Motos America, Inc. - Quarter Report: 2019 October (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________________
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2019
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-184061
WECONNECT TECH INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada | 39-2060052 |
(State or Other Jurisdiction | (I.R.S. Employer |
of Incorporation or Organization) | Identification No.) |
1st Floor, Block A, Axis Business Campus
No. 13A & 13B, Jalan 225, Section 51A
46100 Petaling Jaya
Selangor, Malaysia
+60 17 380 2755
(Address of Principal Executive Offices and Issuer’s
Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☒ | |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 27, 2019, the issuer had outstanding 593,610,070 shares of common stock.
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WECONNECT TECH INTERNATIONAL, INC.
(Currency expressed in United States Dollars (“US$”), except for number of shares)
October 31, 2019 | July 31, 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 1,178 | $ | 3,343 | ||||
Account receivables | 9,832 | 11,957 | ||||||
Other receivables, deposits and prepayments | 28,106 | 54,050 | ||||||
Amount due from related parties | 821 | 829 | ||||||
Total Current Assets | 39,937 | 70,179 | ||||||
Non-Current Assets | ||||||||
Plant and equipment, net | 81,572 | 88,649 | ||||||
Total Non-Current Assets | 81,572 | 88,649 | ||||||
Total Assets | $ | 121,509 | $ | 158,828 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Account payables | $ | 58,109 | $ | 75,777 | ||||
Other payables and accrued liabilities | 189,395 | 199,086 | ||||||
Amount due to related parties | 1,169,416 | 1,071,620 | ||||||
Current tax liabilities | 21,205 | 21,211 | ||||||
Total Current Liabilities | 1,438,125 | 1,367,694 | ||||||
Non-Current Liabilities | ||||||||
Deferred taxation | 9,336 | 9,449 | ||||||
Total Non-Current Liabilities | 9,336 | 9,449 | ||||||
Total Liabilities | 1,447,461 | 1,377,143 | ||||||
Stockholders' Equity | ||||||||
Common Stock 593,610,070 shares issued and outstanding at October 31, 2019 and July 31, 2019 | 593,610 | 593,610 | ||||||
Additional paid-in capital | 4,958,781 | 4,958,781 | ||||||
Accumulated loss | (6,653,361 | ) | (6,535,337 | ) | ||||
Accumulated other comprehensive loss | (224,982 | ) | (235,369 | ) | ||||
Total Stockholders' Equity | (1,325,952 | ) | (1,218,315 | ) | ||||
Total Liabilities and Stockholders' Equity | $ | 121,509 | $ | 158,828 |
(The accompanying notes are integral part of these financial statements)
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WECONNECT TECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
For the three months ended October 31, | ||||||||
2019 (Unaudited) | 2018 (Unaudited) | |||||||
Revenue | $ | 36,578 | $ | 55,032 | ||||
Cost of Revenue | – | (1,003 | ) | |||||
Gross Profit | 36,578 | 54,029 | ||||||
Other Income | 3,429 | 250 | ||||||
General and Administrative Expenses | (158,031 | ) | (225,320 | ) | ||||
Loss Before Taxation | $ | (118,024 | ) | $ | (171,041 | ) | ||
Taxation | – | – | ||||||
Loss After Taxation | $ | (118,024 | ) | $ | (171,041 | ) | ||
Foreign Currency Translation Adjustment | 10,387 | (7,096 | ) | |||||
Total Comprehensive Loss for The Period | $ | (107,637 | ) | $ | (178,137 | ) | ||
Earnings Per Share | $ | – | $ | – | ||||
Weighted Average Number of Common Shares Outstanding Basic and Diluted | 593,610,070 | 593,610,070 |
(The accompanying notes are integral part of these financial statements)
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WECONNECT TECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019
(Currency expressed in United States Dollars (“US$”))
(Unaudited)
Three Months Ended October 31, | ||||||||
2019 (Unaudited) | 2018 (Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Loss before taxation | $ | (118,024 | ) | $ | (171,041 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Unrealized foreign exchange gains | (2,974 | ) | – | |||||
Foreign translation reserve adjustment | – | – | ||||||
Depreciation of plant and equipment | 6,002 | 6,704 | ||||||
Plant and equipment written off | – | (241 | ) | |||||
Operating loss before working capital changes | (114,996 | ) | (164,578 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Account receivables | 1,978 | (6,655 | ) | |||||
Other receivables, deposits and prepayments | 25,235 | (28,530 | ) | |||||
Amount due to directors | – | 15,500 | ||||||
Amount due to related parties | 110,087 | 172,253 | ||||||
Account payables | (17,134 | ) | 13,146 | |||||
Other payables and accrued liabilities | (7,296 | ) | 3,763 | |||||
