WeTrade Group(WETG) - 2021 Q4 - Annual Report

Cover Page This is an Annual Report on Form 10-K for WeTrade Group Inc. for the fiscal year ended December 31, 2021 - This is an Annual Report on Form 10-K for WeTrade Group Inc. for the fiscal year ended December 31, 2021[1] - The registrant is a smaller reporting company and an emerging growth company[3] Cautionary Note Regarding Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, identified by terms like "may," "will," "expect," and "believe" - The report contains forward-looking statements subject to risks and uncertainties, identified by terms like "may," "will," "expect," and "believe." These statements are based on information available at the time and are not guarantees of future performance[10][11] - Key risk factors include the ability to raise capital, identify and execute acquisitions, general economic conditions, and significant competition[12] PART I Business WeTrade Group Inc. provides technical services and solutions through its social e-commerce platform, primarily the "YCloud" system, targeting micro-businesses in China Overview The company provides technical and auto-billing management services to micro-business online stores in China via its independently developed social e-commerce platform, "YCloud" - WeTrade Group Inc. is a technology service provider focused on social e-commerce, utilizing its proprietary "YCloud" system[14] - The YCloud system's main functions include managing user marketing relationships, CPS commission profit management, multi-channel data statistics, AI fission and management, and supply chain systems[16] - The company provides YCloud access to two primary customers, Weijiafu and Changtongfu, who in turn serve micro-business owners and businesses in the hotel and travel industries[15] Corporate History and Structure WeTrade Group, Inc. was incorporated in Wyoming in 2019, operating through wholly-owned subsidiaries in Singapore, Hong Kong, and mainland China - The company operates through a multi-layered corporate structure with a US parent company and subsidiaries in Singapore, Hong Kong, and mainland China[17][19][20] Our Industry The company operates in China's growing social e-commerce market, targeting micro-businesses, which is projected to expand significantly - The target market of micro-businesses in China is projected to grow from 60 million people in 2019 to 330 million in 2023[23][25] - The company operates within the S2B2C (Supplier-to-Business-to-Consumer) model, connecting suppliers with small shop owners who then manage sales to consumers[24] - Key competitors in the third-party service provider space include Weimob (15.3% market share) and Youzan (7.3% market share)[26] YCloud System YCloud is presented as the first global micro-business cloud intelligence system, offering integrated payment processing, AI-driven user analysis, and cross-platform supply chain integration - YCloud provides integrated payment methods and analytics, allowing micro-business owners to accept payments through various channels while managing revenue through a single system[28][29] - The system uses AI to analyze user behavior across multiple apps to provide tailored recommendations and displays[32] - It features a supply chain system that integrates supply, sales, finance, and service, connecting suppliers and customers seamlessly[32] Revenue Model The company's revenue is derived from service fees charged for transactions conducted through the YCloud platform, ranging from 2% to 3.5% of Gross Merchandise Volume (GMV) - Revenue is generated from service fees calculated as a percentage of Gross Merchandise Volume (GMV)[37] - The service fee rate ranges from 2% to 3.5% of GMV[37] Growth Strategy The company's growth strategy focuses on expanding its micro-business user base, entering new industries, forming strategic partnerships, and pursuing global expansion - Core Business Growth: Capitalize on the expected increase of micro-business runners in China to 330 million by 2023[42] - New Industry Expansion: Target industries like beauty, tourism, hospitality, and live commerce[43] - Global Expansion: Plan to cooperate with international social media platforms including Kakao Talk, Line, and Whatsapp[44] Intellectual Property The company protects its technology through a portfolio of intellectual property, including registered copyrights for its software systems, a trademark, and several domain names Registered Copyrights | Copyright Number | Issue Date | Category | Copyright Name | |---|---|---|---| | 2020SR0413838 | 2020/05/07 | Software | WePay System V1.0 | | 2020SR0318464 | 2020/04/09 | Software | Yueshang Social E-commerce Revenue Management System | | 2020SR1899615 | 2020/12/25 | Software | Changtongfu Revenue Management System V1.0 | | 2020SR1918178 | 2020/12/30 | Software | Zhinengfu Revenue Management System V1.0 | | 2021SR0044549 | 2021/01/08 | Software | Micro-business Cloud Intelligent System V1.0 | - The company owns one trademark registered in Singapore and six domain names, including