ITEM 1. BUSINESS
OVERVIEW
We are an IT-solutions provider and until recently, provided a multi-dimensional e-commerce platform that facilitates shopping, business, trade and integrates online & office transactions in a single application. Prior to June 2019, we developed and operated a mobile platform designed to consolidate users’ cash and connect merchants to consumers by offering a cashless form of transaction, in-app shopping and a user rewards system. On June 2019, we ceased the operation of the platform but continue to maintain our IT solution business operations. During the fiscal years ended July 31, 2019, and 2018, we generated comprehensive losses of $1,493,284 and $1,556,408, respectively.
In March 2019, we embarked on a diversification plan to move into the energy, oil & gas sector to strengthen our financial position. On October 24, 2019, we entered into a nonbinding Memorandum of Understanding with MIG Next Technologies Sdn. Bhd. (the “MOU”) pursuant to which the parties agreed to explore a strategic partnership to exploit that certain thermal catalytic cracking technology with proprietary permanent catalyst, named as CHCSTDRP (CH Closed System Thermally Depolymerisation Refining Process) Technology, in accordance with the terms and conditions set forth in the MOU. Pursuant to the MOU, MIG Next Technologies Sdn. Bhd. (“MIG Next”), agreed not to initiate, solicit, encourage, directly or indirectly, or accept any offer or proposal, regarding a strategic partnership relating to the exploitation of such technology by any person other than Company. The MOU expires on the date that is six (6) months from the date of the MOU unless otherwise extended by the parties.
Two Hundred Sixty Thousand and Two Hundred Fifty Thousand (260,000 and 250,000 respectively) ordinary shares of MIG Next, representing 27.66% and 26.60% respectively of the issued and outstanding securities of MIG Next, are held by Shiong Han Wee, our Chief Executive Officer and Director and Kwueh Lin Wong, our Secretary and Director.
Our goal is to explore green technology in the pursuit of improving the quality of living through positive economic contributions and responsible energy production. We believe that we will require approximately USD3,000,000 to fund our diversification plan for the next 18 months. We intend to finance our business expansion efforts through sales of our securities to existing shareholders and loans from existing shareholders or financial institutions.
OUR NEW GREEN TECHNOLOGY FOCUS
With economic growth, industrialization and growing population in developing countries such as Malaysia, there is an increase in energy demand to meet the consumption patterns of the population. In light of the global environmental problems that call for drastic cuts on fossil fuel use, the Malaysian government is taking initiatives to implement policies to address this acceleration of consumption through green technology (GT) applications. The term ‘green technology’ refers to technology that is considered environmentally friendly based on its production process or supply chain. GT includes alternative means of energy production that are less harmful to the environment than traditional ways of generating energy, such as burning fossil fuels.
Green technology initiatives are in line with Sustainable Development Goals (SDGs) that have been adopted by 193 countries across the globe. The SDGs provide clear guidelines and targets for all countries to implement in accordance with their own priorities and the environmental challenges of the world at large. GT plays a key role towards achieving the indicators of SDGs, namely Goal 6 (clean water and sanitation), Goal 7 (affordable and clean energy), Goal 11 (sustainable cities and communities), Goal 12 (responsible consumption and production) and Goal 13 (climate action). We believe that GT is the future of any economy due to rising energy costs and the threat of global warming. We expect that businesses will increasingly recognize the benefits of using technology to reduce their carbon footprint and minimize waste.
Prospective Green Technology
WECT is exploring a transformation technology that uses thermal depolymerization technology as the base paired with catalytic cracking process using quantum entanglement principle to turn organic & inorganic substances to produce oil, gas and charcoal. On October 24, 2019, we entered into a nonbinding Memorandum of Understanding with MIG Next pursuant to which the parties agreed to explore a strategic partnership to exploit thermal catalytic cracking technology with proprietary permanent catalyst, named as CHCSTDRP (CH Closed System Thermally Depolymerisation Refining Process) Technology, in accordance with the terms and conditions set forth in the MOU. Pursuant to the MOU, MIG Next agreed not to initiate, solicit, encourage, directly or indirectly, or accept any offer or proposal, regarding a strategic partnership relating to the exploitation of such technology by any person other than Company. The MOU expires on the date that is six (6) months from the date of the MOU unless otherwise extended by the parties.
Two Hundred Sixty Thousand and Two Hundred Fifty Thousand (260,000 and 250,000 respectively) ordinary shares of MIG Next, representing 27.66% and 26.60% respectively of the issued and outstanding securities of MIG Next, are held by Shiong Han Wee, our Chief Executive Officer and Director and Kwueh Lin Wong, our Secretary and Director.
We intend to work with industry specialists and engineers who have taken more than 15 years to perfect this process, which we believe has been successfully proven at a research center in Netherlands and Malaysia. To fund our diversification plan and operation in the next 18 months, we will require approximately USD3,000,000. We intend to finance our business expansion efforts through sales of our securities to existing shareholders and loans from existing shareholders or financial institutions.
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 1st 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 IT solution business with a focus on users located in Malaysia. On June 2019, MMT ceased the operation of the platform and currently only maintains its IT solution business operations.
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:
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.
MMT was established in 2015 and commenced operations in Malaysia on October 2015. MMT has developed and operated a mobile platform designed to consolidate users’ cash and connect merchants to consumers by offering a cashless form of transaction, in-app shopping and a user rewards system. On June 2019, MMT ceased the operation of the platform and currently only maintains its IT solution business operations.
In March 2019, we embarked on a diversification plan to move into the energy, oil & gas sector to strengthen our financial position. On October 24, 2019, we entered into a nonbinding Memorandum of Understanding with MIG Next Technologies Sdn. Bhd. (the “MOU”) pursuant to which the parties agreed to explore a strategic partnership to exploit that certain thermal catalytic cracking technology with proprietary permanent catalyst, named as CHCSTDRP (CH Closed System Thermally Depolymerisation Refining Process) Technology, in accordance with the terms and conditions set forth in the MOU. Pursuant to the MOU, MIG Next Technologies Sdn. Bhd. (“MIG Next”), agreed not to initiate, solicit, encourage, directly or indirectly, or accept any offer or proposal, regarding a strategic partnership relating to the exploitation of such technology by any person other than Company. The MOU expires on the date that is six (6) months from the date of the MOU unless otherwise extended by the parties.
