WeTrade Group(WETG) - 2020 Q4 - Annual Report

Part I Business WeTrade Group Inc. provides technical services and solutions via its membership-based social e-commerce platform, centered on the 'YCloud' system for micro-businesses in China - The company's core business is providing technical services and solutions via its social e-commerce platform, centered around the independently developed "YCloud" system for micro-businesses in China[12] - The YCloud system's main functions include managing user marketing relationships, CPS commission profit management, multi-channel data statistics, AI fission and management, and an improved supply chain system[15] - The company's primary competitor is identified as China Youzan Limited, with WeTrade differentiating itself by focusing on the micro-business industry and digital transaction simplicity[24] - As of the report date, the company has 89 full-time employees, with 60 personnel in Research & Development, accounting for 64.5% of the total workforce[48] Intellectual Property Summary | Type | Count | | :--- | :--- | | Registered Copyrights | 2 | | Registered Trademarks | 4 | | Registered Domain Names | 4 | Risk Factors The company faces significant risks from evolving markets, reliance on third-party platforms, external events like pandemics, and potential data security breaches - The company's success is contingent on its ability to develop new products and adapt to rapid technological changes in e-commerce, mobile commerce, and payment integration services[49][51] - The business is dependent on the ability of its products to integrate with various operating systems and e-commerce platforms like WeChat, and changes in these systems could adversely affect the company[53] - The COVID-19 pandemic is identified as a significant risk factor that has caused a severe decline in global travel and could materially affect the company's business and financial condition[55][56] - Operations are vulnerable to interruptions or failures of its technology systems or those of third-party providers, which could damage the company's reputation and harm operating results[57][58] - The business involves collecting and storing users' personal data, making it vulnerable to cyberattacks and security breaches, which could lead to significant legal, regulatory, and financial exposure[60][62] Unresolved Staff Comments The company reports that there are no unresolved staff comments - None[63] Properties The company details its leased properties, including a new headquarters lease in Beijing effective from September 2020 to September 2025 New Headquarters Lease Details | Lease Term | Address | Space (sqm) | Avg. Monthly Rent (RMB) | | :--- | :--- | :--- | :--- | | Sep 16, 2020 to Sep 15, 2025 | No. 18, Kechuang 10th Street, Beijing | 6,216.64 | 414,105.93 | Legal Proceedings The company states that it is not currently involved in any legal proceedings and is not aware of any pending or potential legal actions - The company is not currently involved in any legal proceedings[66] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[66] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of December 31, 2020, the company had approximately 370 common stock holders, with no cash dividends declared or equity compensation plans in place - As of December 31, 2020, there were approximately 370 holders of record of the company's common stock[68] - The company has not declared any cash dividends and intends to retain future earnings to finance business development and expansion[69] - As of December 31, 2020, there were no compensation plans for equity security issuance and no recent sales of unregistered securities[70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported $6.27 million in revenue and $2.68 million net income in 2020, a significant turnaround from 2019, with growth in assets and positive operating cash flow Results of Operations (2020 vs. 2019) | Metric | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Total Revenue | $6,271,564 | $0 | | Gross Profit | $5,655,969 | - | | General & Admin Expenses | ($1,901,336) | ($417,407) | | Net Income / (Loss) | $2,675,037 | ($417,407) | Balance Sheet Summary (As of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Cash and Cash equivalents | $4,640,603 | $6,591,128 | | Total Assets | $13,542,707 | $6,591,128 | | Total Liabilities | $4,648,822 | $1,786,515 | | Total Stockholders' Equity | $8,893,885 | $4,804,613 | - Cash provided by operating activities increased by approximately $1.3 million, from a use of $130,892 in 2019 to a provision of $1,162,337 in 2020[91] - Cash used in financing activities was $3.68 million in 2020, a shift from cash provided by financing activities of $6.72 million in 2019, mainly due to loan repayments to related parties and new loans to third parties[92] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 31, 2020, due to identified material weaknesses in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were not effective as of the end of the period covered by the report[93] - Material weaknesses were identified in internal control over financial reporting, related to: (i) internal audit functions; (ii) a lack of segregation of duties within accounting; and (iii) the lack of multiple levels of review of accounting data[95] Part III Directors, Executive Officers and Corporate Governance This section outlines the company's directors, executive officers, Board committee structures, and notes the absence of a formal Code of Ethics Directors and Executive Officers | Name | Age | Title | | :--- | :--- | :--- | | Zheng Dai | 45 | Chairman of the Board | | Pijun Liu | 38 | Chief Executive Officer and Director | | Kean Tat Che | 38 | Chief Financial Officer, Secretary and Director | | Zhuo Li | 32 | Chief Operation Officer and Director | | Donghui Wang | 49 | Independent Director and Chair of Audit Committee | | Daxue Li | 50 | Independent Director and