Motos America, Inc. - Quarter Report: 2019 April (Form 10-Q)

Table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 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)

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

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 May 29, 2019, the issuer had outstanding 593,610,070 shares of common stock.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET

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

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

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2019

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

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

WECONNECT TECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED APRIL 30, 2019

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

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

WECONNECT TECH INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2019

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

(Unaudited)

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. The non-controlling interest remaining will be 0.338%. 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:

Basis of Presentation

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

In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the nine months ended April 30, 2019, are not necessarily indicative of the results that may be expected for future quarters or the year ending July 31, 2019.

Basis of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of April 30, 2019, and July 31, 2018, the Company had $3,716 and $14,159 in cash and cash equivalents, respectively.

Plant and Equipment

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

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.

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:

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:

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 April 30, 2019 and July 31, 2018.

The Company applied the provisions of ASC 740-10-50, Accounting for Uncertainty in Income Taxes, which provides clarification related to the process associated with accounting for uncertain tax position recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. At April 30, 2019 and July 31, 2018, management considered that the Company had no uncertain tax positions and will continue to evaluate for uncertain positions in the future.

Basic and Diluted Net Income/(Loss) Per Share

The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. Diluted earnings per share excludes all dilutive potential shares if their effect is anti-dilutive. As at April 30, 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.

During the nine months ended April 30, 2019, MIG Network & Consultancy Sdn. Berhad (the “MIG Network and Consultancy”), a Malaysian company that Executive Directors of the Company are the major shareholders, has advanced in an aggregate amount of $909,480, equivalent to RM3,761,155 to the Company for working capital purpose. The advances were unsecured, interest free, and due on demand. As of April 30, 2019, and July 31, 2018, there were $909,480 and $323,424 advances outstanding, respectively.

Common Stock

As of April 30, 2019, and July 31, 2018, there are 593,610,070 shares of common stock issued and outstanding.

Preferred Stock

As of April 30, 2019, and July 31, 2018, there are no issued and outstanding preferred stocks.

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 $596,000) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance of the payment due to it under contract in the sum of S$800,000, together with a claim for damages to be assessed by the Singapore Court.

In accordance with applicable accounting guidance, the Company records accruals for certain of its outstanding legal proceedings, investigations or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Company discloses the amount of the accrual if the financial statements would be otherwise misleading, which was not the case for the three months ended April 30, 2019.

Prior to the filing of 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. Upon the filing of its claims, the Company expects to recognize an impairment in the amount of $298,456. 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 do 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 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.

There is no subsequent events as of April 30, 2019.

The Company and Artemis Tech Sdn. Bhd., or Artemis, are parties to an agreement effective September 14, 2018, pursuant to which Artemis agreed to develop and enhance our web-based Merchant Management System for MYR 747,500 (approximately US$180,490). The Company paid US$43,428 for the first stage of development work performed on September 21, 2018. The remaining cost to complete the web-based Merchant Management System in future is approximately US$137,062. We expect the work to conclude on or about December 31, 2019. The foregoing description of the Merchant Management System development agreement is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.1 to this quarterly report on Form 10-Q and incorporated herein by reference.

The Company and Ang Swie Kheong are parties to an agreement effective March 12, 2018, pursuant to which Ang Swie Kheong agreed to develop an electronic wallet system for MYR400,000 (approximately US$96,855). The Company had paid a total of US$48,427 for the first stage of application development on April 5, 2018, and July 25, 2018. The remaining cost to complete the electronic wallet system in future is approximately US$48,428. We expect the work to conclude on or about December 31, 2019. The foregoing description of the E Wallet Agreement development agreement is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.2 to this quarterly report on Form 10-Q and incorporated herein by reference.

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 April 30, 2019.

The comparative figures in fiscal year ended July 31, 2018 have been restated due to the acquisition of our subsidiary company, MIG Mobile Tech Bhd., on June 8, 2018, which was accounted for as a Reverse Take Over under common control.

The comparative figures have been reclassified to conform with the current period presentation.

