WeTrade Group(WETG) - 2022 Q2 - Quarterly Report

PART I - Financial Information Financial Statements Unaudited consolidated financial statements for June 30, 2022, show decreased assets and net income, with a significant share cancellation Note 1 – Nature of Business WeTrade Group provides technical services via its 'YCloud' social e-commerce platform for micro-businesses in China, expanding into new sectors - The company's core business is providing a cloud-based intelligence system called "YCloud" for social e-commerce, targeting micro-businesses in China[16] - Key functions of YCloud include managing marketing relationships, CPS commission profit management, multi-channel data statistics, AI fission and management, and supply chain integration[18] - In Q1 2022, the company expanded its client base by entering into YCloud system service agreements with Beijing Yidong, Maitu International, and Beijing Youth Travel[19][20] Note 4 – Revenue Revenue from YCloud's GMV-based service fees (2%-3.5%) decreased, with total GMV falling to $116.5 million for H1 2022 - Revenue is derived from a system service fee of 2%-3.5% of the Gross Merchandise Volume (GMV) generated on the YCloud platform[62] Gross Merchandise Volume (GMV) Comparison | Period | June 30, 2022 (USD) | June 30, 2021 (USD) | | :--- | :--- | :--- | | Non-related parties GMV | $107,714,046 | $150,250,147 | | Related party GMV | $8,732,504 | $50,678,696 | | Total GMV | $116,466,550 | $200,928,843 | - For the six months ended June 30, 2022, the company generated $3,556,596 in revenue from four third-party customers and $288,337 from one related-party customer, Changtongfu[64] Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 (USD) | December 31, 2021 (USD) | | :--- | :--- | :--- | | Total Current Assets | $15,639,121 | $16,436,393 | | Total Assets | $18,861,328 | $19,470,524 | | Total Current Liabilities | $3,421,093 | $2,998,960 | | Total Liabilities | $4,924,897 | $4,941,202 | | Total Stockholders' Equity | $13,936,431 | $14,529,322 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | Six Months Ended June 30, 2022 (USD) | Six Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | :--- | :--- | | Total Service Revenue | $1,608,080 | $3,882,893 | $3,844,933 | $6,663,816 | | Gross Profit | $1,517,429 | $3,692,434 | $2,965,094 | $6,327,049 | | Net Income / (Loss) | ($442,637) | $1,842,030 | $118,218 | $2,494,114 | | EPS (basic and diluted) | ($0.00) | $0.01 | $0.00 | $0.01 | Condensed Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 (USD) | Six Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | | Net cash from operating activities | $6,491,363 | ($541,827) | | Net cash used in investing activities | ($648,389) | ($170,265) | | Net cash from/(used in) financing activities | $842,547 | ($420,562) | | Cash and cash equivalents, end of period | $7,152,073 | $3,210,464 | - On April 13, 2022, the company canceled 120,418,995 shares of Common Stock, reducing outstanding shares from 305,451,498 to 185,032,503[98] - Subsequent to the reporting period, on July 21, 2022, the company uplisted to the Nasdaq Capital Market and closed an IPO of 10,000,000 shares at $4.00 per share, expecting net proceeds of approximately $37.1 million[99][100] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue and net income declines to decreased GMV from COVID-19 lockdowns; cash improved significantly from receivables collection Results of Operations (Six Months Ended June 30, 2022 vs 2021) H1 2022 revenue decreased 42.3% to $3.84 million, and net income plummeted 95.3%, primarily due to lower GMV from COVID-19 lockdowns Six-Month Operational Results Comparison | Metric | Six Months Ended June 30, 2022 (USD) | Six Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | | Total Revenue | $3,844,933 | $6,663,816 | | Gross Profit | $2,965,094 | $6,327,049 | | Net Income | $118,218 | $2,494,114 | - The decrease in revenue was mainly due to a decline in Gross Merchandise Volume (GMV) in the YCloud system, a result of Covid-19 lockdowns in several major PRC cities since March 2022[106] - General and administrative expenses decreased from $3.66 million to $2.79 million, primarily because no advertising, exhibition, or legal due diligence expenses were incurred during the period due to the lockdown[109] Results of Operations (Three Months Ended June 30, 2022 vs 2021) Q2 2022 saw a net loss of $442,637 (vs. Q2 2021 net income), driven by a 58.6% revenue decline and increased marketing expenses Three-Month Operational Results Comparison | Metric | Three Months Ended June 30, 2022 (USD) | Three Months Ended June 30, 2021 (USD) | | :--- | :--- | :--- | | Total Revenue | $1,608,080 | $3,882,893 | | Operations Profit / (Loss) | ($465,093) | $1,924,977 | | Net Income / (Loss) | ($442,637) | $1,842,030 | - The company shifted from a net income of $1.84 million in Q2 2021 to a net loss of $442,637 in Q2 2022, primarily due to the decrease in GMV-based revenue caused by COVID-19 lockdowns[113] - General and administrative expenses increased from $1.77 million to $1.98 million in the quarter, as more marketing and promotion expenses were incurred compared to the prior period[112] Liquidity and Capital Resources Cash on hand increased to $7.15 million as of June 30, 2022, driven by $8.2 million in accounts receivable collection and positive operating cash flow - Cash on hand increased to $7,152,073 as of June 30, 2022, mainly due to the collection of approximately $8.2 million in accounts receivables[114] - Net cash provided by operating activities was $6,491,363, a turnaround from cash used of $541,827 in the prior period, driven by increased collections from customers[115] - Cash used in investing activities increased to $648,389 from $170,265, mainly due to additions to leasehold improvements[115] Quantitative and Qualitative Disclosures about Market Risk As a "smaller reporting company," the company is not required to provide quantitative and qualitative disclosures about market risk - As a "smaller reporting company" defined by Regulation S-K, the company is not required to provide the information for this item[120] Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2022, due to material weaknesses like lack of audit committee and insufficient oversight - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022[122] - Material weaknesses identified include: lack of an audit committee, lack of a majority of outside directors, management domination by two individuals, lack of internal audit functions, and lack of segregation of duties within accounting[122][123] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[126] PART II – Other Information Legal Proceedings The company reported no legal proceedings during the period - None[128] Risk Factors As a "smaller reporting company," the company is not required to provide this information - The company is a "smaller reporting company" and is not required to provide the information contained in this item[128] Unregistered Sales of Equity Securities And Use Of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - None[128] Other Information The company reported no other information for the period - None[128] Exhibits The report includes certifications from the Principal Executive Officer and Principal Financial Officer, along with financial statements in XBRL format - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[129] - Financial statements for the quarter ended June 30, 2022, are provided in XBRL format[129]