10-Q: Wewards Inc. Reports Q2 2024 Results: Operating Loss Decreases Amidst Ongoing Search for Licensing Agreements

Wewards Inc. reported a decreased operating loss for the quarter ended November 30, 2023, despite not generating any revenue, as the company continues to seek licensing agreements for its platform.

Summary

• Wewards Inc. has released its financial results for the quarter ended November 30, 2023, showing a net loss of $169,730 for the three-month period and $370,563 for the six-month period.
• The company did not generate any revenue during the reported periods.
• Operating expenses decreased due to the termination of the office lease on October 31, 2023.
• The company's cash balance was $780,173 as of November 30, 2023, with negative working capital of $12,975,138.
• Wewards is actively seeking licensing agreements for its web-based platform and Megopoly game to generate revenue.
• The company is dependent on its CEO and majority shareholder, Mr. Lei Pei, for financing, primarily through convertible loans.
• There is substantial doubt about the company's ability to continue as a going concern without additional financing and revenue generation.

Sentiment

Score: 2

Explanation: The sentiment is very negative due to the lack of revenue, significant losses, reliance on related party financing, and substantial doubt about the company's ability to continue as a going concern. The company's financial position is precarious, and its future is highly uncertain.

Positives

• The operating loss decreased by $12,367 for the three months ended November 30, 2023, compared to the same period in 2022.
• Rent expenses decreased by $15,000 due to the termination of the office lease.
• Net loss decreased by $15,672 for the three months ended November 30, 2023, compared to the same period in 2022.
• Other expense decreased due to increased interest income on cash balances due to rising interest rates.

Negatives

• The company did not generate any revenue during the reported periods.
• The company has a significant accumulated deficit of $18,244,153.
• The company has negative working capital of $12,975,138.
• The company is heavily reliant on related party financing.
• There is substantial doubt about the company's ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is dependent on securing additional financing and generating revenue.
• The company is heavily reliant on its CEO and majority shareholder for financing, and there is no guarantee that this will continue.
• The company has a significant amount of debt in the form of convertible notes payable to a related party.
• The company has not yet generated any revenue from its platform or Megopoly game.
• The company's disclosure controls and procedures were not effective at the reasonable assurance level.

Future Outlook

The company is actively pursuing licensing agreements to generate revenue and is dependent on additional financing to continue operations. There is no guarantee that additional financing will be available or that the company will become profitable.

Management Comments

• Management is actively pursuing licensing agreements to commence revenues.
• The company has been wholly dependent upon Mr. Pei and his affiliated companies to provide financing when needed.
• There can be no assurance that Mr. Pei will continue to make additional financing available to us when needed.

Industry Context

The company operates in the competitive online gaming and cryptocurrency rewards space. The success of the company is dependent on its ability to secure licensing agreements and generate revenue from its platform and Megopoly game. The company's focus on Bitcoin rewards is aligned with the growing interest in cryptocurrency, but the lack of revenue generation and reliance on related party financing are significant challenges.

Comparison to Industry Standards

• The company's lack of revenue generation is a significant deviation from industry standards for software and gaming companies.
• Many comparable companies in the gaming and software licensing space have established revenue streams and are not reliant on related party financing.
• For example, companies like Unity Technologies and Epic Games generate substantial revenue through licensing their game engines and related services.
• The company's negative working capital and accumulated deficit are also concerning when compared to industry benchmarks.
• The company's reliance on convertible notes from related parties is not a typical financing structure for established companies in the technology sector.

Related Party Transactions

• The company has $10,500,000 in convertible notes payable to Sky Rover Holdings, Ltd, an entity owned and controlled by Mr. Pei.
• All revenues to date have been recognized from licensing Megopoly and related IP to Sandbx Corp., a separate company owned by the Chief Operating Officer of United Power and FL Galaxy, related parties of the Company.
• The company purchased intellectual property rights from United Power, a Nevada corporation under common ownership with Lei Pei.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial instability and reliance on related party financing.
• Employees may be impacted by the company's uncertain future and potential need for cost-cutting measures.
• Customers and suppliers are not directly impacted at this stage, as the company has not yet generated revenue or established significant business relationships.
• Creditors, particularly related parties, are exposed to the risk of non-payment if the company is unable to secure additional financing or generate revenue.

Next Steps

• The company intends to actively pursue licensing agreements for its platform and Megopoly game.
• The company will need to secure additional financing to continue operations.

Key Dates

Keywords

Wewards Inc, financial results, quarterly report, net loss, operating loss, convertible notes, related party, Megopoly, licensing agreements, going concern, bitcoin rewards, software license