10-Q: UPAY Reports Wider Q3 Loss Amid Debt Settlement

UPAY, Inc. reported a significantly increased net loss for the third quarter and nine months ended November 30, 2025, primarily due to a substantial loss on debt settlement, despite a quarterly revenue increase.

Summary

• Net loss for the three months ended November 30, 2025, increased to $1,032,123 from $159,184 in the prior year, largely due to a $904,400 loss on settlement of debt.
• Revenue for the three months ended November 30, 2025, increased by $34,221 to $184,587, driven by transactional revenue in South African operations.
• For the nine months ended November 30, 2025, net loss widened to $1,291,361 from $501,185 in the prior year, also primarily due to the debt settlement loss.
• Nine-month revenue decreased by $31,738 to $543,948, attributed to a decrease in transactional revenue in South Africa.
• Working capital deficit improved to ($199,281) at November 30, 2025, from ($386,487) at February 28, 2025.
• Cash and cash equivalents increased to $67,418 at November 30, 2025, from $55,362 at February 28, 2025.
• Net cash used in operating activities decreased significantly to ($259,375) for the nine months ended November 30, 2025, from ($741,637) in the prior year.
• The company issued 800,000 shares of common stock with a fair value of $1,120,000 to settle $215,600 in related party notes payable and accrued interest, resulting in a $904,400 loss.
• Management concluded that disclosure controls and procedures were not effective as of November 30, 2025, citing a material weakness due to a lack of accounting policies and procedures, no independent board members, and no audit committee financial expert.
• The company's ability to continue as a going concern is in substantial doubt due to insufficient revenues and reliance on uncertain equity financing.

Sentiment

Score: 2

Explanation: The company faces significant financial challenges, including a substantial net loss driven by debt settlement, declining nine-month revenue, and explicit 'going concern' doubt. Material weaknesses in internal controls further compound the negative outlook, despite some improvements in working capital and cash from operations.

Positives

• Quarterly revenue increased by 22.76% to $184,587 for the three months ended November 30, 2025, compared to $150,366 in the prior year.
• Total expenses for the three months ended November 30, 2025, decreased by $13,355 to $243,433, primarily due to reduced general and administrative expenses in South African operations.
• Working capital deficit improved by $187,206, reducing from ($386,487) at February 28, 2025, to ($199,281) at November 30, 2025.
• Net cash used in operating activities significantly decreased by $482,262 for the nine months ended November 30, 2025, to ($259,375) from ($741,637) in the prior year.
• Net cash provided by financing activities increased to $270,000 for the nine months ended November 30, 2025, from $100,000 in the prior year.

Negatives

• Net loss for the three months ended November 30, 2025, increased by $872,939 to $1,032,123, primarily due to a $904,400 loss on settlement of debt.
• Net loss for the nine months ended November 30, 2025, increased by $790,176 to $1,291,361, primarily due to the $904,400 loss on settlement of debt.
• Revenue for the nine months ended November 30, 2025, decreased by $31,738 (5.51%) to $543,948 compared to the prior year.
• The company has a substantial doubt about its ability to continue as a going concern due to insufficient revenues and reliance on uncertain equity financing.
• Disclosure controls and procedures were deemed not effective as of November 30, 2025, indicating a material weakness in internal controls.
• The company's accumulated deficit increased to ($3,454,612) at November 30, 2025, from ($2,163,251) at February 28, 2025.

Risks

• Vulnerability to economic conditions.
• Ability to raise adequate working capital.
• Loss of customers or sales weakness.
• Inability to achieve sales levels or other operating results.
• Unavailability of funds for expansion purposes.
• Operational inefficiencies.
• Potential negative impact from further outbreaks of Covid-19 on business, results of operations, financial condition, and global economies/financial markets.
• Increased competitive pressures from existing competitors and new entrants.
• Uncertainty regarding the adaptability of the software system to countries other than South Africa.
• Uncertainty regarding developing interest in the software system in new expansion countries.
• Dependence on the level of activity of credit facilities and their need for the company's software.
• Substantial doubt about the company's ability to continue as a going concern due to insufficient revenues and reliance on uncertain equity financing.
• Material weakness in internal control over financial reporting due to lack of developed and communicated accounting policies and procedures, and absence of independent board members or an audit committee financial expert.