Two Hundred Sixty Thousand and Two Hundred Fifty Thousand (260,000 and 250,000 respectively) ordinary shares of MIG Next, representing 27.66% and 26.60% respectively of the issued and outstanding securities of MIG Next, are held by Shiong Han Wee, our Chief Executive Officer and Director and Kwueh Lin Wong, our Secretary and Director
Our goal is to explore green technology in the pursuit of improving the quality of living through positive economic contributions and responsible energy production. We believe that we will require approximately USD3,000,000 to fund our diversification plan for the next 18 months. We intend to finance our business expansion efforts through sales of our securities to existing shareholders and loans from existing shareholders or financial institutions.
CORPORATE STRUCTURE
A chart of our current corporate structure is set forth below:
WeConnect Tech
International, Inc. (NV)
(“WECT”)
MIG Mobile Tech Berhad
(Malaysia)
(“MMT”)
OUR CURRENT PRODUCTS AND SERVICES
We currently provide the following services.
System Consultation: Our IT team provides IT consultation services and facilitates client interaction with systems developers.
System Testing: Our IT team provides assurance testing to enable clients to determine whether their system is operating with the desired functionalities.
Hardware and Software Renting: We lease various computer equipment and provides server rental and maintenance services.
OPERATIONS
Our current business operations are divided into the following core functions to address the needs of our customers.
Service Consultant: Our Service Consultant team focuses on expanding the customer base of the Company, as well as addressing all the needs of our customers. They work with the IT team to fulfill customer requests. Our consultants work closely with the customer before and after delivery/completion of product/services. As of July 31, 2019, we employed 5 services representatives.
Technology: We embrace and welcome new technologies to improve the user experience for our customers. Our information technology team is focused on the design and development of new products and services, maintenance of customer websites and development and maintenance of our customer server or internal operations systems.
DISTRIBUTION
Major Customers
During the twelve months ended July 31, 2019, the following customers accounted for 10% or more of our total net revenues:
MIG O2O Berhad, East Cloud Sdn Bhd and MIG Network & Consultancy Sdn Bhd are affiliated with our executive officers and directors, Shiong Han Wee and Kwueh Lin Wong.
Major Vendors
During the twelve months ended July 31, 2019, no vendors accounted for 10% or more of our total operating costs.
INTELLECTUAL PROPERTY AND PATENTS
We expect to rely on patents, trade secrets, copyrights, expertise, trademarks, license agreements and contractual provisions to establish our intellectual property rights and protect our “WeConnect” brand and services. These legal means, however, afford only limited protection and may not adequately protect our rights. Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources and management attention. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.
The laws of Malaysia and our target countries may not protect our brand and services and intellectual property to the same extent as U.S. laws, if at all. We may be unable to fully protect our intellectual property rights in these countries. Furthermore, companies in the internet, social media technology and other industries may own large numbers of patents, copyrights and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights.
We intend to seek the widest possible protection for significant product and process developments in our major markets through a combination of trade secrets, trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level of protection afforded by the particular jurisdiction. Initially, we expect that our revenue will be derived mainly from our operations in Malaysia where intellectual property protection may be limited and difficult to enforce. In such instances, we may seek protection of our intellectual property through measures taken to increase the confidentiality of our findings.
We also intend to register trademarks as a means of protecting the brand names of our companies and products. In addition to this, we also aim to protect our trademarks against infringement and also seek to register design protection where appropriate.
We rely on trade secrets and unpatentable knowledge that we seek to protect, in part, by confidentiality agreements. We expect that, where applicable, we will require our employees to execute confidentiality agreements upon the commencement of employment with us. We expect these agreements to provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not to be disclosed to third parties except in specific limited circumstances. The agreements will also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable knowledge will not otherwise become known or be independently developed by competitors.
EMPLOYEES
As of July 31, 2019, we have the following employees:
All of our employees are located in Malaysia. None of our employees are members of a trade union. We believe that we maintain good relationships with our employees and have not experienced any strikes or shutdowns and have not been involved in any labor disputes.
We are required to make contributions under a defined contribution pension plan for all of our eligible employees in Malaysia. We are required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level. The total contributions made were $51,700 and $81,390, for the years ended July 31, 2019, and 2018, respectively.
GOVERNMENT AND INDUSTRY REGULATIONS
We are subject to the general laws in Malaysia governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws.
Insurance
We maintain certain insurance in accordance with customary industry practices in Malaysia. Under Malaysian law it is a requirement that all employers in the city must purchase Employee's Compensation Insurance to cover their liability in the event that their staff suffers an injury or illness during the normal course of their work. MMT maintains Employee’s Compensation Insurance, vehicle insurance and third-party risks insurance for the business purposes.
CORPORATE INFORMATION
Our principal executive and registered offices are located at 1st Floor, Block A, Axis Business Campus, No. 13A & 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia, telephone number +603-79316456. Our website is located at https://weconnect.tech/connectingeveryone/. Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q and amendments to those reports filed or furnished pursuant to the Exchange Act are available on our website. You may request copies of such filings free of charge by writing to our corporate offices.
ITEM 1A.
ITEM 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 1B.
ITEM 1B. Unresolved Staff Comments.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.
ITEM 2. Properties.
We maintain our 7,000 square feet corporate office at 1st Floor, Block A, Axis Business Campus, No. 13A and 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia. Our corporate office is subject to a sublease by and between MIG Network & Consultancy Sdn. Bhd., and MIG Mobile Tech Bhd. According to the sublease, we are obligated to pay a monthly rental of MYR 24,073 (approximately US $5,826) during the term. The sublease expires October 31, 2019. The foregoing description of the sublease is qualified in its entirety by reference to the Tenancy Agreement, which is filed as Exhibit 10.2 to this Current Report and incorporated herein by reference.
ITEM 3.
ITEM 3. 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 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 Singapore 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 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 year ended July 31, 2019.
Prior to the filing of its claims against Digiland, the Company recognized the amount of $584,000 in receivable, deposits and prepayments. The amount is being recognized as deposit because the development of the application-based software has not been materialized to-date. Upon the filing of its claims, the Company expects to recognize an impairment in the amount of $584,000. 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, litigation-related expenses and accruals previously recognized, the Company does not expect to recognize additional accruals for litigation-related expense for the next quarter.
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 $584,000, 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.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
Shares of our common stock are quoted on the OTC Pink under the symbol “WECT”. As of October 21, 2019, the last closing price of our securities was $0.15, with little to no quoting activity. There is no established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained.
