
| 0.3 | % | |
| (0.2 | )% | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Transaction revenue | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | 75,274 | | |
$ | 53,667 | | |
$ | 21,607 | | |
| 40.3 | % |
Gross margin | |
| 100.0 | % | |
| 100.0 | % | |
| — | % | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Agent subscription revenue | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | — | | |
$ | 15 | | |
$ | (15 | ) | |
| (100.0 | )% |
Gross margin | |
| — | % | |
| 100.0 | % | |
| (100.0 | )% | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Member subscription revenue | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | 383,538 | | |
$ | 211,441 | | |
$ | 172,097 | | |
| 81.4 | % |
Gross margin | |
| 100.0 | % | |
| 100.0 | % | |
| — | % | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Sublicense revenue | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | 22,701 | | |
$ | — | | |
$ | 22,701 | | |
| 100.0 | % |
Gross margin | |
| 45.6 | % | |
| — | % | |
| 45.6 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Total | |
| | | |
| | | |
| | | |
| | |
Gross profit | |
$ | 523,284 | | |
$ | 476,188 | | |
$ | 47,096 | | |
| 9.9 | % |
Gross margin | |
| 0.8 | % | |
| 0.6 | % | |
| 0.2 | % | |
| | |
Our gross profit for the year ended June 30, 2023 amounted to approximately
$523,000 as compared to approximately $476,000 for the year ended June 30, 2022 which represents an increase of approximately $47,000
or 9.9%. The increase in gross profit was primarily due to the growth in member subscription revenue, as we had more customers subscribed
to our Zmember program as of June 30, 2023
The gross margin was approximately 0.8% and 0.6% for the years ended
June 30, 2023, and 2022, respectively. The 0.2% increase in gross margin attributed to the rise in gross profit from Member subscription
revenue, which has a higher gross margin compared to our other revenue streams.
Operating expenses
Our operating expenses consist of selling expenses,
general and administrative expenses, research and development expenses, and stock-based compensation expenses.
Selling expenses
Selling expenses amounted to approximately $4.7
million and $6.3 million for the years ended June 30, 2023 and 2022, respectively. Representing a decrease of approximately $1.6 million
or 24.8%. The decrease was mainly attributable to decrease in marketing and promotion expense of approximately $1.4 million related to
promoting our ZCITY platform. Marketing and promotion expense consists of redemptions of reward points which is generated from non-spending
related activities (registration as a new user, referral of a new user and Spin & Win eligibility to receive reward points) in exchange
for discounted credit of purchasing our products upon conversion of using the reward points. For the years end June 30, 2023 and 2022,
we incurred approximately $1.8 million and $2.8 million, respectively, in marketing and promotion expense, and recognized the same amount
of product revenue at the time of redemption of the non-spending related activities reward points by our customers. The decrease in marketing
and promotion expense was mainly due to decrease of new registered user, and eventually resulted in less redemption in non-spending related
activities reward points by our customers.
General and administrative expenses
General and administrative expenses amounted to approximately $4.7
million and $2.8 million for the years ended June 30, 2023 and 2022, respectively. Representing an increase of approximately $1.9 million
or 65.6%. The increase was mainly due to increase in salary expense of approximately $0.5 million, director & officer liability insurance
expense of approximately $0.1 million, and professional fee of approximately $1.0 million as a result of expansion of management and administration
team to support our business operation.
Research and development expenses
Research and development expense amounted to approximately $0.5 million
and $0.3 million for the years ended June 30, 2023 and 2022, respectively, representing 105.9% increase as we increase spending to maintain
and enhance our mobile application or website to ensure our customers to have exceptional user experience while navigating within the
ZCITY platform.
Stock-based compensation expenses
Stock-based compensation expenses amounted to approximately $0.8 million and $1.3 million for the years ended June 30, 2023 and 2022
respectively, representing decrease of approximately $0.5 million. The stock-based compensation incurred for the year ended June 30, 2022
are from Exchange Listing LLC (the “Consultant”). The decreased was mainly due to the Consultant completed its service
during the quarter ended December 31, 2022. The decrease was offset by additional stock-based compensation issued to Voon Him “Victor”
Hoo for his service as our former director amounted to approximately $0.4 million for the year ended June 30, 2023.
Other expenses, net
Other expenses, net amounted to approximately
$1.4 million and $1.6 million for the years ended June 30, 2023 and 2022, respectively. Representing a decrease of approximately $0.2 million
or 10.4%. The decrease was mainly attributable to decrease of interest expenses of approximately $0.3 million as we have less interest-bearing
convertible note outstanding as of June 30, 2023.
Provision for income taxes
Provision for income taxes amounted to approximately
$98,000 and $16,000 for the years ended June 30, 2023 and 2022, respectively. The amount was attributable to tax imposed on Treasure
Global Inc from the State of Delaware, as we are required to remit franchise tax to the State of Delaware on an annual basis. We
also were subject to controlled foreign corporations Subpart F income (“Subpart F”) tax, which is a tax primarily on passive
income from controlled foreign corporations with a tax rate of 35%. In addition, the Tax Cuts and Jobs Act imposed a global intangible
low-taxed income (“GILTI”) tax, which is a tax on certain off-shore earnings at an effective rate of 10.5% for tax years (50%
deduction of the current enacted tax rate of 21%) with a partial offset for 80% foreign tax credits. If the foreign tax rate is 13.125%
or higher, there will be no U.S. corporate tax after the 80% foreign tax credits are applied. For the years ended June 30, 2023 and 2022,
our foreign subsidiaries did not generate any income that are subject to Subpart F tax and GILTI tax.
Net losses
Our net losses decreased by approximately $18,000
predominately due to the reasons as discussed above.
Liquidity and Capital Resources
In assessing liquidity, we monitor and analyze
cash on-hand and operating expenditure commitments. Our liquidity needs are to meet working capital requirements and operating expense
obligations. To date, we financed our operations primarily through cash flows from contribution from stockholders, issuance of convertible
notes, related party loans, and our completion of initial underwritten public offering.
As of June 30, 2023 and 2022, we had approximately
$4.6 million and $1.8 million, respectively, in cash and cash equivalent which primarily consists of bank deposits, which are unrestricted
as to withdrawal and use.
On August 15, 2022, we had closed our initial
underwritten public offering of 2,300,000 shares of common stock, par value $0.00001 per share, at $4.00 per share. We had received aggregate
net proceeds from the closing of approximately $8.2 million, after deducting underwriting discounts and commissions and fees, and other
estimated offering expenses which amounted to approximately $1.0 million.
From February to June 2023, we issued two convertible notes to a third
party in an aggregate principal amount of $5,500,000. We received $5,060,000 in proceeds from the third-party net of discount. The convertible
notes accrue or will accrue interest at 4% per annum and has a 12-months term.
Despite receiving the proceeds from our initial
underwritten public offering and issuance of two convertible notes, management is of the opinion that we will not have sufficient funds
to meet the working capital requirements and debt obligations as they become due starting from one year from the date of this report due
to our recurring loss. Therefore, management has determined there is substantial doubt about our ability to continue as a going concern.
If we are unable to generate significant revenue, we may be required to curtail or cease our operations. Management is trying to alleviate
the going concern risk through the following sources:
| ● | Equity
financing to support our working capital; |
| ● | Other
available sources of financing (including debt) from Malaysian banks and other financial institutions; and |
| ● | Financial
support and credit guarantee commitments from our related parties. |
However, there is no guarantee that the substantial doubt about our
ability to continue as a going concern will be alleviated.
The following summarizes the key components of
our cash flows for the years ended June 30, 2023 and 2022:
| |
For the Years Ended | |
| |
June 30, 2023 | | |
June 30, 2022 | |
| |
| | |
| |
Net cash used in operating activities | |
$ | (9,560,285 | ) | |
$ | (8,663,901 | ) |
Net cash used in investing activities | |
| (61,244 | ) | |
| (311,739 | ) |
Net cash provided by financing activities | |
| 12,659,188 | | |
| 8,163,893 | |
Effect of exchange rate on cash and cash equivalents | |
| (289,257 | ) | |
| (186,419 | ) |
Net change in cash and cash equivalents | |
$ | 2,748,402 | | |
$ | (998,166 | ) |
Operating Activities
Net cash used in operating activities for the years ended June 30,
2023 was approximately $9.6 million and were mainly comprised of the net loss of approximately $11.7 million, increase of prepayments
of approximately $0.1 million as our vendors required us to make deposit to secure the purchase, increase of accounts receivable of approximately
$0.2 million as a result of offering credit terms to our corporate customers engaged in the sales of nutrition products, and food and
beverage products, increase in inventory of approximately $0.2 million as we increase our inventory level on June 30, 2023 to meet with
the demand of our product, and increase of approximately $0.4 million in other receivables and other current assets as we prepaid IT maintenance
fee to a third party service provider, offset by amortization of debt discount of approximately $1.3 million, stock-based compensation
of approximately $0.8 million, increase of approximately $0.1 million in customer deposits as we incurred deferred revenue related to
member subscription revenue for the remaining subscribed period as of June 30, 2023, increase of
approximately $0.1 million in contract liability as we deferred more revenue due to increase of our customer’s redemption rate in
spending related reward point, and increase of approximately $0.5 million in other payables and accrued liabilities mainly
related to the accrued professional expenses.
Net cash used in operating activities
for the year ended June 30, 2022 was approximately $8.7 million and were mainly comprised of the net loss of approximately $11.7 million,
decrease of accounts payable (including related parties) of approximately $0.2 million as we had pay out some of the accounts payable
balance to the third parties or related parties vendors timely, decrease of customer deposits, related parties of approximately $0.2
million as we had returned the deposit related to I.T professional service back to the related parties due to projects abandoned,
and decrease of other payables, related parties as we paid out the remaining balance of professional fee incurred from two related parties
of approximately $0.1 million. The net cash used in operating activities was mainly offset by amortization of debt discount of approximately
$1.3 million, stock-based compensation of approximately $1.3 million, increase of inventories of approximately $0.2 million as we improved
our inventories turnover rate due to demand of our product, and the increase in other payables and accrued liability of approximately
$0.7 million mainly related to the accrued professional expenses.
Investing Activities
Net cash used in investing activities for the year ended June 30, 2023
was approximately $61,000, which mainly due to purchase of equipment of approximately $87,000 for our operations used, and offset with
proceeds of approximately $26,000 received from disposal of our office equipment.
Net cash used in investing activities for the
year ended June 30, 2022 was approximately $0.3 million, mainly due to purchase of equipment for our operations.
Financing Activities
Net cash provided by financing activities for the year ended June 30,
2023 was approximately $12.7 million, which mainly comprised of proceeds received from the issuance of convertible notes to third parties
of approximately $7.7 million, proceeds received from our initial public offering of approximately $8.2 million, and proceeds received
from third parties loans of approximately $0.6 million, offset by repayment to related parties, third parties loans, and insurance
loan of approximately $3.8 million, repayment of senior note of $65,000, and $15,000 payment of deferred offering costs.
Net cash
provided by financing activities for the year ended June 30, 2022 was approximately $8.2 million, which were mainly comprised of proceeds
received from the issuance of convertible note from third parties and related parties of approximately $8.6 million, and proceeds received
from third parties loans of approximately $1.5 million, offset by repayment to related parties loan of approximately $1.8 million, and
approximately $0.1 million payment of deferred offering costs.
Off-Balance Sheet Arrangements
As of the date of this Annual Report, we have
the following off-balance sheet arrangements that are likely to have a future effect on our financial condition, revenues or expenses,
results of operations and liquidity:
Commitment
On May 1, 2023, our subsidiary Morgan enter into a worldwide master
license agreement (“License Agreement”) with Morganfield’s Holdings Sdn Bhd (“Licensor”), an unrelated third
party. Pursuant to the License agreement, the Licensor agreed to grant Morgan with the exclusive worldwide license for right of use in
Morganfield’s Trademark (“Trademark”) for a period of five years. During the five years license period, Morgan is obligated
to pay the licensor for license fee on monthly basis in an aggregate total of minimum payment of approximately $1.5 million or 40% of
the total monthly collection from Morgan’s sub-licensees, whichever is higher.
On June 6, 2023, we entered into a worldwide master license agreement
(“License Agreement 2”) with Sigma Muhibah Sdn Bhd (“Licensor 2”), an unrelated third party. Pursuant to the License
Agreement 2, the Licensor 2 agreed to grant the AY Food Ventures Sdn Bhd with the exclusive worldwide license for right of use in Abe
Yus’s Trademark (“Trademark 2”) for a period of five years. During the five years license period, we agree to pay the
licensor 2 for license fee on monthly basis in an aggregate total of minimum payment of approximately $1.2 million or 40% of the total
monthly collection from our sub-licensees, whichever is higher.
Critical Accounting Estimate
Our consolidated financial statements and accompanying
notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements and accompanying
notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that
are significant to the preparation of our financial statements. These estimates are important for an understanding of our financial condition
and results of operation. Certain accounting estimates are particularly sensitive because of their significance to financial statements
and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
We believe the following critical accounting estimates involve the most significant estimates and judgments used in the preparation of
our financial statements.
The preparation of these consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our consolidated
financial statements include the estimated retail price per point and estimated breakage to calculate the revenue recognized in our loyalty
program revenue, the useful lives of property and equipment, impairment of long-lived assets, allowance for doubtful accounts, write-down
for estimated obsolescence or unmarketable inventories, realization of deferred tax assets and uncertain tax position, fair value of our
stock price to determine the beneficial conversion feature (“BCF”) within the convertible note, fair value of the stock-based
compensation, and fair value of the warrants issued. Actual results could differ from these estimates.
Accounts receivable, net
Accounts receivable are recorded at the invoiced amount, net of an
allowance for uncollectible accounts, and do not accrue interest. We offer various payments terms to customers from cash due on delivery
to 90 days based on their credit history. Accounts receivable encompass amounts due from agent subscription revenue, sales of healthcare
products on our ZCITY platform, sublicensing revenue, and sales of food and beverage products. Management regularly assesses the adequacy
of the allowance for doubtful accounts by considering historical collection trends and aging of receivables. Additionally, management
periodically evaluates individual customer financial conditions, credit histories, and current economic conditions to make necessary adjustments
to the allowance. Account balances are charged off against the allowance when all collection efforts have been exhausted, and recovery
potential is deemed remote. Our management reviews historical accounts receivable collection rates across all aging brackets and has made
100% provision for customer balances aged above 120 days for sales of healthcare products on our ZCITY platform and 100% provision for
customer balances aged above 60 days for sublicensing revenue and sales of food and beverage products. Our management continuously assesses
the reasonableness of the valuation allowance policy and updates it as needed. As of June 30, 2023, and 2022, our allowance for accounts
receivable was $214 and $227, respectively.
Inventories
Our inventories are recorded at the lower of
cost or net realizable value, with cost determined using the first-in-first-out (FIFO) method. These costs encompass gift cards or ‘E-voucher’
pin codes, which are acquired from our suppliers as merchandise goods or store credit, as well as healthcare products. Management conducts
regular comparisons between the cost of inventories and their net realizable value. If the net realizable value is lower than the cost,
an allowance is made for inventory write-down. Ongoing assessments of inventories are carried out to identify potential write-downs due
to estimated obsolescence or unmarketability. This determination is based on the difference between the inventory costs and the estimated
net realizable value, considering forecasts for future demand and market conditions. Once inventories are written down to the lower of
cost or net realizable value, they are not subsequently marked up based on changes in underlying facts and circumstances. Our management
has reviewed the aforementioned factors and has applied a 100% write-down for inventories aged above 180 days related to our E-voucher
and health care products. For the years ended June 30, 2023 and 2022, $0, and $8,805 write-downs for estimated obsolescence or unmarketable
inventories were recorded, respectively.
Other receivables and other current assets, net
Other receivables and other current assets primarily include refundable
advance to third party service provider and other deposits. Management regularly reviews the aging of receivables and changes in payment
trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written
off against allowances after exhaustive efforts at collection are made. No allowance of other receivables and other current assets were
recorded as of June 30, 2023 and 2022.
Prepayments
Prepayments and deposits are mainly cash deposited
or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any prepayments determined
by management that such advances will not be in receipt of inventories, services, or refundable, we will recognize an allowance account
to reserve such balances. Management reviews our prepayments on a regular basis to determine if the allowance is adequate, and adjusts
the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has
determined that the likelihood of collection is not probable. Our management continues to evaluate the reasonableness of the valuation
allowance policy and updates it if necessary. No allowance of prepayments were recorded as of June 30, 2023 and 2022.
Impairment for long-lived assets
Long-lived assets, including property and equipment with finite lives
are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that
will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assessed the recoverability
of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated
undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset,
if any, are less than the carrying value of the asset. If an impairment is identified, we would reduce the carrying amount of the asset
to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.
No impairment for long-lived assets were recorded as of June 30, 2023 and 2022.
Revenue recognition
Loyalty program
- Performance obligations satisfied over time
Our ZCITY reward loyalty program allows members
to earn points on purchases that can be redeemed for rewards that include discounts on future purchases. When members purchase our product
or make purchase with our participated vendor through ZCITY, we allocate the transaction price between the product or service, and
the reward points earned based on the relative stand-alone selling prices and expected point redemption. The portion allocated to the
reward points is initially recorded as contract liability and subsequently recognized as revenue upon redemption or expiration.
The two primary estimates utilized to record the
contract liability for reward points earned by members are the estimated retail price per point and estimated breakage. The estimated
retail price per point is based on the actual historical retail prices of product purchased or service obtained through the redemption
of reward points. We estimate breakage of reward points based on historical redemption rates. We continually evaluate our methodology
and assumptions based on developments in retail price per point redeemed, redemption patterns and other factors. Changes in the retail
price per point and redemption rates have the effect of either increasing or decreasing the contract liability through current period
revenue by an amount estimated to represent the retail value of all points previously earned but not yet redeemed by loyalty program members
as of the end of the reporting period.
Income taxes
Deferred taxes are accounted for using the asset
and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it
is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated
using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged
or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred
tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance
with the laws of the relevant taxing authorities.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
Stock-based compensation
We recognize compensation costs resulting from the issuance of stock-based
awards to third party consultant and former director as an expense in the statements of operations over the requisite service period based
on a measurement of fair value for each stock-based award. The fair value of each warrants granted are estimated as of the grant date
using the Black-Scholes-Merton option-pricing model while the fair value of each common stock granted are estimated using the Company’s
closing stock price on the grant date. The fair value is amortized as compensation cost on a straight-line basis over the requisite service
period of the awards. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of the
common stock of the Company, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others.
