2 Summary of significant accounting policies
Basis
of presentation
The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”).
Consolidation
The
condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. A subsidiary is an
entity (including a structured entity), directly or indirectly, controlled by the Company. The financial statements of the subsidiaries
are prepared for the same reporting period as the Company, using consistent accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated on consolidation.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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Summary of significant accounting policies (cont’d) |
Going
concern
The
Company has incurred a net loss and significant cash outflows from cash used in operating activities over the last year, and as at June
30, 2024, had an accumulated loss of S$13,443,153 (US$9,919,682). These financial statements have been prepared on a going concern basis,
which assumes the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets
and discharge its liabilities in the normal course of operations as they come due.
Management
has commenced a strategy to raise debt and equity. However, there can be no certainty that these additional financings will be available
on acceptable terms or at all. If management is unable to execute this plan, there would likely be a material adverse effect on the Company’s
business. All of these factors raise substantial doubt about the ability of the Company to continue as a going concern.
The
condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
Foreign
currency translation
The
functional currency for SIMPPLE and its subsidiaries, IFSC Pte. Ltd., Gaussian Robotics Pte. Ltd. and Simpple Pte. Ltd., is the Singapore
Dollar (“S$”), while the functional currency for Simpple Australia Pty Ltd is Australian Dollar (“AUD”). The
Company uses Singapore Dollar (“S$”) as its reporting currency.
In
the condensed consolidated financial statements of the Company, transactions in currencies other than the functional currency are measured
and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date,
monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional
currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded
in the income statements during the period in which they occur.
Translations
of the condensed consolidated balance sheet, condensed consolidated statement of income and condensed consolidated statements of cash
flow from S$ into US$ as of and for the six months ended June 30, 2024 are solely for the convenience of the reader and were calculated
at the rate of US$0.7379 = S$1, as set forth in the statistical release of the Federal Reserve System on June 30, 2024. No representation
is made that the SGD amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2024, or
at any other rate.
Use
of estimates
The
preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which from the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Significant accounting estimates reflected in the Company’s condensed consolidated financial
statements include allowance for credit losses on receivables, the useful lives of property and equipment, impairment of intangible assets
and interest rate of leases. Actual results may differ from these estimates.
Cash
and cash equivalents
Cash
and cash equivalents mainly represent cash at bank and demand deposits which have original maturities less than three months and are
unrestricted as to withdrawal or use.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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Summary of significant accounting policies (cont’d) |
Account
receivables
Account
receivables mainly represent amounts due from clients for sale of goods and services fees which are recorded net of allowance. Management
reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and provides allowance when necessary.
The allowance is based on management’s best estimates of specific losses on individual customer exposures, as well as the historical
trends of collections. Account balances are charged off against the allowance after all means of collection have been exhausted and the
likelihood of collection is not probable.
Deposits
and prepayments
Deposits
and prepayments are classified as either current or non-current based on the terms of the respective agreements. These advances are unsecured
and are reviewed periodically to determine whether their carrying value has become impaired. As of December 31, 2023 and June 30, 2024,
management believes that the Company’s prepayments and deposits are not impaired.
Inventory
Inventories
are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-out principle, and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them
to their existing location and condition.
Intangible
assets
Intangible
assets with finite lives are initially recorded at cost and amortized in a method which reflects the pattern in which the economic benefits
of the intangible assets are expected to be consumed or otherwise used up.
We
evaluate the recoverability of intangible assets with finite lives for possible impairment whenever events or circumstances indicate
that the carrying amount of such assets may not be recoverable. The recoverability of these assets is measured by a comparison of the
carrying amounts to the future discounted cash flows the assets are expected to generate from the use and eventual disposition. If such
review indicates that the carrying amount of intangible assets with finite lives is not recoverable, and the assets fair value is less
than the carrying amount, an impairment charge is recognized. We have not recorded any material impairment charges during the periods
presented.
