ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statements
This quarterly report on Form 10-Q and other reports that we file with the SEC contain statements that are considered forward-looking statements. Forward-looking statements give the Companys current expectations, plans, objectives, assumptions or forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Companys future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as anticipate, estimate, plans, potential, projects, ongoing, expects, management believes, we believe, we intend, and similar expressions. These statements are based on the Companys current plans and are subject to risks and uncertainties, and as such the Companys actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. Any or all of the forward-looking statements in this periodic report may turn out to be inaccurate and as such, you should not place undue reliance on these forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions due to a number of factors, including:
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dependence on key personnel;
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Competitive factors;
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degree of success of research and development programs;
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the operation of our business; and
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general economic conditions in the ASEAN, Asia-Pacific Region and in the Unit States.
These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this annual report.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:
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Weyland the Company, we, us, or our, are to the business of Weyland Tech Inc., a Delaware corporation;
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SEC are to the Securities and Exchange Commission;
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Securities Act are to the Securities Act of 1933, as amended;
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Exchange Act are to the Securities Exchange Act of 1934, as amended;
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U.S. dollars, dollars and $ are to the legal currency of the United States.
You should read the following plan of operation together with our financial statements and related notes appearing elsewhere in this quarterly report and the most recent Form 10-K and Form 10-Q. This plan of operation contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.
Overview
Weyland Techs CreateApp platform, offered as a Platform as a Service (PaaS), enables small-medium-sized businesses ("SMB") to create a mobile application ("app") without the need of technical knowledge, high investment or background in IT. At present, the Company does not charge for use of the PaaS platform. The Company recognizes revenue on a pay to use subscription basis when our customers use our platform.
We believe that SMB can increase sales, reach more customers and promote their products and services via a simple easy to build mobile app at an affordable price and in a cost-effective manner.
Our corporate headquarters are located at 85 Broad Street, 16-079 New York, NY 10004. Although we maintain a website at www.weyland-tech.com, we do not intend the information available on our website be incorporated into this filing.
On Feb. 15, 2018
the Company announced that Mr. Jon Najarian has joined the Companys Board of Directors.
Jon Dr.J Najarian was a linebacker for the Chicago Bears before he turned to another kind of contact sport trading on the Chicago Board Options Exchange.
He became a member of the CBOE, NYSE, CME and CBOT and worked as a floor trader for some 25 years. In 1990 he founded Mercury Trading, a market-making firm at the Chicago Board Options Exchange (CBOE), which he sold in 2004 to Citadel, one of the worlds largest hedge funds. In 2005 Jon co-founded optionMONSTER and tradeMONSTER both were acquired in 2014 by private equity firm General Atlantic Partners. Today, he is a professional investor, money manager and media analyst.
Jon developed and patented trading applications and algorithms used to identify unusual activity in stock, options, and futures markets. optionMONSTER, an options news and education site, was described by Securities Industry News as content king of the options business.
For years tradeMONSTER has been rated Best for Options Traders by Barrons and was the first online broker to deploy streaming, desktop-like trading in a web browser.
In 2016 Jon and his brother Pete co-founded Najarian Advisors, a company advising institutional investors on options strategies.
The brothers invest in and work with start-ups via Rebellion Partners, a venture consulting firm they launched in 2015.
Jon can be seen weekly on CNBC, where he is cast member of the Halftime Report and the Fast Money show. He is also the feature of the DRJ Report on CBOE-TV, the exchanges popular webcast.
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On March 14, 2018
the Company confirmed that it has received a non-binding acquisition proposal from its recently announced strategic partner, Chinas DDBill Payment Co., Ltd (DDBill) which operates Chinas fourth largest payments gateway Dinpay (www.dinpay.com, English: us.dinpay.com) and Dinpay Technology Group Ltd. (DTG).
On March 28, 2018
the Company announced the launch of the ENable mobile commerce and logistics platform with its Strategic Partner, DPEX Worldwide (DPEX). The result of the strategic partnership announced in December 2016, the official launch of ENable is the culmination of over a year of integration of Weylands CreateApp technologies with DPEXs logistics and shipping platform.
On April 25, 2018
the Company announced its fiscal 2018 business strategy and updates on its e-Wallet initiative.
Business Outlook
Weyland Tech, Inc. is focused on mobile commerce enablement via our enhanced platform built in 2017, and offered on a Platform-as-a-Service (PaaS) basis, and the companys e-wallet initiative. Recent product launches with our strategic partners DPEX (Indonesia), BTG (Thailand), Augicom/Orange (France) are representative of the PaaS platform strategy and product offering.