These assumptions reflect the Company’s best estimates, but they involve inherent uncertainties based on market conditions generally
outside the control of the Company. The fair value of the stock-based compensation which included warrants and common stock issued were
estimated to be $819,332 and $1,283,994 for the years ended June 30, 2023 and 2022, respectively.
Convertible notes
We evaluate our convertible notes to determine
if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the
fair value of the embedded derivative is recorded at fair value each reporting period and recorded as a liability. In the event that the
fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense.
In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible
instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative
instrument.
If the conversion features of conventional convertible debt provide
for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”).
A BCF is recorded by us as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those
circumstances, the convertible debt is recorded net of the discount related to the BCF, and we amortize the discount to interest expense,
over the life of the debt.
Warrants
We account for warrants as equity-classified instruments in accordance
with ASC 480 and ASC 815. The fair value of each warrant granted is estimated as of the date of grant using the Black-Scholes-Merton option-pricing
model. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards. The
Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of our common stock, expected
life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect our best
estimates, but they involve inherent uncertainties based on market conditions generally outside our control. Based on the above assumption,
the fair value of the warrants issued were estimated to be $175,349 for the year ended June 30, 2023.
Recent Accounting Pronouncements
See Note 2 of the notes to the consolidated financial
statements included elsewhere in this report for a discussion of recently issued accounting standards.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.
The Company is a smaller reporting company as
defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
Item
8. Financial Statements and Supplementary Data.
TREASURE GLOBAL INC.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
TABLE OF CONTENTS
To: |
The Board
of Directors and Stockholders of |
|
Treasure Global Inc |
Report
of Independent Registered Public Accounting Firm
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Treasure Global Inc and its subsidiaries (the “Company”) as
of June 30, 2023, and the related consolidated statements of operations and comprehensive loss, change in stockholders’ deficiency,
and cash flows for the year ended June 30, 2023, and the related notes (collectively referred to as the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023,
and the results of its operations and its cash flows for the year ended June 30, 2023, in conformity with accounting principles generally
accepted in the United States of America.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company had an accumulated deficit and its net cash outflows from operating activities raises
substantial doubt about its ability to continue as a going concern. Management’s plan regarding these matters are described in
Note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ WWC, P.C. | |
WWC,
P.C. | |
Certified
Public Accountants | |
PCAOB
ID: 1171 | |
We
have served as the Company’s auditor since 2023.
San
Mateo, California
September
28, 2023
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Treasure
Global Inc.
Opinion on the Consolidated Financial
Statements
We have audited the accompanying
consolidated balance sheet of Treasure Global Inc. (the “Company”) as of June 30, 2022, and the related consolidated statements
of operations and comprehensive loss, changes in stockholders’ (deficiency) equity and cash flows for the year ended June 30, 2022,
and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022, and the results of its
operations and its cash flows for each of the years in the year ended June 30, 2022, in conformity with accounting principles generally
accepted in the United States of America.
Explanatory Paragraph - Going
Concern
The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial
statements, the Company has incurred recurring losses from operations, a working capital deficit and accumulated deficit at June 30, 2022.
These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards
to these matters are also described in Note 3. These consolidated financial statements do not include any adjustments that might result
from the outcome of these uncertainties. If the Company is unable to successfully obtain the necessary additional financial support as
specified in Note 3, there could be a material adverse effect on the Company.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide
a reasonable basis for our opinion.
We served as the Company’s auditor from
2021 through 2022
/s/ Friedman LLP
New York, New York
December 5, 2022
PCAOB ID: 711
TREASURE GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
June 30, | | |
June 30, | |
| |
2023 | | |
2022 | |
ASSETS | |
| | |
| |
CURRENT ASSETS | |
| | |
| |
Cash and cash equivalents | |
$ | 4,593,634 | | |
$ | 1,845,232 | |
Accounts receivable, net | |
| 163,169 | | |
| - | |
Inventories | |
| 400,543 | | |
| 216,069 | |
Other receivables and other current assets | |
| 613,125 | | |
| 8,780 | |
Other receivable, a related party | |
| 12,379 | | |
| - | |
Prepayments | |
| 248,551 | | |
| 203,020 | |
Total current assets | |
| 6,031,401 | | |
| 2,273,101 | |
| |
| | | |
| | |
NON-CURRENT ASSETS | |
| | | |
| | |
Property and equipment, net | |
| 279,600 | | |
| 337,645 | |
Operating lease right-of-use assets | |
| 61,377 | | |
| - | |
Deferred offering costs | |
| - | | |
| 93,536 | |
Total non-current assets | |
| 340,977 | | |
| 431,181 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 6,372,378 | | |
$ | 2,704,282 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | |
| | | |
| | |
CURRENT LIABILITIES | |
| | | |
| | |
Related party loan, current portion | |
$ | 5,323 | | |
$ | 4,505 | |
Insurance loan | |
| 160,292 | | |
| - | |
Convertible notes payable, net of unamortized discounts of $358,284 and $717,260 as of June 30, 2023 and 2022, respectively | |
| 4,791,716 | | |
| 10,954,042 | |
Convertible notes payable, related parties | |
| - | | |
| 2,437,574 | |
Loans from third parties | |
| - | | |
| 1,417,647 | |
Accounts payable | |
| 42,853 | | |
| 25,397 | |
Accounts payable, related parties | |
| - | | |
| 14,326 | |
Customer deposits | |
| 161,475 | | |
| 73,317 | |
Contract liabilities | |
| 157,080 | | |
| 56,757 | |
Other payables and accrued liabilities | |
| 723,396 | | |
| 1,161,860 | |
Other payables, related parties | |
| 1,660 | | |
| - | |
Amount due to related parties | |
| 320,960 | | |
| 2,060,088 | |
Operating lease liabilities | |
| 40,274 | | |
| - | |
Income tax payables | |
| 67,546 | | |
| 16,445 | |
Total current liabilities | |
| 6,472,575 | | |
| 18,221,958 | |
| |
| | | |
| | |
NON-CURRENT LIABILITIES | |
| | | |
| | |
Operating lease liabilities, non-current | |
| 22,036 | | |
| - | |
Related party loan, non-current portion | |
| 8,099 | | |
| 13,883 | |
Senior note | |
| - | | |
| 65,000 | |
Total non-current liabilities | |
| 30,135 | | |
| 78,883 | |
TOTAL LIABILITIES | |
| 6,502,710 | | |
| 18,300,841 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES (Note 15) | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIENCY | |
| | | |
| | |
Common stock, par value $0.00001; 170,000,000 shares authorized, 17,901,353 and 10,545,251 shares issued and outstanding as of June 30, 2023 and 2022, respectively | |
| 180 | | |
| 105 | |
Additional paid-in capital | |
| 31,485,556 | | |
| 4,020,552 | |
Accumulated deficits | |
| (31,443,451 | ) | |
| (19,715,740 | ) |
Accumulated other comprehensive (loss) income | |
| (172,617 | ) | |
| 98,524 | |
TOTAL STOCKHOLDERS’ DEFICIENCY | |
| (130,332 | ) | |
| (15,596,559 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | |
$ | 6,372,378 | | |
$ | 2,704,282 | |
The accompanying notes are an integral part of
these consolidated financial statements.
TREASURE GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
|
For the Years Ended
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
69,408,319 |
|
|
$ |
79,674,879 |
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
(68,885,035 |
) |
|
|
(79,198,691 |
) |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
523,284 |
|
|
|
476,188 |
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
(4,721,723 |
) |
|
|
(6,282,465 |
) |
General and administrative |
|
|
(4,670,030 |
) |
|
|
(2,819,811 |
) |
Research and development |
|
|
(549,065 |
) |
|
|
(266,716 |
) |
Stock-based compensation |
|
|
(819,332 |
) |
|
|
(1,283,994 |
) |
Total operating expenses |
|
|
(10,760,150 |
) |
|
|
(10,652,986 |
) |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(10,236,866 |
) |
|
|
(10,176,798 |
) |
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE) INCOME |
|
|
|
|
|
|
|
|
Other (expense) income, net |
|
|
(7,937 |
) |
|
|
54,854 |
|
Interest expense |
|
|
(95,242 |
) |
|
|
(341,609 |
) |
Amortization of debt discount |
|
|
(1,290,050 |
) |
|
|
(1,266,861 |
) |
TOTAL OTHER EXPENSE, NET |
|
|
(1,393,229 |
) |
|
|
(1,553,616 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(11,630,095 |
) |
|
|
(11,730,414 |
) |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
(97,616 |
) |
|
|
(15,600 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS |
|
|
(11,727,711 |
) |
|
|
(11,746,014 |
) |
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(271,141 |
) |
|
|
154,104 |
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS |
|
$ |
(11,998,852 |
) |
|
$ |
(11,591,910 |
) |
|
|
|
|
|
|
|
|
|
LOSS PER SHARE |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.70 |
) |
|
$ |
(1.12 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
16,691,956 |
|
|
|
10,469,396 |
|
The accompanying notes are
an integral part of these consolidated financial statements.
TREASURE GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’
DEFICIENCY
| |
| | |
| | |
| | |
| | |
ACCUMULATED | | |
| |
| |
COMMON STOCK | | |
ADDITIONAL | | |
| | |
OTHER | | |
TOTAL | |
| |
Number of shares | | |
par value | | |
PAID IN CAPITAL | | |
ACCUMULATED DEFICIT | | |
COMPREHENSIVE INCOME (LOSS) | | |
STOCKHOLDERS’ DEFICIENCY | |
Balance as of June 30, 2021 | |
| 10,312,585 | | |
$ | 103 | | |
$ | 1,504,950 | | |
$ | (7,969,726 | ) | |
$ | (55,580 | ) | |
$ | (6,520,253 | ) |
Beneficial conversion feature from issuance of convertible notes | |
| - | | |
| - | | |
| 1,231,610 | | |
| - | | |
| - | | |
| 1,231,610 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (11,746,014 | ) | |
| - | | |
| (11,746,014 | ) |
Issuance of common stock - non-employee stock compensation | |
| 232,666 | | |
| 2 | | |
| 1,283,992 | | |
| - | | |
| - | | |
| 1,283,994 | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| 154,104 | | |
| 154,104 | |
Balance as of June 30, 2022 | |
| 10,545,251 | | |
| 105 | | |
| 4,020,552 | | |
| (19,715,740 | ) | |
| 98,524 | | |
| (15,596,559 | ) |
Beneficial conversion feature from issuance of convertible notes | |
| - | | |
| - | | |
| 749,062 | | |
| - | | |
| - | | |
| 749,062 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (11,727,711 | ) | |
| - | | |
| (11,727,711 | ) |
Issuance of common stock - non-employee stock compensation | |
| 395,547 | | |
| 4 | | |
| 819,328 | | |
| - | | |
| - | | |
| 819,332 | |
Conversion of convertible note payable | |
| 4,150,140 | | |
| 42 | | |
| 14,476,325 | | |
| - | | |
| - | | |
| 14,476,367 | |
Conversion of convertible note payable, related parties | |
| 353,272 | | |
| 4 | | |
| 2,437,570 | | |
| - | | |
| - | | |
| 2,437,574 | |
Issuance of common stock in initial public offering, net of issuance costs | |
| 2,300,000 | | |
| 23 | | |
| 7,951,202 | | |
| - | | |
| - | | |
| 7,951,225 | |
Fair value of warrants issued in initial public offering | |
| - | | |
| - | | |
| 175,349 | | |
| - | | |
| - | | |
| 175,349 | |
Issuance of warrants - non- employee stock compensation | |
| - | | |
| - | | |
| 856,170 | | |
| - | | |
| - | | |
| 856,170 | |
Cashless exercise of warrants- non- employee stock compensation into common stock | |
| 157,143 | | |
| 2 | | |
| (2 | ) | |
| - | | |
| - | | |
| - | |
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| (271,141 | ) | |
| (271,141 | ) |
Balance as of June 30, 2023 | |
| 17,901,353 | | |
$ | 180 | | |
$ | 31,485,556 | | |
$ | (31,443,451 | ) | |
$ | (172,617 | ) | |
$ | (130,332 | ) |
The accompanying notes are an integral part of
these consolidated financial statements.
TREASURE GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
For the Years Ended June 30, | |
| |
2023 | | |
2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net loss | |
$ | (11,727,711 | ) | |
$ | (11,746,014 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 108,483 | | |
| 60,605 | |
Amortization of debt discounts | |
| 1,290,050 | | |
| 1,266,861 | |
Amortization of operating right-of-use assets | |
| 35,034 | | |
| - | |
Allowance for (recovery of) doubtful accounts, net | |
| 601 | | |
| (24,953 | ) |
Inventories impairment | |
| - | | |
| 8,805 | |
Stock-based compensation | |
| 819,332 | | |
| 1,283,994 | |
Loss from disposal of equipment | |
| 18,362 | | |
| - | |
Change in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (170,107 | ) | |
| 107,233 | |
Account receivable, a related party | |
| - | | |
| 10,116 | |
Inventories | |
| (204,028 | ) | |
| 151,184 | |
Other receivables and other current assets | |
| (352,990 | ) | |
| 5,376 | |
Other receivable, a related party | |
| (12,860 | ) | |
| - | |
Prepayments | |
| (58,941 | ) | |
| (35,730 | ) |
Accounts payable | |
| 19,588 | | |
| (17,648 | ) |
Accounts payable, related parties | |
| (14,061 | ) | |
| (142,642 | ) |
Customer deposits | |
| 95,787 | | |
| (67,237 | ) |
Customer deposits, related parties | |
| - | | |
| (191,698 | ) |
Contract liabilities | |
| 107,474 | | |
| 47,066 | |
Other payables and accrued liabilities | |
| 468,492 | | |
| 719,184 | |
Other payables, related parties | |
| 1,725 | | |
| (112,848 | ) |
Operating lease liabilities | |
| (34,065 | ) | |
| - | |
Income tax payables | |
| 49,550 | | |
| 14,445 | |
Net cash used in operating activities | |
| (9,560,285 | ) | |
| (8,663,901 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchases of equipment | |
| (86,964 | ) | |
| (312,358 | ) |
Proceeds from sale of equipment | |
| 25,720 | | |
| 619 | |
Net cash used in investing activities | |
| (61,244 | ) | |
| (311,739 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Payments of deferred offering cost | |
| (15,000 | ) | |
| (93,536 | ) |
Proceeds from issuance of common stock in initial public offering | |
| 8,235,110 | | |
| - | |
Principal payments of insurance loan | |
| (104,271 | ) | |
| - | |
Payments of related party loans | |
| (4,105 | ) | |
| (5,434 | ) |
Proceeds from issuance of convertible notes | |
| 7,732,092 | | |
| 7,587,150 | |
Proceeds from issuance of convertible notes, related parties | |
| - | | |
| 1,037,574 | |
Repayments from related parties | |
| - | | |
| 59,722 | |
Repayment of senior note | |
| (65,000 | ) | |
| - | |
Repayments to related parties | |
| (1,728,225 | ) | |
| (1,898,578 | ) |
Proceeds from third party loans | |
| 556,719 | | |
| 1,476,995 | |
Repayments to third party loans | |
| (1,948,132 | ) | |
| - | |
Net cash provided by financing activities | |
| 12,659,188 | | |
| 8,163,893 | |
| |
| | | |
| | |
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS | |
| (289,257 | ) | |
| (186,419 | ) |
| |
| | | |
| | |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |
| 2,748,402 | | |
| (998,166 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS, beginning of year | |
| 1,845,232 | | |
| 2,843,398 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS, end of year | |
$ | 4,593,634 | | |
$ | 1,845,232 | |
| |
| | | |
| | |
SUPPLEMENTAL CASH FLOWS INFORMATION | |
| | | |
| | |
Income taxes paid | |
$ | 46,450 | | |
$ | 1,628 | |
Interest paid | |
$ | 65,679 | | |
$ | 291,433 | |
| |
| | | |
| | |
SUPPLEMENTAL NON-CASH FLOWS INFORMATION | |
| | | |
| | |
Offering costs paid in the prior period | |
$ | 93,536 | | |
$ | - | |
Beneficial conversion feature resulted from issuance of convertible notes | |
$ | 749,062 | | |
$ | 1,231,610 | |
Fair value of warrants issued to underwriter | |
$ | 175,349 | | |
$ | - | |
Fair value of warrants issued to consultant | |
$ | 856,170 | | |
$ | - | |
Fair value of common stock issued to consultant | |
$ | 819,332 | | |
$ | - | |
Recognition of operating right-of-use asset and lease liability | |
$ | 98,795 | | |
$ | - | |
Recognition of accrued restoration cost in a lease | |
$ | 24,664 | | |
| - | |
Conversion of convertible notes payable, net of unamortized discounts | |
$ | 14,476,367 | | |
$ | - | |
Conversion of convertible notes payable, related parties | |
$ | 2,437,574 | | |
$ | - | |
Insurance premium prepaid by insurance loan | |
$ | 264,563 | | |
$ | - | |
The accompanying notes are an integral part of
these consolidated financial statements.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of business and organization
Treasure Global Inc. (“TGL” or the
“Company”) is a holding company incorporated on March 20, 2020, under the laws of the State of Delaware. The Company
has no substantive operations other than holding all of the outstanding shares of Gem Reward Sdn. Bhd. (“GEM”), which was
established under the laws of the Malaysia on June 6, 2017, through a reverse recapitalization.
On March 11, 2021, TGL completed a reverse recapitalization
(“Reorganization”) under common control of its then existing stockholders, who collectively owned all of the equity interests
of GEM prior to the Reorganization through a Share Swap Agreement. GEM is under common control of the same stockholders of TGL through
a beneficial ownership agreement, which results in the consolidation of GEM and has been accounted for as a Reorganization of entities
under common control at carrying value. Before and after the Reorganization, the Company, together with its subsidiaries is effectively
controlled by the same stockholders, and therefore the Reorganization is considered as a recapitalization of entities under common control
in accordance with Accounting Standards Codification (“ASC”) 805-50-25. The consolidation of the Company and its subsidiaries
have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of
the beginning of the first period presented in the accompanying consolidated financial statements in accordance with ASC 805-50-45-5.
The Company, through its wholly owned subsidiary,
GEM, engages in the payment processing industry and operate an online-to-offline (“O2O”) e-commerce platform known as “ZCITY”.
