Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

---

 

FORM 10-Q

 

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2018

 

☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 333-184061

 

WECONNECT TECH INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		39-2060052
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)

 

1st Floor, Block A, Axis Business Campus

No. 13A & 13B, Jalan 225, Section 51A

46100 Petaling Jaya

Selangor, Malaysia

+60 17 380 2755
(Address of Principal Executive Offices and Issuer’s
Telephone Number, including Area Code)

 

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 (§ 229.405 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, 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. (Check one)

 

	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐     No  ☒

 

As of December 5, 2018, the issuer had outstanding 593,610,070 shares of common stock.

 

 

 

 

TABLE OF CONTENTS

 

		Page
PART I	FINANCIAL INFORMATION	3
ITEM 1	Unaudited Condensed Financial Statements	3
	Consolidated Balance Sheets as of October 31, 2018 and July 31, 2018	3
	Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended October 31, 2018 and 2017	4
	Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2018 and 2017	5
	Notes to Unaudited Condensed Financial Statements	6
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	16
ITEM 4	Controls and Procedures	16
PART II	OTHER INFORMATION	17
ITEM 1	Legal Proceedings	17
ITEM 1A	Risk Factors	17
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	17
ITEM 3	Defaults upon Senior Securities	17
ITEM 4	Mine Safety Disclosures	17
ITEM 5	Other Information	17
ITEM 6	Exhibits	18
SIGNATURES		19

 

 

 

 

PART I   FINANCIAL INFORMATION

 

ITEM 1  Financial Statements

 

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

 

		October 31, 2018 (Unaudited)				July 31, 2018
ASSETS
Current Assets
Cash and cash equivalents		$	19,102			$	14,159
Account receivables			6,745				179
Other receivables, deposits and prepayments			754,620				748,260
Amount due from related parties			–				38,353
Inventories			3,192				3,288
Total Current Assets		$	783,659			$	804,239
Non-Current Assets
Plant and equipment, net		$	108,267			$	118,610
Total Non-Current Assets		$	108,267			$	118,610
Total Assets		$	891,926			$	922,849
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payables		$	14,623			$	1,515
Other payables and accrued liabilities			247,756				250,624
Amount due to directors			65,905				51,920
Amount due to related parties			446,709				323,424
Current tax liabilities			10,776				10,792
Total Current Liabilities		$	785,769			$	638,275
Non-Current Liabilities
Deferred taxation		$	9,325			$	9,605
Total Non-Current Liabilities		$	9,325			$	9,605
Total Liabilities		$	795,094			$	647,880
Stockholders' Equity
Common Stock 643,610,070 shares issued and outstanding at October 31, 2018 and July 31, 2018		$	5,117,462			$	5,117,462
Additional paid-in capital			434,929				434,929
Accumulated loss			(5,220,002	)			(5,048,961	)
Accumulated other comprehensive loss			(235,557	)			(228,461	)
Total Stockholders' Equity		$	96,832			$	274,969
Total Liabilities and Stockholders' Equity		$	891,926			$	922,849

 

(The accompanying notes are integral part of these financial statements)

 

 

 

 

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED OCTOBER 31, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

		For the three months ended October 31,
		2018 (Unaudited)				2017 (Unaudited)
Revenue		$	55,032			$	4,816
Cost of Revenue			(1,003	)			(67,992	)
Gross Profit/(Loss)			54,029				(63,176	)
Other Income/(Expenses)			250				(3,810	)
General and Administrative Expenses			(225,320	)			(382,498	)
Loss Before Taxation		$	(171,041	)		$	(449,484	)
Taxation			–				–
Loss After Taxation		$	(171,041	)		$	(449,484	)
Other Comprehensive Loss
Foreign Currency Translation Adjustment			(7,096	)			–
Total Comprehensive Loss for The Year		$	(178,137	)		$	(449,484	)
Earnings Per Share			0				0
Weighted Average Number of Common Shares Outstanding
Basic and Diluted			643,610,070				60,200,219

 

 

(The accompanying notes are integral part of these financial statements)

 

 

 

