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. has filed Amendment No. 2 to its Form 10-K for the fiscal year ended May 31, 2024.
• The amendment corrects the Controls and Procedures disclosures in Item 9.A. and 9.B.
• The original Form 10-K was filed on August 28, 2024.
• The amendment speaks as of the original filing date and does not reflect events occurring after the filing of the Original Form 10-K.
• 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.
• The company maintains cash in bank deposit accounts, the balances of which at times may exceed federally insured limits.
• The company had approximately $514,205 and $640,755 in excess of FDIC insured limits at May 31, 2024 and 2023, respectively.
• The company did not generate any revenues during the fiscal years ended May 31, 2024 or 2023.
• General and administrative expenses for the year ended May 31, 2024 were $8,218, compared to $2,839 during the year ended May 31, 2023.
• Rent expense was $75,113 during the year ended May 31, 2024, compared to the $180,000 of expenses incurred during the year ended May 31, 2023.
• Professional fees for the year ended May 31, 2024 were $62,515, compared to $62,492 during the year ended May 31, 2023.
• The operating loss for the year ended May 31, 2024 was $145,846, compared to $245,331 during the year ended May 31, 2023.
• Other expense, on a net basis, for the year ended May 31, 2024 was $505,893, compared to other expense, on a net basis, of $515,359 during the year ended May 31, 2023.
• Net loss for the year ended May 31, 2024 was $651,739, compared to $760,690 during the year ended May 31, 2023.
• As of May 31, 2024, the company had current assets of $764,692 and current liabilities of $3,521,006.
• 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.
• At May 31, 2024, the company had approximately $9,021,000 of federal net operating losses.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation with no revenue, negative working capital, and dependence on related party financing. While there are some improvements in reducing losses, the overall outlook is negative.

Positives

• The company's operating loss decreased by $99,485, or 41%, primarily due to decreased rents.
• The company's net loss decreased by $108,951, or 14%, due to decreased rent expense and increased interest income.
• The company is actively seeking licensing arrangements to bring the Megopoly game to market.

Negatives

• The company has not generated any revenues during the fiscal years ended May 31, 2024 or 2023.
• The company has a negative working capital of $2,756,314 as of May 31, 2024.
• The company has an accumulated deficit of $18,525,329.
• The company's disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed.

Risks

• The company's ability to continue as a going concern is dependent upon its ability to raise additional capital and achieve sustainable revenues and profitable operations.
• There is 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.
• The company does not have sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the company's bank accounts.
• The company has no formal process related to the identification and approval of related party transactions.

Future Outlook

The company expects to continue to experience net negative cash flows from operations and will be required to obtain additional financing to fund operations. The company is actively pursuing licensing agreements to commence revenues.

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 rewards space, which is subject to evolving regulations and competition. The success of the company's platform depends on its ability to attract merchants and consumers and to comply with applicable regulations.

Comparison to Industry Standards

• It is difficult to compare Wewards, Inc. to industry standards due to its unique business model and lack of revenue.
• Companies in the e-commerce and cryptocurrency space typically have significant revenue and user growth, which Wewards, Inc. has not yet achieved.
• Comparable companies may include those offering cryptocurrency rewards programs or developing blockchain-based gaming platforms, but their financial performance may vary significantly.

Related Party Transactions

• The company purchased intellectual property rights from United Power, a Nevada corporation under common ownership with Lei Pei, the company's sole officer and director and majority shareholder.
• The company entered into an agreement with Sandbx Corp., a company owned by the Chief Operating Officer of United Power and FL Galaxy, related parties to the company, as the company's Chief Executive Officer, Lei Pei, is also the Chief Executive Officer of United Power and FL Galaxy, to further develop the Megopoly game.
• 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 condition and dependence on related party financing.
• Employees (currently only one, unpaid officer) are impacted by the company's limited resources and uncertain future.
• Customers and suppliers are indirectly affected by the company's ability to operate and deliver its products and services.
• Creditors face risk due to the company's negative working capital and dependence on financing.

Next Steps

• The company intends to generate revenue by licensing white-label versions of the Platform to third parties.
• The company is actively seeking licensing arrangements to bring the Megopoly game to market.
• The company will need to raise additional capital to fund its operations.

Key Dates

Keywords

Wewards, Form 10-K, Amendment, Financial Statements, Megopoly, Bitcoin, Licensing, Convertible Notes, Related Party Transactions, Internal Controls