Forward-looking statements

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

Currency and exchange rate

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “$” refer to the legal currency of the United States. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

Overview

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

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

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

Potential Business Segment

To strengthen our financial position, on March 18, 2019, we entered into a Share Exchange Agreement with GF Offshore Sdn. Bhd., a private limited company organized under the laws of Malaysia (“GF”), and certain Investors pursuant to which we agreed to issue Ninety Million (90,000,000) shares of our common stock, par value $0.001, (the “WECT Shares”) to acquire Three Million Six Hundred Sixty Thousand (3,660,000) shares of the GF Ordinary Stock (representing up to 60% of the total issued and outstanding shares of GF Ordinary Stock) held by such Investors. GF is engaged in the business of supplying petroleum oil and gas products.

Under the terms of the Share Exchange Agreement, GF will be required to meet certain performance milestones during the two-year period after closing. If GF fails to meet any performance milestone, a portion of the WECT Shares will be subject to claw back. Upon the closing of the share exchange, we will be required to appoint one independent director and a representative of GF to its board of directors. In connection with our pending acquisition, Shiong Han Wee, our Chief Executive Officer and Director, was appointed to serve as a director of GF on April 2, 2019.

We are in active discussions regarding the definitive terms of such acquisition. Accordingly, the final terms may differ from those described above.

The foregoing description of the Share Exchange Agreement is qualified in its entirety by reference to such agreement, which is filed as Exhibit 10.1 to the current report on Form 8-K filed with the Commission on April 15, 2019, and incorporated herein by reference.

History

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

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

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

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

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.

On March 18, 2019, we entered into a Share Exchange Agreement with GF Offshorre Sdn. Bhd., a private limited company organized under the laws of Malaysia (“GF”), and certain Investors pursuant to which we agreed to issue Ninety Million (90,000,000) shares of our common stock, par value $0.001, (the “WECT Shares”) to acquire Three Million Six Hundred Sixty Thousand (3,660,000) shares of the GF Ordinary Stock (representing up to 60% of the total issued and outstanding shares of GF Ordinary Stock) held by such Investors. GF is engaged in the business of supplying petroleum oil and gas products. We are in active discussions regarding the definitive terms of such acquisition. Accordingly, the final terms may differ from those described above.

Going Concern

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Accordingly, our financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. As at April 30, 2019, the Company has working capital deficiency of $754,788 and has accumulated losses of $5,998,564 since its inception. Further losses are anticipated in the development of the business, raising substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

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

Results of Operations

The following table provides selected financial data about our company as of April 30, 2019 and 2018.

Three Months Ended April 30, 2019, Compared to Three Months Ended April 30, 2018

Revenues. During the three months ended April 30, 2019, and 2018, we earned revenues of $644 and recorded a negative revenue of $(490), respectively. The slight increase in net revenues is primarily attributable to the increase of merchant’s platform fee.

During the three months ended April 30, 2019, and 2018, there are no customers accounted for 10% or more of our total net revenues.

General and Administrative Expenses. General and administrative expenses were $222,693 and $326,761 for the three months ended April 30, 2019, and 2018, respectively. The decrease in operating expenses was primarily attributable to the decrease of payroll expenses.

During the three months ended April 30, 2019 and 2018, no vendors accounted for 10% or more of our total operating costs. 

Gross Profit. We recorded a gross profit of $482 and gross loss of $12,900 for the three months ended April 30, 2019, and 2018, respectively. The increase in gross profit is mainly attributable to the decrease in cost of revenue due to restructuring of incentives given to merchants and users in our ecosystem.

Income Tax Expense. We did not record income tax expenses for the three months ended April 30, 2019, and 2018 respectively.

Comprehensive Loss. We suffered a comprehensive net loss of $213,912 and $268,047 for the three months ended April 30, 2019, and 2018, respectively. The decrease in gross loss is primarily attributable to the decrease of general and administrative expenses.

Nine Months Ended April 30, 2019, Compared to Nine Months Ended April 30, 2018

Revenues. During the nine months ended April 30, 2019, and 2018, we earned revenues of $64,386 and $15,913, respectively. The increase in revenues is primarily attributable to IT service fees rendered during the period.