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED OCTOBER 31, 2018

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

		Three Months Ended October 31,
		2018 (Unaudited)				2017 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(171,041	)		$	(449,484	)
Adjustments to reconcile net loss to net cash used in operating activities:
Foreign exchange gains and losses			–				5,134
Depreciation of plant and equipment			6,704				7,008
Plant and equipment written off			(241	)			(498	)
Donated services and rent			–				1,500
Operating loss before working capital changes		$	(164,578	)		$	(436,340	)
Changes in operating assets and liabilities:
Account Receivables			(6,655	)			(324,971	)
Other receivables, deposits and prepayments			(28,530	)			2,875
Amount due to directors			15,500				(63,669	)
Amount due from related parties			172,253				1,358,340
Account payables			13,146				(576,646	)
Other payables and accrued liabilities			3,763				13,604
Net cash generated from / (used in) operating activities		$	4,899			$	(26,807	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment			–				(3,962	)
Sales proceed from disposal of plant and equipment			509				1,398
Net cash generated from / (used in) investing activity		$	509			$	(2,564	)
Change in cash and cash equivalents			5,408				(29,371	)
Foreign currency translation adjustment			(465	)			(2,242	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		$	4,943			$	(31,613	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		$	14,159			$	68,667
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	19,102			$	37,054

 

 

(The accompanying notes are integral part of these financial statements)

 

 

 

 

WECONNECT TECH INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED OCTOBER 31,2018

(Amount expressed in United States Dollars (“US$”), except for number of shares or stated otherwise)

(Unaudited)

 

1.	ORGANIZATION AND BUSINESS BACKGROUND

 

WECONNECT Tech International Inc. was incorporated under the laws of the State of Nevada on April 25, 2007. For purposes of financial statements presentation, WECONNECT Tech International Inc. and its subsidiary are herein referred to as “the Company” or “We”.

 

Our business office is located at 1st Floor, Block A, Axis Business Campus, No. 13A & 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia.

 

On June 8, 2018, we have acquired approximately 99.662% equity interest of MIG Mobile Tech Bhd, a public limited company incorporated in Malaysia. MIG Mobile Tech Bhd is mainly engaged in e-commerce, online to offline marketplace and payment eco-system. This transaction was accounted for as a transaction among entities under common control and the assets, liabilities, revenues, and expenses of MIG Mobile Tech Bhd were carried over to and combined with the Company at historical cost, and as if the transfer occurred at the beginning of the period. We have conducted our business through MIG Mobile Tech Bhd since then.

 

Details of the Company’s subsidiary:

 

No		Company Name		Place and date of incorporation		Particulars of issued capital		Principal activities
1		MIG Mobile Tech Bhd		Malaysia Oct 1, 2015		50,000,000 ordinary shares of RM1 each		E-commerce, online to offline marketplace and payment eco-system

 

 

2.	Summary of Significant Accounting Policies

 

Basis of Presentation

 

The interim financial information referred to above has been prepared and presented in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations. This report on Form 10-Q should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended July 31, 2018.

 

In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three months ended October 31, 2018, are not necessarily indicative of the results that may be expected for future quarters or the year ending July 31, 2019.

 

Basis of Consolidation

 

The consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company accounts and transactions have been eliminated upon consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to valuation of donated services and rent, fair value measurements and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

 

 

 

Cash and Cash Equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of October 31, 2018, and July 31, 2018, the Company had $19,102 and $14,159 in cash and cash equivalents, respectively.

 

Plant and Equipment

 

Plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation of plant and equipment are calculated on the straight-line method over their estimated useful lives as follows:

 

Classification	Principal annual rate / Estimated useful lives
Computer hardware and software	4 years
Furniture and fittings	10 years
Office equipment	5 years
Telecommunication	2 years
Renovation	10 years
Signboard	5 years
Security and alarm system	4 years

 

Expenditures for maintenance and repairs are expenses as incurred.

 

Inventories

 

Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Statements of Operation and Comprehensive Income.

 

Revenue Recognition

 

Revenue recognized when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable.

 

a)	Sales of goods
	Revenue from sales of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is measured at the fair value of the consideration received or receivable, net of discounts and taxes application to the revenue.