The Company has extensive business interests in creating an innovative O2O e-commerce platform with an instant rebate and affiliate cashback
program business model, focusing on providing a seamless payment solution and capitalizing on big data using artificial intelligence technology.
The Company’s proprietary product is an internet application (or “app”) called “ZCITY App”. ZCITY App drives
user app download and transactions by providing instant rebate and cashback. The Company aims to transform and simplify a user’s
e-payment gateway experience by providing great deals, rewards and promotions with every use in an effort to make it Malaysia’s
top reward and payment gateway platform.
On April 12, 2023, the Company entered into a
share sale agreement (the “Agreement”) with Damanhuri Bin Hussien (“DBH”), an unrelated party. Pursuant to the
Agreement, the Company agreed to purchase 10,000 units of ordinary shares, representing a 100% equity interest in Foodlink Global Sdn
Bhd (“Foodlink”), along with its two wholly owned subsidiaries, Morgan Global Sdn. Bhd (“Morgan”) and AY Food
Ventures Sdn. Bhd. (“AY Food”), for a consideration of MYR12,000 (approximately $3,000) from DBH.
Foodlink, Morgan, and AY Food are engaged in the
operation of sub-licensing restaurant branding and the selling and trading of food and beverage products. Since Foodlink, Morgan, and
AY Food are blank check companies that were incorporated in January 2023 without any operating history prior to the acquisition, the acquisition
of these entities is immaterial to the Company’s consolidated financial statements.
The accompanying consolidated financial statements reflect the
activities of TGL and each of the following entities.
Name |
|
|
Background |
|
Ownership |
Gem Reward Sdn. Bhd. (“GEM”) |
|
●
●
● |
A Malaysian company Incorporated in June 2017 Operated O2O e-commerce platform known as ZCITY |
|
100% owned by TGL |
Foodlink Global Sdn Bhd (“Foodlink”), |
|
●
●
● |
A Malaysian company Incorporated in January 2023 Sub-licensing restaurant branding and selling and trading of foods and beverage products. |
|
100% owned by TGL |
Morgan Global Sdn. Bhd (“Morgan”) |
|
●
●
● |
A Malaysian company Incorporated in January 2023 Sub-licensing restaurant branding and selling and trading of foods and beverage products. |
|
100% owned by Foodlink |
AY Food Ventures Sdn. Bhd. (“AY Food”), |
|
●
●
● |
A Malaysian company Incorporated in January 2023 Sub-licensing restaurant branding and selling and trading of foods and beverage products. |
|
100% owned by Foodlink |
Note 2 – Summary of significant
accounting policies
Going concern
In assessing the Company’s liquidity and
the significant doubt about its ability to continue as a going concern, the Company monitors and analyzes cash on hand and operating expenditure
commitments. The Company’s liquidity needs are to meet working capital requirements and operating expense obligations. To date,
the Company has financed its operations primarily through cash flows from contributions from stockholders, issuance of convertible notes
from third parties and related parties, related party loans, and its initial underwritten public offering (the “Offering”).
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s management has considered whether there is substantial
doubt about its ability to continue as a going concern due to: (1) recurring loss from operations of approximately $10.2 million for the
year ended June 30, 2023; (2) accumulated deficit of approximately $31.4 million as of June 30, 2023; and (3) net operating cash outflow
of approximately $9.6 million for the year ended June 30, 2023.
On August 15, 2022, the Company closed its Offering
of 2,300,000 shares of common stock, par value $0.00001 per share, at $4.00 per share. The Company received aggregate net proceeds from
the closing of approximately $8.2 million, after deducting underwriting discounts, commissions, fees, and other estimated offering expenses.
From February 2023 to June 2023, the Company issued
two convertible notes to a third party, in an aggregate principal amount of $5,500,000. Upon completion of these transactions, the Company
received $5,060,000 in net proceeds from this third party, net of debt discount. The convertible notes accrue or will accrue interest
expense at 4% per annum and have a 12-month term.
Despite receiving the net proceeds from its Offering
and the issuance of convertible notes, the Company’s management is of the opinion that it will not have sufficient funds to meet
the Company’s working capital requirements and debt obligations as they become due starting from one year from the date of this
report due to the recurring loss. Therefore, management has determined that there is a significant doubt about its ability to continue
as a going concern. If the Company is unable to generate significant revenue, it may be required to curtail or cease its operations. Management
is trying to alleviate the going concern risk through the following sources:
| ● | Equity
financing to support its working capital; |
| ● | Other
available sources of financing (including debt) from Malaysian banks and other financial institutions; and |
| ● | Financial
support and credit guarantee commitments from the Company’s related parties. |
There, however, is no guarantee that
the substantial doubt about the Company’s ability to continue as a going concern will be alleviated.
Basis
of presentation
The accompanying
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
Principles
of consolidation
The consolidated
financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company
and its subsidiaries have been eliminated upon consolidation.
A subsidiary
is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern
the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority
of votes at the meeting of directors.
Enterprise wide disclosure
The Company’s Chief Operating Decision Makers
(CODM), which include the Chief Executive Officer and their direct reports, review financial information presented on a consolidated basis.
This information is accompanied by a breakdown of revenues from different revenue streams, facilitating resource allocation and financial
performance evaluation. The reporting of operating segments aligns with the internal reports provided to the CODM, a group composed of
specific members of the Company’s management team.
As of June 30, 2023, the Company had two operating
segments: (1) revenue generated from the ZCITY platform and (2) revenue from food and beverage products, along with sublicensing revenue.
However, upon assessing both the qualitative and quantitative criteria outlined in ASC 280, ‘Segment Reporting,’ it was determined that
the operating segments related to food and beverage product revenue and sublicensing revenue did not meet the quantitative criteria. Consequently,
the Company considers itself to be operating within a single reportable segment.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Use of estimates
The preparation of these consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our consolidated
financial statements include the estimated retail price per point and estimated breakage to calculate the revenue recognized in our loyalty
program revenue, the useful lives of property and equipment, impairment of long-lived assets, allowance for doubtful accounts, write-down
for estimated obsolescence or unmarketable inventories, realization of deferred tax assets and uncertain tax position, fair value of
our stock price to determine the beneficial conversion feature (“BCF”) within the convertible note, fair value of the stock-based
compensation, and fair value of the warrants issued. Actual results could differ from these estimates.
Foreign currency translation and transaction
Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange
rates at the balance sheet dates. The resulting exchange differences are recorded in the Consolidated Statements of Operations and Comprehensive
Loss. The reporting currency of the Company is United States Dollars (“US$”) and the accompanying consolidated financial
statements have been expressed in US$. The Company’s subsidiaries in Malaysia conducts their businesses and maintains their books
and record in the local currency, Malaysian Ringgit (“MYR” or “RM”), as its functional currency. In general,
for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in
accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date.
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 gain or loss within
the consolidated statements of changes in stockholders’ deficiency. Cash flows are also translated at average translation rates
for the periods, therefore, amounts reported on the consolidated statements of cash flows will not necessarily agree with changes in the
corresponding balances on the consolidated balance sheets.
Translation of foreign currencies into US$1 have
been made at the following exchange rates for the respective periods:
| |
As of | |
| |
June 30,
2023 | | |
June 30,
2022 | |
Period-end MYR: US$1 exchange rate | |
| 4.67 | | |
| 4.41 | |
| |
For the years ended
June 30, | |
| |
2023 | | |
2022 | |
Period-average MYR: US$1 exchange rate | |
| 4.49 | | |
| 4.23 | |
Cash and cash equivalents
Cash is carried at cost and represent cash on
hand, time deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three
months or less. Cash equivalents consist of funds received from customer, which funds were held at the third-party platform’s fund
account, and which are unrestricted and immediately available for withdrawal and use.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounts receivable, net
Accounts receivable are recorded at the invoiced amount less an allowance
for any uncollectible accounts and do not bear interest. The Company provides various payment terms from cash due on delivery to 90 days
based on customer’s credibility. Accounts receivable include money due from agent subscription and sales of health care product
on its ZCITY platform as well as sublicensing revenue and sales of food and beverage products. Management reviews the adequacy of the
allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically
evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in
the allowance when it is considered necessary. 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’s management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. As of June 30, 2023 and 2022, the Company recorded $214, and $227 of
allowance for doubtful account, respectively.
For the years ended June 30, 2023 and 2022, the
Company record $601 and $0 additional allowance doubtful account against accounts receivable, respectively.
For the years ended June 30, 2023 and 2022, the Company recovered doubtful
account from accounts receivable amounted to $0 and $24,953, 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 gift card or “E-voucher”
pin code which are purchased from the Company’s suppliers as merchandized goods or store credit. Costs also included health
care products, foods and beverage products which are purchased from the Company’s suppliers as merchandized goods. Management
compares the cost of inventories with the net realizable value and if applicable, an allowance is made for writing down the
inventory to its net realizable value, if lower than cost. On an ongoing basis, inventories are reviewed for potential write-down
for estimated obsolescence or unmarketable inventories which equals the difference between the costs of inventories and the
estimated net realizable value based upon forecasts for future demand and market conditions. When inventories are written-down to
the lower of cost or net realizable value, it is not marked up subsequently based on changes in underlying facts and circumstances.
For the years ended June 30, 2023 and 2022, $0 and $8,805 write-down for inventories were recorded, respectively.
Other receivables and other current assets
Other receivables and other current assets primarily include prepayment
made by the Company to third parties for cyber security service, director & officer liability insurance (“D&O Insurance”),
other professional fee. Other receivables and other current assets also include refundable advance to third party service provider, and
other deposits. I Management regularly reviews the aging of receivables and changes in payment trends and records allowances when
management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after
exhaustive efforts at collection are made. As of June 30, 2023 and 2022, no allowance for doubtful account was recorded.
Prepayments
Prepayments and deposits are mainly cash deposited
or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any prepayments determined
by management that such advances will not be in receipts of inventories, services, or refundable, the Company will recognize an allowance
account to reserve such balances. Management reviews its prepayments on a regular basis to determine if the allowance is adequate, and
adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management
has determined that the likelihood of collection is not probable. The Company’s management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. As of June 30, 2023 and 2022, no allowance for the doubtful accounts
was recorded.
Property and equipment, net
Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with no
residual value. The estimated useful lives are as follows:
| |
Expected
useful lives | |
Computer and office equipment | |
5 years | |
Furniture and fixtures | |
3-5 years | |
Motor vehicles | |
5 years | |
Leasehold improvement | |
3 years | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The cost and related accumulated depreciation
of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of
operations and comprehensive loss. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals
and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of
depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment for long-lived assets
Long-lived assets, including property and equipment
with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market
conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company
assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize
an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected
from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would
reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate,
to comparable market values. As of June 30, 2023 and 2022, no impairment of long-lived assets was recognized.
Deferred offering costs
Deferred offering costs represents costs associated
with the Company’s Offering on August 15, 2022. The deferred offering costs had been netted against the proceeds received from the
Offering.
Customer deposits
Customer
deposits represent amounts advanced by customers on service order. Customer deposits are reduced when the related sale is recognized in
accordance with the Company’s revenue recognition policy. Customer deposits also represent unamortized member subscription revenue.
Convertible notes
The Company evaluates its convertible notes to
determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment
is that the fair value of the embedded derivative is recorded at fair value each reporting period and recorded as a liability. In the
event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income
or expense.
In circumstances where the embedded conversion
option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible
instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative
instrument.
If the conversion features of conventional convertible
debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion
feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion
and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company
amortizes the discount to interest expense, over the life of the debt.
Upon conversion, the carrying amount of the convertible
note, net of the unamortized discount shall be reduced by, if any, the cash (or other assets) transferred and then shall be recognized
in the capital accounts to reflect the shares issued and no gain or loss is recognized pursuant to ASC Topic 470-20-40-4.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Warrants
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment
considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant
to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net
cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of equity at the time of issuance. As the Company’s warrants
meet all of the criteria for equity classification, so the Company classified each warrant as its own equity.
Revenue recognition
The Company adopted Accounting Standards Update
(“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606) for all periods presented. The core principle underlying
the revenue recognition of this ASU allows the Company to recognize - revenue that represents the transfer of goods and services to customers
in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company
to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based
on when control of goods and services transfers to a customer.
To achieve that core principle, the Company applies
five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract
with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable
consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price
to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance
obligation.
The Company accounts for a contract with a customer
when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial
substance and consideration is probable of substantially collection.
Revenue recognition policies for each type of
revenue stream are as follows:
Product revenue
- Performance obligations satisfied at a point
in time
The Company primarily sells discounted gift cards
(or E-vouchers) from retailers, health care products and computer products through individual order directly through the Company’s
online marketplace platform and its mobile application (“ZCITY”). In addition, the Company through its subsidiaries, Morgan
and AY Food, engages in sales of food and beverage products. When the Company is acting as a principal in the transaction, the Company
accounts for the revenue generated from its sales of E-vouchers, health care products, computer products, and food and beverage product
on a gross basis as the Company is is responsible for fulfilling the promise to provide the specified goods, which the Company has control
of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. In making this determination, the
Company assesses whether it is primarily obligated in these transactions, is subject to inventory risk, has latitude in establishing prices,
or has met several but not all of these indicators in accordance with ASC 606-10-55-36 through 40. The Company determined that it is primarily
responsible for fulfilling the promise to provide the specified good as the Company directly purchases and pays for in full the applicable
E-voucher, health care products and computer products from the vendors prior to posting of such products for sale on its online marketplace
platform and prior to taking any orders for sales of such products. Meanwhile, the Company maintained an average daily inventory of approximately
$403,994 to support an average 2.1 days of sales during the year ended June 30, 2023, which demonstrate the Company had control over the
products prior to selling it to the customers as the ownership of the products did not transfer momentarily to the customer after
the Company purchased the products from vendors. In addition, the Company cannot return the products to the vendors due to lack of sales
which demonstrated that the Company is subject to inventory risk, and it has discretion in establishing the price of the products which
has demonstrated that the Company has the ability to direct the use of that good or service and obtain substantially all of the remaining
benefits.
In certain instances, the Company is acting as
an agent in the transaction and is engaging in drop shipping arrangements for health care, food, and beverage products, where the products
were shipped directly from the vendors to the customers. In these drop shipping transactions, the Company was not primarily responsible
for fulfilling the promise to deliver the products to the customers, and as a result, did not exercise control over the goods or assume
any inventory risks. Therefore, the Company determined that revenue from sales of products under the drop shipping arrangements were recognized
on a net basis.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
Company recognizes the sales of E-vouchers, health care products, computer products, and food and beverage products revenue when the control
of the specified goods is transferred to its customer. No refund or return policy is provided to the customer. For the years ended June
30, 2023 and 2022, approximately $1.8 million and $2.8 million of
product revenues are related to non-spending related activities with the same amount recorded as selling expenses, respectively.
Loyalty program
- Performance obligations satisfied at a point
in time
The Company’s ZCITY reward loyalty
program allows members to earn points on purchases that can be redeemed for rewards that include discounts on future purchases. When members
purchase the Company’s product or make purchase with the Company’s participated vendor through ZCITY, the Company allocate
the transaction price between the product and service, and the reward points earned based on the relative stand-alone selling prices and
expected point redemption. The portion allocated to the reward points is initially recorded as contract liability and subsequently recognized
as revenue upon redemption or expiration.
The two primary estimates utilized to record the
contract liabilities for reward points earned by members are the estimated retail price per point and estimated breakage. The estimated
retail price per point is based on the actual historical retail prices of product purchased or service obtained through the redemption
of reward points. The Company estimate breakage of reward points based on historical redemption rates. The Company continually evaluates
its methodology and assumptions based on developments in retail price per point redeemed, redemption patterns and other factors. Changes
in the retail price per point and redemption rates have the effect of either increasing or decreasing the contract liabilities through
current period revenue by an amount estimated to represent the retail value of all points previously earned but not yet redeemed by loyalty
program members as of the end of the reporting period.
Transactions revenue
- Performance obligations satisfied at a point
in time
The transactions revenues primarily consist of
fees charged to merchants for participating in ZCITY upon successful sales transaction and payment service taken place between
the merchants and their customers online.
The Company earns transaction revenue from merchants
when transactions are completed on certain retail marketplaces. Such revenue is generally determined as a percentage based on the value
of merchandise or services being sold by the merchants. In connection with the transaction revenue, the Company offers to share the profit
of the transaction (“agent commission”) to the agents who has referred merchants to participating in Company’s online
marketplace platform and in ZCITY. Transaction revenue is recognized, net of agent commission, in the consolidated statements of
operations at the time when the underlying transaction is completed.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Agent subscription revenue
- Performance obligations satisfied at a point
in time
In order to attract more merchants to join the
Company’s online marketplace and in ZCITY, the Company provides a right to the agent, an individual or a merchant, to join
the Zagent program and assist the Company to develop more merchants to join its merchant network. The agent subscription revenue primarily
consists of fees charged to the agents in exchange for the right by introducing merchants to join the Company’s merchant network
and to earn a future fixed percentage of commission fee upon completion of each sales transaction. As the agent subscription fee is non-refundable,
agent subscription revenue is recognized in the consolidated statements of operations at the time when an agent completed the Zagent program
training and the remittance of payment of the subscription fee.
Member subscription revenue
- Performance obligations satisfied over time
In order to attract more customer to engage with
the Company’s online marketplace and in ZCITY, the Company provides membership subscription to the customers to join the Zmember
program, a membership program that provides member with benefits which included exclusive saving, bonus, and referral rewards. Member
subscription revenue primarily consists of fees charge to customers who sign up for Zmember. As the Company provides customers with 6
months member subscription service in general, member subscription revenue is recognized in the consolidated statement of operation over
the time across the subscription period.
Sublicense revenue
- Performance obligations satisfied over time
The Company, through its wholly-owned subsidiaries,
Morgan and AY Food, generates revenue by sublicensing the right to use the Licensor’s Trademark to its customers. Since the sublicense
fee is charged to customers on a monthly basis throughout the contractual period, the Company recognizes sublicense revenue in the consolidated
statements of operations over the duration of the contract. Furthermore, the Company establishes itself as the principal in these arrangements,
as it possesses the latitude to establish pricing and assumes the inventory risk associated with fulfilling the minimum payment obligations
to the Trademark’s licensor regardless of the number of sublicensees engaged by the Company during the license period.