Net cash (used in) / generated from operating activities | (2,126 | ) | 4,899 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Sales proceed from disposal of plant and equipment | – | 509 | ||||||
Net cash generated from investing activity | – | 509 | ||||||
Change in cash and cash equivalents | (2,126 | ) | 5,408 | |||||
Foreign currency translation adjustment | (39 | ) | (465 | ) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (2,165 | ) | 4,943 | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,343 | 14,159 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 1,178 | $ | 19,102 |
(The accompanying notes are integral part of these financial statements)
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WECONNECT TECH INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31,2019
(Amount expressed in United States Dollars (“US$”), except for number of shares or stated otherwise)
(Unaudited)
1. | ORGANIZATION AND BUSINESS BACKGROUND |
WECONNECT Tech International Inc. was incorporated under the laws of the State of Nevada on April 25, 2007. For purposes of financial statements presentation, WECONNECT Tech International Inc. and its subsidiary are herein referred to as “the Company” or “We”.
Our business office is located at 1st Floor, Block A, Axis Business Campus, No. 13A & 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor, Malaysia.
On June 8, 2018, we acquired approximately 99.662% equity interest of MIG Mobile Tech Bhd, a public limited company incorporated in Malaysia. At that time, MIG Mobile Tech Bhd was mainly engaged in e-commerce, online to offline marketplace and payment eco-system. This transaction was accounted for as a transaction among entities under common control and the assets, liabilities, revenues, and expenses of MIG Mobile Tech Bhd were carried over to and combined with the Company at historical cost, and as if the transfer occurred at the beginning of the period. We have conducted our business through MIG Mobile Tech Bhd since then.
Details of the Company’s subsidiary:
No | Company Name | Place and date of incorporation | Particulars of issued capital | Principal activities | ||||||
1 | MIG Mobile Tech Bhd | Malaysia Oct 1, 2015 | 50,000,000 ordinary shares of RM1 each | E-commerce, online to offline marketplace and payment eco-system |
2. | Summary of Significant Accounting Policies |
Basis of Presentation
The interim financial information referred to above has been prepared and presented in conformity with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The interim financial information has been prepared on a basis consistent with prior interim periods and years and includes all disclosures that are necessary and required by applicable laws and regulations. This report on Form 10-Q should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended July 31, 2019.
In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the three months ended October 31, 2019, are not necessarily indicative of the results that may be expected for future quarters or the year ending July 31, 2020.
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Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company accounts and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to valuation of donated services and rent, fair value measurements and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of October 31, 2019, and July 31, 2019, the Company had $1,178 and $3,343 in cash and cash equivalents, respectively.
Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation and impairment. Depreciation of plant and equipment are calculated on the straight-line method over their estimated useful lives as follows:
Classification | Principal annual rate / Estimated useful lives | |
Computer hardware and software | 4 years | |
Furniture and fittings | 10 years | |
Office equipment | 5 years | |
Telecommunication | 2 years | |
Renovation | 10 years | |
Signboard | 5 years | |
Security and alarm system | 4 years |
Expenditures for maintenance and repairs are expenses as incurred.
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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.
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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 October 31, 2019, the Company suffered an accumulated deficit of $6,653,361, net current liabilities of $1,398,188 and continuously incurred a net operating loss of $118,024 for period ended October 31, 2019. The continuation of the Company as a going concern through October 31, 2019 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.