 

b)	Rendering of Services
	Revenue from rendering of services is measured by reference to the stage of completions of the transaction at the reporting date.

 

c)	Interest income
	Interest income is recognized using the effective interest method, and accrued on a timely basis.

 

Foreign Currencies Translation

 

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 statement of operations.

 

 

 

 

The functional currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the subsidiary maintains its books and record in a local currency, Malaysian Ringgit (“MYR” or “RM”), which is functional currency as being the primary currency of the economic environment in which the entity operates.

 

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 subsidiary are recorded as a separate component of other comprehensive income. The Company has not to, the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

 

Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates for the respective years:

 

		As of and for the quarter ended October 31,
		2018				2017
Quarterly average MYR : US$1 exchange rate			4.1299				4.2305
Quarter end MYR : US$1 exchange rate			4.1825				4.2407

 

Fair Value of Financial Instruments

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivable, deposits and other receivables, amount due to related parties and other payables approximate at their fair values because of the short-term nature of these financial instruments.

 

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1:

Observable inputs such as quoted prices in active markets;

Level 2:

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

Income Tax

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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 that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. There were no significant deferred tax items as of October 31, 2018 and July 31, 2018.

 

The Company applied the provisions of ASC 740-10-50, Accounting for Uncertainty In Income Taxes, which provides clarification related to the process associated with accounting for uncertain tax position recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At October 31, 2018 and July 31, 2018, management considered that the Company had no uncertain tax positions and will continue to evaluate for uncertain positions in the future.

 

 

 

 

Basic and Diluted Net Income/(Loss) Per Share

 

The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive. As at October 31, 2018 and 2017, there were no potentially dilutive securities outstanding.

  

Recent Accounting Pronouncements

 

Management has considered all recent accounting pronouncements issued and their potential effect on our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's condensed financial statements.

 

3.	Related Party Transactions

 

During the three months ended October 31, 2018, MIG Network & Consultancy Sdn Berhad (the “MIG Network and Consultancy”), a Malaysian company that Executive Directors of the Company are the major shareholders, has advanced in an aggregate amount of $172,253, equivalent to RM711,387 to the Company for working capital purpose. The advances were unsecured, interest free, and due on demand. As of October 31, 2018, and July 31, 2018, there were $446,709 and $285,071 advances outstanding, respectively.

 

		For the Three Months ended				For the Three Months ended
		October 31, 2018				October 31, 2017
Revenue generated from:
North Cloud Sdn Bhd		$	26,635			$	–
MIG O2O Berhad			19,371				–
MIG Network & Consultancy Sdn Bhd			8,475				–
		$	54,481			$	–
Payroll outsourcing charge back to:
North Cloud Sdn Bhd		$	9,085			$	–
MIG O2O Berhad			15,989				–
MIG Network & Consultancy Sdn Bhd			729				–
		$	25,803			4	–
Rental paid to
MIG Network & Consultancy Sdn Bhd		$	17,850			$	5,448
		$	17,850			$	5,448

 

		October 31, 2018				July 31, 2018
Amount due from related parties:
MIG Mobile Tech Limited		$	–			$	38,353
		$	–			$	38,353
Amount due to related parties:
MIG Network & Consultancy Sdn Bhd		$	446,709			$	323,424
		$	446,709			$	323,424
Amount due to directors:
Shiong Han Wee		$	6,216			$	6,414
Kwueh Lin Wong			44,189				45,506
Pui Hold Ho			13,000				–
Mun Wai Wong			2,500				–
		$	65,905			$	51,920

 

 

 

 

4.	Stockholders’ Equity

 

Common Stock

  

As of October 31, 2018, there are no new issued and outstanding preferred stocks during the financial period.

 

As of October 31, 2018, there are 643,610,070 shares of common stock issued and outstanding.

 

Preferred Stock

 

As of October 31, 2018, there are no issued and outstanding preferred stocks.