Disaggregated information of revenues by products/services
are as follows:
| |
For the years ended June 30, | |
| |
2023 | | |
2022 | |
Gift card or “E-voucher” revenue (1) | |
$ | 68,050,624 | | |
$ | 78,739,939 | |
Health care products, computer products, and food and beverage products revenue (1) | |
| 324,209 | | |
| 49,524 | |
Loyalty program revenue (1) | |
| 524,854 | | |
| 620,293 | |
Transaction revenue (1) | |
| 75,274 | | |
| 53,667 | |
Agent subscription revenue (1) | |
| - | | |
| 15 | |
Member subscription revenue (2) | |
| 383,538 | | |
| 211,441 | |
Sub license revenue (2) | |
| 49,820 | | |
| - | |
Total revenues | |
$ | 69,408,319 | | |
$ | 79,674,879 | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cost of revenue
Cost of revenue sold mainly consists of the purchases
of the gift card or “E-voucher” pin code, and health care products which is directly attributable to the sales of product
on the Company’s online marketplace platform. In addition, cost of revenue sold also consists of purchase of food and beverage products
for resales and license payment to Trademark’s licensor for sublicense revenue.
Advertising costs
Advertising costs amounted to $3,494,347 and
$4,224,710 for the years ended June 30, 2023 and 2022, respectively.
Research and development
Research and development expenses include salaries
and other compensation-related expenses to the Company’s research and product development personnel, and related expenses for the
Company’s research and product development team. Research and development expenses amounted to $549,065 and $266,716 for
the years ended June 30, 2023 and 2022, respectively.
Defined contribution plan
The full-time employees of the Company are entitled
to the government mandated defined contribution plan. The Company is required to accrue and pay for these benefits based on certain percentages
of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant government regulations, and
make cash contributions to the government mandated defined contribution plan. Total expenses for the plans were $208,190 and $139,593 for
the years ended June 30, 2023 and 2022, respectively.
The related contribution plans include:
| ● | Social Security Organization (“SOSCO”) – 1.75% based on employee’s monthly salary capped of RM 4,000; |
| ● | Employees Provident Fund (“EPF”) – 12% based on employee’s monthly salary; |
| ● | Employment Insurance System (“EIS”) – 0.2% based on employee’s monthly salary capped of RM 4,000; |
Income
taxes
The Company accounts for income taxes in accordance
with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are
non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred taxes are accounted for using the asset
and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle,
deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it
is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated
using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged
or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred
tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance
with the laws of the relevant taxing authorities.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and
interest incurred related to underpayment of income tax for the years ended June 30, 2023 and 2022.
The Company is incorporated in the State of Delaware
and is required to pay franchise taxes to the State of Delaware on an annual basis.
The Company conducts much of its business activities
in Malaysia and is subject to tax in its jurisdiction. As a result of its business activities, the Company will file separate tax returns
that are subject to examination by the foreign tax authorities.
Stock-based compensation
The Company recognizes compensation costs resulting from the issuance
of stock-based awards to third party consultant and former director as an expense in the statements of operations over the requisite
service period based on a measurement of fair value for each stock-based award. The fair value of each warrants granted are estimated
as of the grant date using the Black-Scholes-Merton option-pricing model while the fair value of each common stock granted are estimated
using the Company’s closing stock price on the grant date. The fair value is amortized as compensation cost on a straight-line basis
over the requisite service period of the awards. The Black-Scholes-Merton option-pricing model includes various assumptions, including
the fair market value of the common stock of the Company, expected life of stock options, the expected volatility and the expected risk-free
interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent uncertainties based
on market conditions generally outside the control of the Company.
As a result, if other assumptions had been used,
stock-based compensation expense, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore,
if the Company uses different assumptions on future grants, stock-based compensation expense could be materially affected in future periods.
Comprehensive loss
Comprehensive loss consists of two
components, net loss and other comprehensive loss. Net loss refers to revenue, expenses, gains and losses that under GAAP are
recorded as an element of stockholders’ equity (deficiency) Other comprehensive loss but are excluded from net loss. Other
comprehensive loss consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its
functional currencies.
Loss per share
The Company computes earnings (loss) per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net loss divided by the weighted average common stock outstanding for the period. Diluted EPS presents the dilutive effect
on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential common stock that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS for the years ended
June 30, 2023 and 2022, a total of 1,383,356 and 3,282,887 contingent shares to be issued to the underwriters and
convertible note holders are excluded in the diluted EPS calculation due to its anti-diluted effect, respectively.
Fair value measurements
Fair value is defined as the price that would
be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value
measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and
considers assumptions that market participants would use when pricing the asset or liability. The following summarizes the three levels
of inputs required to measure fair value, of which the first two are considered observable and the third is considered unobservable:
Level 1 - Unadjusted quoted prices in active markets
for identical assets or liabilities.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Level 2 - Observable inputs other than Level 1
prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported
by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value for certain assets
and liabilities such as cash and cash equivalents, accounts receivable, inventories, other receivables and other current assets, prepayments,
accounts payable, customers deposits, contract liabilities, other payables and accrued liabilities have been determined to approximate
carrying amounts due to the short maturities of these instruments. The Company believes that its related party loan, insurance
loan, senior note, and convertible notes approximates fair value based on current yields for debt instruments with similar terms.
Related parties
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject
to common control or common significant influence.
Lease
Effective July 1, 2022, the Company adopted ASU
2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require us to reassess: (1) whether any
expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct
costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy
election not to recognize lease assets and liabilities.
If any of the following criteria are met, the Company classifies the
lease as a finance lease:
| ● | The lease transfers ownership
of the underlying asset to the lessee by the end of the lease term; |
| ● | The lease grants the lessee
an option to purchase the underlying asset that the Company is reasonably certain to exercise; |
| ● | The lease term is for 75% or
more of the remaining economic life of the underlying asset, unless the commencement date falls within the last 25% of the economic life
of the underlying asset; |
| ● | The present value of the sum
of the lease payments equals or exceeds 90% of the fair value of the underlying asset; or |
| ● | The underlying asset is of
such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. |
Leases that do not meet any of the above criteria
are accounted for as operating leases.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company combines lease and non-lease components
in its contracts under Topic 842, when permissible.
Operating lease right-of-use (“ROU”)
asset and lease liability are recognized at the adoption date of July 1, 2022 or the commencement date, whichever is earlier, based on
the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable,
the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present
value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized
basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease terms used to calculate the present value
of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable
certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating
lease ROU asset to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore
operating lease ROU asset and liability do not include leases with a lease term of twelve months or less. Its leases generally do not
provide a residual guarantee.
The operating lease ROU asset also excludes lease
incentives. Lease expense is recognized on a straight-line basis over the lease term for operating lease.
The Company reviews the impairment of its ROU
asset consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets
when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liability in any tested
asset group and includes the associated operating lease payments in the undiscounted future pre-tax cash flows. For the years ended June
30, 2023 and 2022, the Company did not recognize impairment loss on its operating lease ROU asset.
Recent accounting pronouncements
The Company considers the applicability and impact
of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under
the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging
growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the
adoption of these accounting standards until they would apply to private companies.
In May 2019, the FASB issued ASU 2019-05, which
is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured
at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial
Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting
for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized
cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The
amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option
for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase
comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.
Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13
while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which
to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies
applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after
December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning July 1, 2023 as the Company
is qualified as an emerging growth company. The Company has adopted of this standard on July 1, 2023, the adoption did not have a material
impact on its consolidated financial statements.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In December 2019, the FASB issued ASU 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting
for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application
of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.
For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within
fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim
period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other
entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt
the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim
period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company has adopted of
this standard on July 1, 2022, the adoption did not have a material impact on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06,
“Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40)”. The amendment in this Update is to address issues identified as a result of the complexity associated
with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and
equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and
convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized
from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those
with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative,
and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial
premiums for which the premiums are recorded as paid-in capital. The amendments in this Update are effective for public business entities
that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies
as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For
all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within
those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim
periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal
year. The Company has not early adopted this update and it will become effective on July 1, 2024 as the Company is qualified as an emerging
growth company. The Company believes the adoption of this ASU would have a material effect on the Company’s consolidated financial
statements and related disclosures.
Except as mentioned above, the Company does not believe other recently
issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated
balance sheets, statements of operations and comprehensive loss and statements of cash flows.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Accounts receivable, net
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Accounts receivable | |
$ | 163,383 | | |
$ | 227 | |
Allowance for doubtful accounts | |
| (214 | ) | |
| (227 | ) |
Total accounts receivable, net | |
$ | 163,169 | | |
$ | - | |
Movements of allowance for doubtful accounts are as follows:
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Beginning balance | |
$ | 227 | | |
$ | 25,690 | |
Addition (recovery) | |
| 601 | | |
| (24,953 | ) |
Write-off | |
| (601 | ) | |
| - | |
Exchange rate effect | |
| (13 | ) | |
| (510 | ) |
Ending balance | |
$ | 214 | | |
$ | 227 | |
Note 4 – Inventories
Inventories consist of the following:
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Gift card (or E-voucher) | |
$ | 378,710 | | |
$ | 187,271 | |
Nutrition products | |
| 8,383 | | |
| 28,798 | |
Food and beverage products | |
| 13,450 | | |
| - | |
Total | |
$ | 400,543 | | |
$ | 216,069 | |
Note 5 – Other receivables and other current assets
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Deposits (1) | |
$ | 59,486 | | |
$ | 6,020 | |
Prepaid tax | |
| 1,595 | | |
| 2,760 | |
Prepaid expense (2) | |
| 552,044 | | |
| - | |
Total other receivables and other current assets | |
$ | 613,125 | | |
$ | 8,780 | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In July 2022, the Company entered into
an IT service agreement (“Service Agreement”) with a third party. Pursuant to the Service Agreement, the third party will
provide IT and advisory service to the Company to enhance its cyber security for a two-year period with a consideration of $477,251.
The Company expenses the prepaid expense related to Service Agreement based on the service performed and completed during each period.
As of June 30, 2023, the balance of prepaid expense pertained to the Service Agreement amounted to $181,237.
In March 2023, the Company has purchased
a D&O Insurance premium amounted to $311,250 which cover a period of twelve months, to be expired on February 24, 2024. As of
June 30, 2023, the balance of prepaid expense pertained to the D&O Insurance amounted to $207,500.
Note 6 – Prepayments
| |
As of
June 30,
2023 | | |
As of
June 30,
2022 | |
| |
| | | |
| | |
Deposits to suppliers | |
$ | 248,551 | | |
$ | 203,020 | |
Note 7 – Property and equipment, net
Property and equipment, net consist of the following:
| |
As of June
30,
2023 | | |
As of June
30,
2022 | |
| |
| | |
| |
Computer and office equipment | |
$ | 142,520 | | |
$ | 151,205 | |
Furniture and fixtures | |
| 73,355 | | |
| 76,148 | |
Motor vehicle | |
| 83,185 | | |
| 88,045 | |
Leasehold improvement | |
| 132,797 | | |
| 89,425 | |
Subtotal | |
| 431,857 | | |
| 404,823 | |
Less: accumulated depreciation | |
| (152,257 | ) | |
| (67,178 | ) |
Total | |
$ | 279,600 | | |
$ | 337,645 | |
Depreciation expense for years ended June 30,
2023 and 2022 were amounted to $108,483 and $60,605, respectively.
Note 8 – Loans and notes
Insurance loan
On February 28, 2023, the Company entered
into a loan agreement with First Insurance Funding, a third party (the “Premium Finance Agreement”), pursuant to which
First Insurance Funding provided the Company with a short-term loan amounted to $264,563 with interest rate of 5.9% per annum to be
due in ten equal monthly instalments of $27,177. Meanwhile, the loan is strictly used to pay for the D&O Insurance as indicated
on Note 5. For the years ended June 30, 2023 and 2022, interest expenses pertained to the insurance loan amounted to
$4,437 and $0, respectively.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Loans from third parties
The Company entered into a loan agreement with
Agtiq Solutions Sdn Bhd, a third party (the “Agtiq Loan Agreement”) dated June 27, 2022, pursuant to which Agtiq Solutions
Sdn Bhd provided the Company with a revolving loan facility to borrow up to RM 3,000,000 (approximately $0.7 million) bearing
interest at 3.5% per annum, which is payable on demand. As of June 30, 2022, the Company had balance outstanding from this facility
amounted to $668,923. On July 12, 2022, the Company repaid the remaining balance in full.
The Company entered into a loan agreement with Technovative Hub Sdn
Bhd, a third party (the “Technovative Loan Agreement”) date June 27, 2022, pursuant to which Technovative Hub Sdn Bhd provided
the Company with a revolving loan facility to borrow up to RM 4,000,000 (approximately $1.0 million) bearing interest at 3.5%
per annum, which is payable on demand. As of June 30, 2022, the Company had balance outstanding form this facility amounted to $748,724.
In July 2022, the Company had withdrew additional $567,215 from this facility under the Technovative Loan Agreement and repaid the
remaining balance in full on July 18, 2022.
For the years ended June 30, 2023 and 2022, interest expenses related
to the aforementioned loans from third parties amounted to $2,515 and $0, respectively.
Senior note
On June 30, 2021, the Company issued a 12%
Redeemable Senior Note in the principal amount of $65,000 to Yong Kim Fong, a Malaysian citizen (the “Fong Note”). The
Fong Note bears interest at 12.0% per annum and is due on the earlier of (x) the date on which our common stock is listed on Nasdaq
and (y) July 1, 2024. The Fong Note is pre-payable in full, but not in part. As of June 30, 2022, the balance of the Fong Note amounted
to $65,000. On September 1, 2022, the Company fully repaid the balance.
Convertible notes
The Company evaluated the convertible notes agreement
under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that
have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation
and liability classification.
On November 13, 2020, the Company issue a convertible
note, to an accredited investor, in the aggregate principal amount of $2,123,600. Pursuant to the agreement, the note bear an interest
rate of 13.33% per annum, payable (i) on December 31, 2020; (ii) during calendar year 2021, monthly on the last day of each month
and (iii) during calendar years 2022 and 2023 until the Maturity Date, semiannually on each June 30 and December 31; provided
that for calendar year 2023 the final interest payment date shall be the Maturity Date. The Company evaluated the convertible notes agreement
under ASC 815, which generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated
for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related
to the risks of the host contract. None of the embedded terms in the convertible notes required bifurcation and liability classification.
However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based
on the intrinsic value on the date of issuance. The Company evaluated the convertible notes for a beneficial conversion feature in accordance
with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the conversion price ($4.00) was below
the market price ($5.48) as per an enterprise per share value appraised from an independent third party, and the convertible notes contained
a beneficial conversion feature.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition, notes issuance costs in connection
with this note amounted $212,360 and reduced the carrying value of the convertible notes as a debt discount. The carrying value,
net of debt discount, will be accreted over the term of the convertible notes from date of issuance to date of maturity using effective
interest rate method. For the years ended June 30, 2023 and 2022, amortization of debt discount amounted to $46,296 and 466,232, respectively.
As of June 30, 2022, convertible note balance
from this accredited investor, net of unamortized discounts of $292,276 was amounted to $1,831,324. Upon completion of the Company’s
Offering on August 15, 2022, the above mentioned convertible note balance, net of unamortized discount amounted to $1,877,620 was
converted into 530,900 shares of the Company’s common stock. Meanwhile, additional 15,927 shares of common stock
were issued to this accredited investor as success fees.
On January 3, 2022, the Company had entered into a loan agreement (the
“Tophill Loan Agreement 1”) with a third party to borrow up to approximately $4.8 million with up to 3.5% per annum
interest rate. The loan is due on demand together with interest accrued thereon. On March 14, 2022, the Company and above mentioned third
party had made amendment to the Tophill Loan Agreement 1. Pursuant to the amendment, the aggregate outstanding principal amount of all
Loans plus any accrued and unpaid interest (“Loan balance”) thereon as of the closing date of the IPO shall automatically
converted into a number of shares of the Company’s common stock equal to the Loan balance divided by 80% of the public offering
price of the Company’s common stock in the IPO; and the loan agreement shall terminate and no additional amounts under the loan
agreement will be available to the Company and after taking into consideration the conversion of the Loan balance, no amount under any
loan shall be outstanding. In addition, the Company entered into another Loan Agreement (the “Tophill Loan Agreement 2”) dated
May 13, 2022 with Tophill, pursuant to which Tophill provided the company with a revolving loan facility to borrow up to RM 50,000,000 (approximately
$11.9 million) bearing interest at 3.5% per annum, which is payable on demand. Meanwhile, the agreement provides that (i) all
principal and accrued and unpaid interest outstanding under the Tophill Loan Agreement 2 on the closing of the Company’s initial
public offering will automatically be converted into shares of the Company’s common stock at a conversion price that is equal to 80%
of the initial public offering price and (ii) the Tophill Loan Agreement 2 terminates on the closing date of the Company’s initial
public offering. The Company evaluated the loan agreement under ASC 815, which generally requires the analysis embedded terms and features
that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks
and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms in the loan required
bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion
feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company evaluated the loan for a beneficial
conversion feature in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company determined that the
conversion price ($4.38) was below the market price ($5.48) as per an enterprise per share value appraised from an independent third party,
and the loan contained a beneficial conversion feature. The Company recognized the intrinsic value of embedded conversion feature of $537,383 and
$1,231,610 in the additional paid-in capital and reduced the carrying value of the loan as a debt discount for years ended June 30,
2023 and 2022, respectively. The carrying value, net of debt discount, will be accreted over the term of the loan from date of issuance
to the date of maturity using effective interest rate method, recorded as current liabilities. As of June 30, 2022, the convertible note
balance from Tophill Loan Agreement 1 and Agreement 2, net of unamortized discounts of $424,984, was amounted to $5,542,231 while for
the year ended June 30, 2022, amortization of debt discount for the loan amounted to $800,629. For the year June 30, 2023, the Company
has issued additional convertible note amounted to $2,672,092 pertained to Tophill Loan Agreement 2 while amortization of debt discount
amounted to $950,360 pertained to aforementioned convertible notes. Upon completion of the Company’s Offering on August 15,
2022, the remaining principal and accrued interest balance related to Tophill Loan Agreement 1 and Agreement 2 amounted to $8,639,307 was
converted into 2,756,879 shares of the Company’s common stock.