ycloud.online and wetradegroup.net[49][51] Employees As of the report date, the company had 76 full-time employees, with the technology department comprising the largest portion at 46 employees Employees by Function | Functional Area | Number of Employees | |---|---| | Technology | 46 | | General and Administrative | 8 | | Financial Department | 9 | | Strategic Department | 5 | | Human Resource | 4 | | Operating | 4 | | Total | 76 | Regulations The company's operations are subject to a complex set of laws and regulations in both the People's Republic of China (PRC) and Hong Kong, covering areas like internet security, foreign investment, and taxation - In the PRC, the company is subject to the Cyber Security Law, which governs the collection, use, and protection of personal data[58][59] - Foreign investment is governed by the Foreign Investment Law and the Negative List, with the company's PRC subsidiary, Yueshang Beijing, being a Wholly Foreign-invested Enterprise[61][62][65] - The company is subject to PRC Enterprise Income Tax (EIT) at a rate of 25% for its resident enterprises and a Value-added Tax (VAT) rate of 6%[75][78] Risk Factors This section is not applicable as the company qualifies as a smaller reporting company - Disclosure for this item is not required because WeTrade Group Inc. is a smaller reporting company[92] Unresolved Staff Comments The company reports that it has no unresolved staff comments - There are no unresolved staff comments as of the report date[92] Properties The company's principal executive office is a leased space of 6,216.64 square meters in Beijing, China, with a monthly rent of approximately RMB 414,106 Principal Office Lease Details | Address | Space (sq. meters) | Lease Term | Average Monthly Rent | |---|---|---|---| | No. 18, Kechuang 10th Street, Beijing Economic and Technological Development Zone, Beijing, China | 6,216.64 | Sep 16, 2020 - Sep 15, 2025 | RMB 414,105.93 | Legal Proceedings The company is not currently involved in any legal proceedings and is not aware of any pending or potential legal actions - There are no active or threatened legal proceedings against the company[95] Mine Safety Disclosures This section is not applicable to the company's business - Not applicable[95] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities As of December 31, 2021, there were approximately 370 holders of record of the company's common stock, with no cash dividends declared or equity repurchases made - As of December 31, 2021, there were approximately 370 holders of record of common stock[96] - The company has not paid cash dividends and intends to retain earnings for business development[97] - No equity securities were repurchased by the company during the fiscal year ended December 31, 2021[99] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's revenue grew significantly from $6.3 million in 2020 to $14.4 million in 2021, driven by increased Gross Merchandise Volume (GMV), with net income rising to $5.2 million Results of Operations Total revenue increased by 129% to $14.4 million in FY2021 from $6.3 million in FY2020, primarily due to a substantial increase in Gross Merchandise Volume (GMV) Results of Operations (FY2021 vs. FY2020) | Metric | FY 2021 | FY 2020 | |---|---|---| | Total Revenue | $14,381,295 | $6,271,564 | | Gross Profit | $11,699,356 | $5,655,969 | | General & Admin | ($5,705,063) | ($1,901,336) | | Operations Profit | $5,994,293 | $3,754,633 | | Net Income | $5,175,675 | $2,675,037 | Gross Merchandise Volume (GMV) (FY2021 vs. FY2020) | GMV Source | 2021 US$ | 2020 US$ | |---|---|---| | Non-related party | 292,177,817 | 10,437,687 | | Related party | 139,359,179 | 153,038,677 | | Total | 431,536,996 | 163,476,364 | Liquidity and Capital Resources As of December 31, 2021, total assets were $19.5 million and total liabilities were $4.9 million, with cash decreasing to $0.6 million primarily due to a $3.8 million cash outflow from operating activities Balance Sheet Summary (As of Dec 31) | Metric | 2021 | 2020 | |---|---|---| | Cash and Cash equivalents | $616,593 | $4,640,603 | | Total Assets | $19,470,524 | $13,542,707 | | Total Liabilities | $4,941,202 | $4,648,822 | | Total Stockholders' Equity | $14,529,322 | $8,893,885 | - Net cash used in operating activities was $3.75 million in 2021, a significant shift from $1.16 million provided by operating activities in 2020, mainly due to a $3.9 million increase in trade receivables and a $2.9 million increase in prepaid expenses[114] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2021, due to identified material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of the end of the reporting period[125] - Material weaknesses in internal control over financial reporting were identified, including issues with internal audit functions, segregation of duties, and lack of multiple review levels[128] PART III Directors, Executive Officers, and Corporate Governance The company is led by a board of nine directors, a majority of whom are independent, with key executive officers including