See accompanying notes to financial statements.
See accompanying notes to financial
statements.
See accompanying notes to financial statements.
See accompanying notes to financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
Organization
Wewards, Inc. (“Wewards” or “the
Company”) was incorporated in the state of 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 with Future Continental
Limited (“Purchaser”), pursuant to which, on May 11, 2015, the Seller sold 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 at such time, for $340,000. In October 2015, the Purchaser
sold the 6,000,000 Shares to Mr. Lei Pei, an affiliate of the Purchaser, in consideration of Mr. Pei’s agreement to serve as our
director and CEO. On January 8, 2018, by consent of Lei Pei as the Company’s principal shareholder, the Company changed its
name to Wewards, Inc. The Company’s corporate office is located in Las Vegas, Nevada.
The Company has developed and is the owner of a web-based
platform accessible by mobile apps (the “Platform”) that will enable consumers to purchase goods from merchants and earn rebates
payable in the form of Bitcoin. The Platform provides an innovative Bitcoin rewards ecosystem. It
is designed to transform traditional concepts of commerce into a cooperative society where both merchants and consumers are collaborating,
utilizing Bitcoin to reward consumers. The ecosystem provides consumers with rewards each time they complete a challenge defined by a
merchant. This is intended to make the ecommerce process beneficial to all market participants, and to help distribute commercial wealth
among and between the merchants and consumers. The Company intends to generate revenue by licensing “white-label” versions
of the Platform to third parties.
We have not generated any revenue during our current
period, or the fiscal year ended May 31, 2022. During our fiscal year ended May 31, 2021, we generated revenue 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, as our Chief Executive Officer, Lei Pei, is also the Chief Executive
Officer of United Power and FL Galaxy. Pursuant to our license agreement with Sandbx Corp., we received a $50,000 initial setup fee, and a monthly royalty payment in the amount of 10% of net revenues
from the sale of in-game assets by the licensee, or $5,000, whichever was greater, resulting in total revenues of $83,454 under this license
agreement during the year ended May 31, 2021. The license agreement was terminated on May 16, 2021. The Company also entered
into an agreement in January of 2021 with Sandbx Corp. to further develop the Megopoly game, under which the Company paid Sandbx Corp.
monthly fees of $168,500, resulting in $1,622,500 and $842,500 of related party software development costs for the years ended May 31,
2022 and 2021, respectively.
The development agreement with Sandbx Corp. was terminated with the completion of Megopoly in December of 2021. The Company is now actively
seeking licensing arrangements to bring the game to market.
Basis of Presentation
The unaudited condensed financial statements of the
Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of the Condensed Financial Statements have been included. Such adjustments are of a normal, recurring
nature. The Condensed Financial Statements, and the accompanying notes, are prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) and do not contain certain information included in the Company’s Annual
Report on Form 10-K for the fiscal year ended May 31, 2022. The interim Condensed Financial Statements should be read in conjunction
with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might
be expected for the entire fiscal year.
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.
Concentrations of Credit Risk
The Company maintains our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000 under current regulations. The Company had approximately $706,643 and $890,382 in excess of FDIC insured limits
at February 28, 2023and May 31, 2022, respectively. The Company has not experienced any losses in such accounts.
Fair Value of Financial Instruments
Under Financial Accounting Standards Board “FASB”, Accounting
Standards Codification (“ASC”) 820-10-05, the FASB establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected
herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management
to approximate fair value primarily due to the short-term nature of the instruments. The Company had no items that required fair value
measurement on a recurring basis.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
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.
Convertible Instruments
The Company evaluates its convertible instruments,
options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives
to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is
that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair
value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon
conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value
is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC
Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. We analyzed the derivative
financial instruments (the Convertible Notes), in accordance with ASC 815. The objective is to provide guidance for determining whether
an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which
would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that
falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument
that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a
two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's
contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. The Company
utilized multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash
flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount
at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties,
that is, other than in a forced or liquidation sale.
Revenue Recognition
The Company recognizes revenue in accordance with
ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the licensing of our software
by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract;
(3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize
revenue when each performance obligation is satisfied. 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, as our Chief Executive Officer, Lei Pei, is also the Chief Executive Officer of United
Power and FL Galaxy.
We derive revenue principally
from licensing our intellectual property, including our game, and related extra content and services that can be utilized by players of
our game. Our product and service offerings include, but are not limited to, licensing to third parties (“software
license”) to distribute and host our games and content (“Online-Hosted Service Games”).