In May, June, July, September, October, and December 2021,
the Company issued various batches of convertible notes to 10 accredited investors which included 5 third parties in the aggregate principal
amount of $3,580,488 and 5 related parties in the aggregate principal amount of $2,437,574 (see Note 10). Pursuant
to the agreement, the maturity date is 36 months after the issuance, provided that if an IPO listing is not successful,
the accredited investors should be entitled to require the Company to redeem the convertible notes at the subscription/conversion of $6.90 per
share along with interest payable at the rate of 12.0% per annum. The Company also evaluated the convertible notes agreement under
ASC 815 and determined none of the embedded terms in the convertible notes required bifurcation and liability classification. However,
the Company was required to determine if the debt contained a BCF and determined that the conversion price ($6.90) was above the market
price ($5.48) as per an enterprise per share value appraised from an independent third party, and the convertible notes do not contain
a beneficial conversion feature. As a result, the Company record the proceeds received from these convertible notes as a liability in
its entirely. As of June 30, 2022, the convertible note balance from these 10 accredited investors amounted to $6,018,062. Upon completion
of the Company’s Offering on August 15, 2022, the balance of these convertible notes amounted to $6,018,062 was converted into 872,183 shares
of common stock, among which, $2,437,574 was converted into 353,272 shares of common stock are belonged to the related
parties.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On
February 28, 2023, The Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with YA
II PN, Ltd., (” YA II PN”), a third party. Pursuant
to the Securities Purchase agreement, YA II PN agreed to purchase two unsecured convertible notes, in the aggregate principal amount of
up to $5,500,000.00 in a private placement (the “Private Placement”) for a purchase price with respect to each convertible
note of 92% of the initial principal amount of such convertible notes. The convertible notes accrue
or will accrue interest at 4.0% per annum and has a 12-month term after disbursement. The conversion price, as of any conversion date
or other date of determination, is the lower of (i) $1.6204 per share of Common Stock (the “Fixed Conversion Price”) or (ii)
93% of the lowest volume-weighted average price (“VWAP”) of the common shares on the primary market during the 10 consecutive
trading days immediately preceding the date on which YA II PN exercises its conversion right in accordance with the requirements of the
applicable convertible debenture or other date of determination, but not lower than $0.25 per share (the “Floor Price”). The
conversion price will be subject to adjustment to give effect to any stock dividend, stock split or recapitalization.
YA II PN may not during any calendar month convert
more than an aggregate of the greater of (a) 25% of the aggregate dollar value traded on the Primary Market during such calendar month
or (b) $1,100,000 of principal amount of the Convertible Debentures (plus accrued and unpaid Interest) utilizing the variable conversion
price. This limitation shall not apply (i) at any time upon the occurrence and during the continuance of an Event of Default, and (ii)
with respect to any conversions utilizing the Fixed Conversion Price. This limitation may be waived with the consent of the Company. Notwithstanding
anything to the contrary contained above, the Company shall not issue more than 3,455,894 shares of Common Stock (the “Exchange
Cap”) pursuant to the terms of the Convertible, except that such limitation shall not apply in the event that the Company (A) obtains
the approval of its stockholders as required by the applicable rules of the Nasdaq Stock Market for issuances of shares of Common Stock
in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the holder of the Convertible Debentures. It is a closing condition to the purchase by the
Buyer of the $3,500,000 Convertible Debenture that such shareholder approval be obtained.
As
of June 30, 2023, YA II PN purchased two unsecured convertible notes consist of $2,000,000 (“Tranche 1”) and $3,500,000 (“Tranche
2”) in principal amount. The Company evaluated the Securities Purchase Agreement under ASC 815, which generally requires the analysis
embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded
terms in the convertible notes required bifurcation and liability classification. However, the Company was required to determine if the
debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The
Company evaluated the convertible notes for a beneficial conversion feature in accordance with ASC 470-20 “Debt with Conversion
and Other Options”. The Company determined that the conversion price of Tranche 1 ($1.55) and Tranche 2 ($1.30),
was below the market price of Tranche 1 ($1.56) and Tranche 2 ($1.38) as per
stock price listed in the stock market on February 28, 2023, and June 14, 2023, respectively, therefore, the convertible notes contained
a beneficial conversion feature. In June 2023, $350,000 of these convertible notes along with $28,953 accrued interest was converted into
327,523 shares of common stock.
In addition, 8% of purchase discount in connection
with above mentioned convertible notes amounted to $440,000 reduced the carrying value of the convertible note as a debt discount.
The carrying value, net of debt discount, will be accreted over the term of the convertible note from date of issuance to date of maturity
using effective interest rate method. For the years ended June 30, 2023 and 2022, amortization of debt discount were amounted to $293,395
and $0, respectively pertained to convertible notes from YA II PN.
The Company has convertible notes payable, net
of unamortized discounts as follows:
| |
Face value of convertible notes payable | | |
Unamortized debt discounts | | |
Convertible notes payable, net of unamortized discounts | | |
Third parties | | |
Related parties | |
June 30, 2021 balance | |
$ | 5,733,961 | | |
$ | (758,508 | ) | |
$ | 4,975,453 | | |
$ | 3,575,453 | | |
$ | 1,400,000 | |
Issuance of convertible notes | |
| 8,374,915 | | |
| (1,231,610 | ) | |
| 7,143,305 | | |
| 6,105,731 | | |
| 1,037,574 | |
Amortization of debt discounts | |
| - | | |
| 1,266,861 | | |
| 1,266,861 | | |
| 1,266,861 | | |
| - | |
Exchange rate effect | |
| - | | |
| 5,997 | | |
| 5,997 | | |
| 5,997 | | |
| - | |
June 30, 2022 balance | |
| 14,108,876 | | |
| (717,260 | ) | |
| 13,391,616 | | |
| 10,954,042 | | |
| 2,437,574 | |
Issuance of convertible notes | |
| 8,172,093 | | |
| (1,189,074 | ) | |
| 6,983,019 | | |
| 6,983,019 | | |
| - | |
Amortization of debt discounts | |
| - | | |
| 1,290,050 | | |
| 1,290,050 | | |
| 1,290,050 | | |
| - | |
Conversion | |
| (17,130,969 | ) | |
| 245,980 | | |
| (16,884,989 | ) | |
| (14,447,415 | ) | |
| (2,437,574 | ) |
Exchange rate effect | |
| - | | |
| 12,020 | | |
| 12,020 | | |
| 12,020 | | |
| - | |
June 30, 2023 balance | |
$ | 5,150,000 | | |
$ | (358,284 | ) | |
$ | 4,791,716 | | |
$ | 4,791,716 | | |
$ | - | |
For years ended June 30, 2023 and 2022, interest expenses related to
the aforementioned convertible notes amounted to $85,184 and $340,277.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Other payables and accrued liabilities
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
| |
| | |
| |
Accrued professional fees (i) | |
$ | 233,600 | | |
$ | 910,186 | |
Accrued promotion expenses (ii) | |
| 39,538 | | |
| 41,476 | |
Accrued payroll | |
| 157,542 | | |
| 112,069 | |
Accrued interest (iii) | |
| 79,936 | | |
| 92,686 | |
Payables to merchant from ZCITY platform (iv) | |
| 174,056 | | |
| - | |
Others | |
| 38,724 | | |
| 5,443 | |
Total other payables and accrued liabilities | |
$ | 723,396 | | |
$ | 1,161,860 | |
| (i) | Accrued professional fees |
The balance of accrued professional fees represented amount due to
third parties service providers which include marketing consulting service, IT related professional service, audit fee, and consulting
fee related to capital raising. In addition, the balance of accrued professional fees also consist of consulting fee which the Company
agree to compensate the consultant by issuing 300,000 warrants exercisable for a period of 5 years at $4.00 per
share. On August 15, 2022, the Company had issued the warrants to the consultant upon completion of its Offering. The value of the consulting
fee was estimated by the fair value of the warrants which was determined by using the Black Scholes model (Note 11). The consulting fee
was estimated to be $856,170 and record as accrued professional fee as of June 30, 2022. Upon issuance of the warrants, the above-mentioned
balance of the accrued professional fee was reduced by increasing the same amount in additional paid in capital.
| (ii) | Accrued promotion expense |
The balance of accrued promotion expense represented
the balance of profit sharing payable to the Company’s merchant and subscribed agents to promote business growth.
The balance of accrued interest represented the
balance of interest payable from convertible note aforementioned in Note 8.
| (iv) | Payables to merchants from ZCITY platform |
The balance of payables to merchants from ZCITY
platform represented the amount the Company collected on behalf of merchant from its customer through the Company’s ZCITY platform.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Related Party balances and
transactions
Related party balances
Other receivable, a related party
Name of related party |
|
Relationship |
|
Nature |
|
As of
June 30,
2023 |
|
|
As of
June 30,
2022 |
|
Ezytronic Sdn Bhd |
|
Jau Long “Jerry” Ooi is the common shareholder |
|
Equipment rental deposit |
|
$ |
12,379 |
|
|
$ |
- |
|
Convertible notes payable, related parties
Name of related party |
|
Relationship |
|
Nature |
|
As of
June 30,
2023 |
|
|
As of
June 30,
2022 |
|
Chuah Su Mei |
|
Spouse of Kok Pin “Darren” Tan, shareholder of TGL |
|
CLN |
|
$ |
- |
|
|
$ |
240,444 |
|
Click Development Berhad |
|
Shareholder of TGL |
|
CLN |
|
|
- |
|
|
|
120,235 |
|
Cloudmaxx Sdn Bhd |
|
Jau Long “Jerry” Ooi and Kok Pin “Darren” Tan are common shareholder |
|
CLN |
|
|
- |
|
|
|
568,305 |
|
V Capital Kronos Berhad |
|
Shareholder of TGL, and Voon Him “Victor” Hoo is the common shareholder |
|
CLN |
|
|
- |
|
|
|
1,400,000 |
|
World Cloud Ventures Sdn Bhd |
|
Jau Long “Jerry” Ooi is the common shareholder |
|
CLN |
|
|
- |
|
|
|
108,590 |
|
Total |
|
|
|
|
|
$ |
- |
|
|
$ |
2,437,574 |
|
Pursuant to the convertible note agreement related
to above convertible notes payable, related parties, the convertible note shall not be interest bearing if the Company completes its Offering
within the 36 months from the date of issuance of the convertible note, unless it has not been converted by the third anniversary
of its issuance date, in which case it shall bear interest from the time of issuance at 12% per annum. As the Company completed
its Offering on August 15, 2022, no interest expenses pertained to above convertible notes payable, related parties were accrued for years
ended June 30, 2023 and 2022.
Accounts payable, related parties
Name of Related Party | |
Relationship | |
Nature | |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Ezytronic Sdn Bhd | |
Jau Long “Jerry” Ooi is the common shareholder | |
Purchase of inventories | |
$ | - | | |
$ | 4,229 | |
The Evolutionary Zeal Sdn Bhd | |
Shareholder of TGL | |
Purchase of inventories | |
| - | | |
| 9,034 | |
World Cloud Ventures Sdn Bhd | |
Jau Long “Jerry” Ooi is a common shareholder | |
Purchase of inventories | |
| - | | |
| 1,063 | |
Total | |
| |
| |
$ | - | | |
$ | 14,326 | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other payables, related parties
Name of Related Party | |
Relationship | |
Nature | |
As of June 30 2023 | | |
As of June 30, 2022 | |
True Sight Sdn Bhd | |
Su Huay “Sue” Chuah, the Company’s Chief Marketing Officer is the shareholder of this entity | |
Consulting fee | |
$ | 345 | | |
$ | - | |
Ezytronic Sdn Bhd | |
Jau Long “Jerry” Ooi is a common shareholder | |
Operating expense paid on behalf | |
| 1,315 | | |
| - | |
Total | |
| |
| |
$ | 1,660 | | |
$ | - | |
Amount due to related parties
Name of Related Party | |
Relationship | |
Nature | |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Chong Chan “Sam” Teo | |
Directors, Chief Executive Officer, and Shareholder of TGL | |
Interest-free loan, due on demand | |
$ | 186,579 | | |
$ | 197,480 | |
Kok Pin “Darren” Tan | |
Shareholder of TGL | |
Interest-free loan, due on demand | |
| 134,381 | | |
| 1,862,608 | |
Total | |
| |
| |
$ | 320,960 | | |
$ | 2,060,088 | |
Related party loan
On December 7, 2020, the Company obtained right of use of a vehicle
through signing a trust of deed with Chan Chong “Sam” Teo, the Chief Executive Officer and a shareholder of TGL. In
return, the Company is obligated to remit monthly installment auto loan payment related to this vehicle on behalf of the related party
mentioned above. The total amount of loan that the Company is entitled to repay is approximately $27,000 (RM 114,000). The auto
loan bear 5.96% of interest rate per annum with 60 equal monthly installment payment due on the first of each month. As
of June 30, 2023, such loan has an outstanding balance of $13,422, of which $8,099 due after 12 months period and classified as related
party loan, non-current portion. The interest expense was $1,779 and $1,333 during the years ended June 30, 2023 and 2022, respectively.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Related
party transaction
Revenue from related parties
Name of Related Party | |
Relationship | |
Nature | | |
For the
year ended
June 30,
2023 | | |
For the
year ended
June 30,
2022 | |
Ezytronic Sdn Bhd | |
Jau Long “Jerry” Ooi is a common shareholder | |
| Sales of products | | |
$ | - | | |
$ | 166,139 | |
Matrix Ideal Sdn Bhd | |
Yu Weng Lok is a common shareholder | |
| Sales of products | | |
| 126 | | |
| 2,837 | |
Total | |
| |
| | | |
$ | 126 | | |
$ | 168,976 | |
Purchase from related parties
Name of Related Party | |
Relationship | |
Nature | | |
For the
year ended
June 30,
2023 | | |
For the
year ended
June 30,
2022 | |
Ezytronic Sdn Bhd | |
Jau Long “Jerry” Ooi is a common shareholder | |
| Purchase of products | | |
$ | 22,036 | | |
$ | 54,328 | |
World Cloud Ventures Sdn Bhd | |
Shareholder of TGL | |
| Purchase of Services | | |
| 55,484 | | |
| 48,259 | |
The Evolutionary Zeal Sdn Bhd | |
Jay Long “Jerry” Ooi is a common shareholder | |
| Purchase of products | | |
| - | | |
| 18,824 | |
Total | |
| |
| | | |
$ | 77,520 | | |
$ | 121,411 | |
Equipment purchased from a related party
Name of Related Party | |
Relationship | |
Nature | | |
For the
year ended
June 30,
2023 | | |
For the
year ended
June 30,
2022 | |
Ezytronic Sdn Bhd | |
Jau Long “Jerry” Ooi is a common shareholder | |
| Purchase of equipment | | |
$ | 52,328 | | |
$ | - | |
Consulting fees from related parties
Name of Related Party | |
Relationship | |
Nature | |
For the
Year Ended
June 30,
2023 | | |
For the
Year Ended
June 30,
2022 | |
V Capital Investment Limited | |
Voon Him “Victor” Hoo, the Company’s Chairman and Managing Director is the director of this entity beginning on June 1, 2021. | |
Consulting fees | |
$ | - | | |
$ | 75,000 | |
Imej Jiwa Communications Sdn Bhd | |
Voon Him “Victor” Hoo, the Company’s former Chairman and Managing Director is the director of this entity | |
Consulting fess | |
| 2,744 | | |
| - | |
True Sight Sdn Bhd | |
Su Huay “Sue” Chuah, the Company’s Chief Marketing Officer is a 40% shareholder of this entity | |
Consulting fees | |
| 290,476 | | |
| 615,367 | |
Total | |
| |
| |
$ | 293,220 | | |
$ | 690,367 | |
TREASURE
GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Stockholders’
Equity (Deficiency)
Common stock
Prior to October 2021, TGL is authorized to issue 10,000,000 shares
having a par value of $0.00001 per share. In October 2021, TGL increased its authorized shares to 170,000,000 shares as
part of the Reorganization with GEM, consisting of 150,000,000 shares of common stock with $0.00001 par value, and 20,000,000 shares
of preferred stock with $0.00001 par value as of June 30, 2023 and 2022. The share capital increased of TGL presented herein is prepared
on the basis as if the Reorganization became effective as of the beginning of the first period presented of shares capital of GEM.
Beneficial conversion feature from issuance
of convertible note
On January 3, 2022 and May 13, 2022, the Company
entered into 2 loan agreements which allow the third party to convert the loan balance along with interest balance incurred into a number
of shares of the Company’s common stock as of the closing date of the IPO. For the year ended June 30, 2023, the Company has withdrew
additional $2,686,914 from these loan agreements. As the Company determined that loan contained a beneficial conversion feature,
the Company recognized the fair value of embedded conversion feature of $537,383 in the convertible notes as additional paid-in capital
and reduced the carrying value of the convertible notes as a debt discount for the year ended June 30, 2023.
From February to June, 2023, the Company issued
two convertible notes, to a third party, in an aggregate principal amount of $5,500,000. As the Company determined these convertible notes
contained a beneficial conversion feature, therefore, the Company recognized the fair value of embedded conversion feature of $211,679
in the convertible notes as additional paid-in capital and reduced the carrying value of the convertible notes as a debt discount for
the year ended June 30, 2023.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Common stock issued upon conversion of convertible
note payable, net of unamortized discounts
On August 15, 2022, the Company issued 4,175,889 shares
of common stock upon the conversion of $16,534,988 of convertible note payable, net of unamortized discounts and accrued interest
(Note 8), among which, $2,437,574 was converted into 353,272 shares of common stock are belonged to the related parties.
In June 2023, the Company issued 327,523 shares
of common stock upon conversion of $378,953 of convertible note payable, net of unamortized discounts and accrued interest. (Note 8).
Common stock issued from the Offering, net
of issuance costs
On August 15, 2022, the Company had closed its
initial underwritten public offering of 2,300,000 shares of common stock, which included the full exercise of the underwriter’s
over-allotment option, at a public prince of $4.00 per share. The Company received net proceeds of approximately $8.2 million,
net of underwriting discounts and commissions and fees, other offering expenses amounted to approximately $1.0 million, and fair
value of warrants issued to the underwriters of approximately $0.2 million.