The following table sets forth, for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the OTC Pink. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
(b) Approximate Number of Holders of Common Stock
As of October 3, 2019, there were approximately 370 shareholders of record of our common stock. Such number does not include any shareholders holding shares in nominee or “street name”.
(c) Dividends
Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. We paid no dividends during the periods reported herein, nor do we anticipate paying any dividends in the foreseeable future.
(d) Equity Compensation Plan Information
There are no options, warrants or convertible securities outstanding.
(e) Recent Sales of Unregistered Securities
The information set forth below describes our issuance of securities without registration under the Securities Act of 1933, as amended, during the year ended July 31, 2019, that were not previously disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 10-K: None.
ITEM 6.
ITEM 6. Selected Financial Data.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiaries for the fiscal years ended July 31, 2019 and 2018. The discussion and analysis that follow should be read together with the section entitled “Forward-Looking Statements” and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K.
Except for historical information, the matters discussed in this section are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.
Currency and exchange rate
Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “US$” refer to the legal currency of the United States. References to “MYR” or “RM” are to the Malaysian Ringgit, the legal currency of Malaysia. 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 were incorporated under the laws of the State of Nevada on April 25, 2007, as an exploration stage company engaged in the acquisition and exploration of mineral properties. Immediately prior to our acquisition of MIG Mobile Tech Berhad, we were a “shell company” with no meaningful assets or operations other than our efforts to identify and merge with an operating company. We changed our name from Contact Minerals Corp. to WECONNECT Tech International, Inc. effective November 6, 2017. Our business office is located at 1st Floor, Block A, Axis Business Campus, No. 13A & 13B, Jalan 225, Seksyen 51A, 46100 Petaling Jaya, Selangor D.E., Malaysia.
Effective August 29, 2017, Contact Minerals Corp. (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 (Mr. Wee and Mr. Wong. collectively being 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:
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.
Mobile & IT Business
As a result of our acquisition of the MMT Shares, we entered into the payment and IT solution business with a focus on users located in Malaysia. MMT was incorporated and registered as a public limited company in the Malaysia on Oct 1, 2015. MMT has developed and operates a mobile platform designed to consolidate users’ cash and connect merchants to consumers by offering a cashless form of transaction, in-app shopping and a user rewards system. However, on June 2019, MMT ceased the operation of the platform and currently only maintains its IT solution business operations.
New Green Technology Focus
We are exploring a transformation technology that uses thermal depolymerization technology as the base paired with catalytic cracking process using quantum entanglement principle to turn organic & inorganic substances to produce oil, gas and charcoal. We intend to work with industry specialists and engineers who have taken more than 15 years to perfect this process, which has successfully been proven at a research center in Netherlands and Malaysia. Our goal is to reinvent energy, creating a positive impact on the people and environment in order to create a sustainable future for all.
To fund our diversification plan and operation in the next 18 months, we will require approximately USD3,000,000. We intend to finance our business expansion efforts through sales of our securities to existing shareholders and loans from existing shareholders or financial institutions.
Financial Condition
During the twelve-month period following the date of this annual 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 believe that we will require approximately USD3,000,000 to fund our green technology business plan and operation for the next 18 months. We believe that debt financing will not be an alternative for funding as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or shareholder loans. However, we do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or shareholder loans to establish our new business.
Results of Operations
Comparison of the years ended July 31, 2019 and 2018
The following table sets forth certain operational data for the years ended July 31, 2019, and 2018:
Net Revenue. We generated revenues of $111,045 and $238,716 during the fiscal year ended July 31, 2019 and 2018, respectively. Our revenues are generally derived from the provision of IT service fees. The decrease in net revenues is primarily attributable to reduction of IT service contracts received and cessation of platform operation.
During the twelve months ended July 31, 2019 and 2018, the following customers accounted for 10% or more of our total net revenues:
East Cloud Sdn Bhd, MIG O2O Berhad and MIG Network & Consultancy Sdn Bhd are affiliated with our executive officers and directors, Shiong Han Wee and Kwueh Lin Wong. North Cloud Sdn Bhd is a shareholder holding less than 5% of our issued and outstanding securities.
Gross Loss. We generated a gross profit of $100,651 and suffered a gross loss of $27,445 for the fiscal years ended July 31, 2019, and 2018, respectively. The increase in gross profit is primarily attributable to the increase in net revenue generated from IT service fees.
Operating Expenses. During the fiscal year ended July 31, 2019, and 2018, we incurred operating and administrative expenses of $1,587,572 and $1,483,773 respectively. The increase in operating and administrative expenses is attributable to the impairment of the application-based software.
During the twelve months ended July 31, 2019 and 2018, no vendors accounted for 10% or more of our total operating costs.
Income Tax Expense. There is no income tax expense recorded for the fiscal year ended July 31, 2019, and income tax refund of $249 was reported for the fiscal years ended July 31, 2018.
Net Loss. We recorded a net loss of $1,486,376 and $1,556,408 for the fiscal years ended July 31, 2019, and 2018, respectively. The decrease in net loss is primarily due to lower foreign currency translation loss recorded during the year.
Liquidity and Capital Resources
As of July 31, 2019, we had current assets of $70,179 and current liabilities of $1,367,694. Our current assets consisted of $11,957 of trade receivables, $54,050 of other receivables, deposits and prepayments, $829 of amount due from related parties and $3,343 of cash and cash equivalent. Our current liabilities consisted $75,777 of trade payables, $199,086 of other payables and accruals, $1,071,620 of amount due to related parties and $21,211 of tax provision.
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.
Stockholders’ equity decreases from surplus of $274,969 as of July 31, 2018 to a deficit of $1,218,315 as of July 31, 2019.
Net Cash Used In Operating Activities
Net cash used in operating activities was $12,171 for the year ended July 31, 2019, and consisted primarily of operating loss before working capital changes of $1,486,376, a decrease in plant and equipment written off of $503, a decrease in foreign translation reserve of $10, an increase in trade receivables of $11,767, an increase in other receivables, deposits and prepayments, a decrease in amount due to directors of $51,017, a decrease in other payables and accrued liabilities of $37,648, offset against an increase in depreciation of plant and equipment of $26,918, impairment of $694,959, inventory written off of $3,231, amount due to related parties of $789,499 and account payables of $74,236.
