10-K/A: Wewards, Inc. Amends 10-K to Correct Controls and Procedures Disclosures

Wewards, Inc. files an amendment to its original Form 10-K to correct disclosures related to controls and procedures.

Summary

• Wewards, Inc. filed an amendment to its original Form 10-K for the fiscal year ended May 31, 2024, to correct controls and procedures disclosures.
• The amendment addresses Item 9.A and 9.B regarding controls and procedures.
• The original Form 10-K was filed on August 28, 2024.
• The company has developed a web-based platform accessible by mobile apps that will enable consumers to purchase goods from merchants and earn rebates payable in the form of Bitcoin.
• The company intends to generate revenue by licensing white-label versions of the Platform to third parties, but to date, no such license agreement has been entered into, and the company has not generated any revenues from the Platform.
• The company purchased intellectual property rights (IP) from United Power, a Nevada corporation under common ownership with Lei Pei, the company's sole officer and director and majority shareholder, for cash consideration of $179,300.
• The IP consists of technology and related rights associated with the game Megopoly, an MMO (Massively Multiplayer Online Game).
• The company did not generate any revenue, or incur any software development costs, during the fiscal years ended May 31, 2024 or 2023, and is now actively seeking licensing arrangements to bring the game to market.
• The company currently has no full-time employees, other than its sole officer and director Mr. Lei Pei, who receives no salary.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation with significant losses, dependence on related party financing, and auditor concerns about the company's ability to continue as a going concern. The correction of internal control disclosures further highlights existing weaknesses.

Positives

• The company's operating loss decreased primarily due to decreased rents incurred in the current period, compared to the prior period due to the termination of the lease on October 31, 2023.
• The company's net loss decreased due primarily to $104,887 of decreased rent expense related to the termination of the lease on October 31, 2023, and increased interest income on cash balances due to rising interest rates.

Negatives

• The company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed.
• The company does not have an Audit Committee.
• The company did not maintain appropriate cash controls.
• There is a lack of segregation of duties.
• The company has no formal process related to the identification and approval of related party transactions.
• The company has incurred recurring losses from operations resulting in an accumulated deficit of $18,525,329 and had negative working capital of $2,756,314.

Risks

• The company's independent auditor has raised concerns about its ability to continue as a going concern.
• The company does not currently have sufficient funds to fund its operations at their current levels for the next twelve months.
• The company is dependent on its CEO and majority shareholder, Mr. Pei, and his affiliated companies, to provide financing to it when needed, generally in the form of convertible loans.
• There can be no assurance that Mr. Pei will continue to make additional financing available to the company when needed.
• The terms of any future financing may contain undue restrictions on the company's operations and result in substantial dilution for its stockholders.
• The company may not be able to sustain or increase profitability, and its failure to do so would adversely affect its business, including its ability to raise additional funds.

Future Outlook

The company is actively seeking licensing arrangements to generate revenue from its platform and Megopoly game. The company's ability to continue as a going concern is dependent on raising additional capital and achieving sustainable revenues and profitable operations.

Management Comments

• Management is actively pursuing licensing agreements to commence revenues.
• Management believes it is more likely than not that the net deferred tax assets will not be fully realizable.

Industry Context

The company operates in the e-commerce and cryptocurrency sectors, which are both rapidly evolving and subject to regulatory uncertainties. The success of the company's platform depends on its ability to navigate these challenges and establish partnerships with merchants and consumers.

Comparison to Industry Standards

• It is difficult to compare Wewards, Inc. to industry standards due to its unique business model and lack of revenue generation.
• Companies in the e-commerce and cryptocurrency sectors typically have established revenue streams and user bases, which Wewards, Inc. currently lacks.
• Comparable companies in the gaming industry, such as Activision Blizzard or Electronic Arts, have significant revenue from game sales and in-app purchases, which Wewards, Inc. has not yet achieved with Megopoly.
• The company's reliance on related party financing is also a deviation from industry norms, as most companies seek funding from venture capital or public markets.

Related Party Transactions

• On April 2, 2020, the company purchased intellectual property rights (IP) from United Power, a Nevada corporation under common ownership with Lei Pei, its sole officer and director and majority shareholder, for cash consideration of $179,300.
• The company entered into an agreement in January of 2021 with Sandbx Corp., a company owned by the Chief Operating Officer of United Power and FL Galaxy, related parties to the company, as its Chief Executive Officer, Lei Pei, is also the Chief Executive Officer of United Power and FL Galaxy, to further develop the Megopoly game, under which the company paid Sandbx Corp. monthly fees of $168,500, resulting in $1,622,500 of related party software development costs for the year ended May 31, 2022.
• The company has received a total of $10,500,000 in exchange for convertible notes owed to Sky Rover Holdings, Ltd (Sky Rover), an entity owned and controlled by Mr. Pei.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and dependence on related party financing.
• Employees (currently only the CEO) are at risk due to the company's uncertain future.
• Customers may be impacted if the company is unable to continue operating its platform and Megopoly game.
• Suppliers and creditors face risk of non-payment due to the company's financial difficulties.

Next Steps

• The company intends to continue to make investments in research and development and product development in seeking to sustain and improve its competitive position and meet its customers' needs.
• The company is actively seeking licensing arrangements to generate revenue from its platform and Megopoly game.
• The company intends to secure new facilities or expand existing facilities as necessary to support future growth.

Key Dates

Keywords

financial statements, internal control, going concern, convertible notes, Megopoly, Wewards, Bitcoin, licensing