Common stock issued for consulting service
In July 2021 the Company signed a capital market advisory agreement
(“Agreement”) with Exchange Listing, LLC (“Consultant”), to engage in advisory service in capital market advisory,
corporate governance, and organizational meeting. The term of this Agreement shall commence on the execution date and shall continue until
the later of nine months or until the Company is trading on a senior exchange or otherwise extended by both parties. The Company extended
the contract term until the Company is trading on a senior exchange. Upon execution of this agreement, the Company agrees to sell to the
Consultant, or its designees shares of the Company’s common stock which equivalents to 2% of the Company’s fully –
diluted shares outstanding, at $0.001 per share. The Company estimated the fair value of the common stock issued to the Consultant for
the year ended June 30, 2022 by using the market price $5.48 per share as per an enterprise per share value appraised from an independent
third party. For the year ended June 30, 2022, the Company has issued 232,666 shares of common stock to the Consultant and the
stock-based compensation in connection with the service period of these shares amounted to $1,283,994. After completion of the Company’s
Offering on August 15, 2022, the Company had issued additional 109,833 shares of common stock to ensure that the Consultant’s
total shares of the Company’s common stock equivalents to 2% of the Company’s fully – diluted shares outstanding using
the fair value of $4.00 per share with the fair value of $439,332. Stock-based compensation expense amounted $439,332 and $1,283,994 for
the years ended June 30, 2023 and 2022, respectively.
Common stock issued to former director
On March 20, 2023, Voon Him “Victor”
Hoo has resigned as managing director and chairman of the Company. To compensate Victor for his service, the Board approved to issue 285,714
shares of common stock which is equivalent to $380,000 based on the closing price of the Company’s closing stock on March 21, 2023
to Victor.
Warrants
- Issuance of warrants - non- employee stock compensation
Pertain to above mentioned Agreement with the Consultant, on August
15, 2022, the Company also issued 300,000 warrants to the Consultant or its designees exercisable for a period of five
years at $4.00 per share upon completion of the Company’s Offering. Meanwhile, on the same date, the Consultant had exercised
all of its warrants on cashless basis and received 157,143 shares of the Company’s common stock.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the warrants which was determined
by using the Black Scholes model using the following assumptions: (1) expected volatility of 49.0%, (2) risk-free interest
rate of 0.89%, (3) expected life of 5.0 years, (4) exercise price of $4.0 and (5) estimated market
price of $5.48 on July 1, 2020, the date of which the consulting agreement was entered. Based on above assumption, the fair value
of the warrants were estimated to be $856,170.
- Issuance of the underwriters warrants
On August 10, 2022, the Company entered into an
underwriting agreement (the “Underwriting Agreement”) with EF Hutton, division of Benchmark Investments, LLC, as representative
of the underwriters (the “Representative”), relating to the Offering of 2,300,000 shares of the Company’s
common stock, par value $0.00001 per share, at an Offering price of $4.00 per share. Pursuant to the Underwriting Agreement,
in exchange for the representative’s firm commitment to purchase the Shares, the Company agreed to issue the underwriters warrants
(the “Representative’s Warrants”) to purchase an aggregate of 100,000 shares of the Company’s common
stock, which is equal to five percent (5%) of the shares sold in the Offering, excluding the over-allotment option, at an exercise price
of $5.00, which is equal to 125% of the Offering price. The Representative’s Warrant may be exercised beginning on February 10,
2023, until August 10, 2027. For the year ended June 30, 2023, there are no warrants were exercised by the Representative.
The fair value of the warrants which was determined
by using the Black Scholes model using the following assumptions: (1) expected volatility of 54.8%, (2) risk-free interest
rate of 2.91%, (3) expected life of 5.0 years, (4) exercise price of $5.0 and (5) stock price of $4.0 on
August 15, 2022, the date of which the warrants were issued. Based on above assumption, the fair value of the warrants were estimated
to be $175,349.
Warrants outstanding as of June 30, 2023 are as
follows:
| |
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Term (Years) | |
Outstanding at June 30, 2022 | |
| - | | |
$ | - | | |
| - | |
Granted | |
| 400,000 | | |
| 4.25 | | |
| 5.0 | |
Exercised | |
| (300,000 | ) | |
| 4.00 | | |
| | |
Outstanding at June 30, 2023 | |
| 100,000 | | |
$ | 5.00 | | |
| 4.1 | |
Note 12 – Income taxes
The United States and foreign components of loss
before income taxes were comprised of the following:
| |
For the years ended | |
| |
June 30, | |
| |
2023 | | |
2022 | |
Tax jurisdictions from: | |
| | |
| |
- Local – United States | |
$ | (3,728,225 | ) | |
$ | (3,541,832 | ) |
- Foreign – Malaysia | |
| (7,901,870 | ) | |
| (8,188,582 | ) |
Loss before income tax | |
$ | (11,630,095 | ) | |
$ | (11,730,414 | ) |
The provision for income taxes consisted of the following:
| |
For the years ended | |
| |
June 30, | |
| |
2023 | | |
2022 | |
Tax jurisdictions from: | |
| | |
| |
- Local – United States | |
$ | 97,616 | | |
$ | 15,600 | |
- Foreign – Malaysia | |
| - | | |
| - | |
Provision for income taxes | |
$ | 97,616 | | |
$ | 15,600 | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
United States of America
TGL was incorporated in the State of Delaware
and is subject to the tax laws of the United States of America. As of June 30, 2023, the operations in the United States of America incurred
$5,607,076 of cumulative net operating losses which can be carried forward indefinitely to offset future taxable income. The deferred
tax valuation allowance as of June 30, 2023 and 2022 were $1,177,486 and $324,144, respectively.
TGL also subject to controlled foreign corporations
Subpart F income (“Subpart F”) tax, which is a tax primarily on passive income from controlled foreign corporations with a
tax rate of 35%. In addition, the Tax Cuts and Jobs Act imposed a global intangible low-taxed income (“GILTI”) tax, which
is a tax on certain off-shore earnings at an effective rate of 10.5% for tax years (50% deduction of the current enacted tax rate
of 21%) with a partial offset for 80% foreign tax credits. If the foreign tax rate is 13.125% or higher, there will be
no U.S. corporate tax after the 80% foreign tax credits are applied.
For the years ended June 30, 2023 and 2022, the
Company’s foreign subsidiaries did not generate any income that are subject to Subpart F tax and GILTI tax.
Malaysia
GEM,
Foodlink, Morgan, and AY Food are governed by the income tax laws of Malaysia and the income tax provision in respect of operations in
Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations
and practices in respect thereof. Under the Income Tax Act of Malaysia, enterprises that incorporated in Malaysia are usually subject
to a unified 24% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on
case-by-case basis. As of June 30, 2023, the operations in the Malaysia incurred $12,344,728 of cumulative net operating losses
which can be carried forward for a maximum period of ten consecutive years to offset future taxable income. The deferred tax
valuation allowance as of June 30, 2023 and 2022 were $4,927,995 and $3,031,546, respectively.
The following table reconciles
the local (United States) statutory rates to the Company’s effective tax rate for the periods indicated below:
| |
For the years ended | |
| |
June 30, | |
| |
2023 | | |
2022 | |
U.S. statutory rate | |
| 21.0 | % | |
| 21.0 | % |
Differential of Malaysia statutory tax rate | |
| 2.0 | % | |
| 2.1 | % |
Change in valuation allowance | |
| (23.8 | )% | |
| (15.9 | )% |
Permanent difference (1) | |
| - | % | |
| (7.3 | )% |
Effective tax rate | |
| (0.8 | )% | |
| (0.1 | )% |
The following table sets forth the significant
components of the aggregate deferred tax assets of the Company as of:
| |
As of June 30, 2023 | | |
As of June 30, 2022 | |
Deferred tax assets: | |
| | |
| |
Net operating loss carry forwards in U.S. | |
$ | 1,177,486 | | |
$ | 324,144 | |
Net operating loss carry forwards in Malaysia | |
| 4,927,995 | | |
| 3,031,546 | |
Stock based compensation | |
| - | | |
| 179,796 | |
Amortization of debt discount | |
| 70,415 | | |
| 148,081 | |
Less: valuation allowance* | |
| (6,175,896 | ) | |
| (3,683,567 | ) |
Deferred tax assets | |
$ | - | | |
$ | - | |
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Uncertain tax positions
The Company evaluates each uncertain tax position
(including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated
with the tax positions. As of June 30, 2023 and 2022, the Company did not have any significant unrecognized uncertain tax positions.
The Company did not incur interest and penalties tax for the years ended June 30, 2023 and 2022.
Note 13 – Concentrations of risks
(a) Major customers
For the years ended June 30, 2023 and 2022, no customer
accounted for 10.0% or more of the Company’s total revenues.
As of June 30, 2023, two customers account for approximately
24.6% and 24.6% of the total balance of accounts receivable, respectively. As of June 30, 2022, no customer account for 10.0%
or more of the total balance of accounts receivable.
(b) Major vendors
For the years ended June 30, 2023, two vendors
accounted for approximately 62.5% and 32.7% of the Company’s total purchases. For the year ended June 30, 2022 one vendor
accounted for approximately 95.0% of the Company’s total purchases.
As of June 30, 2023, one vendor accounted
for 91.0% of the total balance of accounts payable. As of June 30, 2022, three vendors accounted for approximately 45.0%, 22.9%,
and 10.9% of the total balance of accounts payable, respectively.
(c) Credit risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash. As of June 30, 2023 and 2022, $4,593,634 and
$1,845,232 were deposited with financial institutions or fund received from customer being held in third party platform’s fund
account, and $2,458,638 and $1,759,715 of these balances are not covered by deposit insurance, respectively. While management
believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.
Financial instruments that are potentially subject to credit risk consist
principally of accounts receivable. The Company believes the concentration of credit risk in its accounts receivable is substantially
mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral
from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends and other information.
(d) Exchange rate risk
The Company cannot guarantee that the current
exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable
periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of RM converted to
US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
TREASURE GLOBAL INC AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Leases
The Company determines if a contract contains
a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for
financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation
includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option
periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic
penalty. The Company’s office lease was classified as operating leases. The lease generally do not contain options to extend at
the time of expiration.
The
Company had an existing operating lease for office as of July 1, 2022. Upon adoption of FASB ASU 2016-02 on July 1, 2022, the Company
recognized $84,829 ROU asset and same amount of operating lease liability based on the present value of the future minimum
rental payments of leases, using a discount rate of 3.5% based on duration of lease terms. As of June 30, 2023, the weighted-average
lease term is 1.6 years for the remaining leases. The Company’s lease agreements do not contain any material residual
value guarantees or material restrictive covenants. The Company’s lease liabilities under the remaining operating leases as of
June 30, 2023 for the next five years is as follows:
| |
June 30, | |
2024 | |
$ | 40,838 | |
2025 | |
| 23,217 | |
Total undiscounted lease payments | |
| 64,055 | |
Less imputed interest | |
| (1,745 | ) |
Total lease liabilities | |
$ | 62,310 | |
Lease expense for the years ended June 30, 2023 and 2022 were $168,752,
and $35,032, respectively.
Note 15 – Commitments and contingencies
Contingencies
Legal
From time to time, the Company is party to certain
legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible
losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements.
Commitment
On May
1, 2023, the Company through its 100% own subsidiary Morgan enter into a worldwide master license agreement (“License Agreement”)
with Morganfield’s Holdings Sdn Bhd (“Licensor”), an unrelated third party. Pursuant to the License agreement, the
Licensor agreed to grant the Morgan with the exclusive worldwide license for right of use in Licensor’s Trademark (“Trademark”)
for a period of five years. During the five years license period, the Company agree to pay the licensor for monthly license fee in an
aggregate total of minimum payment of approximately $1.5 million or 40% of the total monthly collection from the Company’s sub-licensees,
whichever is higher.
On June 6, 2023, the Company through its 100%
own subsidiary AY Food Ventures Sdn Bhd enter into a worldwide master license agreement (“License Agreement”) with Sigma Muhibah
Sdn Bhd (“Licensor”), an unrelated third party. Pursuant to the License agreement, the Licensor agreed to grant the AY Food
Ventures Sdn Bhd with the exclusive worldwide license for right of use in Abe Yus’s Trademark (“Trademark”) for a period
of five years. During the five years license period, the Company agree to pay the licensor for monthly license fee in an aggregate total
of minimum payment of approximately $1.2 million or 40% of the total monthly collection from the Company’s sub-licensees, whichever
is higher.
16 – SUBSEQUENT EVENTS
The Company evaluated all events and transactions that occurred after
June 30, 2023 up through September 28, 2023, the date the Company issued these consolidated financial statements.
From July to September 2023, the Company issued
2,416,226 shares of common stock upon conversion of $1,224,077 of convertible note payable and accrued interest from YA II PN3.
Item
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
None.
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
As of the end of the period covered by this Report,
we carried out an evaluation, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, based on the foregoing evaluation, our principal executive officer and principal financial
officer concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level
due to the material weaknesses described below.
Management’s
Report on Internal Control over Financial Reporting
Our management,
including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with U.S. GAAP. Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting as of June 30, 2023, based on the Internal Control-Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation under the 2013
Framework, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting
was not effective as of June 30, 2023 due to the following material weaknesses:
| ● | Inadequate
U.S. GAAP expertise. The current accounting staff is inexperienced in applying U.S. GAAP standard as they are primarily engaged in ensuring
compliance with International Financial Reporting Standards (“IFRS”) accounting and reporting requirement for our consolidated
operating entities, and thus require substantial training. The current staff’s accounting skills and understanding as to how to
fulfill the requirements of U.S. GAAP-based reporting, including subsidiary financial statements consolidation, are inadequate; |
| ● | Inadequate
internal audit function. We lack of a functional internal audit department or personnel that monitors the consistencies of the preventive
internal control procedures and lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures
have been carried out as planned; |
A material weakness is a deficiency, or a combination of deficiencies,
within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely
basis.
Following the identification of the material weaknesses,
we plan to take remedial measures including:
| ● | hiring
more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial
reporting function and to set up a financial and system control framework; |
| ● | implementing
regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; |
| ● | establishing
internal audit function by engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley Act compliance requirements
and improvement of overall internal control; and |
| ● | strengthening
corporate governance. |
Changes
in Internal Control Over Financial Reporting
Other than the applicable remediation efforts
implemented during the quarter ended June 30, 2023 as described below, there were no other changes in our internal control over financial
reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the quarter
ended June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ● | We developed and implemented
comprehensive policies and procedures for IT risk assessment, vulnerability management, user account management, and password management.
These policies have improved the security and integrity of our IT systems and data, ensuring that access is appropriately managed and
monitored. These policies also mitigated the risk of unauthorized access and data breaches; |
| ● | We implemented policies and
procedures designed to enhance our control framework on segregation of duties and related monitoring. This has mitigated the risk of
unauthorized access and data breaches; |
| ● | We implemented procedures to
identify related party transactions and to provide proper disclosure on our consolidated financial statement; and |
| ● | We developed and implemented
robust procedures by recognizing the importance of third-party IT service vendor risk assessment and management. These procedures allow
us to assess and manage risks associated with third-party IT service vendors effectively, minimizing potential vulnerabilities. |
Item
9B. Other Information.
None.
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not
applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
The following are our executive officers and directors and their respective
ages and positions as of June 30, 2023.
Name | |
Age | | |
Position |
Chong Chan “Sam”
Teo | |
| 40 | | |
Chief Executive
Officer, Director |
Su Chen “Chanell”
Chuah | |
| 44 | | |
Chief Operating Officer |
Meng Chun “Michael”
Chan | |
| 51 | | |
Chief Financial Officer |
Su Huay “Sue”
Chuah | |
| 41 | | |
Chief Marketing Officer |
Chen Hoe “Samuel”
Sam | |
| 42 | | |
Chief Technology Officer |
Jau Long “Jerry”
Ooi | |
| 41 | | |
Vice President |
Ho Yi Hui | |
| 45 | | |
Executive Director |
Joseph R. “Bobby”
Banks | |
| 61 | | |
Director |
Marco Baccanello | |
| 61 | | |
Director |
Jeremy Roberts | |
| 50 | | |
Director |
Chong
Chan “Sam” Teo
is
our Chief Executive Officer and a Director. Mr. Teo is an experienced corporate strategist who has contributed to building high-performance
teams through implementation of organizational innovation within multiple companies operating in the fintech and ecommerce fields. Prior
to this role, Mr. Teo served as Chief Operations Officer of the Company from July 2020 to June 2021, where he, among other things, led
sales and strategic business development. From March 2020 to June 2021, Mr. Teo was the Chief Executive Officer of GEM, leading GEM in
strategic/tactical planning, forecasting, capital budgeting, and financial cost controls. Prior to that role, Mr. Teo served as Director
of Business Development of GEM from May 2018 to February 2020, where he was in charge of sales and business development. From May 2016
to April 2018, Mr. Teo was the Managing Director of Modes Cube Sdn Bhd, leading its business delivery team. Mr. Teo earned a Bachelor’s
degree in Quantity Survey from the Sheffield Hallam University in 2006, and received a Diploma in Quantity Survey from the Tunku Abdul
Rahman College in 2004.
Su
Chen “Chanell” Chuah
is
our Chief Operating Officer. From 2020 to present Ms. Chuah has been Chief Operating Officer for GEM. At GEM, Ms. Chuah has, among other
things, lead project management ensuring exchange listing related matters are executed according to plan; maintained liaison with exchange
listing advisors’ counterpart to ensure corporate compliance elements are taken care of within the organization; ensured alignment
of business directions/communication among internal and external stakeholders with regards to overall organization goals and plans and
also the proprietary product planning. From 2016 to 2021 Ms. Chuah was the Chief Operating Officer for World Cloud Ventures Sdn Bhd.
At World Cloud, Ms. Chuah’s responsibilities were, among other things, project management for mobile app, i1happyhour; ensuring
portal development, business development planning, marketing strategy planning and business readiness; leading the application of MSC
status for the company under the product: i1happyhour and successfully getting the approval; project management for Loyalty Reward Program,
Gem Reward, ensuring development of IT portal, business readiness, marketing readiness, business development, legal agreement matters
and customer service and project management for e-commerce program, ze.la.fa covering the IT platform development, online seller recruitment,
agreement preparation and customer service. Ms. Chuah earned a Bachelor’s of Business in Finance and Banking from Charles Stuart
University in 2010.
Meng
Chun ‘Michael’ Chan is our Chief Financial Officer, appointed as of July 31, 2023. Prior to his appointment as Chief
Financial Officer, Mr. Chan was the Company’s Financial Controller from January 3, 2023, where he handled finance, and accounts
matters as well as assisting with M&A and fund raising. From May 2022 to September 2022, he was the Chief Financial Officer for Ikhasas
Group of companies handling overall corporate finance including potential IPO, fund raising, banking, tax and accounts and investment.
