NOTES TO THE CONDENSED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
WEWARDS, INC. (the corporate name of which was Global Entertainment Clubs, Inc. until January 8, 2018) was incorporated in Nevada on September 10, 2013 as Betafox Corp., with the initial intent to manufacture and sell color candles. On April 26, 2015, Giorgos Kallides (the “Seller”), entered into an Agreement for the Purchase of Common Stock (the “Stock Purchase Agreement”) with Future Continental Limited, (“Purchaser”) pursuant to which the Seller agreed to sell to Purchaser, six million (6,000,000) shares of common stock of the Company (the “Shares”) owned by the Seller, constituting approximately 73.8% of the Company’s 8,130,000 issued and outstanding common shares, for $340,000. The sale was consummated on May 11, 2015. As a result of the transfer of the shares, there was a change of control of the Company. The Company’s corporate office is located in Las Vegas, NV.
On August 6, 2016 the Company signed Statements of Work (“SOWs”) with Intellectsoft LLC, an unaffiliated company, to perform services for the development and administration of websites to support a mobile app which will enable consumers to purchase goods with “Future World Group” vouchers, and merchants will be able to sell their goods directly to the users, using this platform.
The SOWs provide that after this mobile app has been developed, Intellectsoft LLC will then proceed to phase 2, which is intended to be the development of this app for trade centers.
In addition to the SOWs with Intellectsoft, between August 20, 2016 and September 27, 2016, the registrant signed five SOWs with hedgehog lab, an unaffiliated UK-based company which is also unaffiliated with Intellectsoft, to provide additional services to the registrant in connection with the app being developed. The objective of these services, to be completed in two phases, is for the Company to become the exclusive worldwide licensee (except in the United States) for (1) creating a white labelled version of Future World which can be packaged up in a way by which small co-operatives of merchants can create their own eco systems of product selling and loyalty point trading, using “Future Vouchers”; (2) taking the current version of the app, improving the identified pain points and providing versions in English and Chinese, to allow the app to be used in Asia, Europe and North America (except the United States), by the merchants and customers in as short a time as possible; (3) having a loyalty point trading platform visualized within the new iOS and Android applications, as well as defining the distribution of future vouchers and loyalty points; and (4) the creation of a prototype of a 3D globe system, visualizing the potential for the globalization of the app into cities. The Company has now acquired this technology from an affiliated entity and owns this technology.
The Company also intends to be the exclusive licensee of an online gaming platform, F&L Galaxy, Inc. (“F&L”), a company that is affiliated with the Company,, by virtue of common control by the Company’s principal shareholder and CEO, will purchase (from an affiliated, privately-owned company), the blockchain technology for use in setting up the global gaming platform. All IP addresses for the United States will be blocked by the Company, which means that a US-based person will not be able to participate in the global gaming platform. F&L intends to license the technology to the Company exclusively, and on a worldwide basis—except for the United States, and the Company then intends to sublicense the gaming platform to unaffiliated White Label licensees. The White Label sublicensees will pay the Company a sublicense fee for the use of the technology, each time that an end user signs up. As of the date of the filing of this Quarterly Report on Form 10-Q, no definitive agreements have been signed by the Company with F&L, with respect to the gaming platform.
As of the date of the filing of this Quarterly Report on Form 10-Q, the merchant platform has been completely developed, and the Company owns this technology; however, no licensee has yet been signed by the Company, and no revenues have been generated. The gaming platform described above has not yet been completed and is not operational.
January 8, 2018, by consent of Lei Pei, the principal shareholder, the Company changed its corporate name in Nevada to WEWARDS, INC. The Company’s trading symbol is now WEWA.
6
WEWARDS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of February 28, 2019 and the results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2018 filed with the SEC.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Software Development cost
The Company expenses software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Capitalization ends, and amortization begins when the product is available for general release to customers.
Impairment of Intangible Assets
The Company reviews intangible assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. The Company measures recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value.
Reclassifications
Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the three and nine months ended February 28, 2019.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the condensed financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying condensed unaudited financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Although the Company currently has $4,634,639 of cash as of February 28, 2019, it also has total liabilities of $11,515,146 and has not completed its efforts to establish a stabilized source of revenues sufficient to cover its operating costs over an extended period of time. The Company has no revenues to date, an accumulated deficit of $11,210,608 and a stockholders’ deficit of $6,019,776.
