Filing summary
Issuer and period: The supplied filing is a Form 10-Q for the quarter ended March 31, 2021, but it identifies the registrant as WeTrade Group Inc., not Next Technology Holding Inc. Confirm that this is the intended filing before relying on the figures. Amounts are in U.S. dollars unless noted.
Business context
WeTrade describes a membership-based social e-commerce technology business serving micro-businesses, primarily in China, through its YCloud platform. It earns service fees tied to transactions processed through the platform; the filing says fees are generally 3.5% of gross merchandise volume. Management describes trial operations in Hong Kong, the Philippines, and Singapore, and plans to pursue platform partnerships and expansion into additional industries. These are stated plans, not quantified guidance.
Key financial metrics
| Metric | Q1 2021 / March 31, 2021 | Comparable / prior balance |
|---|---|---|
| Revenue | $2,780,923 | $21,070 in Q1 2020 |
| Gross profit / margin | $2,634,615 / approximately 94.7% | $21,070 gross profit in Q1 2020 |
| Operating income | $745,425; approximately 26.8% of revenue | Operating loss; MD&A table reports ($4,000), while the statements report ($25,070) |
| Net income | $652,084; approximately 23.4% of revenue | Net loss of $461 in Q1 2020 |
| Basic and diluted EPS | $0.00 as presented | ($0.00) as presented |
| Operating cash flow | ($1,969,329) | ($1,419,973) in Q1 2020 |
| Cash and cash equivalents | $2,672,940 | $4,640,603 at December 31, 2020 |
| Current assets / current liabilities | $11,434,642 / $2,565,803 | $10,460,597 / $2,177,224 at December 31, 2020 |
| Total liabilities | $4,874,172 | $4,648,822 at December 31, 2020 |
Cash fell by $1,967,663 during the quarter. Operating cash use reflected working-capital outflows, including increases in notes receivable and prepayments. The company reported no financing cash flow in Q1 2021. It had $4,516,275 of notes receivable, including a disclosed RMB 30 million short-term loan to a third party at 5% annual interest, maturing November 4, 2021; accrued interest was reported at $57,026.
Lease liabilities totaled $2,893,522 ($585,153 current and $2,308,369 non-current). The company also reported $452,500 due to related parties, described as unsecured, interest-free, and without a fixed repayment term. No senior securities were outstanding.
Changes, outlook, and risks
- Revenue rose sharply from the very small Q1 2020 base. The filing attributes Q1 2021 revenue to YCloud service fees and identifies two customers as generating the period’s revenue.
- Management says general and administrative expense of $1,889,190 increased largely because 89 staff were recruited for software development. Cost of revenue was $146,308.
- Management cites growth strategy execution, access to manufacturing partners on favorable terms, economic conditions, and working-capital needs as risks to forward-looking results. It also says COVID-19 could reduce spending and demand, and that its effects could not be predicted.
- The company disclosed that disclosure controls and internal control over financial reporting were not effective at March 31, 2021. Cited weaknesses include limited internal resources, lack of an audit committee and a majority of outside directors, management concentration, inadequate segregation of accounting duties, and insufficient review. Management said remediation would depend on proper funding.
- The filing reports no legal proceedings, no off-balance-sheet arrangements, and no specific financial guidance. Cash held in China and Singapore was not covered by FDIC or comparable local deposit insurance, according to the filing.
Important facts to verify
- Issuer identity: The filing is for WeTrade Group Inc., although the request names Next Technology Holding Inc.
- Income statement presentation: The statements label $652,084 as “net income (loss) attributable to noncontrolling interest,” while the cash flow statement and MD&A present it as net income. Clarify the intended attribution and presentation.
- Operating loss comparison: The Q1 2020 operating loss is shown as ($25,070) in the statements and ($4,000) in the MD&A comparison table.
- Lease disclosure: The lease maturity table lists total payments of $3,237,396 and imputed interest of $343,874, but then gives present value of lease liabilities as $6,130,917. That figure does not reconcile with the reported $2,893,522 lease liability; confirm the correct amount.
- Share count: The balance sheet reports 305,451,498 shares outstanding, while the unregistered-sales section reports 305,491,498. The cover page also reports 305,451,498 as of May 28, 2021.
- Revenue concentration and receivables: Verify the identities and related-party status of the two revenue customers, collection of $2,880,285 in accounts receivable, and repayment of the third-party loan. The filing’s MD&A refers to revenue from a related party, while its revenue note identifies two customers without clearly reconciling that description.