Net cash used in operating activities was $2,775,284 for the year ended July 31, 2018, and consisted primarily of operating loss before working capital changes of $1,325,915 and increase in other receivables, deposits and prepayments of $689,688, amount due from/(to) related parties of $397,435, other payables and accrued liabilities of $293,166, and amount due from directors of $92,974.
Net Cash Used In Investing Activities
Net cash gain in investing activities for the fiscal year ended July 31, 2019 was $1,588, consisted primarily of sales proceeds of plant and equipment.
Net cash used in investing activities for the fiscal year ended July 31, 2018 was $70,669, consisted purchases of plant and equipment.
Net Cash Generated From Financing Activities
There is no net cash generated from financing activities for the fiscal year ended July 31, 2019.
Net cash generated from financing activities for the fiscal year ended July 31, 2018 was $2,940,687, consisted of proceeds from the issuance of securities.
We have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
The success of our business plan is dependent upon the availability of additional capital resources on terms satisfactory to management as we are not generating sufficient revenues from our business operations. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, capital leases and long-term debt. There can be no assurance that we can raise such additional capital resources on satisfactory terms. We believe that our current cash and other sources of liquidity discussed above are adequate to support operations for at least the next 12 months. We anticipate continuing to rely on equity sales of our common shares and shareholder loans 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 plan of operations.
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments.
· 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.
· 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:
Expenditures for maintenance and repairs are expensed as incurred.
· 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.
· 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.
· 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:
· Recent accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. In August 2015, the FASB issued an Accounting Standards Update to defer by one year the effective dates of its new revenue recognition standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year public entities) and interim periods therein. This adoption will not have a material impact on our financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. We adopted the new standard effective January 1, 2018, on a prospective basis and do not expect the standard to have a material impact on our consolidated financial statements.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements can be expected to cause a material impact on its financial condition or the results of its operations.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
Page
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statement of Operation and Comprehensive Income
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements -
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of WECONNECT Tech International Inc.
1st Floor, Block A, Axis Business Campus,
No. 13A & 13B, Jalan 225, Section 51A,
46100 Petaling Jaya, Selangor
Malaysia.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of WECONNECT Tech International Inc. (“the Company”) as of July 31, 2019 and 2018, and the related consolidated statements of income, stockholders' equity and cash flows for each of the two years ended July 31, 2019 and 2018 and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements presented fairly, in all material respects, the financial position of the Company as of July 31, 2019 and 2018, and the results of its operations and its cash flow for each of the two years ended July 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s losses from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.
/s/ TOTAL ASIA ASSOCIATES PLT
TOTAL ASIA ASSOCIATES PLT
We have served as Company's auditor since 2018.
Selangor, Malaysia.
Oct 24, 2019
WECONNECT TECH INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
As of July 31, 2019 and 2018
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Audited)
See accompanying notes to consolidated financial statements.
WECONNECT TECH INTERNATIONAL INC.
Consolidated Statement of Operation and Comprehensive Income
For the years ended July 31, 2019 and 2018
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Audited)
See accompanying notes to consolidated financial statements.
WECONNECT TECH INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended July 31, 2019 and 2018
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Audited)
See accompanying notes to consolidated financial statements.
WECONNECT TECH INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended July 31, 2019 and 2018
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Audited)
See accompanying notes to consolidated financial statements.
WECONNECT TECH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended July 31, 2019 and 2018
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Audited)
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:
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying notes to consolidated financial statements.
Basis of Presentation
These financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
The Company has adopted its fiscal year-end to be July 31.
Basic 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.
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:
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.
Comprehensive Income
ASC Topic 220, “Comprehensive Income” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statements of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation and cumulative net change in the fair value of available-for-sale investments held at the balance sheet date. This comprehensive income is not included in the computation of income tax expense or benefit.
Income Tax Expense
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future year.
The company conducts major businesses in Malaysia and is subject to tax in their own jurisdiction. As a result of its business activities, the company will file separate tax returns that are subject to examination by the foreign tax authorities.
Going concern
The accompanying financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As of July 31, 2019, the Company suffered an accumulated deficit of $6,535,337 and continuously incurred a net operating loss of $1,486,376 for year ended July 31, 2019. The continuation of the Company as a going concern through July 31, 2019 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
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 July 31, 2018 and 2017, there were no potentially dilutive securities outstanding.
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:
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
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
Segment Reporting
ASC Topic 280, "Segment Reporting" establish standards for reporting information about operating segments on a basis consistent with the Company's internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. For the years ended July 31, 2019 and 2018, the Company operates in one reportable operating segment in Singapore and Malaysia.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. In August 2015, the FASB issued an Accounting Standards Update to defer by one year the effective dates of its new revenue recognition standard until annual reporting periods beginning after December 15, 2017 (2018 for calendar-year public entities) and interim periods therein. This adoption will not have a material impact on our financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. We adopted the new standard effective January 1, 2018, on a prospective basis and do not expect the standard to have a material impact on our consolidated financial statements.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements can be expected to cause a material impact on its financial condition or the results of its operations.
3. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
4. AMOUNT DUE FROM/(TO) RELATED PARTIES
The amounts are unsecured, bear no interest and are repayable on demand.
5. INVENTORIES
6. PLANT AND EQUIPMENT
Plant and equipment consist of the following:
Depreciation expense for the years ended July 31, 2019 and 2018 are US$26,918 and US$28,536 respectively.
7. OTHER PAYABLES AND ACCRUED LIABILITIES
8. AMOUNT DUE TO DIRECTORS
The amounts are unsecured, bear no interest and are repayable on demand.
9. INCOME TAX
The loss before income taxes of the Company for the years ended July 31, 2019 and 2018 were comprised of the following:
Provision for income taxes consist of the following:
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company is registered in State of Nevada and has subsidiary that operate in Malaysia that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to the tax laws of the United States of America. The corporate income tax rates is reduced to 21% from 35% since the introduction of The Tax Cuts and Job Acts on January 1, 2018.
Malaysia
MIG Mobile Tech Bhd is subject to Malaysia Corporate Tax at a progressive income tax rate ranging from 18% to 24% on its assessable income for its tax year.
The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of July 31, 2019 and 2018:
Management believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company provided for a full valuation allowance against its deferred tax assets of US$1,211,751 as of July 31, 2018. For the year ended July 31, 2019, the valuation allowance increased by US$359,479 primarily relating to net operating loss carry forwards from the various tax regime.