Future Outlook

The company intends to fund operations through equity financing arrangements, but there is no assurance of success. Future financial condition and results are subject to change and inherent risks, including economic conditions, ability to raise working capital, customer retention, sales levels, expansion funding, operational inefficiencies, potential Covid-19 impacts, and competitive pressures. The company is also evaluating the adaptability of its system to other countries and developing interest in new markets.

Management Comments

• The Company intends to fund operations through equity financing arrangements.
• Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
• Our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management... as appropriate to allow timely decisions regarding required disclosure.
• We have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices.
• The Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert.

Industry Context

UPAY, Inc. operates principally in South Africa, focusing on software development and licensing, and providing services to the credit provider industry. The company's revenue fluctuations are directly tied to transactional revenue within this specific South African market. Its expansion plans into other countries suggest an ambition to diversify beyond its current primary market, but this also introduces risks related to market adaptability and interest generation.

Corporate Governance

Legal Proceedings

• No material pending legal proceedings to which the company or its subsidiary is a party or of which any of its properties, or the properties of its subsidiary, is the subject.
• No such proceedings contemplated by any governmental authorities.
• No material proceedings in which any of the directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to the company or its subsidiary or has a material interest adverse to the company or its subsidiary.

Related Party Transactions

• Promissory notes with the CEO totaling $40,000 principal, with accrued interest of $4,690, $4,233, and $7,605 respectively, as of November 30, 2025.
• Promissory notes with companies controlled by a significant shareholder totaling $190,000 principal, with accrued interest of $6,949, $8,959, $4,841, $4,151, $3,726, $1,629, $2,157, $1,781, and $1,082 respectively, as of November 30, 2025.
• A $26,000 principal and $11,732 accrued interest from a related party note was settled by issuing 140,007 shares of common stock on October 17, 2025.
• A $130,000 principal and $47,868 accrued interest from a related party note was settled by issuing 659,993 shares of common stock on October 17, 2025.
• $631 owed to officers of the company for advances as of November 30, 2025, which are unsecured, non-interest bearing, and due on demand.
• Salary expenses of $83,901 incurred to the CEO during the nine months ended November 30, 2025.
• Directors fees of $102,750 incurred to a Director and COO during the nine months ended November 30, 2025.
• Directors fees of $3,368 incurred to another Director during the nine months ended November 30, 2025.
• Proceeds from a related party loan of $220,000 were received during the nine months ended November 30, 2025.

Stakeholder Impact

• Shareholders: Significant dilution from the issuance of 800,000 shares to settle related party debt, resulting in a substantial loss on settlement. Increased accumulated deficit and "going concern" doubt pose risks to shareholder value.
• Creditors: Related party creditors received common stock in settlement of debt, indicating a shift from debt to equity for some obligations. Other notes payable remain, some in default.
• Employees/Management: CEO and other directors receive salary and fees, some in the form of common stock issuable. The material weakness in internal controls could impact operational efficiency and accountability.
• Customers: Revenue concentration among a few customers (25% and 9% from top two) and receivables concentration (30%, 10%, 10% from top three) indicates reliance on a limited customer base, posing a risk if these relationships deteriorate.

Next Steps

• Fund operations through equity financing arrangements.
• Evaluate the adaptability of the software system to other countries besides South Africa.
• Develop interest in the software system in other countries planned for expansion.
• Continue to evaluate the effectiveness of internal controls and procedures on an ongoing basis.

Key Dates

Recommendation

The company's financial health is severely distressed, evidenced by a significantly widened net loss, declining nine-month revenue, and an explicit 'going concern' warning. The substantial loss on debt settlement, while a non-cash event, highlights underlying financial instability and reliance on equity for survival. Furthermore, the disclosed material weaknesses in internal controls, including a lack of independent board members and an audit committee financial expert, indicate severe corporate governance deficiencies. These factors collectively present an extremely high-risk profile with a strong likelihood of further value erosion, making the stock a strong sell.

Keywords

UPAY Inc., 10-Q, Quarterly Report, Financial Results, Net Loss, Revenue, Debt Settlement, Going Concern, Internal Controls, South Africa, Software Development, Credit Provider Industry, Working Capital, SEC Filing, Financial Reporting, Equity Financing