The
intangible asset is amortized using the straight-line approach over the estimated useful life as follows:
Schedule
of intangible asset estimated useful life
| Software development cost | |
5 years |
Property
and equipment, net
Property
and equipment are stated at cost less accumulated depreciation and impairment if applicable. The Company computes depreciation using
the straight-line method over the estimated useful lives of the assets as follows:
Schedule of property and equipment estimated useful life
| Furniture and fittings | |
3 years |
| Machineries | |
3 years |
| Office equipment & computers | |
1 year |
| Renovation | |
3 years |
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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Summary of significant accounting policies (cont’d) |
Property
and equipment, net (cont’d)
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 condensed consolidated statement of income. 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
of long-lived assets
The
Company evaluates the recoverability of its long-lived assets (asset groups), including property and equipment and operating lease right-of-use
assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of its asset (asset group) may not
be fully recoverable. When these events occur, the Company measures impairment but comparing the carrying amount of the assets to the
estimated undiscounted future cash flows expected to result from the use of the asset (asset group) and their eventual disposition. If
the sum of the expected undiscounted cash flows is less than the carrying amount of the asset (asset group), the Company recognizes an
impairment loss based on the excess of the carrying amount of the asset (asset group) over their fair value. Fair value is generally
determined by discounting the cash flows expected to be generated by the asset (asset group), when the market prices are not readily
available. The adjusted carrying amount of the asset is the new cost basis and is depreciated over the asset’s remaining useful
life. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. For the six months ended June 30, 2023 and 2024, no impairment of long-lived
assets was recognized.
Contract
liabilities
The
Company bills its clients based upon contractual schedules. The timing of revenue recognition, billings and cash collections result in
accounts receivable and contract liabilities.
Leases
The
Company is a lessee of non-cancellable operating leases for its corporate office premise and vehicles. The Company determines if an arrangement
is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement
date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing
rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancellable lease term
in calculating the right-of-use assets and liabilities.
The
Company adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease
component. Non-lease components include payments for building management, utilities and property tax. It separates the non-lease components
from the lease components to which they relate.
The
Company evaluates the impairment of its right-of-use assets 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 finance and operating lease liabilities in any tested asset group and include the associated lease payments in the
undiscounted future pre-tax cash flows. For the six months ended June 30, 2023 and 2024, the Company did not have any impairment loss
against its operating lease right-of-use assets.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
| 2 |
Summary of significant accounting policies (cont’d) |
Fair
value measurements
ASC
820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which pricing the asset
or liability. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| Level
1 |
-
observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| Level
2 |
-
Other inputs that are directly or indirectly observable in the marketplace. |
| Level
3 |
-
Unobservable inputs which are supported by little or no market activity. |
The
carrying amounts of cash and cash equivalents, account receivables, account payables, other payables to related parties, and accruals
and other payables approximate their fair values because of their generally short maturities.
Revenue
recognition
The
Company applied ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) for all periods presented.
The
five-step model defined by ASC 606 required the Company to (1) identify its contracts with customers, (2) identify its performance obligations
under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance
obligations in those contracts, and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue
is recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in
exchange for those goods or services.
The
Company has elected to apply the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.
The
Company elected a practical expedient that it does not adjust the promised amount of consideration for the effects of a significant financing
component if the Company expects that, upon inception of revenue contracts, the period between when the Company transfers its promised
services or deliverables to its clients and when the clients pay for those services or deliverables will be one year or less.
Revenue
is measured based on the consideration to which the Company expects to be entitled in exchange for transferring promised goods or services
to a customer, excluding amounts collected on behalf of third parties.
Revenue
is recognised when the Company satisfies a performance obligation by transferring a promised good or service to the customer, which is
when the customer obtains control of the good or service. A performance obligation may be satisfied at a point in time or over time.
The amount of revenue recognised is the amount allocated to the satisfied performance obligation.
The
Company’s principal revenue streams include:
Sale
of goods – Commercial customers
The
Company supplies autonomous robotic cleaning equipment for commercial applications.
Revenue
is recognised when the goods are delivered to the customer and all criteria for acceptance have been satisfied. No element of financing
is deemed present as the sales are made with credit terms consistent with market practice. The Company recognises contract liabilities
for consideration received in respect of unsatisfied performance obligations and reports these amounts in its balance sheet.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
Summary of significant accounting policies (cont’d) |
Revenue
recognition (cont’d)
The
Company’s principal revenue streams include (cont’d):
Sale
of goods – Commercial customers (cont’d)
Revenue
from sale of goods – commercial customers also include revenue from comprehensive maintenance service. For these contracts. We
account for the maintenance service separately from the sales of goods as they are distinct performance obligations. Refer to the discussion
below related to contracts with multiple performance obligations for further details. The transaction price is allocated to separate
performance obligations on a relative stand-alone selling price (“SSP”) basis. The transactions price allocated to the sales
of goods is recognized when transfer of control of the goods to the customer. The transaction price allocated to the comprehensive maintenance
service is recognized over the contract term.