 

5.	Subsequent Events

 

On November 12, 2018, MIG Mobile Tech Berhad, a subsidiary of the Company, filed a claim against Digiland Private Limited (“Digiland”) for breach of contract and misrepresentation arising from, among other things, Digiland’s failure to perform under its supplier contract with the Company. In its suit, MIG Mobile Tech Berhad is seeking a return of funds previously paid to Digiland in the amount of S$800,000 Singaporean Dollars (approximately US $596,000) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance of the payment due to it under contract in the sum of S$800,000, together with a claim for damages to be assessed by the Singapore Court.

 

In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Company discloses the amount of the accrual if the financial statements would be otherwise misleading, which was not the case for the three months ended October 31, 2018.

 

When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then the Company discloses an estimate of the possible loss or range of loss, if such estimate can be made or discloses that an estimate cannot be made.

 

The assessments whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, often involve a series of complex judgments about future events. Management is often unable to estimate a range of reasonably possible loss, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel or unsettled legal theories or a large number of parties. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss, fine, penalty or business impact, if any.

 

Prior to the filing of the its claims against Digiland, the Company recognized the amount of $596,912 in receivable, deposits and prepayments. The amount is being recognised as deposit because the development of the application-based software has not been materialised to-date. Upon the filing of its claims, the Company expects to recognize a full impairment in the amount of $596,612. The Company is unable to ascertain the result of the legal proceedings as the proceedings are in the early stages and there is uncertainty arising from the development of the case.

 

Excluding fees paid to external legal counsel, the Company expects to recognize additional accruals for litigation-related expense in the approximate amount of $85,000 at January 31, 2019, for loss contingencies deemed probable and subject to reasonable estimation.

 

We expect that the aggregate range of reasonably possible losses, in excess of accruals established, if any, for such legal proceeding is likely to range from S$800,000 and upwards if Digiland prevails in its counterclaim against us. The estimated aggregate range of reasonably possible losses is based upon currently available information for those proceedings in which the Company is involved, taking into account the Company’s best estimate of such losses for those cases for which such estimate can be made. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, such range represents what the Company believes to be an estimate of possible loss only for those matters meeting such criteria. It does not represent the Company’s maximum loss exposure.

 

 

 

 

6.	Commitment and Contingencies

 

The Company has entered into a new agreement for developing and enhancing the web-based Merchant Management System which amounting to US$180,490 on September 14, 2018 with an independent third party. The Company had paid US$43,428 in relation for the first stage of development work done on September 21, 2018. The remaining cost to complete the web-based Merchant Management System in future is amounting to US$137,062.

 

The Company has entered into an agreement for developing an electronic wallet system which amounting to US$96,855 on March 12, 2018 with an independent third party. The Company had paid a total of US$48,427 in for the first stage of application development on April 5, 2018 and July 25, 2018. The remaining cost to complete the electronic wallet system in future is amounting to US$48,428.

 

The Company has entered into an agreement with Digiland Pte Ltd. on September 12, 2017, amounting to US$1,189,061 for eMobile Apps (User and Merchant) and Backed Admin Web Portal. The remaining cost to complete the eMobile Apps (User and Merchant) and Backed Admin Web Portal in future is amounting to US$617,559.

 

Subsequent to the financial year end, the Company’s future lease payments of US$5,929 per month for office premise is expected to end on Oct 31, 2019.

 

 

7.	Comparative Figures

 

The comparative figures in fiscal year ended 31 July 2017 had been restated due to the Merger and Acquisition – Reverse Take Over of our subsidiary company – MIG Mobile Tech Bhd on 8 June 2018 under common control.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-looking statements

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report on Form 10-Q. This quarterly report on Form 10-Q contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this discussion, including, without limitation, statements containing the words "believes," "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained herein to reflect future events or developments.

 

Currency and exchange rate

 

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue 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 income within the statement of stockholders’ equity.

 

Overview

 

We are a payment-solution provider designed to consolidate users’ forms of payment and connect merchants to consumers in a dynamic ecosystem via digital transactions in the form of mobile payment, visa-powered payment card, and other features such as rewarding in-app system and shopping aggregator system that are both convenient and rewarding. In a society that is still extremely cash-reliant in its daily transactions, we offer a cashless transaction solution with our digital payment system that can be used domestically and internationally.