These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Foreign Currencies Translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The functional currency of the Company is the United States Dollars (“US$”) 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.
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Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates for the respective years:
As of and for the quarter ended October 31, | ||||||||
2019 | 2018 | |||||||
Quarterly average MYR : US$1 exchange rate | 4.1872 | 4.1299 | ||||||
Quarter end MYR : US$1 exchange rate | 4.1775 | 4.1825 |
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivable, deposits and other receivables, amount due to related parties and other payables approximate at their fair values because of the short-term nature of these financial instruments.
The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1: | Observable inputs such as quoted prices in active markets; |
Level 2: | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Income Tax
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. There were no significant deferred tax items as of October 31, 2019 and July 31, 2019.
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The Company applied the provisions of ASC 740-10-50, Accounting for Uncertainty In Income Taxes, which provides clarification related to the process associated with accounting for uncertain tax position recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At October 31, 2019 and July 31, 2019, management considered that the Company had no uncertain tax positions and will continue to evaluate for uncertain positions in the future.
Basic and Diluted Net Income/(Loss) Per Share
The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive. As at October 31, 2019 and 2018, there were no potentially dilutive securities outstanding.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued and their potential effect on our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company's condensed financial statements.
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3. | Related Party Transactions |
During the three months ended October 31, 2019, MIG Network & Consultancy Sdn Bhd (the “MIG Network and Consultancy”), a Malaysian company, has advanced in an aggregate amount of $97,796 to the Company for working capital purpose. The advances were unsecured, interest free, and due on demand. As of October 31, 2019, and July 31, 2019, there were $1,169,416 and $1,071,620 advances outstanding, respectively. Shiong Han Wee, our Chief Executive Officer and Director, and Kwueh Lin Wong, our Secretary and Director, own 0.4% and 40.2%, respectively, of MIG Network and Consultancy.
For the Three Months ended | For the Three Months ended | |||||||
October 31, 2019 | October 31, 2018 | |||||||
Revenue generated from: | ||||||||
MIG O2O Berhad | $ | – | $ | 19,371 | ||||
East Cloud Sdn Bhd | 13,420 | – | ||||||
Creative Property Management Sdn Bhd | 2,374 | – | ||||||
MIG Network & Consultancy Sdn Bhd | 5,382 | 8,475 | ||||||
$ | 21,176 | $ | 27,846 | |||||
Payroll outsourcing charge back to: | ||||||||
MIG Network & Consultancy Sdn Bhd | $ | 121 | $ | 729 | ||||
$ | 121 | $ | 729 | |||||
Manpower charge back to: | ||||||||
MIG O2O Berhad | $ | 10,030 | $ | 15,989 | ||||
$ | 10,030 | $ | 15,989 | |||||
Legal fee paid to | ||||||||
MIG Network & Consultancy Sdn Bhd | $ | 2,278 | $ | – | ||||
$ | 2,278 | $ | – | |||||
Rental paid to | ||||||||
MIG Network & Consultancy Sdn Bhd | $ | 17,247 | $ | 17,850 | ||||
$ | 17,247 | $ | 17,850 |
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October 31, 2019 | July 31, 2019 | |||||||
Amount due from related parties: | ||||||||
East Cloud Sdn Bhd | $ | 4,444 | $ | 5,982 | ||||
Creative Property Management Sdn Bhd | 821 | 829 | ||||||
$ | 5,265 | $ | 6,811 | |||||
Amount due to related parties: | ||||||||
MIG Network & Consultancy Sdn Bhd | $ | 1,169,416 | $ | 1,071,620 | ||||
$ | 1,169,416 | $ | 1,071,620 | |||||
Amount due to directors: | ||||||||
Shiong Han Wee | $ | 2,394 | $ | – | ||||
Kwueh Lin Wong | 2,394 | – | ||||||
$ | 4,788 | $ | – |
4. | Stockholders’ Equity |
Common Stock
As of October 31, 2019, there are no preferred stock issued and outstanding.
As of October 31, 2019, there are 593,610,070 shares of common stock issued and outstanding.