10. RELATED PARTY TRANSACTIONS
The related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of business.
All the related parties stated above are under common directors, Wee Shiong Han and Wong Kwueh Lin.
11. CONCENTRATION OF RISK
a) Major customers
For the years ended July 31, 2019 and 2018, the customers who accounted for 10% or more of the Company’s sales and its outstanding receivables balance at period-end are presented as follows:
b) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain stable, therefore there is a possibility that the Company could post the same amount of income for two comparable periods and because of the fluctuating exchange rate post higher or lower income depending on exchange rate converted into US$ at the end of the financial year. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
12. COMMITMENTS AND CONTINGENCIES
The Company entered into an agreement with Digiland Pte Ltd. on September 12, 2017, amounting to SGD$1,600.00 (approximately 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 approximately US$617,559. The Company and Digiland are parties to legal claims against each other, as more fully described in Note 5 Legal Proceedings of Notes to our Consolidated Financial Statements.
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.
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, therefore, no contingencies were provided as at July 31, 2019.
13. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after July 31, 2019 up through the date the Company presented these audited financial statements, except for the Share Exchange Agreement dated March 18, 2019, by and among WeConnect Tech International, Inc., GF Offshorre Sdn. Bhd. and certain Investors which will expire on October 31, 2019.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
ITEM 9A.
ITEM 9A. Controls and Procedures.
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our Chief Executive Officer, and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of July 31, 2019.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
During the fourth quarter of fiscal 2019, there were no changes in the internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
ITEM 9B.
ITEM 9B. Other Information.
None.
PART III
ITEM 10.
ITEM 10. Directors, Executive Officers and Corporate Governance.
Set forth below are the present directors, director nominees and executive officers of the Company. There are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. There are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
Set forth below is a brief description of the background and business experience of our executive officers and directors:
Shiong Han Wee, age 42, has served as our Chief Executive Officer and director since August 29, 2017. He has over 15 years of experience as a business consultant and coacher to the Malaysia business community. Since 2011, Mr. Wee has served as the founder, Chief Executive Officer and director of the MIG Group, which are engaged in a diversified range of businesses such as real estate, mobile technology, food and beverage and education. From 2007 to 2009, Mr. Wee served as a director of Future Focus Academic Sdn. Bhd., an education company. Mr. Wee received his undergraduate degree in Business Management from the University of Bolton in the United Kingdom in 2002 and his “A Levels” designation from the SEGI College in Kuala Lumpur, Malaysia in 1998.
Mr. Wee is the 2015 recipient of the Malaysia Young Entrepreneur Award. He also received the Singapore Prominent Brand Award in 2015 in connection with his work with MIG Network International Pte. Ltd. (Singapore). Mr. Wee brings to our Board his business experience in the internet and mobile industries.
Kwueh Lin Wong, age 42, has served as our Secretary and director since August 29, 2017. From August 29, 2017, to June 1, 2018, Mr. Wong also served as our Chief Financial Officer. Mr. Wong has over 10 years of experience as an IT consultant and business consultant. Since 2011, Mr. Wong has served as the founder and director of the MIG Group, which are engaged in a diversified range of businesses such as real estate, mobile technology, food and beverage and education. From 2008 to 2014, Mr. Wong was a consultant for Pusat Tiusyen Makmur Maju, an education company. From 2007 to 2009, he served as a director of Future Focus Academic Sdn. Bhd., an education company. From 2004 to 2007, he served as the Marketing Manager of All IT Marketing Sdn. Bhd. Mr. Wong received his Degree in Engineering from Computer Multimedia University in Selangor, Malaysia in 2005. He received an Advanced Diploma in Computer Engineering in 2000 and a Diploma in Computer Engineering in 1998 from Informatics College in Kuala Lumpur, Malaysia. Mr. Wong brings to our Board his deep experience in computer engineering and internet and mobile industries.
Pui Hold Ho, age 37, was appointed to our board of directors on September 22, 2017. He is an accountant by profession, a fellow member of the Association of Chartered Certified Accountants (ACCA), United Kingdom, a member of the Malaysian Institute of Accountants (MIA) and also a member of Asean Chartered Professional Accountants (ACPA). Mr. Ho has years of professional experience in auditing, banking and corporate finance. He started his career in 2004 by joining a Singapore advisory firm as IPO consultant where he participated in a few successful listings of companies in SGX. He then joined Ernst & Young as Senior Audit Associate until 2009 before he left to join AmBank (M) Berhad - Corporate & Institutional Banking. In the bank, he was responsible in client credit evaluation and marketing of the Bank’s products mainly in debt capital market, offshore loan syndication, corporate finance advisory & treasury products. To further advance his career, he took up the chief financial officer position in a foreign company listed on Bursa Malaysia Securities Berhad until 2013. He now sits on the board of the following companies listed on Main Market of Bursa Malaysia Securities Berhad: HB Global Limited, a food processing company specializing in the production of Ready-to-Serve foods; Malaysia Pacific Corporation Berhad, a property development and investment corporation; Milux Corporation Berhad, a manufacturer of gas appliances, water heaters and gas regulators and distributors of gas and electrical home appliances; Multi-Usage Holdings Berhad, an investment holding and management services company; and Permaju Industries Berhad, a motor vehicles trader and provision of its related services, properties development and timber plantation. Mr. Ho brings to our Board his financial and accounting experience as well as public company governance expertise.
Mun Wai Wong, age 62, has over 30 years of professional and commercial experience in accounting and finance. Mr. Wong started his professional career in 1981 as auditor before joining a Malaysian listed company in financial services as a Finance Manager in 1993. Mr. Wong was subsequently promoted to Senior Finance Manager cum Company Secretary before leaving in 1996. From 1997 to 2003, Mr. Wong was the Chief Operating Officer and Executive Director of a Malaysia Second Board listed company. Mr. Wong now serve as an independent director of Comintel Corporation Berhad (COMCORP:KLSE) since October 2010 and an independent director of MSCB Holdings Berhad (MSC:KLSE) since May 2012. Currently Mr. Wong is with an international consultancy firm. Mr. Wong is a Chartered Accountant from the Malaysia Institute of Accountants, a Fellow Member of The Chartered Association of Certified Accountants, and an Associate Member of the Malaysian Institute of Chartered Secretaries and Administrators. Mr. Wong brings to our Board his vast experience in the accounting and finance matters.