 

We were founded with one single technology ambition – to be a one-stop payment solution group backed by an integrated digital eco-system. Centered around online and offline commerce platforms, the Company boasts three (3) main payment gateways:

 

i.

Digital Payment

ii.

Visa Empowered Card

iii.

In-app Reward Program (Coming soon)

 

With our participation in online and offline platforms, we hope to improve the payment landscape in Malaysia, connecting people across emerging markets. We seek to revolutionize the way business works by providing cutting-edge payment solutions, security, internet & mobile technologies and integrating with conventional business practices to mitigate the constraints of distance and time for maximum convenience and speed.

 

History

 

We were incorporated under the laws of the State of Nevada on April 25, 2007. Prior to our acquisition of MIG Mobile Tech Berhad (“MMT”), a corporation organized under the laws of Malaysia, we were an exploration stage company engaged in the acquisition and exploration of mineral properties. We were also a “shell company” with no meaningful assets or operations other than our efforts to identify and merge with an operating company. We operated under the name “Contact Minerals Corp. and our securities traded under the symbol “CNTM.” Effective November 6, 2017, we changed our name to “WECONNECT Tech International, Inc.” and our symbol to “WECT.” Our business office is located at 1^st Floor, Block A, Axis Business Campus, No. 13A & 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia. Effective June 8, 2018, we consummated the acquisition of 49,831,007 shares of MMT (the “MMT Shares”), constituting approximately 99.662% of the issued and outstanding securities of MMT. As a result of our acquisition of the MMT Shares, we ventured into the payment solution business with a focus on users located in Malaysia.

 

 

 

 

Effective August 29, 2017, the Company and Kerry McCullagh, the Company’s former Chief Executive Officer, Chief Financial Officer, President, Secretary and Treasurer (the “Seller”) entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Shiong Han Wee and Kwueh Lin Wong (collectively, the “Purchasers”). Under the terms of the Stock Purchase Agreement, the Purchasers agreed to purchase 7,000,000 shares from the Seller (the Seller Shares”) and 78,770,000 shares from the Company (the “Issued Shares”) for an aggregate purchase price of $350,000. The sale of the Seller Shares and the Issued Shares consummated September 11, 2017.

 

Upon the consummation of the sale, Kerry McCullagh, Alex Langer and William McCullagh, our former executive officers and directors, resigned from all of their positions with the Company. Their resignations were not due to any dispute or disagreement with the Company on any matter relating to the Company's operations, policies or practices.

 

The following individuals were appointed to serve in the positions set forth next to their names below:

 

Name		Age		Position
Shiong Han Wee		41		Director, Chief Executive Officer
Kwueh Lin Wong		41		Director, Secretary

 

 

Chee Kuen Chim and Pui Hold Ho were each appointed to serve as a Director of the Company effective September 22, 2017. Mr. Chim resigned from his positions with the Company effective May 11, 2018, and Mun Wai Wong was appointed to fill the vacancy caused by such resignation on June 1, 2018.

 

Effective June 1, 2018, Kwueh Lin Wong resigned from his position as the Chief Financial Officer of the Company and Chow Wing Loke was appointed to fill the vacancy caused by Mr. Wong’s resignation.

 

Effective June 8, 2018, we consummated the acquisition of 49,831,007 shares of MMT (the “MMT Shares”), constituting approximately 99.662% of the issued and outstanding securities of MMT. As consideration, we agreed to issue to the MMT shareholders 498,310,070 shares of our common stock, at a value of US $0.05 per share, for an aggregate value of US$24,915,503.50. As a result of our acquisition of the MMT Shares, we entered into the payment solution business with a focus on users located in Malaysia.

 

Going Concern

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Accordingly, our financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. As at October 31, 2018, the Company has working capital deficiency of $2,110 and has accumulated losses of $5,220,002 since its inception. Further losses are anticipated in the development of the business, raising substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management expects to finance operating costs over the next twelve months with loans from directors and/or private placements of common stock, but we cannot guarantee that we will be able to achieve same.

 

Results of Operations

 

The following table provides selected financial data about our company as of October 31, 2018 and 2017.