Preferred Stock
As of October 31, 2019, there are no issued and outstanding preferred stocks.
5. | 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 October 31, 2019 up through the date the Company presented these financial statements, except for the Share Exchange Agreement dated June 18, 2019, by and among WeConnect Tech International, Inc., OZ Seventy Five Holdings (M) Berhad and certain Investors which will expire on December 31, 2019.
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6. | Commitment and Contingencies |
The Company entered into an agreement with Digiland Pte Ltd. on September 12, 2017, amounting to SGD$1,600,000 (approximately US$1,176,129) 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$588,065. The Company and Digiland are parties to legal claims against each other, as more fully described in Note 7 Estimates of Notes to our Condensed Financial Statements.
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 October 31, 2019.
7. | Estimates |
On November 12, 2018, MIG Mobile Tech Berhad, a subsidiary of the Company, filed a claim against Digiland Private Limited (“Digiland”) for breach of contract and misrepresentation arising from, among other things, Digiland’s failure to perform under its supplier contract with the Company. In its suit, MIG Mobile Tech Berhad is seeking a return of funds previously paid to Digiland in the amount of S$800,000 Singaporean Dollars (approximately US $608,172) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance of the payment due to it under contract in the sum of S$800,000, together with a claim for damages to be assessed by the Singapore Court.
In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Company discloses the amount of the accrual if the financial statements would be otherwise misleading, which was not the case for the three months ended October 31, 2019.
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When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then the Company discloses an estimate of the possible loss or range of loss, if such estimate can be made or discloses that an estimate cannot be made.
The assessments whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, often involve a series of complex judgments about future events. Management is often unable to estimate a range of reasonably possible loss, particularly where (i) the damages sought are substantial or indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel or unsettled legal theories or a large number of parties. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss, fine, penalty or business impact, if any.
Prior to the filing of the its claims against Digiland, the Company recognized the amount of $596,912 in receivable, deposits and prepayments. The amount is being recognized as deposit because the development of the application-based software has not been materialized to-date. Subsequent to the filing of its claims, the Company has recognized a full impairment in the amount of $596,612. The Company is unable to ascertain the result of the legal proceedings as the proceedings are in the early stages and there is uncertainty arising from the development of the case.
We expect that the aggregate range of reasonably possible losses, in excess of accruals established, if any, for such legal proceeding is likely to range from S$800,000 and upwards if Digiland prevails in its counterclaim against us. The estimated aggregate range of reasonably possible losses is based upon currently available information for those proceedings in which the Company is involved, taking into account the Company’s best estimate of such losses for those cases for which such estimate can be made. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, such range represents what the Company believes to be an estimate of possible loss only for those matters meeting such criteria. It does not represent the Company’s maximum loss exposure.
8. | Significant Event |
The Share Exchange Agreement dated March 18, 2019, by and among WeConnect Tech International, Inc., GF Offshorre Sdn. Bhd. and certain Investors expired on October 31, 2019.
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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report on Form 10-Q. This quarterly report on Form 10-Q contains certain forward-looking statements and our future operating results could differ materially from those discussed herein. Certain statements contained in this discussion, including, without limitation, statements containing the words "believes," "anticipates," "expects" and the like, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, as we issue “penny stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange Act, we are ineligible to rely on these safe harbor provisions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained herein to reflect future events or developments.
Currency and exchange rate
Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.
Overview
We are 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 periods ended October 31, 2019, and 2018, we suffered comprehensive losses of $107,637 and $178,137, 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.
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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.
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 payment 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:
Name | Age | Position | |||
Shiong Han Wee | 42 | Director, Chief Executive Officer | |||
Kwueh Lin Wong | 42 | Director, Secretary |
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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.
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 condensed 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 Condensed Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.
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Results of Operations
The following table provides selected financial data about our company as of October 31, 2019 and 2018.
Three Months Ended October 31, 2019, Compared to Three Months Ended October 31, 2018.