During the nine months ended April 30, 2019, and 2018, the following customers accounted for 10% or more of our total net revenues:

MIG O2O Berhad, MIG Network & Consultancy Sdn Bhd and WPAY International Berhad 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.

General and Administrative Expenses. Operating expenses were $995,763 and $1,282,914 for the nine months ended April 30, 2019, and 2018, respectively. The decrease in operating expenses was primarily attributable to decrease in marketing and payroll expenses.

During the nine months ended April 30, 2019 and 2018, no vendors accounted for 10% or more of our total operating costs. 

Gross Profit. We recorded a gross profit of $54,144 and gross loss of $54,342 for the nine months ended April 30, 2019, and 2018, respectively. The increase in gross profit is mainly attributable to the decrease in cost of revenue due to restructuring of incentives given to merchants and users in our ecosystem.

Income Tax Expense. We did not record income tax expenses for the nine months ended April 30, 2019, and 2018 respectively.

Comprehensive Loss. We suffered a net loss of $931,301 and $1,273,549 for the nine months ended April 30, 2019, and 2018, respectively. The decrease in comprehensive loss is primarily attributable to the decrease of general and administrative expenses.

Liquidity and Capital Resources

Working Capital

We had current assets of $460,843 consisting primarily of inventories of $3,228, account receivables of $1,907, other receivables, deposits and prepayments of $448,583, amount due to related parties of $3,409 and cash and cash equivalents of $3,716 as of April 30, 2019. Our current liabilities consisted of $909,480 of amount due to related parties, $211,721 of other payables and accruals, $21,210 of current tax liabilities and $73,220 of account payables.

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

Cash Flows

Cash Flow from Operating Activities

During the nine months ended April 30, 2019, net cash used in operating activities was $11,812, compared to $2,614,555 for the nine months ended April 30, 2018. Net cash used in operating activities during the nine months ended April 30, 2019 consisted primarily of a net loss of $941,081, a decrease in account receivables of $1,735, a decrease in other receivables, deposits and prepayments of $15,345, a decrease in amount due to directors of $51,100, a decrease in other payables and accrued liabilities of $24,637, gain on disposal of $504, foreign translation reserve of $2,670, offset by an increase in amount due to related parties of $630,658, an increase of account payables of $71,834, impairment of $302,134 and depreciation of plant and equipment of 20,634.

Net cash used in operating activities during the nine months ended April 30, 2018 consisted primarily of a net loss of $1,263,717, a decrease in account receivables of $695,936, a decrease in amount due to directors of $144,916, a decrease in account payables of $922,284, foreign translation reserve of $66,325 and gain on disposal of $539, offset by an increase of other receivables, deposits and prepayments of $3,258, an increase in amount due to related parties of $400,194, depreciation of plant and equipment of $22,342, plant and equipment written off of $51,868 and donated services and rent of $1,500.

Cash Flow from Investing Activities

During the nine months ended April 30, 2019, there was net cash generated from investing activities of $1,591 consisted of sales proceeds from disposal of property, plant and equipment of $2,087 and offset by $496 from purchase of plant and equipment.

During the nine months ended April 30, 2018, there was net cash used from investing activities of $66,194 consisted of purchase of plant and equipment of $67,707, offset by $1,513 of sales proceeds from disposal of property, plant and equipment.

Cash Flow from Financing Activities

During the nine months ended April 30, 2019, financing activities did not provide any net cash.

During the nine months ended April 30, 2018, there was net cash generated from financing activity of $2,629,433 which primarily consisted of issued of share capital of $2,629,433.

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.

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.

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 April 30, 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, 2018. 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 April 30, 2019, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

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 $596,000) together with a claim for damages to be assessed by the Singapore Court. Within the same suit, Digiland has filed a counterclaim against MIG Mobile Tech Berhad for the balance of the payment due to it under contract in the sum of S$800,000, together with a claim for damages to be assessed by the Singapore Court. This matter is more fully described in Note 5 Legal Proceedings of Notes to our Consolidated Financial Statements.

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

None.

None.

None.

Not applicable.

None.

SIGNATURES

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