10-Q: Welsis Corp. Reports Q3 Loss, Faces Going Concern Doubt

Welsis Corp. reported a significant net loss for the nine months ended June 30, 2025, with auditors raising substantial doubt about its ability to continue as a going concern amidst a business pivot to cryptocurrency.

Summary

• Shifted business focus from teletherapy to cryptocurrency/blockchain with the launch of TokenTraders.net, but remains in development stage with no revenue from this new segment.
• Reported a net loss of $41,682 for the nine months ended June 30, 2025, a significant deterioration from a net income of $9,359 in the prior year period.
• Accumulated deficit increased to $207,118 as of June 30, 2025, from $165,436 at September 30, 2024.
• Total liabilities increased to $133,492 as of June 30, 2025, from $89,641 at September 30, 2024, primarily due to an increase in convertible notes payable.
• Cash used in operating activities significantly increased to $47,053 for the nine months ended June 30, 2025, compared to $9,834 in the prior year.
• The company's $40,000 note payable is currently in default.
• Disclosure controls and procedures were deemed not effective as of June 30, 2025.

Sentiment

Score: 2

Explanation: The company is in a precarious financial position, marked by zero revenue, significant losses, increasing liabilities, and a 'going concern' warning. While there's a strategic pivot to a high-growth industry, it's still in development with no revenue, and the company is heavily reliant on future capital raises with no concrete plan for securing them. The default on a note and ineffective controls further compound the negative outlook.

Positives

• Reduced net loss for the three months ended June 30, 2025, to $8,718 from $17,352 in the prior year, primarily due to decreased professional fees.
• Working capital deficiency slightly improved to $66,325 from $71,696, mainly due to a decrease in accounts payable and accrued liabilities.

Negatives

• No revenue generated for the nine months ended June 30, 2025, compared to $2,000 in the prior year, indicating a complete cessation of previous operations and no revenue from the new business.
• Shifted from a net income of $9,359 to a net loss of $41,682 for the nine months ended June 30, 2025.
• Significant increase in total liabilities to $133,492, driven by a rise in convertible notes payable to $64,998.
• The $40,000 note payable is in default, indicating financial distress.
• Accumulated deficit worsened to $207,118.
• Mobile application and website assets from the previous teletherapy business were fully impaired due to the change in management and business focus.
• Disclosure controls and procedures were found to be ineffective.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to accumulated deficit and negative operating cash flow.
• Reliance on future capital raises (equity, related party loans, convertible notes) to fund operations, with no assurance of availability or acceptable terms.
• Risk of significant dilution to current shareholders from future equity or convertible debt issuances.
• The $40,000 note payable is in default, which could lead to legal action or further financial strain.
• Ineffective disclosure controls and procedures, raising concerns about the reliability of financial reporting.
• Uncertainty regarding the success and revenue generation of the new cryptocurrency and blockchain business, as it is still in the development stage.
• Potential for additional increases in operating expenses and capital expenditures related to inventory acquisition, developmental expenses for the start-up business, and marketing expenses.

Future Outlook

Management expects working capital requirements to increase with business growth and plans to fund operations through existing funds and further issuances of equity or debt securities. The company anticipates needing to raise additional capital in the next twelve months to sustain and expand operations, primarily through equity financing from common stock sales and potential short-term loans from directors.

Management Comments

• "We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities."
• "Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next three months."
• "We will have to raise additional funds in the next twelve months in order to sustain and expand our operations."
• "We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock."
• "We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made."

Industry Context

Welsis Corp.'s pivot from teletherapy to the cryptocurrency and blockchain industry reflects a strategic shift towards a high-growth, yet volatile, sector. While the teletherapy market offers steady demand, the company's previous operations ceased. The move into crypto exchange platforms like TokenTraders.net places it in a competitive landscape with established players, requiring significant capital and robust technology to gain market share. The company is currently in a development stage within this new industry, indicating it has yet to generate revenue or establish a significant presence.

Comparison to Industry Standards

• The company's current financial state, characterized by zero revenue and significant net losses, is far below industry standards for operational companies in either the teletherapy or cryptocurrency exchange sectors. Established crypto exchanges like Coinbase or Binance generate billions in revenue and operate profitably, while even smaller, emerging platforms typically demonstrate some level of operational revenue or significant user adoption.
• The accumulated deficit of $207,118 and the 'going concern' warning are indicative of a pre-revenue, development-stage company, which is common for startups but highlights a critical need for immediate and substantial funding compared to mature industry players.
• The default on a $40,000 note payable and the reliance on convertible notes for operating expenses suggest a lack of traditional financing options, contrasting with well-capitalized industry peers who can access diverse funding sources.
• The impairment of the mobile application and website assets from the previous business indicates a complete write-off of prior investments, which is a significant setback not typically seen in successful, pivoting companies that can repurpose or sell existing assets.

Management Changes

Corporate Governance

Legal Proceedings

• No material, existing or pending legal proceedings against the company, nor is the company involved as a plaintiff in any material proceeding or pending litigation.
• No proceedings where directors, officers, affiliates, or shareholders are adverse parties or have a material adverse interest.

Related Party Transactions

• During the nine months ended June 30, 2024, the company incurred debt forgiveness of $53,015. This comprised $38,615 from the company's former Director (Dusan Zindovic) and $14,400 from the company's majority shareholder (Skywest Pinnacle Limited).
• The gain on debt forgiveness was recorded to additional paid-in capital.
• During the nine months ended June 30, 2024, the company incurred consulting fees of $3,000 to the former Director.

Stakeholder Impact

• Shareholders face significant dilution risk from anticipated future equity or convertible debt issuances required to fund operations.
• Creditors, particularly the holder of the $40,000 note payable, are impacted by the company's default status and the 'going concern' uncertainty.
• Employees (if any beyond management) may face uncertainty given the company's development stage, lack of revenue, and financial instability.
• Potential customers of the new TokenTraders.net platform may face risks associated with a development-stage crypto exchange with financial instability and ineffective internal controls.

Next Steps

• Implement its business plan for the cryptocurrency and blockchain industry.
• Generate sufficient revenue from the new business segment.
• Raise additional funds through equity financing, related party loans, and convertible notes to sustain and expand operations.
• Address the default status of the $40,000 note payable.
• Improve and make effective its disclosure controls and procedures.

Key Dates

Recommendation

Welsis Corp. is in a dire financial state, evidenced by zero revenue, substantial net losses, a growing accumulated deficit, and a 'going concern' warning from management. The company's $40,000 note payable is in default, and it relies heavily on issuing convertible notes and future equity raises, which will significantly dilute existing shareholders. The pivot to the highly competitive cryptocurrency industry is unproven, with no revenue generated to date. Furthermore, the disclosure controls and procedures are ineffective, raising serious concerns about financial transparency and governance. Given the severe financial distress, high operational risk, and lack of clear path to profitability, the stock carries extreme risk and is not a viable investment.

Keywords

Welsis Corp, 10-Q, Quarterly Report, Financial Results, Cryptocurrency, Blockchain, TokenTraders.net, Teletherapy, Going Concern, Net Loss, Capital Raise, SEC Filing, Development Stage, Financial Distress, Corporate Governance