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
We evaluate and recognize
revenue by:
| · | identifying the contract(s) with the customer; |
| · | identifying the performance obligations in the contract; |
| · | determining the transaction price; |
| · | allocating the transaction price to performance obligations in the contract; and |
| · | recognizing revenue as each performance obligation is satisfied through the transfer of a promised good
or service to a customer (i.e., “transfer of control”). |
Online-Hosted Service
Games. Sales of our Online-Hosted Service Games are determined to have one distinct performance obligation: the online hosting. We
recognize revenue from these arrangements as the service is provided through our licensing agreement(s).
Licensing Revenue
We utilize third-party licensees
to distribute and host our games and content in accordance with license agreements, for which the licensees typically pay us a fixed minimum
guarantee and/or sales-based royalties. These arrangements typically include multiple performance obligations, such as a time-based license
of software and future update rights. We recognize as revenue a portion of the minimum guarantee when we transfer control of the license
of software (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee
with future update rights. Any sales-based royalties are generally recognized as the related sales occur by the licensee.
Significant Judgments
around Revenue Arrangements
Identifying performance
obligations. Performance obligations promised in a contract are identified based on the goods and services that will be transferred
to the customer that are both capable of being distinct, (i.e., the customer can benefit from the goods or services either on its own
or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately
identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, we must apply judgment
to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are
accounted for as a combined performance obligation.
Determining the transaction
price. The transaction price is determined based on the consideration that we will be entitled to receive in exchange for transferring
our goods and services to the customer. Determining the transaction price often requires judgment, based on an assessment of contractual
terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection,
and rebates, which is estimated at the time of the transaction. In addition, the transaction price does not include an estimate of the
variable consideration related to sales-based royalties. Sales-based royalties are recognized as the sales occur.
Allocating the transaction
price. Allocating the transaction price requires that we determine an estimate of the relative stand-alone selling price for each
distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective, especially in situations
where we do not sell the performance obligation on a stand-alone basis (which occurs in the majority of our transactions). In those situations,
we determine the relative stand-alone selling price based on various observable inputs using all information that is reasonably available.
Examples of observable inputs and information include: historical internal pricing data, cost plus margin analyses, third-party external
pricing of similar or same products and services such as software licenses and maintenance support within the enterprise software industry.
The results of our analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation.
Determining the Estimated
Offering Period. The offering period is the period in which we offer to provide the future update rights and/or online hosting for
the game. Because the offering period is not an explicitly defined period, we must make an estimate of the offering period for the service-related
performance obligations (i.e., future update rights and online hosting). Determining the Estimated Offering Period is inherently subjective
and is subject to regular revision. Generally, we consider the specified contract period of our software licenses
and therefore, the offering period is estimated to be over the term of the license. We recognize revenue for future update rights and
online hosting performance obligations ratably on a straight-line basis over this period as there is a consistent pattern of delivery
for these performance obligations.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
Software Development Costs
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.
Stock-Based Compensation
The Company accounts for equity instruments issued
to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant
to ASC 2018-07 (ASC 2018-07). All transactions in which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is
more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the
counterparty's performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments
is reached because of sufficiently large disincentives for nonperformance.
Basic and Diluted Loss Per Share
Basic earnings per share (“EPS”) are computed
by dividing net income (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted
EPS is computed by dividing net income by the weighted average number of common shares and potential common shares outstanding (if dilutive)
during each period. Potential common shares include stock options, warrants and restricted stock. The number of potential common shares
outstanding relating to stock options, warrants and restricted stock is computed using the treasury stock method. For the periods presented,
potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Income Taxes
Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for
significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.
Uncertain Tax Positions
In accordance with ASC 740, “Income Taxes”
(“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position.
These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities may periodically audit
the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the
timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with
various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years
may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not
yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax position
relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Recent Accounting Standards
From time to time, new accounting pronouncements
are issued by the FASB that are adopted by the Company as of the specified effective date.
In March 2022, the FASB issued Accounting Standards Update (“ASU”)
No. 2022-02, amendments
related to Troubled Debt Restructurings (“TDRs”) for all entities after they adopt 2016-13 and amendments related to vintage
disclosures that affect public business entities with investments in financing receivables, under Financial Instruments-Credit
Losses (Topic 326). The amendments in the accounting guidance for TDRs by creditors eliminates the recognition and measurement guidance
for TDRs in Subtopic 310-40. The effective dates for the amendments in this Update are the same as the effective dates in Update 2016-13.