As a result, the Companys core product has evolved over the course of 2017 to capitalize on the immediate opportunity for developing a larger network of valuable users and merchants by developing services that will enable the adoption of mobile commerce across Greater South East Asia. The platform enhancements have taken the Companys technology from a standalone DIY app builder to an enhanced platform built to enable mobile commerce.
In 2018, Weyland will focus on scaling this business model by continuing to develop and expand strategic partnerships that would increase the number of users and merchants available to users of the Companys products on a Platform-as-a-Service (PaaS) basis. These efforts will expand on the success of recent product launches representative of the PaaS platform strategy and product offering with our strategic partners DPEX (Indonesia), BTG (Thailand), and Augicom/Orange (France). And after extensive discussions with our partners, management believes that supporting these initiatives through deeper engagement, interaction and co-marketing/sales will substantially benefit the Company in 2018 and beyond.
Growing the PaaS offering will also benefit from 2017s ancillary initiatives in eSports and online-to-offline commerce, which will be absorbed into the PaaS focus in 2018. The lessons from our eSports initiative will inform marketing of the PaaS platform and guide our efforts in attracting partners that service the young upcoming entrepreneurs in this and other exciting new drivers of SMB growth. Similarly, the lessons of the O2O trial in Hong Kong, have and will continue to benefit the development of the advanced logistical and transactional components that differentiate our platform from the stand alone DIY App builders that CreateApp has competed with historically.
The Company is also pleased to report that its 2017 e-wallet initiative, AtozPay, has surpassed expectations since its launch, achieving stronger than anticipated customer traction with limited marketing expense. With the AtozPay e-wallet, the Company created a consumer facing product offering that supports the PaaS strategy developed by the enhancements to the CreateApp platform and enables Weyland to drive higher monetization on those platforms by providing payments capabilities.
AtoZPay is designed to be a robust, universal payment platform therefore its growth is not limited to the Companys PaaS customers alone.
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In managements view, the recent acquisition offer from DinPay did not fairly compensate the shareholders for the value being created with Atozpay. Therefore, instead of a sale of the Company, to maximize the independent growth of AtozPay and consequently shareholder value, management has begun the process to spin-off the e-wallet business via a special dividend.
This effort is intended to boost shareholder value by creating a stand-alone vehicle for the fast growing global e-money/e-wallet industry. Private and public transactions in the e-money/e-wallet industry in South East Asia are growing more frequent with valuations that would represent substantial value creation for existing shareholders.
While additional details will be released over the coming months, it is the Companys belief that the spin-off and a subsequent IPO of the e-wallet business can be completed by the end of fiscal 2018.
Large institutional firms approached to discuss financing the e-wallets growth consistently recommended the Company focus on revenue production of developed platforms. Our existing PaaS partners expressed a similar desire to focus on expanding those platforms with us. Management agrees that by focusing on the PaaS platform and the e-wallet business, the Company has the ability to grow at a more rapid pace as well as exploit the Companys advantages in those markets together with our partners.
Finally, the Company continues to be interested in bringing blockchain technology to our PaaS platforms and e-wallet technologies where appropriate, however due to regulatory considerations that could hinder the growth of AtozPay the Company will not be moving forward with Tokes Platform at this time, and will instead focus on growing e-wallet transaction volume and gaining share of our e-wallet in our markets.
Plan of Operations
Although Weyland Tech's CreateApp platform originally focused on the Pan-Asia marketsthe platform is provided in fourteen, predominantly Asian, languageswe have partners that work with us to develop the EU and North American markets.
The CreateApp platform enables SMB to create a mobile application ("app") without the need of technical knowledge, high investment or background in IT.
We believe that through apps created on our platform, SMBs can increase sales, reach more customers and promote their products and services via a simple easy to build mobile app at an affordable price and in a cost-effective manner.
Weyland Tech currently offers the CreateApp platform directly, as a Platform as a Service (PaaS) in the following key markets:
Singapore: www.createappsingapore.com
India (Jaipur): www.aapkiapp.in
US/Canada: www.createappamericas.com
Weyland Tech currently offers a DIY App builder through a 'white label' platform, also under a PaaS model, with the apps developed generating revenue in the following markets, primarily via cooperation agreements that were structured in late 2015, 2016 and 2017:
EU, via a Strategic Cooperation with Augicom S.A. (www.augicom.ch) (https://createapp.pro/)
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Malaysia, via a Cooperation Agreement with Silver Ridge Tangerine Sdn Bhd (www.silverridge.com.my)
Hong Kong and South China via a Cooperation Agreement with Info Zone Development Ltd.