Chow Wing Loke, age 50, has served as our Chief Financial Officer since June 1, 2018, and the Chief Financial Officer of MIG Mobile Tech Bhd., a payment solution provider and our operating subsidiary, since March 2018. Prior to joining MIG Mobile Tech Bhd., Mr. Loke served as the General Manager of Autoliv Hirotako Sdn. Bhd., an automotive safety restraint system manufacturer in Malaysia and an affiliate company of Autoliv Inc. (ALV:NYSE), from May 2008 to March 2018. Prior to this, he served as the Chief Financial Officer and or Financial Controller with various companies in Malaysia. He is a Fellow of the Chartered Certified Accountants. Mr. Loke received his professional qualification in 1992 from Systematic Business School in Malaysia.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings
No executive officer or director is a party in a legal proceeding adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.
No executive officer or director has been involved in the last ten years in any of the following:
· Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
· Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
· Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
· Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
· Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or
· Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Board Committees
Effective September 22, 2017, we formed an Audit Committee which is comprised of our independent directors: Pui Hold Ho and Mun Wai Wong. A copy of the charter for our Audit Committee is filed as Exhibit 99.1. Mr. Ho currently serves as the Audit Committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.
We have not formed separate Corporate Governance and Compensation and Nominations committees. Our entire Board performs the functions of the Corporate Governance and Compensation and Nominations committees. We hope to establish these committees as the business of the Company becomes more mature.
Code of Ethics
We adopted a Code of Ethics applicable to our officers and directors, which is a “code of ethics” as defined by applicable rules of the SEC. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our officers or directors, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
ITEM 11.
ITEM 11. Executive Compensation.
Compensation Philosophy and Objectives
Currently, our executive directors and officers do not receive compensation for services in such capacities. We expect to establish a compensation plan as our company matures. We expect that our executive compensation philosophy will be to create a long-term direct relationship between pay and our performance. Our executive compensation program will be designed to provide a balanced total compensation package over the executive’s career with us. The compensation program objectives will be to attract, motivate and retain the qualified executives that help ensure our future success, to provide incentives for increasing our profits by awarding executives when corporate goals are achieved and to align the interests of executives and long-term stockholders. We expect the compensation package of our named executive officers to consist of two main elements:
1. base salary for our executives that is competitive relative to the market, and that reflects individual performance, retention and other relevant considerations; and
2. discretionary bonus awards payable in cash and tied to the satisfaction of corporate objectives.
Process for Setting Executive Compensation
As we do not have Compensation Committee, our Board will be responsible for developing and overseeing the implementation of our philosophy with respect to the compensation of executives and for monitoring the implementation and results of the compensation philosophy to ensure compensation remains competitive, creates proper incentives to enhance stockholder value and rewards superior performance. The Board or Compensation Committee will annually review and approve for each named executive officer, and particularly with regard to the Chief Executive Officer, all components of the executive’s compensation. The Board or Compensation Committee may award discretionary bonuses to each of the named executives, and reviews and approves the process and factors (including individual and corporate performance measures and actual performance versus such measures) used by the Chief Executive Officer to recommend such awards. Additionally, the Board or Compensation Committee will review and approve the base salary, equity-incentive awards (if any) and any other special or supplemental benefits of the named executive officers.
We expect out Chief Executive Officer to periodically provide the Board or Compensation Committee with an evaluation of each named executive officer’s performance, based on the individual performance goals and objectives developed by the Chief Executive Officer at the beginning of the year, as well as other factors. The Board of Compensation Committee will provide an evaluation for the Chief Executive Officer. These evaluations will serve as the bases for bonus recommendations and changes in the compensation arrangements of our named executives.
Our Compensation Peer Group
We expect to engage in informal market analysis in evaluating our executive compensation arrangements. As the Company and its businesses mature, we may retain compensation consultants that will assist us in developing a formal benchmark and selecting a compensation peer group of companies similar to us in size or business for the purpose of comparing executive compensation levels.
Program Components
We expect our executive compensation program to consist of the following elements:
Base Salary
Our base salary structure will be designed to encourage internal growth, attract and retain new talent, and reward strong leadership that will sustain our growth and profitability. The base salary for each named executive officer will reflect our past and current operating profits, the named executive officer’s individual contribution to our success throughout his career, internal pay equity and informal market data regarding comparable positions within similarly situated companies. In determining and setting base salary, the Board/Compensation Committee will consider all of these factors, though it will not assign specific weights to any factor. The Board/Compensation Committee will generally review the base salary for each named executive officer on an annual basis. For each of our named executive officers, we expect to review base salary data internally obtained by the Company for comparable executive positions in similarly situated companies to ensure that the base salary rate for each executive is competitive relative to the market.
Discretionary Bonus
The objectives of our bonus awards will be to encourage and reward our employees, including the named executive officers, who contribute to and participate in our success by their ability, industry, leadership, loyalty or exceptional service and to recruit additional executives who will contribute to that success.
Each of our named executive officers will be eligible for consideration for a discretionary cash bonus. The Chief Executive Officer will make recommendations regarding bonus awards for the named executive officers and the Board/Compensation Committee provides the bonus recommendation for the Chief Executive Officer. However, the Board/Compensation Committee will have sole and final authority and discretion in designating to whom awards are made, the size of the award, if any, and its terms and conditions. The bonus recommendation for each of the named executive officers depends on a number of factors, including (i) the performance of the Company for the year, (ii) the satisfaction of certain individual and corporate performance measures, and (iii) other factors which the Board/Compensation Committee may deem relevant. The Company did not award any cash bonuses during fiscal year 2019.
Stock Holdings
The Board/Compensation Committee recognizes the importance of having a portion of the named executive officers’ compensation be paid in the form of equity, to help align the executives’ interests with the interests of the Company’s stockholders. Initially, we expect the Board/Compensation Committee to emphasize the cash-based portion of our compensation program over a stock program because it believes the discretionary nature of the cash-based compensation gives it the needed flexibility to factor in and reward the attainment of longer-term goals for the Company and the executives, as the Board/Compensation Committee deems appropriate.
We have not timed, nor do we plan to time our release of material non-public information for the purpose of affecting the value of executive compensation.
Summary Compensation Table
The following tables set forth, for each of the last two completed fiscal years of the Company, the total compensation awarded to, earned by or paid to any person who was a principal executive officer during the preceding fiscal year and every other highest compensated executive officers earning more than $100,000 during the last fiscal year (together, the “Named Executive Officers”). The tables set forth below reflect the compensation of the Named Executive Officers.