From January 2022 to May 2022, he was the Head of Group Treasury for Sime Darby Plantation Bhd (“Sime Darby”), a public listed
company in Malaysia. At Sime Darby, Mr. Chan managed group cashflow, including banking facilities, worked on group inter-company reconciliations,
financial reports and budget and cashflow plans. From July 2020 to February 2021, Mr. Chan, served as Group Deputy CEO/Group Chief Financial
Officer for Smart Glove Holding Sdn Bhd, a Malaysian private company where he helped reorganize and prepare business for a potential
initial public offering. From November 2015 to June 2020, Mr. Chan served as Chief Financial Officer for TS Global Network Sdn Bhd, a
member company of PT Telkom Indonesia, where he completed the restructuring and turnaround as well as leading the successful adoption
of MFRS standards. Prior to this, from April 2013 to November 2015, he was a Chief Financial Officer for Pasukhas Group Bhd. He was with
Carimin Group of Companies from May 2000 to Aug 2012 before leaving as Group Financial Controller.
Mr.
Chan Meng Chun received his Advance Diploma in Accounting from Institute of Financial Accountants (United Kingdom) in 2007 and a Master’s
Degree in Finance and Accounting from University of Wales in 2014. Mr Chan Meng Chun is a fellow member of the Institute of Public Accountants
(Australia) and fellow member of the Institute of Financial Accountants (United Kingdom).
Su
Huay “Sue” Chuah
is
our Chief Marketing Officer. From March 2021 to present Ms. Chuah has been the Chief Marketing Officer for GEM. At GEM, her responsibilities
have been, among other things, to set marketing goals to establish strategic direction and plan positioning; plan, implement and manage
marketing strategies; and contribute to the overall development of the company. From 2017 to 2021 Ms. Chuah was the Branding & Communication
Director for Click Internet Traffic Sdn Bhd. At Click, Ms. Chuah, among other things, participated in the development of the brand marketing
strategies in order to establish strategic direction and program positioning; defined the departmental vision to instill it in all levels
of the marketing department to make up part of the working culture and oversaw the brand planning process inclusive of the definition
of target consumers and the development of marketing mix and strategies. From 2016 to 2017, Ms. Chuah was the Brand Manager for Click
and her key responsibilities were, among other things, to oversee a wide array of business functions including branding, communication
channels, product development, online and offline promotions, and market research; team management and support their efforts and report
to higher level and to identify how the brand is currently positioned in the market and identify future trends. Ms. Chuah received a
Bachelor’s degree in Mass Communication from Limkokwing University College of Creative Technology in 2005.
Chen
Hoe “Samuel” Sam
is
our Chief Technology Officer. From 2018 to 2020 Mr. Sam was the Senior Technical Manager for ARB Development SDN Bhd. At ARB Development,
Mr. Sam, among other things, established the company’s technical vision and lead all aspects of the company’s technological
development; directed the company’s strategic direction, development and future growth and provided leadership to department to
meet customer’s deadlines. In 2018 Mr. Sam was the Lead Programmer for World Cloud Ventures Sdn Bhd. At World Cloud. Mr. Sam, among
other things, managed a team of programmers, to support and develop in-house software application; gathered requirements from management,
and developed solutions; and embedded bidding feature for a membership mobile application. From 2017 to 2018 Mr. Sam was the Senior Manager
for Tone Excel International Sdn Bhd. At Tone, Mr. Sam Managed internal MIS Team; worked with vendor to maintain in-house Hardware/Software/Network
infrastructure; re-organized hosting server structure and removed redundant server; and worked with vendor to restructure current software
framework to enable the System backbone support web application and mobile application. From 2015 to 2017, Mr. Sam was the Chief Technology
Officer for Isynergy Universal Sdn Bhd. At Isynergy, Mr. Sam, among other things, setup an IT team to maintain and enhance their core
business system (Software/Hardware); worked with CBO to carry out the new system development, integration and implementation; and worked
with MIS Outsourcing Company to maintain in-house Hardware/Software/Email issue. Mr. Sam earned a Bachelor’s degree in Computer
Science/Information Technology in 2004 and a Graduate diploma of Computer Science/Information Technology in 2003.
Jau
Long “Jerry” Ooi
is
our Vice President. From 2017 to present, Mr. Ooi has been the Managing Director of Ezytronic Sdn Bhd, where he leads business development.
Prior to that role, Mr. Ooi served as Sales & Marketing Manager of Ezytronic Sdn Bhd, where he was in charge of sales structure,
marketing strategy, and team development. Mr. Ooi received a Diploma of Computer Science/Information Technology in 2002.
Ho
Yi Hui
is
an Executive Director. From 2019 to present Ms. Ho has been an Executive Director at Hanz Consulting Group Sdn. Bhd. where she provides
professional and business consultation services, in terms of compliance and advisory for audit, tax and company secretarial related matters
and professional training and coaching, Fron March 2018 to October 2019 she worked for RSM Tax Consultants (Malaysia) Sdn Bhd. as a Tax
Executive Director where she led a team of 30 tax associates, seniors, managers and directors. Ms. Ho obtained an Advanced Diploma in
Commerce Business Studies (Financial Accounting) and a Diploma in Business Studies (Accounting) from Tunku Abdul Rahman College in 2001.
Joseph
R. “Bobby” Banks
is
a Director. Mr. Banks is a seasoned financial services executive. He previously worked in the New York and London offices of Goldman
Sachs in the Corporate Finance, Mergers & Acquisitions and Communications, Media & Entertainment investment banking departments.
Upon leaving Goldman Sachs, Mr. Banks joined JP Morgan Chase in their London Office as a Managing Director and Head of the Telecom and
Media investment banking business in Europe, the Middle East and Africa (“EMEA”). He subsequently ran the Equity Capital
Markets business for JP Morgan Chase also in EMEA. Mr. Banks has also worked in venture capital from 2014 to 2017 serving as Group Chief
Financial Officer, Member of the Investment Committee, Chief Investor Relations Officer and Executive Board Member of Mountain Partners
AG, a Zurich based venture capital firm. Since 2017, Mr. Banks has been an independent financial and strategy advisor to a number of
companies across industries. Mr. Banks has a BA in Government from Dartmouth College and an MBA in Finance from the Wharton School at
the University of Pennsylvania.
Marco
Baccanello
is a Director. Mr. Baccanello is an experienced
corporate finance executive with expertise in advising companies operating in a broad range of industries, particularly within the technology
space, in early to late-stage financings, growth strategy and strategic disposals, restructurings and acquisitions. In addition, he has
experience in the preparation of the listing and initial public offering documents for companies on Nasdaq and international exchanges,
with an emphasis on funding requirements and regulatory filings. Mr. Baccanello also has developed acquisition and marketing strategies
for multiple digital opportunities, focusing on content published to app stores, including rapidly growing digital businesses in the technology
and gaming space. From 2016 to present, Mr. Baccanello is a member of the Corporate Development team where he leads and manages business
plan developments. Prior to that role, he was the Chief Financial Officer of PlayJam from 2010 to 2016, where he planned, implemented
and managed all the finance activities, including business planning, budgeting, forecasting and negotiations. Mr. Baccanello’s experience
as a former chartered accountant at PricewaterhouseCoopers and director of a private equity firm, specifically his expertise in managing
growth businesses within the services, media and technology industries, make him a qualified director to serve on our Board. Mr. Baccanello
earned a Bachelor’s degree in Economics at the University of Southampton.
Jeremy
Roberts
is a Director. Mr. Jeremy is an experienced Corporate
Financier with track-record of sourcing, structuring and negotiating and completing complex M&A deals and financings across a broad
range of sectors and geographies. From 2013 to present Mr. Jeremy has been the founder and Director of J and L Roberts Advisors in London,
UK., a corporate consultancy firm. At J and L, Mr. Roberts has, among other things, advised family owners, High Net Worth Individuals,
corporate and private equity groups on growth strategies and expansion; structuring and raising capital for various business ventures;
as well as M&A assignments. From 2013 to 2014 he was the Managing Director and consultant for i76 Sp Zoo in Warsaw, Poland.
At i76, he completed Ipopema 76’s first acquisition: Impress Group from Constantia Industries and worked on post-acquisition and
separation matters to post-acquisition optimize internal group structure. From 2011 to 2013 Mr. Jeremy was a Principal at Corven
Corporate Finance in London, UK. From 2002 to 2011, Mr. Jeremy was a Director of Lansdowne Capital, an investment banking boutique, where
he originated and executed transactions within the broader industrials sector. Between 2000 and 2002, Mr. Roberts was a Vice President
in the investment banking division of Credit Suisse in London. Mr. Jeremy earned a BSc in Economics and Politics from University of Bath
in 1994.
Board
Leadership Structure and Risk Oversight
Our
Board has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly
discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The
risk oversight process includes receiving regular reports from board committees and members of senior management to enable our Board
to understand our risk identification, risk management, and risk mitigation strategies with respect to areas of potential material risk,
including operations, finance, legal, regulatory, cybersecurity, strategic, and reputational risk.
Board
of Directors
Our
business and affairs are managed under the direction of our Board. Our Board consists of five directors, three of whom qualify as “independent”
under the listing standards of Nasdaq.
Directors
serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve until their
successors have been elected and qualified.
Director
Independence
Our
board of directors are composed of a majority of “independent directors” as defined under the rules of Nasdaq. We use the
definition of “independence” applied by Nasdaq to make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an
“independent director” is a person other than an officer or employee of the company or any other individual having a relationship
which, in the opinion of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The Nasdaq listing rules provide that a director cannot be considered independent if:
|
● |
the director
is, or at any time during the past three (3) years was, an employee of the company; |
|
● |
the director
or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12)
consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including,
among other things, compensation for board or board committee service); |
|
● |
the director
or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the
company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of
the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions); |
|
● |
the director
or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3)
years, any of the executive officers of the company served on the Remuneration Committee of such other entity; or |
|
● |
the director
or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three
(3) years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit. |
Under
such definitions, our Board has undertaken a review of the independence of each director. Based on information provided by each director
concerning his background, employment and affiliations, our Board has determined that Jeremy Roberts, Marco Baccanello and Joseph “Bobby”
Banks are independent directors of the Company.
Committees
of the Board of Directors
Our
Board has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition
and responsibilities of each of the committees of our Board is described below. Members serve on these committees until their resignation
or until as otherwise determined by our Board.
Audit
Committee
We
have established an audit committee consisting of Marco Baccanello, Joseph “Bobby” Banks and Jeremy Roberts. Marco Baccanello
is the Chairman of the audit committee. In addition, our Board has determined that Marco Baccanello is an audit committee financial expert
within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended, or the Securities Act. The audit committee’s
duties, which are specified in our Audit Committee Charter, include, but are not limited to:
|
● |
reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board
whether the audited financial statements should be included in our annual disclosure report; |
|
● |
discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of our financial statements; |
|
● |
discussing
with management major risk assessment and risk management policies; |
|
● |
monitoring
the independence of the independent auditor; |
|
● |
verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law; |
|
● |
reviewing
and approving all related-party transactions; |
|
● |
inquiring
and discussing with management our compliance with applicable laws and regulations; |
|
● |
pre-approving
all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the
services to be performed; |
|
● |
appointing
or replacing the independent auditor; |
|
● |
determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and
the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
|
● |
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls
or reports which raise material issues regarding our financial statements or accounting policies; and |
|
● |
approving
reimbursement of expenses incurred by our management team in identifying potential target businesses. |
The
audit committee is composed exclusively of “independent directors” who are “financially literate” as defined
under the Nasdaq listing standards. The Nasdaq listing standards define “financially literate” as being able to read and
understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In
addition, the Company intends to certify to Nasdaq that the committee has, and will continue to have, at least one member who has past
employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or
background that results in the individual’s financial sophistication.
Compensation
Committee
We
have established a compensation committee of the Board to consist of Joseph “Bobby” Banks, Jeremy Roberts and Marco Baccanello,
each of whom is an independent director. Each member of our compensation committee is also a non-employee director, as defined under
Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Code. Joseph “Bobby”
Banks is the chairman of the compensation committee. The compensation committee’s duties, which are specified in our Compensation
Committee Charter, include, but are not limited to:
|
● |
reviewing,
approving and determining, or recommending to our board of directors regarding, the compensation of our executive officers; |
|
● |
administering
our equity compensation plans; |
|
● |
reviewing
and approving, or recommending to our board of directors, regarding incentive compensation and equity compensation plans; and |
|
● |
establishing
and reviewing general policies relating to compensation and benefits of our employees. |
Nominating
and Corporate Governance Committee
We
have established a nominating and corporate governance committee consisting of Jeremy Roberts, Joseph “Bobby” Banks and Marco
Baccanello. Jeremy Roberts is the Chairman of the nominating and corporate governance committee. The nominating and corporate governance
committee’s duties, which are specified in our Nominating and Corporate Governance Audit Committee Charter, include, but are not
limited to:
|
● |
identifying,
reviewing and evaluating candidates to serve on our board of directors consistent with criteria approved by our board of directors; |
|
● |
evaluating
director performance on our board of directors and applicable committees of our board of directors and determining whether continued
service on our board of directors is appropriate; |
|
● |
evaluating
nominations by stockholders of candidates for election to our board of directors; and |
|
● |
corporate
governance matters. |
Code
of Ethics
Our
Board plans to adopt a written code of business conduct and ethics (“Code”) that applies to our directors, officers and employees,
including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing
similar functions. We intend to post on our website a current copy of the Code and all disclosures that are required by law in regard
to any amendments to, or waivers from, any provision of the Code.
Family
Relationships
Su
Chen “Chanell” Chuah, our Chief Operating Officer and Su Huay “Sue” Chuah, our Chief Marketing Officer are sisters.
Involvement
in Certain Legal Proceedings
None
of our other directors, executive officers, significant employees or control persons have been involved in any legal proceeding listed
in Item 401(f) of Regulation S-K in the past 10 years.
Delinquent
Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than 10% of a registered class of our equity securities (“Ten Percent Holders”) to file
reports of beneficial ownership and changes in beneficial ownership with the SEC. To our knowledge, based solely on a review of the copies
of such reports furnished to us, the following directors, executive officers and Ten Percent Holders did not comply with all Section 16(a)
filing requirements during the fiscal year 2023 as follows: (i) our independent director, Joseph “Bobby” Banks, has yet to
file his Form 3 and is planning to file his Form 3 as soon as reasonably practicable; (ii) our executive director, Ho Yi Hui, filed his
Form 3 filing late; and (iii) our recently appointed Chief Financial Officer, Meng Chun “Michael” Chan, filed his Form 3 filing
late.
Item
11. Executive Compensation
Summary
Compensation Table
The
following table illustrates the compensation paid by the Company to its executive officers. The disclosure is provided for the fiscal
years ended June 30, 2023 and 2022. We refer to these individuals as our “named executive officers.”:
Name and Principal Position |
|
Fiscal Year
Ended
June 30, |
|
|
Salary (1)
($) |
|
|
Total
($) |
|
Chong Chan “Sam” Teo (2) |
|
2023 |
|
|
$ |
37,105 |
|
|
$ |
37,105 |
|
Chief Executive Officer |
|
2022 |
|
|
$ |
26,309 |
|
|
$ |
26,309 |
|
Voon Him “Victor” Hoo(3) |
|
2023 |
|
|
$ |
-- |
|
|
$ |
-- |
|
Chairman and Managing Director |
|
2022 |
|
|
$ |
120,000 |
|
|
$ |
120,000 |
|
| (1) | Salaries
were paid in Malaysian Ringgits, U.S. dollar amounts are approximate. |
| (2) | Mr.
Teo was appointed Chief Executive Officer on June 16, 2021. |
| (3) | Mr.
Hoo resigned as Chairman and Managing Director on March 20, 2023 |
None
of our other executives earned compensation in excess of $100,000 in fiscal years ended June 30, 2023 or 2022 and therefore pursuant
to Instruction 1 to Item 402(m)(2) of Regulation S-K, only the compensation for our Chief Executive Officer and Chief Financial Officer
is provided.
Employment
Agreements.
Teo
Employment Agreement
Chong Chan “Sam” Teo, our Chief Executive
Officer, and the Company entered into an Executive Employment Agreement dated as of July 1, 2020 (the “Teo Employment Agreement”),
pursuant which Mr. Teo was appointed as our Chief Operating Officer. On June 16, 2021. Mr. Teo resigned as our Chief Operating Officer
and was appointed Chief Executive Officer. Mr. Teo is still otherwise employed under the terms of the Teo Employment Agreement. The Teo
Employment Agreement provides Mr. Teo with a basic salary of MYR 10,000 (approximately $2,408) per month, which was increased to MYR 10,500
(approximately $2,333) per month on August 1, 2020, then further increased to MYR 11,500 (approximately $2,555) per month on July 1, 2022,
followed by an additional increase to MYR 16,000 (approximately $3,555) per month on January 1, 2023 and recently increased to MYR 18,000
(approximately $4,000) per month on June 1, 2023 and benefits that are generally given
to our senior executives. The Company or Mr. Teo may terminate the Employment Agreement with one hundred twenty days’ notice effective
August 1, 2023. Mr. Teo was also employed as the Chief Executive Officer of GEM since March 1, 2020 on identical terms.
Ho
Employment Agreement:
Yi Hui Ho, our Executive Director, and the Company
entered into an Executive Employment Agreement dated as of March 20, 2023 (the “Ho Employment Agreement”), pursuant which
Ms Ho was appointed as our Executive Director. The Ho Employment Agreement is one year term and on yearly renewable term. Under the Ho
Employment Agreement Ms. Ho is entitled to compensation of MYR20,000 (approximately $4,444 per quarter effective from March 20 2023. The
Company or Ms Ho may terminate the Employment Agreement with 2 months’ written notice.
Outstanding
Equity Awards at June 30, 2022
During
the fiscal year ended June 30, 2022, we did not grant any stock options.
Director
Compensation Table
The
following table illustrates the compensation paid by the Company to its directors. Only the independent directors are entitled to receive
board compensation. The disclosure is provided for the fiscal year ended June 30, 2023.
Name | |
Salary per director ($) | | |
Total per director ($) | |
Joseph “Bobby” Banks | |
$ | 66,000 | | |
$ | 66,000 | |
Marco Baccanello | |
$ | 93,030 | | |
$ | 93,030 | |
Jeremy Roberts | |
$ | 72,000 | | |
$ | 72,000 | |
The
independent directors (Joseph “Bobby” Banks, Marco Baccanello and Jeremy Roberts) are entitled to receive $6,000 per
month, commencing October 16, 2021.