Zheng Dai (Chairman), Pijun Liu (CEO), and Kean Tat Che (CFO) Key Directors and Executive Officers | Name | Age | Position | |---|---|---| | Zheng Dai | 46 | Director and Chairman of the Board | | Pijun Liu | 39 | Chief Executive Officer and Director | | Kean Tat Che | 39 | Chief Financial Officer, Secretary and Director | | Zhuo Li | 33 | Chief Operation Officer and Director | | Biming Guo | 49 | Independent Director, Chair of Audit Committee | - The Board of Directors consists of nine members, with a majority being independent[146] - The company has established an Audit Committee, a Compensation Committee, and a Nominating Committee, with specified compositions and responsibilities[149][150][151] Executive Compensation Executive compensation for 2021 included salaries and bonuses for key officers, with all amounts accrued and deferred, contingent upon the company's Nasdaq listing 2021 Named Executive Officer Compensation | Name and Principal Position | Salary ($) | Bonus ($) | Total ($) | |---|---|---|---| | Pijun Liu, CEO | 80,000 | 8,000 | 88,000 | | Kean Tat Che, CFO | 50,000 | 5,000 | 55,000 | | Zheng Dai, CTO | 80,000 | 8,000 | 88,000 | | Zhuo Li, COO | 50,000 | 5,000 | 55,000 | - Compensation payments for named executive officers and independent directors have been deferred until the company is listed on Nasdaq[157][161] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The company's ownership is concentrated among a few key entities and individuals, with Future Science and Technology Co Ltd holding 28.5% and all executive officers and directors as a group owning approximately 39.86% Beneficial Ownership | Owner | Percentage Ownership | |---|---| | Future Science and Technology Co Ltd (Zheng Dai) | 28.5% | | AiShangYou Limited | 26.8% | | LD Property Limited | 5.9% | | All executive officers and directors as a group | 39.86% | Certain Relationships and Related Transactions, and Director Independence The company engaged in several transactions with related parties, with amounts due to related parties totaling $1.1 million as of December 31, 2021 - The company has transactions with entities where its CEO, Liu Pijun, and other directors have beneficial interests[167] Amount Due to Related Parties (as of Dec 31, 2021) | Item | Amount | |---|---| | Related parties payable | $745,532 | | Director fee payable | $360,000 | | Total | $1,105,532 | - A related party loan of $140,000 from Global Joy Trip Ltd was forgiven in January 2021 as the entity was dissolved[172] Principal Accounting Fees and Services The company incurred total fees of $133,000 from its principal accountant in fiscal year 2021, primarily for audit services Accountant Fees (FY2021 vs. FY2020) | Fee Type | 2021 | 2020 | |---|---|---| | Audit Fees | $95,000 | $100,300 | | Tax Fees | $8,000 | $3,000 | | All Other Fees | $30,000 | $30,000 | | Total Fees | $133,000 | $133,300 | PART IV Exhibits, Financial Statement Schedules This section lists the documents filed as part of the annual report, including consolidated financial statements and various certifications - The filing includes the consolidated financial statements for the years ended December 31, 2021 and 2020[183] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Sections 302 and 906 are filed with the report[178][179][180][181] FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm The independent auditor, TAAD LLP, issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2021 and 2020, confirming fair presentation in conformity with U.S. GAAP - The auditor, TAAD LLP, provided an unqualified (clean) opinion on the company's consolidated financial statements[188] - The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)[191] Consolidated Financial Statements This section contains the core consolidated financial statements of WeTrade Group Inc., including Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows Consolidated Net Income Per Share | Metric | 2021 | 2020 | |---|---|---| | Net Income | $5,175,675 | $2,675,037 | | Weighted average shares outstanding | 305,451,498 | 304,166,073 | | Net income per share - basic and diluted | $0.02 | $0.01 | Notes to the Consolidated Financial Statements The notes provide detailed disclosure on the company's accounting policies and financial figures, covering revenue recognition, related party transactions, and significant receivables - Revenue is recognized based on a 2%-3.5% service fee on the total Gross Merchandise Volume (GMV) generated through the YCloud platform[239] - A significant credit risk concentration exists, with 100% of the $9.2 million in accounts receivable as of Dec 31, 2021, due from two main customers, with the balance fully settled post-reporting date[217][255] - The company has a short-term note receivable of $3.8 million from a third party, bearing an annual interest rate of 5% and maturing in November 2022[257] - The company's major operations are in the PRC, where the corporate income tax rate ranges from 9% to 25%, and for FY2021, the company recorded an income tax expense of $1,122,283[279][280]