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)
276 5th Avenue, Suite 704 #739,
New York, New York10001
+6012643 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
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 36
Item 2. Properties 36
Item 3. Legal Proceedings 36
Item 4. Mine Safety Disclosures 36
PART II
Item 6. [Reserved] 40
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 54
Item 9B. Other Information 55
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 55
PART III
Item 10. Directors, Executive Officers and Corporate Governance 56
Item 11. Executive Compensation 61
Item 14. Principal Accounting Fees and Services 65
PART IV
Item 15. Exhibits, Financial Statement Schedules 66
i
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;
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.
ii
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;
● The market for our ZCITY platform is new and unproven;
● There is no assurance that the Company will be profitable;
iii
iv
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.
1
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:
2
Recent Developments
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/
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
3
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
10 https://services.google.com/fh/files/misc/e_conomy_sea_2022_report.pdf
4
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.
3. Affiliate Partnership
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.
5. Branded e-Vouchers
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.
5
7. ZCITY RAHMAH Package
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.
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.
9. Zstore
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.
6
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.
7
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:
● 200 RP for registration as a new user;
● 100 RP for referral of a new user;
● Conversion of Malaysian ringgit spent into RP;
● 50% RP of every user paid amount; and
● 25% RP of every referred user paid amount as a result of the referral.
8
The key objectives of our RP are:
● Social Engagement;
○ RP are offered to users for increased social engagement.
● Spending;
● Sign-up; and
● Referral Program;
○ 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.
9
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.
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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.
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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.
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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.
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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.
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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:
● e-commerce activities for users;
● services to merchants to help them grow their businesses; and
● 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.”
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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.
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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