The amendments in this Update should be applied prospectively, except for the transition method related to the recognition and measurement
of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to
retained earnings in the period of adoption. The Company is currently evaluating the potential impact on adoption of this ASU on its financial
statements.
In
August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to
simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of
beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures
for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends
the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.
As a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), ASU 2020-06 is effective January 1, 2024 for fiscal years beginning after December 15,
2023 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company has elected the early adoption of ASU 2020-06 as of June 1, 2021. The Company does not expect that the adoption
of this standard will have a material impact on its financial statements.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
In June 2016, the FASB issued Accounting Standards
Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain
other instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be
required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances
for losses. The guidance also requires increased disclosures. The amendments contained in ASU 2016-13 were originally effective for fiscal
years beginning after December 15, 2019, including interim periods within those fiscal years for the Company. In November 2019,
the FASB issued ASU No. 2019-10, which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by
the U.S. Securities and Exchange Commission rules (“SRC”)) to fiscal years beginning after December 15, 2022, including
interim periods.
Early adoption is permitted. The Company meets the
definition of an SRC and is adopting the deferral period for ASU 2016-13. The guidance requires a modified retrospective transition approach
through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating
the impact of the adoption of ASU 2016-13 on its financial statements but does not expect that the adoption of this standard will have
a material impact on its financial statements.
No other new accounting pronouncements, issued
or effective during the period ended February 28, 2023, have had or are expected to have a significant impact on the Company’s
financial statements.
NOTE
2 – GOING CONCERN
As shown in the accompanying financial
statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $17,689,286
and had negative working capital of $1,920,271, and as of
February 28, 2023, the Company’s cash on hand may not be sufficient to sustain operations. These factors raise substantial doubt
about the Company’s ability to continue as a going concern. Management is actively pursuing licensing agreements to commence
revenues. Since our CEO and majority shareholder, Mr. Pei, acquired control over the Company in May 2015, we have been wholly
dependent upon him and his affiliated companies, to provide financing to us 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 us when needed. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going
concern.
The financial statements do not include any adjustments
that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial
statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts
and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Under FASB ASC 820-10-5, fair value is defined as
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase
the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must
be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has certain financial instruments that
must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from
the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted
prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.),
and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated
inputs).
Level 3 - Unobservable inputs that reflect
our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The following schedule summarizes the valuation
of financial instruments at fair value on a recurring basis in the balance sheets as of February 28, 2023 and May 31, 2022,
respectively:
| Schedule of Valuation of Financial Instruments | |
| | | |
| | | |
| | |
| | |
Fair Value Measurements
at
February 28, 2023 | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Assets | |
| | | |
| | | |
| | |
| Cash | |
$ | 956,643 | | |
$ | — | | |
$ | — | |
| Total assets | |
| 956,643 | | |
| — | | |
| — | |
| Liabilities | |
| | | |
| | | |
| | |
| Convertible notes payable, related party | |
| — | | |
| — | | |
| 10,500,000 | |
| Total liabilities | |
| — | | |
| — | | |
| 10,500,000 | |
| | |
$ | 956,643 | | |
$ | — | | |
$ | (10,500,000 | ) |
| | |
Fair Value Measurements
at
May 31, 2022 | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Assets | |
| | | |
| | | |
| | |
| Cash | |
$ | 1,140,382 | | |
$ | — | | |
$ | — | |
| Total assets | |
| 1,140,382 | | |
| — | | |
| — | |
| Liabilities | |
| | | |
| | | |
| | |
| Convertible notes payable, related party | |
| — | | |
| — | | |
| 10,500,000 | |
| Total liabilities | |
| — | | |
| — | | |
| 10,500,000 | |
| | |
$ | 1,140,382 | | |
$ | — | | |
$ | (10,500,000 | ) |
The fair values of our related party debts are deemed
to approximate book value, and are considered Level 2 and 3 inputs as defined by ASC Topic 820-10-35.
There were no transfers of financial assets or liabilities
between Level 1, Level 2 and Level 3 inputs for the period ended February 28, 2023 or the year ended May 31, 2022.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
NOTE 4 – INTANGIBLE ASSETS
On April 2, 2020, 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, based on
a price determined by an independent valuation. The IP consists of technology and related rights
associated with the game Megopoly, an MMO (Massively Multiplayer Online Game). Because United Power is a related party, the acquisition
did not result in a stepped-up basis in the IP, and the full purchase price of $179,300 was treated as an equity contribution.