7
WEWARDS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 4 – INTANGIBLE ASSETS
During the year ended May 31, 2018, the Company began to capitalize costs incurred for the development of its software programs to be used in its revenue generating operation. As of May 31, 2018, and February 28, 2019, the Company had capitalized $806,325 and $374,125, respectively.
NOTE 5 – PREPAID EXPENSES
As of February 28, 2019, the company had $54,406 of prepaid services for technical support fees and consulting services to be provided over the next several months.
NOTE 6 – RELATED PARTY TRANSACTIONS
As of February 28, 2019, and May 31, 2018, the Company owed a company owned by Mr. Pei $70,740 and $70,740, respectively. All funds expended to date have been used for professional fees, and for other general operating purposes. The loans are unsecured, non-interest bearing and due on demand.
As of February 28, 2019 and May 31, 2018, the Company owed F&L Galaxy, Inc., (a Company owned by Weward’s CEO), $12,582 and $12,582, respectively for software development expense. The loan is unsecured, non-interest bearing and due on demand.
On March 16, 2018, Wewards Inc. entered into a Master IT Services Agreement with F&L Galaxy Inc., by which F&L Galaxy Inc. agreed to provide technical support services to Wewards
. Per the terms of the agreement the Company paid $350,000 on April 2, 2018 for services to be provided from April 1, 2018 through March 31, 2019. As of February 28, 2019, the Company has expensed $320,834 and has a prepaid expense to F&L Galaxy of $29,166 (Note 5).
As of February 28, 2019,
and May 31, 2018, the Company owed Mr. Pei $141,950 and $106,950, respectively. All funds expended to date have been used for professional fees, and for other general operating purposes. The loans are unsecured, non-interest bearing and due on demand.
For the nine months ended February 28, 2019, the Company imputed interest at 5% on the above loans, accruing $7,194 to accrued interest expense.
On March 1, 2018, the Company began occupying its new corporate headquarters at 2960 West Sahara Avenue, Las Vegas, NV 89102. The Company signed a five-year sublease with United Power, Inc. (“Power”), an affiliate of the Company by reason of common ownership with Lei Pei, the Company’s sole officer and director and majority shareholder, at a base monthly rent of $15,000, plus a possible increase of up to 3% each year based on increases, if any, of the Consumer Price Index. The building is owned by Future Property Limited (“Future”), another affiliate of the Company because of common ownership; Future entered into a lease with Power, and the Company then sublet the space from Power. The Company is occupying the space for executive and administrative offices. Rent expense for the nine months ended
February 28, 2019
was $138,479.
Convertible Promissory Note
On each of August 1, 2016 and August 3, 2016, Sky Rover Holdings, Ltd., a California corporation (“Sky Rover”) which is 100% owned by Lei Pei, the CEO and principal shareholder, loaned $500,000 to the Company (total of $1,000,000). Sky Rover was issued an unsecured, 5%, convertible promissory note which is due on August 1, 2019, and is convertible in whole or in part, at the option of the holder, into common shares at any time before the due date, at a conversion price of $0.04 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.). At the option of the Company, the interest may also be paid by issuing restricted shares of common stock, at the same conversion price per share. All funds expended to date have been used for professional fees, other general operating purposes and for payments in accordance with the SOWs discussed in Note 1. On March 5, 2018, Sky Rover converted the $1,000,000 and $79,990 of accrued interest into 26,999,750 shares of common stock, repaying this loan in full.
8
WEWARDS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
On September 27, 2016, Sky Rover loaned an additional $2,000,000 to the Company. Sky Rover was issued an unsecured, 5%, convertible promissory note which is due on September 27, 2019, and is convertible, in whole or in part, at the option of the holder, into common shares at any time before the due date, at a conversion price of $0.04 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.). At the option of the Company, the interest may also be paid by issuing restricted shares of common stock, at the same conversion price per share. All funds expended to date have been used for professional fees, other general operating purposes and for payments in accordance with the SOWs discussed in Note 1. On March 5, 2018, Sky Rover converted the $2,000,000 and $144,148 of accrued interest into 53,603,700 shares of common stock, repaying this loan in full.