Chair of Compensation Committee | | Yuxing Ye | 41 | Independent Director and Chair of Nominating Committee | | Hung Fai Choi | 35 | Independent Director | | Ning Qin | 39 | Independent Director | - The Board has established an Audit Committee, a Compensation Committee, and a Nominating Committee, with charters approved by the Board[113] - The company has not adopted a formal Code of Ethics, with the Board determining that general rules of fiduciary duty and existing laws are adequate ethical guidelines for its current operational size[120] Executive Compensation The company details executive and director compensation effective March 1, 2021, with no stock options exercised or long-term incentive awards made in the last fiscal year - Effective March 1, 2021, Chairman Zheng Dai and CEO Pijun Liu are entitled to a monthly salary of $8,000 each[111] - Effective March 1, 2021, CFO Kean Tat Che and COO Zhuo Li are entitled to a monthly salary of $5,000 each[111] - Effective March 1, 2021, all independent non-executive directors are entitled to a monthly salary of $2,000[112] - No stock options were exercised by executive officers, and no awards were made under any Long-Term Incentive Plan in the last fiscal year[113] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of common stock, with directors and executive officers collectively owning 39.86% and key 5% holders identified Security Ownership of Major Holders | Name of Beneficial Owner | Percent of Class | | :--- | :--- | | Directors and Executive Officers (as a group) | 39.86% | | Zheng, Dai | 28.5% | | 5% Security Holders | | | Future Science and Technology Co Ltd | 28.5% | | AiShangYou Limited | 26.8% | | LD Property Limited | 5.9% | Certain Relationships and Related Transactions, and Director Independence The company reports no material related party transactions exceeding specified thresholds involving directors, executive officers, or major shareholders in the last two fiscal years - No director, executive officer, or shareholder holding at least 5% of shares had any material interest in any transaction exceeding the lesser of $120,000 or 1% of the average total assets for the last two completed fiscal years[125] Principal Accountant Fees and Services The report discloses principal accountant fees for 2020 and 2019, totaling $280,300 and $282,000 respectively, primarily for audit and other services Accountant Fees (2019-2020) | Year | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | Total Fees | | :--- | :--- | :--- | :--- | :--- | :--- | | 2020 | $100,300 | $0 | $3,000 | $180,000 | $280,300 | | 2019 | $37,000 | $0 | $0 | $245,000 | $282,000 | Part IV Exhibits, Financial Statement Schedules This section lists documents filed as part of the annual report, including financial statements and various corporate and SEC-required certifications - The report includes the Reports of Independent Registered Public Accounting Firm and the following financial statements for the years ended December 31, 2020 and 2019: Balance Sheets, Statements of Operations, Statements of Stockholders' Equity, and Statements of Cash Flows[129][130] Financial Statements Report of Independent Registered Public Accounting Firm TAAD LLP issued an unqualified opinion on the consolidated financial statements for 2020 and 2019, affirming fair presentation in conformity with U.S. GAAP - The auditor, TAAD LLP, expressed an unqualified opinion that the consolidated financial statements present fairly, in all material respects, the financial position of the Company in conformity with U.S. generally accepted accounting principles[140] - The audit was conducted in accordance with PCAOB standards, and the auditor was not engaged to perform an audit of the company's internal control over financial reporting[142] Consolidated Financial Statements The consolidated financial statements for 2020 show significant growth in revenue and net income, with total assets increasing to $13.5 million and cash decreasing due to financing activities Consolidated Balance Sheet Data (As of Dec 31) | | 2020 | 2019 | | :--- | :--- | :--- | | Total Assets | $13,542,707 | $6,591,128 | | Total Current Assets | $10,680,492 | $6,591,128 | | Total Liabilities | $4,648,822 | $1,786,515 | | Total Current Liabilities | $2,177,224 | $1,786,515 | | Total Stockholders' Equity | $8,893,885 | $4,804,613 | Consolidated Statement of Operations Data (Year Ended Dec 31) | | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | $6,271,564 | $0 | | Gross Profit | $5,655,969 | - | | Net Income / (Loss) | $2,675,037 | ($417,407) | | Comprehensive Income (Loss) | $3,253,772 | ($417,407) | | EPS (basic and diluted) | $0.01 | ($0.00) | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1,162,337 | ($130,892) | | Net Cash from Financing Activities | ($3,682,142) | $6,722,020 | | Change in Cash | ($1,950,525) | $6,591,128 | | Cash at End of Period | $4,640,603 | $6,591,128 | Notes to Financial Statements The notes detail revenue recognition from YCloud GMV, the adoption of ASC 842 for leases, related party balances, and subsequent events including a new loan and customized YCloud system development - Revenue is derived from service fees, charged at 2%-3.5% of the total Gross Merchandise Volume (GMV) generated on the YCloud platform, through an agreement with Weijiafu[184] - The company adopted the new lease standard ASC 842, resulting in the recognition of a $2,813,186 right-of-use asset and $3,041,463 in lease liabilities on the December 31, 2020 balance sheet[175] - As of December 31, 2020, the amount due to related parties was $416,500, consisting of a $140,000 loan from a company owned by Director Dai Zheng and $276,500 in advances from directors[198][202] - Subsequent to year-end, on January 27, 2021, the company appointed a third-party to develop a customized YCloud system for a PRC tobacco company at an estimated total cost of RMB 7 million (approx. $1.08 million)[206]