SUMMARY COMPENSATION TABLE
Mr. Shiong Han Wee was appointed to serve as our Chief Executive Officer and director on August 29, 2017.
Narrative disclosure to Summary Compensation Table
Each of Messrs. Shiong Han Wee, Kwueh Lin Wong and Chow Wing Loke are parties to an employment agreement with MIG Mobile Tech Berhad, our subsidiary, or the Employment Agreements, as of the dates and for the annual salary set forth below:
Each officer is subject to a six-month probation period, which may be extended for a period of three months in the Company’s discretion. During the probationary period, employment may be terminated by either party upon fourteen days prior written notice. The Employment Agreements contain provisions related to confidentiality and ownership of work product.
Our executive officers are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with their services on our behalf.
The foregoing description of the Employment Agreements is qualified in its entirety by reference to such agreements which are filed as Exhibits 10.4 through and including 10.6 to this Current Report and are incorporated herein by reference.
Other than set out above and below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
Equity Awards
There are no options, warrants or convertible securities outstanding. At no time during the last fiscal year with respect to any of our executive officers was there:
· any outstanding option or other equity-based award repriced or otherwise materially modified (such as by extension of exercise periods, the change of vesting or forfeiture conditions, the change or elimination of applicable performance criteria, or the change of the bases upon which returns are determined);
· any waiver or modification of any specified performance target, goal or condition to payout with respect to any amount included in non-stock incentive plan compensation or payouts;
· any option or equity grant;
· any non-equity incentive plan award made to a named executive officer;
· any non-qualified deferred compensation plans including non-qualified defined contribution plans; or
· any payment for any item to be included under All Other Compensation in the Summary Compensation Table.
Director Compensation Table
During our fiscal year ended July 31, 2019, we did not provide compensation to any of our employee directors for serving as our director. We currently have no formal plan for compensating our employee directors for their services in their capacity as directors, although we may elect to issue stock options to such persons from time to time.
Non-Employee Director Fees
Our Compensation Committee and Board determines the form and amount of compensation for our non-employee directors based on informal surveys of similar companies and the amount necessary to attract and retain such directors. For the fiscal year ended July 31, 2019, we paid each of our non-employee directors as follows:
* Fee was paid in Malaysian Ringgit, our functional currency. The Malaysian Ringgit was converted into United States Dollars using the exchange rate of 4.1323 prevailing at the date of payment.
(1) Mr. Ho was appointed to serve as a director of the Company on September 22, 2017. No fees were paid to Mr. Ho up to July 31, 2018. We began to accrue fees of USD1,000 per month for Mr. Ho from May 2018 onwards.
(2) Mr. Wong was appointed to serve as a director on June 1, 2018. No fees were paid to Mr. Wong up to July 31, 2018. We started to accrue fees of USD500 per month for Mr. Wong from June 2018 onwards.
Messrs. Ho and Wong will be receiving a monthly retainer of US$1,000 and US $500 respectively, for serving as independent directors on our board. All directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our non-employee directors are subject to the terms and conditions set forth in a Letter of Appointment of Independent Director, a form of which is filed as Exhibit 10.7 and 10.8 to this Current Report and incorporated herein by reference.
We may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Compensation Risk Management
Our Board of directors and human resources staff conducted an assessment of potential risks that may arise from our compensation programs. Based on this assessment, we concluded that our policies and practices do not encourage excessive and unnecessary risk taking that would be reasonably likely to have material adverse effect on the Company. The assessment included our cash incentive programs, which awards non-executives with cash bonuses for punctuality. Our compensation programs are substantially identical among business units, corporate functions and global locations (with modifications to comply with local regulations as appropriate). The risk-mitigating factors considered in this assessment included:
· the alignment of pay philosophy, peer group companies and compensation amount relative to local competitive practices to support our business objectives; and
· effective balance of cash, short- and long-term performance periods, caps on performance-based award schedules and financial metrics with individual factors and Board and management discretion.
Compensation Committee Interlocks and Insider Participation
We have not yet established a Compensation Committee. Our Board of Directors performs the functions that would be performed by a compensation committee.
During the fiscal year ended July 31, 2019, none of our executive officers has served: (i) on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our board of directors; or (ii) as a director of another entity, one of whose executive officers served on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of the registrant.
Compensation Committee Report
Our Board has reviewed and discussed the Compensation Discussion and Analysis in this report with management. Based on its review and discussion with management, the Board of Directors recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K. The material in this report is not deemed filed with the SEC and is not incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made on, before, or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in such filing.
Submitted by members of the Board of Directors:
Shiong Han Wee
Kwueh Lin Wong
Pui Hold Ho
Mun Wai Wong
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of October 3, 2019 certain information with regard to the record and beneficial ownership of the Company’s common stock by (i) each person known to the Company to be the record or beneficial owner of more than 5% of the Company’s common stock, (ii) each director of the Company, (iii) each of the named executive officers, and (iv) all executive officers and directors of the Company as a group:
(1) Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of October 3, 2019. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of October 3, 2019, is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.
(2) Applicable percentage ownership is based on 593,610,070 shares of common stock outstanding as of October 3, 2019, together with securities exercisable or convertible into shares of common stock within 60 days of October 3, 2019. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Unless otherwise noted, the business address of each beneficial owner listed is 1st Floor, Block A, Axis Business Campus, No. 13A and 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
For the year ended July 31, 2019, East Cloud Sdn Bhd, MIG O2O Berhad and MIG Network & Consultancy Sdn Bhd accounted for 16%, 17% and 14% of our revenues, in the amount of $18,190, $19,360, and $16,053, respectively.
For the year ended July 31, 2018, MIG O2O Berhad, MIG Network & Consultancy Sdn Bhd and MIG F&B Chain Sdn Bhd accounted for 33%, 14% and 0% of our revenues, in the amount of $78,938, $34,536 and $2, respectively.
MIG O2O Berhad and MIG Network & Consultancy Sdn Bhd are owned by our executive officers and directors, Shiong Han Wee and Kwueh Lin Wong. Messrs. Wee and Wong also serve as directors of these companies.