NOTE 5 – CONVERTIBLE NOTES PAYABLE, RELATED PARTY
Convertible notes payable, related party consists
of the following at February 28, 2023 and May 31, 2022, respectively:
| Schedule of Convertible Notes Payable, Related Party | |
| | | |
| | |
| | |
February 28, | | |
May 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| On February 26, 2017, Sky Rover Holdings, Ltd (“Sky Rover), which is owned any
controlled by Mr. Pei, agreed to loan up $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, as amended, is due on February
28, 2024, 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 $4,000,000
of principal of this loan. In addition, Sky Rover converted $1,500,000
of principal of this loan into common shares at the conversion price of $0.08 per share into a total of 18,750,000
shares. Sky Rover waived accrued and unpaid interest of $363,904,
which was credited to additional paid in capital. As of February 28 2023, there is $751,454
of accrued interest due on this loan. | |
$ | 2,500,000 | | |
$ | 2,500,000 | |
| | |
| | | |
| | |
| On November 20, 2017, Sky Rover loaned an additional $8,000,000
to the Company. Sky Rover was issued an unsecured, 5%,
convertible promissory note which, as amended, is due on November 20, 2024, 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, 2023, there is $2,110,685
of accrued interest on this loan. | |
| 8,000,000 | | |
| 8,000,000 | |
| | |
| | | |
| | |
| Total convertible notes payable, related party | |
| 10,500,000 | | |
| 10,500,000 | |
| Less: current portion | |
| — | | |
| — | |
| Convertible notes payable, related party, less current portion | |
$ | 10,500,000 | | |
$ | 10,500,000 | |
If Sky Rover converts the remaining $10,500,000 of
principal on the Convertible Notes at the present conversion price of $0.08 per share into 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 shares of the Company’s
238,733,450 then-issued and outstanding shares (assuming that no other shares are issued prior to conversion), which would approximate
97.4% of the then-outstanding shares.
The Company recognized $392,672
and $392,671 of interest expense for nine months ended February 28, 2023 and 2022, respectively.
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
NOTE 6 – COMMITMENTS AND
CONTINGENCIES - LEASE
The
Company leases its current corporate headquarters at 2960 West Sahara Avenue, Las Vegas, NV 89102, under a five-year sublease from
Future Property Limited. The sublease provides for base monthly rent of $15,000.
The Company is occupying the space for executive and administrative offices. Rent expense for both the nine months ended February
28, 2023 and 2022 was $135,000. The lease expired on February 28,
2023, and was amended to continue on a month-to-month basis at $15,000 per month.
The components of lease expense under ASC 842 were as follows:
| Schedule of components of lease expense | |
| | |
| | |
For the Nine | |
| | |
Months Ended | |
| | |
February 28, | |
| | |
2023 | |
| Operating lease cost: | |
| | |
| Amortization of assets | |
$ | 10,608 | |
| Interest on lease liabilities | |
| 4,392 | |
| Total operating lease cost | |
$ | 135,000 | |
Supplemental cash flow and other information related to operating leases
was as follows:
| Schedule of Supplemental cash flow and other information related to operating leases | |
| | |
| | |
For the Nine | |
| | |
Months Ended | |
| | |
February 28, | |
| | |
2023 | |
| Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| Operating cash flows used for operating leases | |
$ | 135,000 | |
WEWARDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
NOTE 7 –
CHANGES IN STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred stock of 50,000,000
shares, par value $0.001 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.
Common Stock
The Company has 500,000,000
authorized shares of $0.001
par value Common Stock, and had 107,483,450
shares issued and outstanding as of February 28, 2023.
NOTE 8 - INCOME TAX
The Company accounts for income taxes under FASB ASC
740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded
based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences.
For the nine months ended February 28, 2023 and
the year ended May 31, 2022, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been
recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At
February 28, 2023, the Company had approximately $8,844,000
of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2034.
Based on the available objective evidence,
including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets
will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets
at both February 28, 2023 and May 31, 2022.
In accordance with FASB ASC 740, the Company has evaluated
its tax positions and determined there are no uncertain tax positions.
NOTE 9 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, management has performed
an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that
it does not have any material subsequent events to disclose in these financial statements. No events occurred of a material nature that
would have required adjustments to or disclosure in these financial statements except as follows:
On March 1, 2023, the Company and Future Property
Limited, amended its lease agreement. The terms of the amendment provide that the monthly lease payments continued at $15,000 per month
on a month-to-month basis, with all other terms remaining substantially the same as the previous lease.