Indonesia, via a Cooperation Agreement with DPEX Worldwide (www.dpex.com)
North America, via a Cooperation Agreement with Aurum Digital Inc. (www.createappamericas.com)
Thailand via a Cooperation Agreement with BGT Corporation Public Company Limited (http://www.bgtech.co.th/)
The Philippines via a Cooperation Agreement with MocaApp (www.mocaapp.com)
France via a Cooperation Agreement with Orange Pro (https://pro.orange.fr/) (https://createapp.pro/)
For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our platform.
The Company recognizes revenue on a pay to use subscription basis when our customers use our platform.
For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our platform on a white label basis.
Need for Additional Capital
To become profitable and competitive, and execute strategic transactions, we may have to raise additional capital. If we are unable to raise additional equity capital to develop our business and continue earning revenues, we might have to suspend or cease operations and our investors may lose their investment.
We have no assurance that future financings will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Results of Operation
Service Revenue
Service Revenue was $4,179,706 and $2,837,246 for the three months ended March 31, 2018 and 2017, respectively. The increase is due to the service income from our customers.
Cost of Service
Cost of Service was $512,024 and $1,040,048 for the three months ended March 31, 2018 and 2017, respectively. The decrease reflects classification of certain Research and Development and Sales and Marketing expense previously included in Cost of Service.
Gross margin
Gross margin has increased to 87.7% from 63.3% as a result of the classification of certain Research and Development and Sales and Marketing expense previously included in Cost of Service.
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Operating Expenses
General and administrative:
General and administrative expenses were $996,674 and $251,133 and for the three months ended March 31, 2018 and 2017, respectively. The increase was due to increased staff costs, travel, consultancy and professional costs from the increased level of business and our new digital wallet business.
Research and Development:
Research and Development expense were $1,209,116 and $0 for the three months ended March 31, 2018 and 2017, respectively. The increase reflects spending on website, e-commerce platform and mobile app development (powered by CreateApp & Magento), completion of the DPEX Enable dashboard as well as integrating various functionality including the AtoZ Pay payment facility into the CreateApp platform. Additionally, the company continued development of the companys system support knowledge base and other internal systems.
Sales and Marketing:
Sales and Marketing expenses were $1,880,868 for the three months ended March 31, 2018. The increase reflects expenditures on Market Development Funds, Commissions, Sales Performance Incentive Funds as well as non-reusable module development undertaken in efforts to win business all of which were previously classified as Cost of Sales.
Stock-based compensation
Stock-based compensation expenses for the three months ended March 31, 2018 was $ 442,500. (2017: Nil)
Net Profit (Loss)
The Company had a net loss of ($506,959) for the three months ended March 31, 2018 as compared to net profit $1,458,082 for the three months ended March 31, 2017. The decrease in the net income is due to increase in legal and professional costs, travelling cost, consultancy fee, staff costs for the business and stock based compensation.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Liquidity and Capital Resources
On March 31, 2018, we had working capital of $2,292,319. The increase in working capital is due to deposits paid for our digital wallet business, prepayment made for the development for our platform and accruals.
Revenue Recognition
The Companys CreateApp Platform operates as a Platform as a Service (Paas) allowing users to develop their own applications and IT services, which users can access anywhere via a web or desktop browser. The Company recognizes revenue on a pay to use subscription basis when our customers use our platform. For the territories licensed to our distributors and on a white label basis, we derive royalty income from the end user use of our platform on a white label basis.
The Company maintains the CreateApp software platform at its own cost. Any enhancements and minor customization for our resellers/distributors are not separately billed. Major new proprietary features are billed to the customer separately as Development income while re-usable features are added to the features available to all customers on subsequent releases of our platform.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, management performed, with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the SEC), and that such information is accumulated and communicated to management including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.
Annual Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the companys principal executive officers and effected by the companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
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effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management has conducted, with the participation of the Chief Executive Officer and Chief Financial Officer, an assessment, including testing of the effectiveness, of our internal control over financial reporting as defined in Rule 13(a)-15(f) under the Exchange Act as of December 31, 2017. Managements assessment of internal control over financial reporting was conducted using the criteria in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management has concluded that the Companys internal control over financial reporting is effective.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
As a smaller reporting company, the Company is not required to include in this Annual Report a report on the effectiveness of internal control over financial reporting by the Companys independent registered public accounting firm.
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