As of July 31, 2019 and 2018, the Company was indebted to MIG Network & Consultancy Sdn Bhd, our related company, in the amount of $1,037,691 and $323,424, respectively, for advances and expenses incurred on behalf of the Company. The amounts are included in due to related parties and are non-interest bearing, unsecured, and due on demand.
As of July 31, 2018, MIG Mobile Tech Ltd was indebted to the Company, in the amount of $38,299, respectively, for sales of services. The amounts are included in due from related parties and are non-interest bearing, unsecured, and due on demand. MIG Mobile Tech Ltd is owned by our executive officers and directors, Messrs. Wee and Wong.
As of July 31, 2018, MIG Next Technologies Sdn Bhd was indebted to the Company, in the amount of $54 for payment on behalf by the Company. The amounts are included in due from related parties and are non-interest bearing, unsecured, and due on demand. MIG Next Technologies Sdn Bhd is owned by our executive officers and directors, Messrs. Wee and Wong.
As of July 31, 2018, we were indebted to Shiong Han Wee, our Chief Executive Officer and Director, in the amount of $6,414 for advances of the Company. The amounts are included in due to directors and are non-interest bearing, unsecured, and due on demand.
As of July 31, 2018, we were indebted to Kwueh Lin Wong, our Secretary and Director, in the amount of $45,506, for advances and expenses incurred on behalf of the Company. The amounts are included in due to directors and are non-interest bearing, unsecured, and due on demand.
During the years ended July 31, 2018, we recognized a total of $1,000, for donated services at $1,000 per month and a total of $500, for donated rent at $500 per month, provided by Kerry J. McCullagh, our former President, which have been included in the statements of operations and comprehensive (loss) income.
During the year ended July 31, 2019, we recognized a total of $43,083 for manpower charge back to MIG O2O Berhad, our related company, which have been included in the statements of operations and comprehensive (loss) income.
During the years ended July 31, 2019 and 2018, we recognized the following transactions with MIG Network & Consultancy Sdn Bhd, our related company:
The above transactions have been included in the statements of operations and comprehensive (loss) income.
The above transactions have been included in the balance sheet.
We have not adopted policies or procedures for approval of related person transactions but review them on a case-by-case basis. We believe that all related party transactions were on terms at least as favorable as we would have secured in arm’s-length transactions with third parties. Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
Director Independence
Our board of directors is currently composed of four members, two of whom do not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Stock Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
ITEM 14.
ITEM 14. Principal AccountING Fees And Services.
Our Audit Committee has adopted certain pre-approval policies and procedures which are more fully described in Exhibit 99.2.
The following table sets forth fees billed by our auditors during the last two fiscal years for services rendered for the audit of our annual consolidated financial statements and the review of our quarterly financial statements, services by our auditors that are reasonably related to the performance of the audit or review of our consolidated financial statements and that are not reported as audit fees, services rendered in connection with tax compliance, tax advice and tax planning, and all other fees for services rendered.
(1) Audit Fees represent fees for professional services billed and to be billed in connection with the audit of our consolidated annual financial statements, the audit of the effectiveness of internal control over financial reporting and review of the quarterly financial statements and internal controls over financial reporting, and audit services in connection with statutory or regulatory filings, consents or other SEC matters.
Total Asia Associates PLT has billed us US$22,822 in the aggregate for the fiscal year ended July 31, 2019 for audit services rendered.
(2)
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.”
In fiscal year 2019, TRE Outsource Solutions Sdn Bhd has billed us US$1,643, in connection with compiling the Company’s financial statements for fiscal year 2019.
PART IV
ITEM 15.
ITEM 15. Exhibits and Financial Statement Schedules.
The following documents are filed as part of this report:
(1) Financial Statements
Financial Statements are included in Part II, Item 8 of this report.
(2) Financial Statement Schedules
No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the consolidated financial statements or notes thereto.
(3) Exhibits
Exhibit
Number Description of Exhibit
3.1 Amended and Restated Articles of Incorporation (1)
3.3 Bylaws.(2)
4.1 Form of Common Stock Certificate(3)
4.2 Description of Securities*
10.1 Share Exchange Agreement, dated June 8, 2018, by and between MIG Mobile Tech Berhad and WECONNECT Tech International Inc.(4)
10.2 Tenancy Agreement, dated November 1, 2017, by and between MIG Network & Consultancy Sdn. Bhd. And MIG Mobile Tech Bhd.(4)
10.3 Development Agreement, dated October 16, 2017, by and between Digiland Pte. Ltd. and MIG Mobile Tech Bhd.(4)
10.4 Letter of Appointment, dated April 1, 2016, by and between MIG Mobile Tech Berhad and Dato’ Stanley Kwuen Lin Wong(4)
10.5 Letter of Appointment, dated April 1, 2016, by and between MIG Mobile Tech Berhad and Dato’ Brian Wee Shiong Han(4)
10.6 Letter of Appointment, effective March 1, 2018, by and between MIG Mobile Tech Berhad and Chow Wing Loke(4)
10.7 Form of Letter of Appointment of Independent Director - Ho Pui Hold(3)
10.8 Form of Letter of Appointment of Independent Director - Wong Mun Wai(3)
Code of Ethics (5)
List of Subsidiaries*
Power of Attorney*
31.1 Certification of Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
31.2 Certificate of Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act*
32.1 Certification of Chief Financial Officer 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 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.1 Audit Committee Charter.(6)
99.2 Pre-Approval Procedures. (6)
101.INS XBRL Instance Document*
101.SCH XBRL Schema Document*
101.CAL XBRL Calculation Linkbase Document*
101.DEF XBRL Definition Linkbase Document*
101.LAB XBRL Label Linkbase Document*
101.PRE XBRL Presentation Linkbase Document*
*Filed Herewith.
ITEM 16. form 10-k summary.
Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Shiong Han Wee
Chief Executive Officer and Director
October 29, 2019
Shiong Han Wee
(Principal Executive Officer)
/s/ Chow Wing Loke*
Chow Wing Loke
Chief Financial Officer
(Principal Financial Officer)
October 29, 2019
/s/ Kwueh Lin Wong*
Kwueh Lin Wong
Secretary and Director
October 29, 2019
/s/ Pui Hold Ho*
Pui Hold Ho
Director
October 29, 2019
/s/ Mun Wai Wong*
Mun Wai Wong
Director
October 29, 2019
Representing all of the members of the Board of Directors.
* By /s/ Shiong Han Wee
Shiong Han Wee
Attorney-in-Fact**
** By authority of the power of attorney filed herewith