Three Months Ended October 31, 2019 | Three Months Ended October 31, 2018 | |||||||
Revenue | $ | 36,578 | $ | 55,032 | ||||
Cost of revenue | – | (1,003 | ) | |||||
Other income | 3,429 | 250 | ||||||
General and administrative expenses | (158,031 | ) | (225,320 | ) | ||||
Net Loss From Operations | $ | (118,024 | ) | $ | (171,041 | ) |
Revenue. During the three months ended October 31, 2019, and 2018, we earned revenue of $36,578 and $55,032, respectively. Our revenue consisted primarily of IT service fees and merchant platform maintenance fees. The decrease in our revenue is primarily attributable to the cessation of our payment solution platform service. We expect our revenue to maintain at or near current levels for the foreseeable future unless an extraordinary corporate event such as a merger or acquisition or other strategic partnership occurs.
During the three months ended October 31, 2019 and 2018, the following customers accounted for 10% or more of our total net revenue:
Three months ended October 31, 2019 | October 31, 2019 | |||||||||||
Revenues | Percentage of revenues | Accounts receivable | ||||||||||
North Cloud Sdn Bhd | $ | 15,354 | 42% | $ | 4,923 | |||||||
East Cloud Sdn Bhd | 13,420 | 37% | 4,444 | |||||||||
MIG Network & Consultancy Sdn Bhd | 5,382 | 15% | – | |||||||||
TOTAL | $ | 34,156 | 94% | $ | 9,367 |
Three months ended October 31, 2018 | October 31, 2018 | |||||||||||
Revenues | Percentage of revenues | Accounts receivable | ||||||||||
North Cloud Sdn Bhd | $ | 26,635 | 48% | $ | – | |||||||
MIG O2O Berhad | 19,371 | 35% | – | |||||||||
MIG Network & Consultancy Sdn Bhd | 8,475 | 15% | – | |||||||||
TOTAL | $ | 54,481 | 98% | $ | – |
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East Cloud Sdn Bhd, MIG Network & Consultancy Sdn Bhd, and MIG O2O Berhad are affiliated with our executive officers and directors, Shiong Han Wee and Kwueh Lin Wong.
Operating Expenses. Operating expenses were $158,031 and $225,320 for the three months ended October 31, 2019, and 2018, respectively. The decrease in operating expenses was primarily attributable the decrease in payroll expenses, outsourcing cost, deemed supply expenses and accounting cost associated with the cessation of our payment solution platform.
During the three months ended October 31, 2019 and 2018, no vendors accounted for 10% or more of our total operating costs.
Gross Profit. We recorded a gross profit of $36,578 and $54,029 for the three months ended October 31, 2019, and 2018, respectively. The decrease in gross profit is primarily attributable to the lower revenue generated from the IT service fees and the cessation of payment solution platform during the period ended October 31, 2019.
Income Tax Expense. We did not record income tax expenses for the three months ended October 31, 2019, and 2018 respectively.
Net Loss. We suffered a net loss of $118,024 and $171,041 for the three months ended October 31, 2019, and 2018, respectively. The decrease in gross loss is primarily attributable to the decrease of operation and administrative expenses partially offset by decrease in revenue.
Liquidity and Capital Resources
Working Capital
October 31, 2019 | July 31, 2019 | |||||||
Current Assets | $ | 39,937 | $ | 70,179 | ||||
Current Liabilities | 1,438,125 | 1,367,694 | ||||||
Working Capital Deficit | $ | (1,398,188 | ) | $ | (1,297,515 | ) |
We had current assets of $39,937 consisting primarily of cash and cash equivalents of $1,178, account receivables of $9,832, other receivables, deposits and prepayments of $28,106 and amount due from related parties of $821 as of October 31, 2019. Our current liabilities of $1,438,125 consisted of $58,109 of account payables, $189,395 of other payables and accruals, $1,169,416 of amount due to related parties and $21,205 of current tax liabilities.
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As of July 31, 2019, we had current assets of $70,179 and current liabilities of $1,367,694. Our current assets consisted of $3,343 of cash and cash equivalents, $11,957 of account receivables, $54,050 of other receivables, deposits and prepayments and $829 of amount due from related parties. Our current liabilities consisted of $75,777 of account payables, $199,086 of other payables and accruals, $1,071,620 of amount due to related parties and $21,211 of current tax liabilities.