 

Three Months Ended October 31, 2018, Compared to Three Months Ended October 31, 2017

 

 

		Three Months Ended October 31, 2018				Three Months Ended October 31, 2017
Revenue		$	55,032			$	4,816
Cost of Revenue			(1,003	)			(67,992	)
Other Income / (Expense)			250				(3,810	)
General and administrative expenses			(225,320	)			(382,498	)
Net Loss From Operations		$	(171,041	)		$	(449,484	)

 

 

 

Revenues. During the three months ended October 31, 2018, and 2017, we earned revenues of $55,032 and $4,816, respectively. Our revenues consisted primarily of IT service fees and merchant platform maintenance fees. During the three months ended October 31, 2018 and 2017, the following customers accounted for 10% or more of our total net revenues:

 

		Three months ended October 31, 2018								October 31, 2018
		Revenues				Percentage of revenues				Accounts receivable
North Cloud Sdn Bhd		$	26,635				48%			$	–
MIG O2O Berhad			19,371				35%				–
MIG Network & Consultancy Sdn Bhd			8,475				15%				–
TOTAL		$	54,481				98%			$	–

 

During the three months ended October 31, 2017, no customers accounted for 10% or more of our total net revenues.

 

MIG O2O Berhad, MIG Network & Consultancy Sdn Bhd and MIG Mobile Tech Ltd. are affiliated with our executive officers and directors, Shiong Han Wee and Kwueh Lin Wong.

 

Operating Expenses. Operating expenses were $225,320 and $382,498 for the three months ended October 31, 2018, and 2017, respectively. The decrease in operating expenses was primarily attributable decrease in marketing and payroll expenses.

 

During the three months ended October 31, 2018 and 2017, no vendors accounted for 10% or more of our total operating costs. 

 

Gross Profit. We recorded a gross profit of $54,029 and gross loss of $63,176 for the three months ended October 31, 2018, and 2017, respectively. The increase in gross profit is primarily attributable to the revenues generated from the IT service fee rendered during the period. We expect our gross profit to be decrease in the next quarter resulting from the impairment to be recognized in full amounting to $596,612 as stated in the notes to consolidated financial statements.

 

Income Tax Expense. We did not record income tax expenses for the three months ended October 31, 2018, and 2017 respectively.

 

Net Loss. We suffered a net loss of $171,041 and $449,484 for the three months ended October 31, 2018, and 2017, respectively. The decrease in gross loss is primarily attributable to the decrease of operation and administrative expenses and increase of revenue.

 

Liquidity and Capital Resources

 

Working Capital

 

		October 31, 2018				July 31, 2018
Current Assets		$	783,659			$	804,239
Current Liabilities			785,769				638,275
Working Capital (Deficit)/Surplus		$	(2,110	)		$	165,964

 

We had current assets of $783,659 consisting primarily of inventories of $3,192, account receivables of $6,745, other receivables, deposits and prepayments of $754,620 and cash and cash equivalents of $19,102 as of October 31, 2018. Our current liabilities consisted of $446,709 of amount due to related parties, $247,756 of other payables and accruals, $65,905 of amounts due to directors, $10,776 of current tax liabilities and $14,623 of account payables. In the near future, we expect to recognize an impairment of $596,612 to receivables, deposits and prepayments in connection with out lawsuit against Digiland, as more fully discussed in Note 5 of our Notes to Consolidated Financial Statements for the three months ended October 31, 2018.

 

 

 

 

As of July 31, 2018, we had current assets of $804,239 and current liabilities of $638,275. Our current assets consisted of $748,260 of other receivables, deposits and prepayments, $38,353 of amount due from related parties, $14,159 of cash and cash equivalents, $3,288 of inventories and $179 of trade receivables. Our current liabilities consisted of $323,424 of amount due to related parties, $250,624 of other payables and accruals, $51,920 of amounts due to directors, $10,792 of current tax liabilities and $1,515 of trade payables.