On February 23, 2017, Sky Rover loaned an additional $1,000,000 to the Company. Sky Rover was issued an unsecured, 5%, convertible promissory note which is due on February 23, 2020, and is convertible, in whole or in part, at the option of the holder, into common shares at any time before the due date, at a conversion price of $0.08 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.). At the option of the Company, the interest may also be paid by issuing restricted shares of common stock, at the same conversion price per share. All funds expended to date have been used for professional fees, other general operating purposes and for payments in accordance with the SOWs discussed in Note 1. On June 26, 2018, the Company repaid the $1,000,000 loan. Sky Rover waived all accrued and unpaid interest of $66,998, which has been credited to additional paid in capital.
February 26, 2017, Sky Rover agreed to loan up to an additional $20,000,000 to the Company, of which $8,000,000 was loaned on February 28, 2017. Sky Rover was issued an unsecured, 5%, convertible promissory note which is due on February 26, 2020, and is, in whole or in part, at the option of the holder, convertible into common shares at any time before the due date, at a conversion price of $0.08 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.). At the option of the Company, the interest may also be paid by issuing restricted shares of common stock, at the same conversion price per share. On June 26, 2018, the Company repaid the $4,000,000 of the loan. In addition, Sky Rover converted $1,500,000 into the common shares, at the Notes’ conversion price of $.08 per share. As a result of this conversion, the Company issued a total of 18,750,000 shares. Sky Rover waived accrued and unpaid interest of $363,904, which has been credited to additional paid in capital. As of February 28, 2019, there is $2,500,000 and $251,111 of principal and accrued interest, respectively, due on this loan.
On November 20, 2017, Sky Rover loaned the remaining $8,000,000 to the Company. Sky Rover was issued an unsecured, 5%, convertible promissory note which is due on November 20, 2020, and is, in whole or in part, at the option of the holder, convertible into common shares at any time before the due date, at a conversion price of $0.08 per share (subject to adjustment in the event of stock splits, forward splits, recapitalizations, a merger, etc.). At the option of the Company, the interest may also be paid by issuing restricted shares of common stock, at the same conversion price per share. As of February 28, 2019 there is $509,589 of accrued interest on this loan.
If and when Sky Rover converts the remaining $10,500,000 of Notes at the present conversion price of $.08 per share to 131,250,000 shares, those shares, plus the approximate 101,353,450 shares Mr. Pei currently owns, would give him beneficial ownership of 232,603,450 of the Company’s 238,733,450 then-issued and outstanding shares (assuming that no other shares are issued before conversion), which would be approximately 97.4% of the then-outstanding shares.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
On March 1, 2018, the Company began occupying its new corporate headquarters at 2960 West Sahara Avenue, Las Vegas, NV 89102. The Company signed a five-year sublease with United Power, Inc. an affiliate of the Company (Note 6), at a base monthly rent of $15,000, plus a possible increase of up to 3% each year based on increases, if any, of the Consumer Price Index. The Company is occupying the space for executive and administrative offices.
Future minimum lease payments for the Company’s new corporate headquarters (Note 6) are as follows:
|
|
|
|
|
|
Years ending May 31,
|
|
|
|
|
2019
|
|
$
|
45,000
|
|
|
2020
|
|
|
180,000
|
|
|
2021
|
|
|
180,000
|
|
|
2022
|
|
|
180,000
|
|
|
2023
|
|
|
180,000
|
|
|
Total
|
|
$
|
765,000
|
|
9
WEWARDS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
February 28, 2019
(Unaudited)
NOTE 8 – PREFERRED STOCK
The Company has authorized preferred stock of 50,000,000 shares, par value $.001 per share. The voting powers, conversion features, if any, designations, preferences, limitations, restrictions and other rights of the preferred stock shall be prescribed by resolution of the Board of Directors at the time a specific series of preferred stock is designated. None of the preferred shares have been issued as of the date of this Report.
NOTE 9 – SUBSEQUENT EVENTS
Management has performed an evaluation of subsequent events through the date that the unaudited condensed financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these condensed financial statements.
10