Cash Flows
Three Months Ended | Three Months Ended | |||||||
October 31, 2019 | October 31, 2018 | |||||||
Net Cash (Used in) / Provided by Operating Activities | $ | (2,126 | ) | $ | 4,899 | |||
Net Cash Provided by Investing Activities | $ | – | $ | 509 | ||||
Net Cash Provided by Financing Activities | $ | – | $ | – | ||||
Effects on changes in foreign exchange rate | $ | (39 | ) | $ | (465 | ) | ||
Net (decrease) / increase in cash and cash equivalents | $ | (2,165 | ) | $ | 4,943 |
Cash Flow from Operating Activities
During the three months ended October 31, 2019, net cash used in operating activities was $2,165, as opposed to net cash provided by operating activities of $4,943 for the three months ended October 31, 2018. Net cash used in operating activities during the three months ended October 31, 2019 consisted primarily of a loss before taxation of $118,024, unrealized foreign exchange gains of $2,974, a decrease in account payables of $17,134 and other payables and accrued liabilities of $7,296, offset by depreciation of plant and equipment of $6,002, a decrease in account receivables of $1,978, other receivables, deposits and prepayments of $25,235 and an increase in amount due to related parties of $110,087.
Cash Flow from Investing Activities
During the three months ended October 31, 2019, investing activities did not provide nor utilize any net cash.
Cash Flow from Financing Activities
During the three months ended October 31, 2019, financing activities did not provide nor utilize any net cash.
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Financing Requirements
During the twelve-month period following the date of this quarterly report, we anticipate that we will not generate sufficient operating revenue. Accordingly, we will be required to obtain additional financing in order to pursue our plan of operations during and beyond the next twelve months. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or shareholder loans. However, there is no assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our business plan should we decide to proceed.
We anticipate continuing to rely on equity sales of our common shares and advances from our executive officers and directors in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our business operations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have not identified any additional critical accounting policies and judgments. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in note 2 to our financial statements. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
Recent accounting pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
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ITEM 3 Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4 Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures, subject to limitations as noted below, as of October 31, 2019, and during the period prior to and including the date of this report, were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Inherent Limitations
Because of its inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control over Financial Reporting
Our annual report on Form 10-K reported that our internal control over financial reporting was effective as of July 31, 2019. Subject to the foregoing disclosures in this Item 4, there were no changes in our internal control over financial reporting that occurred during our fiscal quarter ended October 31, 2019, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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On November 12, 2018, MIG Mobile Tech Berhad, a subsidiary of the Company, filed a claim against Digiland Private Limited (“Digiland”) for breach of contract and misrepresentation, among other claims, in connection with Digiland’s failure to perform under its supplier contract with the Company. In its suit, MIG Mobile Tech Berhad is seeking a return of funds previously paid to Digiland in the amount of S$800,000 Singaporean Dollars (approximately US $608,172) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance sum of S$800,000 together with a claim for damages to be assessed by the Singapore Court. This matter is more fully described in Note 7 Estimates of Notes to our Condensed Financial Statements.
Other than the item set forth in Note 7 Estimates of Notes to our Condensed Financial Statements, we are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.
None.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3 Defaults upon Senior Securities
None.
ITEM 4 Mine Safety Disclosures
Not applicable.
None.
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____________________
Notes: | |
(1) | Incorporated by reference from Exhibit 1 of our Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on October 18, 2017. |
(2) | Incorporated by reference from our Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on October 1, 2007. |
(3) | Incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 29, 2018. |
(4) | Incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 29, 2019. |
(5) | Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 11, 2018. |
(6) | Incorporated by reference from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 29, 2008. |
(7) | Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 22, 2017. |
*Filed Herewith.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WECONNECT TECH INTERNATIONAL, INC. | ||
By: | /s/ Shiong Han Wee | |
Shiong Han Wee | ||
Chief Executive Officer | ||
Date: December 10, 2019 |
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