 

Cash Flows

 

		Three Months Ended				Three Months Ended
		October 31, 2018				October 31, 2017
Net Cash Provided By / (Used In) Operating Activities		$	4,899			$	(26,807	)
Net Cash Provided By / (Used In) Investing Activities		$	509			$	(2,564	)
Net Cash Provided by Financing Activities		$	–			$	–
Effects on changes in foreign exchange rate		$	(465	)		$	(2,242	)
Net increase / (decrease) in cash and cash equivalents		$	5,408			$	(29,371	)

  

Cash Flow from Operating Activities

 

During the three months ended October 31, 2018, net cash provided by operating activities was $4,899, compared to $(26,807) for the three months ended October 31, 2017. Net cash provided by operating activities during the three months ended October 31, 2018 consisted primarily of a net loss of $171,041 offset by an increase in amounts due to related parties of $172,253, an increase of amount due to directors of $15,500, an increase in other payables and accrued expenses of $3,763, an increase of amount in account receivables $6,655,an increase in account payables of $13,146, plant and equipment write off of $241, an increase of depreciation of plant and equipment of $6.704 and an increase in prepaid expenses of $28,530.

 

Cash Flow from Investing Activities

 

During the three months ended October 31, 2018, there was net cash of $509 from proceeds from disposals of property, plant and equipment.

 

Cash Flow from Financing Activities

 

During the three months ended October 31, 2018, financing activities did not provide any net cash.

   

Financing Requirements

 

During the twelve-month period following the date of this quarterly report, we anticipate that we will not generate sufficient operating revenue. Accordingly, we will be required to obtain additional financing in order to pursue our plan of operations during and beyond the next twelve months. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or shareholder loans. However, there is no assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our business plan should we decide to proceed.

 

We anticipate continuing to rely on equity sales of our common shares and advances from our executive officers and directors in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our business operations.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

 

 

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have not identified any additional critical accounting policies and judgments. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in note 2 to our financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

  

Recent accounting pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

ITEM 3 Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

ITEM 4 Controls and Procedures

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures, subject to limitations as noted below, as of October 31, 2018, and during the period prior to and including the date of this report, were not effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Inherent Limitations

 

Because of its inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Changes in Internal Control over Financial Reporting

 

Our annual report on Form 10-K reported that our internal control over financial reporting was not effective as of July 31, 2018, due to certain material weaknesses more fully discussed in our annual report. Subject to the foregoing disclosures in this Item 4, there were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended October 31, 2018, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

  

PART II OTHER INFORMATION

 

ITEM 1 Legal Proceedings

 

On November 12, 2018, MIG Mobile Tech Berhad, a subsidiary of the Company, filed a claim against Digiland Private Limited (“Digiland”) for breach of contract and misrepresentation, among other claims, in connection with Digiland’s failure to perform under its supplier contract with the Company. In its suit, MIG Mobile Tech Berhad is seeking a return of funds previously paid to Digiland in the amount of S$800,000 Singaporean Dollars (approximately US $584,000) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance sum of S$800,000 together with a claim for damages to be assessed by the Singapore Court. This matter is more fully described in Note 5 Subsequent Events of Notes to our Consolidated Financial Statements.

 

Other than the item set forth in Note 5 Subsequent Events of Notes to our Consolidated Financial Statements, we are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.

 

ITEM 1A Risk Factors

 

None.

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

ITEM 3 Defaults upon Senior Securities

 

None.

 

ITEM 4 Mine Safety Disclosures

 

Not applicable.

 

ITEM 5 Other Information

 

None.

 

 

 

 

ITEM 6 Exhibits

 

Exhibit
Number	Description of Exhibit
3.1	Amended and Restated Articles of Incorporation(1)
3.2	Bylaws.(1)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Audit Committee Charter.(2)
99.2	Pre-Approval Procedures. (2)
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	XBRL Taxonomy Extension Label Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.

 

Notes:
(1)	Incorporated by reference from our Definitive Information Statement filed with the Securities and Exchange Commission on October 18, 2017.
(2)	Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 22, 2017.

* Filed Herewith

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	WECONNECT TECH INTERNATIONAL, INC.
	By:	/s/ Shiong Han Wee
		Shiong Han Wee
		Chief Executive Officer
Date:       December 12, 2018