As Chairman of the Audit Committee Mr. Baccanello also received $7,000 per month from July
to September 2022 for this fiscal year ended June 30, 2023. The payment is for the establishment of the Audit
Committee and its procedures and processes, the engagement ended in September 2022.
The independent directors are also entitled
to receive $300,000 in shares of our common stock issued and to be issued in $60,000 installments on December 11, 2022, March 11,
2023, June 11, 2023, September 11, 2023, and December 11, 2023. The value of the shares will be based on the average closing price
of our common stock as reported on Nasdaq for the last five (5) business days in November 2022. On December 30, 2022, the
independent directors agreed to the waiver of the $300,000 equity compensation.
Item
12. Security ownership Certain Beneficial Owners and Management
The
table below sets forth information regarding the beneficial ownership of the common stock by (i) our directors and named executive officers;
(ii) all the named executives and directors as a group and (iii) any other person or group that to our knowledge beneficially owns more
than five percent of our outstanding shares of common stock.
We have determined beneficial ownership in accordance
with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person
has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire
such powers within 60 days. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of
September 25, 2023 are deemed to be outstanding and beneficially owned by the person holding the options. Shares issuable pursuant to stock
options or warrants are deemed outstanding for computing the percentage ownership of the person holding such options or warrants, but
are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the persons and entities named in the table below will have sole voting and investment
power with respect to all shares of common stock that they will beneficially own, subject to applicable community property laws. The percentage
of beneficial ownership is based on 20,317,579 shares of common stock outstanding on September 25, 2023.
The information contained in this table is as of September 25, 2023. At
that date, 20,317,579 shares of our common stock were outstanding.
Name and Address of Beneficial Owner (1) |
|
Title |
|
Common
Stock |
|
|
Percent of
Common
Stock |
|
Officers and Directors |
|
|
|
|
|
|
|
|
|
|
Chong Chan “Sam” Teo |
|
Chief Executive Officer |
|
|
1,725,997 |
|
|
|
8.5 |
% |
Su Chen “Chanell” Chuah |
|
Chief Operating Officer |
|
|
476,000 |
|
|
|
2.4 |
% |
Meng Chun “Michael” Chan |
|
Chief Financial Officer |
|
|
— |
|
|
|
|
|
Su Huay “Sue” Chuah |
|
Chief Marketing Officer |
|
|
426,000 |
|
|
|
2.2 |
% |
Chen Hoe “Samuel” Sam |
|
Chief Technology Officer |
|
|
— |
|
|
|
|
|
Jau Long “Jerry” Ooi |
|
Vice President |
|
|
318,696 |
|
|
|
1.6 |
% |
Ho Yi Hui |
|
Executive Director |
|
|
— |
|
|
|
|
|
Joseph R. “Bobby” Banks |
|
Director |
|
|
— |
|
|
|
|
|
Marco Baccanello |
|
Director |
|
|
— |
|
|
|
|
|
Jeremy Roberts |
|
Director |
|
|
— |
|
|
|
|
|
Officers and Directors as a Group (total of 10 persons) |
|
|
|
|
2,946,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5%+ Stockholders |
|
|
|
|
|
|
|
|
|
|
Chong Chan “Sam” Teo |
|
|
|
|
1,725,997 |
|
|
|
8.5 |
% |
The Evolutionary Zeal Sdn Bhd (2) |
|
|
|
|
1,500,000 |
|
|
|
7.4 |
% |
Tophill Holdings Sdn. Bhd. |
|
|
|
|
2,756,879 |
|
|
|
13.6 |
% |
| (1) | Unless
otherwise indicated, the principal address of the named directors and directors and 5% stockholders
of the Company is care of Treasure Global Inc., 276 5th Avenue, Suite 704 #739, New York,
New York 10001. |
| (2) | Controlled
by two individuals, Wan Zainudin bin Wan Ibrahim and Roslina binti Omar. |
Item
13. Certain Relationships and Related Party Transactions, and Director Independence
Other
than as disclosed below, and except for the regular salary and bonus payments made to our directors and officers in the ordinary course
of business as described in “Item 11. Executive Compensation,” there have been no transactions since July 1, 2022, or any
currently proposed transaction or series of similar transactions to which the Company was or is to be a party, in which the amount involved
exceeds USD$120,000 and in which any current or former director or officer of the Company, any 5% or greater shareholder of the Company
or any member of the immediate family of any such persons had or will have a direct or indirect material interest.
Su
Chen “Chanell” Chuah, our Chief Operating Officer and Su Huay “Sue” Chuah, our Chief Marketing Officer are sisters.
Jeremy
Roberts and Marco Baccanello, both of whom are independent directors of the Company are also independent directors of VCI Global Limited,
the parent of V Capital Kronos Berhad, an affiliate of the Company during the fiscal year ended June 30, 2023. V Capital Kronos Berhad is no longer an affiliate of the Company.
As of June 30, 2022, Kok Pin “Darren” Tan, the Company’s
former Chief Executive Officer, has loaned the Company $1,862,606, on an interest free basis. During the fiscal year ended June 30,
2023, the Company has repaid $1,728,227 to Kok Pin “Darren” Tan. The remaining amount outstanding is payable on demand.
As of June 30, 2023 and 2022, loan balance from
Chong Chan “Sam” Teo, the Company’s Chief Executive Officer, was amounted to $186,579 and $197,480, respectively, on
an interest free basis.
During the fiscal year ended June 30, 2023, World
Cloud Ventures Sdn. Bhd. has converted its convertible note balance amounted to $108,590 into shares of the Company’s common stock
upon completion of the Company’s initial underwritten public offering. Jau Long “Jerry” Ooi, a Vice President of the
Company owns 50% of the equity of World Cloud Ventures Sdn. Bhd. As of June 30, 2022, World Cloud Ventures Sdn. Bhd.
During the fiscal year ended June 30, 2023, Chuah
Su Mei has converted its convertible note balance amounted to $240,444 into shares of the Company’s common stock upon completion
of the Company’s initial underwritten public offering. Chauh Su Mei, who is the Spouse of Kok Pin “Darren” Tan, shareholder
of the Company.
During the fiscal year ended June 30, 2023, Click
Development Berhad has converted its convertible note balance amounted to $120,235 into shares of the Company’s common stock upon
completion of the Company’s initial underwritten public offering. Click Development Berhad is the shareholder of the Company.
During the fiscal year ended June 30, 2023, Cloudmaxx
Sdn Bhd has converted its convertible note balance amounted to $568,305 into shares of the Company’s common stock upon completion
of the Company’s initial underwritten public offering. Jau Long “Jerry” Ooi, a Vice President of the Company owns 30%
of the equity of Cloudmaxx Sdn. Bhd.
During the fiscal year ended June 30, 2023,
V Capital Kronos Berhad has converted its convertible note balance amounted to $1,400,000 into shares of the Company’s common
stock upon completion of the Company’s initial underwritten public offering. Chauh Su Mei, who is the Spouse of Kok Pin
“Darren” Tan, shareholder of the Company. Voon Him “Victor” Hoo owns more than 50% of the equity of V
Capital Kronos Berhad. V Capital Kronos Berhad owned 14.55% of our outstanding shares of common stock during the Company’s
last fiscal year. V Capital Kronos Berhad does not currently own any of the Company’s common stock.
During the fiscal year ended June 30, 2023 and
2022, the Company paid $290,476 and $690,367, respectively, to True Sight for consulting services. Su Huay “Sue”
Chuah, our Chief Marketing Officer is a 40% shareholder of True Sight Sdn Bhd.
During the fiscal year ended June 30, 2023, Voon Him “Victor”
Hoo received 285,714 shares of our common stock upon his resignation from our board of directors.
Item
14. Principal Accounting Fees and Services
Audit
and Non-Audit Fees
Effective July 3, 2023, WWC, P.C. (“WWC”)
was appointed by the Company to serve as its new independent registered public accounting firm to audit and review the Company’s
financial statements for the year ended June 30, 2023.
Effective September 1,
2022, Friedman LLP (“Friedman”) combined with Marcum LLP and continued to operate as an independent registered public accounting
firm. On December 5, 2022, the Audit Committee and the Board of Directors of the Company approved the dismissal of Friedman LLP and
the engagement of Marcum Asia CPAs LLP (“Marcum Asia”) to serve as the independent registered public accounting firm of the
Company. The services previously provided by Friedman LLP was provided by Marcum Asia as a combined entity. Marcum Asia and Friedman LLP
served as the Company’s independent registered public accounting firm during the fiscal years ended June 30, 2023 and 2022.
Audit services provided by WWC, P.C. for fiscal
year ended June 30, 2023 included the examination of the consolidated financial statements of the Company. Audit services provided by
Marcum Asia and Friedman for fiscal years ended June 30, 2023 and 2022 included the examination of the consolidated financial statements
of the Company, and services related to periodic filings made with the SEC.
Audit Fees
WWC’s audit fee
for the year ended June 30, 2023 was $180,000. Marcum Asia and Friedman’s audit fee for the years ended June 30, 2023 and 2022 was
$300,000 and $270,969, respectively.
Audit-Related Fees
Marcum Asia’s audit-related fee for the year ended June 30, 2023
was $20,000.
Tax Fees
Friedman’s tax fees for the year ended June 30, 2023 was $56,505.
The
aggregate fees billed for the most recently completed fiscal year ended June 30, 2023 and 2022 for professional services rendered by
the principal accountant for the audit of our annual financial statements included in this and services that are normally provided by
the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
| |
Fiscal Year Ended June 30, | |
| |
2023 | | |
2022 | |
Audit Fees | |
$ | 480,000 | | |
$ | 270,969 | |
Audit-Related Fees(1) | |
| 20,000 | | |
| - | |
Tax Fees | |
| 56,505 | | |
| - | |
All Other Fees | |
| - | | |
| - | |
Total | |
$ | 556,505 | | |
$ | 270,969 | |
| (1) | Fees incurred in conjunction with consents and service performed for
various registration statements filed during the year ended June 30, 2023. |
Audit fees consist of fees related to professional services rendered
in connection with the audit of our annual financial statements. All other fees relate to professional services rendered in connection
with the review of the quarterly financial statements.
Our policy is to pre-approve all audit and permissible non-audit services
performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services.
Under our Audit Committee’s policy, pre-approval is generally provided for particular services or categories of services, including
planned services, project-based services and routine consultations. In addition, the Audit Committee may also pre-approve particular services
on a case-by-case basis. Our Audit Committee approved all services that our independent accountants provided to us for the 2023 fiscal
year.
PART
IV
Item
15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this Annual Report:
(1)
The financial statements are filed as part of this Annual Report under “Item 8. Financial Statements and Supplementary Data.”
(2)
The financial statement schedules are omitted because they are either not applicable or the information required is presented in the
financial statements and notes thereto under “Item 8. Financial Statements and Supplementary Data.”
(3)
The exhibits listed in the following Exhibit Index are filed, furnished or incorporated by reference as part of this Annual Report.
EXHIBIT
INDEX
Exhibit
No. |
|
Description |
3.1* |
|
Certificate of Incorporation
of the Registrant |
3.2* |
|
Bylaws of the Registrant |
3.3* |
|
Amendment to Certificate
of Incorporation of the Registrant |
4.1* |
|
Form of Underwriter Warrant
|
10.1* |
|
Form of Common Stock Securities
Purchase Agreement |
10.2* |
|
Form of Convertible Promissory Note issued pursuant to a Securities Purchase Agreement |
10.3** |
|
Registration Rights Agreement dated February 28, 2023 |
10.4* |
|
Investment Agreement dated November 1, 2020 between the Registrant and Space Capital Berhad |
10.5* |
|
13.33% Convertible Redeemable Note issued by the Registrant on November 13, 2020 to Space Capital Behard in the principal amount of $2,123,600 |
10.6* |
|
Collaboration Agreement dated March 21, 2022 between GEM Reward SDN BHD and TNG Digital SDN BHD |
10.7* |
|
Business Partner Agreement dated February 8, 2022 between Public Bank and Gem Reward Sdn Bhd |
10.8* |
|
Agreement dated August 6, 2021 between iPay88 (M) Sdn. Bhd. and Gem Reward Sdn Bhd. |
10.9* |
|
Partnership Agreement dated as of December 16, 2021 between Gem Reward Sdn Bhd and Digi Telecommunications Sdn Bhd |
10.10* |
|
Collection Services Agreement dated as of August 11, 2021 between ATX Distribution Sdn Bhd and Gem Reward Sdn Bhd |
10.11* |
|
Service Provider Agreement effective January 1, 2022 between Coup Marketing Asia Pacific Sdn. Bhd. d/b/a Pay’s Gift and Gem Reward Sdn. Bhd. |
10.12* |
|
Reseller Agreement dated April 12, 2021 between MOL Accessportal Sdn. Bhd. d/b/a Razer Gold and Gem Reward Sdn. Bhd. |
10.13* |
|
Merchant Services Agreement dated August 17, 2021 between Morganfield’s and Gem Reward Sdn. Bhd. |
10.14* |
|
Merchant Services Agreement dated August 17, 2021 between The Alley and Gem Reward Sdn. Bhd. |
10.15* |
|
Merchant Services Agreement dated August 17, 2021 between Hui Lau Shan and Gem Reward Sdn. Bhd. |
10.16* |
|
Employment Agreement dated July 1, 2020 between Chong Chan “Sam” Teo and the Registrant |
10.17* |
|
Employment Agreement dated March 1, 2021 between Su Huay “Sue” Chuah and the Registrant |
10.18* |
|
Employment Agreement dated June 16, 2021 between Su Chen “Chanell” Chuah and the Registrant |
10.19*** |
|
Employment Agreement dated June 5, 2023 between Michael Chan Meng Chun and the Registrant |
10.20**** |
|
Appointment Agreement dated as of September 1, 2021, by and between Bobby Banks and the Registrant |
10.21**** |
|
Appointment Agreement dated as of September 1, 2021, by and between Jeremy Roberts and the Registrant |
10.22**** |
|
Appointment Agreement dated as of September 1, 2021, by and between Marco Baccanello and the Registrant |
10.23**** |
|
Letter Offer dated as of August 2, 2023, issued by CIMB Bank Berhad to the Registrant |
21.1* |
|
List of Subsidiaries of the Company. |
31.1**** |
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2**** |
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1***** |
|
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2***** |
|
Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 |
|
Interactive
Data Files |
101.INS**** |
|
|
101.SCH**** |
|
XBRL
Instance Document |
101.CAL**** |
|
XBRL
Calculation Linkbase Document |
101.DEF**** |
|
XBRL
Definition Linkbase Document |
101.LAB**** |
|
XBRL
Label Linkbase Document |
101.PRE**** |
|
XBRL
Presentation Linkbase Document |
104**** |
|
Cover
Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Incorporated
by reference to the Company’s Registration Statement on Form S-1 (No. 333-264364),
filed on August 1, 2022. |
** | Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-41476), filed on March
1, 2023. |
*** | Incorporated by reference to the Company’s Current Report on Form 8-K (File No. 001-41476), filed on June
23, 2023. |
| ***** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of
Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated
by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act,
except as otherwise specifically stated in such filing. |
Item
16. Form 10-K Summary
The
Company has elected not to include summary information.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 28, 2023 |
TREASURE GLOBAL INC. |
|
|
|
By: |
/s/
Chong Chan “Sam” Teo |
|
|
Chong Chan “Sam” Teo |
|
|
Chief Executive Officer |
POWER
OF ATTORNEY
Each
individual person whose signature appears below hereby appoints Chong Chan “Sam” Teo as attorney-in-fact with full power
of substitution, severally, to execute in the name and on behalf of each such person, individually and in each capacity stated below,
one or more amendments to this annual report which amendments may make such changes in the report as the attorney-in-fact acting in the
premises deems appropriate, to file any such amendment to the report with the SEC, and to take all other actions either of them deem
necessary or advisable to enable the Company to comply with the rules, regulations and requirements of the SEC. Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Chong Chan “Sam” Teo |
|
Chief Executive Officer and Director |
|
September 28, 2023 |
Chong Chan “Sam” Teo |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Michael Chan Meng Chun |
|
Chief Financial Officer |
|
September 28, 2023 |
Michael Chan Meng Chun |
|
(Principal Financial And Accounting Officer) |
|
|
|
|
|
|
|
/s/ Ho Yi Hui |
|
Executive Director |
|
September 28, 2023 |
Ho Yi Hui |
|
|
|
|
|
|
|
|
|
/s/ Joseph R. “Bobby” Banks |
|
Director |
|
September 28, 2023 |
Joseph R. “Bobby” Banks |
|
|
|
|
|
|
|
|
|
/s/ Marco Baccanello |
|
Director |
|
September 28, 2023 |
Marco Baccanello |
|
|
|
|
|
|
|
|
|
/s/ Jeremy Roberts |
|
Director |
|
September 28, 2023 |
Jeremy Roberts |
|
|
|
|
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I, Chong Chan “Sam” Teo, Chief Executive
Officer of Treasure Global Inc (the “Company”), certify that:
(1) I have reviewed this Annual Report on Form 10-K
for the fiscal year ended June 30, 2023;
(2) Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements,
and other financial information included in the report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
(a) designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which the report is being prepared;
(b) designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) evaluated the effectiveness
of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any
change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
and
(5) The Company’s other certifying officer and
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and
to the Audit Committee of the Board of Directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not
material, that involves management or other employees who have a significant role in the Company’s internal control over financial
reporting.
I, Michael Chan Meng Chun, Chief Financial Officer
of Treasure Global Inc (the “Company”), certify that:
(1) I have reviewed this Annual Report on Form 10-K
for the fiscal year ended June 30, 2023;
(2) Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements,
and other financial information included in the report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and
I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
(a) designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which the report is being prepared;
(b) designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) evaluated the effectiveness
of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any
change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
and
(5) The Company’s other certifying officer and
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and
to the Audit Committee of the Board of Directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not
material, that involves management or other employees who have a significant role in the Company’s internal control over financial
reporting.
In connection with the Annual Report on Form 10-K
of Treasure Global Inc (the “Company”) for the year ended June 30, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), the undersigned, Chong Chan “Sam” Teo, Chief Executive Officer of the Company
hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
In connection with the Annual Report on Form 10-K
of Treasure Global Inc (the “Company”) for the year ended June 30, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), the undersigned, Michael Chan Meng Chun, Chief Financial Officer of the Company hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.