Sale
of goods – Distributors
The
Company also sells the above products wholesale to third party distributors. Sales are recognised when control of the products have transferred
to these distributors, being when the products are delivered and accepted. The third party distributors have limited discretion over
sales channels and price to sell the products, and there are no unfulfilled obligations that could affect the distributors’ acceptance
of the products. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with
market practice.
Software
services rendered
Revenue
from software services rendered is recognised in the accounting period in which the services are rendered, as a performance obligation
satisfied over time. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting
period as a proportion of the total services to be provided. Payments for services rendered are not due from the customer until the services
are complete and therefore a contract asset is recognised over the period in which the services are performed, representing the Company’s
right to consideration for the services performed to date.
Revenue
from software services rendered also include revenues from sales of hardware. For these contracts, we account for the hardware separately
from the software service rendered as they are distinct performance obligations. Refer to the discussion below related to contracts with
multiple performance obligations for further details. The transaction price is allocated to separate performance obligations on a relative
SSP basis. The transaction price allocated to the hardware is recognized when transfer of control of the hardware to the customer is
complete. The transaction price allocated to the software service is recognized ratably over contract term.
Contracts
with multiple performance obligations
We
enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and
accounted for as separate performance obligations. We evaluate the terms and conditions included within our customer contracts to ensure
appropriate revenue recognition, including whether products and services are considered distinct performance obligations that should
be accounted for separately versus together. For contracts with multiple performance obligations, the transactions price is allocated
to the sperate performance obligations on a relative SSP basis. We determine SSP by considering the historical selling price of these
performance obligations in similar transactions as well as other factors, including, but not limited to, competitive pricing of similar
products, other software vendor pricing and current pricing practices.
Employee
benefits
Employee
benefits are recognized as an expense, unless the cost qualifies to be capitalized as an asset.
| |
i) |
Defined contribution plans |
Defined
contribution plans are post-employment benefit plans under which the Company pays fixed contributions into separate entities such as
the Central Provident Fund on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions
have been paid.
| |
ii) |
Short-term compensated absences |
Employee
entitlements to annual leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual
leave as a result of services rendered by employees up to the balance sheet date.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
Summary of significant accounting policies (cont’d) |
Employee
benefits (cont’d)
| iii) | Key
management personnel |
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the entity. Directors are considered key management personnel.
Related
parties
Parties
are considered to be related if one party 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. Parties are also considered to be related if they are subject
to common control or significant influence of the same party, such as a family member or relative, shareholder, or a related corporation.
Income
taxes
The
Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective
tax bases.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The
provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for
condensed consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return.
This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures.
The
Company did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line
of its condensed consolidated statements of income for the six months ended June 30, 2023 and 2024, respectively. The Company does not
expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
Earnings
per share
Basic
earnings per share is computed by dividing net earnings attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if convertible bonds
to issue ordinary shares were exercised or converted into ordinary shares.
Credit
risk
Assets
that potentially subject the Company to a significant concentration of credit risk primarily consist of cash, accounts receivable and
other current assets.
The
Company has designed their credit policies with an objective to minimize their exposure to credit risk. The Company’s accounts
receivable are short term in nature and the associated risk is minimal. The Company conducts credit evaluations on its clients and generally
does not require collateral or other security from such clients. The Company periodically evaluates the creditworthiness of the existing
clients in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the
credit risk of specific clients.
SIMPPLE
LTD. AND ITS SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 2 |
Summary of significant accounting policies (cont’d) |
Interest
rate risk
Interest
rate risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of
changes in market interest rates. The Company’s exposure to interest rate risk arises mainly from its interest-bearing financial
liabilities. The Company periodically reviews its liabilities and monitors interest rate fluctuations to ensure that the exposure to
interest rate risk is within acceptable levels. The interest-bearing financial liabilities are carrying at fixed interest rate except
for Bank loan 1, Bank loan 3 and trade loan. There is no impact on the other comprehensive income.
Recent
Accounting Pronouncements
The
Company is an “ emerging growth company ” (“EGC ”) as defined in the Jumpstart Our Business Startups Act of
2012 (the “ JOBS Act ”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued
subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company made the
election to delay the adoption of new or revised accounting standards.
In
December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”
(“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories
in the rate reconciliation, (2) the income or loss from continuing operations (separated by federal, state and foreign). ASU 2023-09
also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.
The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements
that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective
application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its 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 condensed consolidated balance sheets, statements of operations and cash flows.
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