UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
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|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
2024
May 31
,
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ____to ___.
Commission File Number
(Exact name of small business issuer as specified in its charter)
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|
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(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification No.)
|
th
Floor
(Address of principal executive offices)
(
972
)
888-6052
(Company’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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¨
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Smaller reporting company
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Emerging Growth Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
The Company has
shares outstanding as of July
15
, 2024.
UPAY, Inc.
Consolidated Financial Statements
(unaudited)
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Index
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Table of Contents
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| F-2 |
UPAY, INC.
(Expressed in U.S. dollars)
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May 31,
2024
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February 29,
2024
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(unaudited)
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ASSETS
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Current Assets
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Cash and cash equivalents
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$
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$
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Accounts receivable, net of allowance
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Prepaid expenses and other current assets
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Total Current Assets
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Property and Equipment, Net (Note 3)
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Right-of-use Assets, Net (Note 4)
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Deposit (Note 11)
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Total Assets
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$
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$
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current Liabilities
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Accounts payable and accrued liabilities
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$
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$
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Due to related parties (Note 5)
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Current portion of lease liabilities (Note 7)
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Current portion of notes payable (Note 6)
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Notes payable – Related parties (Note 5)
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Total Current Liabilities
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Non-Current Liabilities
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Notes Payable (Note 6)
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Total Liabilities
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Stockholders’
Deficit
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Preferred Stock, $
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Common Stock, $
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Common Stock Issuable
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Additional Paid-in Capital
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Accumulated Deficit
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(
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)
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(
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)
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Accumulated Other Comprehensive Loss
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(
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)
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(
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)
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Total Stockholders’ Deficit
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(
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)
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(
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)
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Total Liabilities and Stockholders’ Deficit
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$
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$
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|
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
UPAY, Inc.
(Expressed in U.S. dollars)
(unaudited)
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Three months
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Three months
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Ended
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Ended
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May 31,
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May 31,
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2024
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2023
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Revenue
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$
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$
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Cost of Revenue
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(
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)
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(
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)
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Gross Profit
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Expenses
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Amortization of right-of-use assets (Note 4)
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Depreciation (Note 3)
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General and administrative
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Total Expenses
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Loss Before Other Income (Expenses) and Income Taxes
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(
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)
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(
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)
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Other Income (Expenses)
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Interest income
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Interest expense
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(
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)
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(
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)
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Gain on settlement of lease (Note 7)
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Loss Before Income Taxes
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(
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)
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(
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)
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Provision for income taxes
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Net Loss
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(
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)
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(
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)
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Other Comprehensive Income (Loss)
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Foreign currency translation adjustments
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|
(
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)
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Comprehensive Loss
|
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$
|
(
|
)
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|
$
|
(
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)
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Net Loss Per Share – Basic and Diluted
|
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$
|
(
|
)
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$
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(
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)
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Weighted-average Common Shares Outstanding – Basic and Diluted
|
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
UPAY, Inc.
(Expressed in U.S. dollars)
(unaudited)
|
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Accumulated
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|||||||
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Additional
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Common
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Other
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|||||||
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Common Stock
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Paid-in
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Stock
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Accumulated
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Comprehensive
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||||||||||
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Shares
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Amount
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Capital
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Issuable
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Deficit
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Loss
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Total
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|||||||
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|||||||
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Balance – February 28, 2023
|
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$
|
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|
$
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|
$
|
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|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
(
|
)
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|
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Common stock issuable for services
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–
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|
|
–
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|
–
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|
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
–
|
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|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Common stock subscribed
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|
|
–
|
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|
|
–
|
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|
|
–
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|
|
|
|
|
|
–
|
|
|
|
–
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|
|
|
|
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(
|
)
|
|
|
–
|
|
|
|
(
|
)
|
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – May 31, 2023
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – February 29, 2024
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable for services
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(
|
)
|
|
|
–
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – May 31, 2024
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-5 |
UPAY, Inc.
(Expressed in U.S. dollars)
(unaudited)
|
|
|
Three Months
Ended
May 31,
2024
|
|
|
Three Months
Ended
May 31,
2023
|
|
||
|
|
|
|
|
|
|
|
||
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
|
–
|
|
|
|
|
|
|
Common stock issued or issuable for services
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
Gain on settlement of lease
|
|
|
–
|
|
|
|
(
|
)
|
|
Interest expense on lease liability
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(
|
)
|
|
|
–
|
|
|
Deposits
|
|
|
–
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
(
|
)
|
|
|
(
|
)
|
|
Accounts payable – related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
–
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
–
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from common stock subscriptions
|
|
|
–
|
|
|
|
|
|
|
Proceeds from shareholder promissory note
|
|
|
–
|
|
|
|
|
|
|
Repayment of lease liabilities
|
|
|
–
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Change in Cash and Cash Equivalents
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - Beginning of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
$
|
|
|
|
Income taxes paid
|
|
$
|
|
|
|
$
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-6 |
UPAY, Inc.
|
1
.
|
Nature of Operations and Continuance of Business
|
UPAY, Inc. (the “Company”) was incorporated in the State of Nevada on July 8, 2015. By a Share Exchange Agreement dated November 4, 2015, the Company agreed to acquire all of the issued and outstanding shares of Rent Pay (Pty) Ltd (“Rent Pay”), in exchange for 200,000 shares of the Company’s common stock. The acquisition is a capital transaction in substance and therefore has been accounted for as a recapitalization. Rent Pay was incorporated in South Africa on February 1, 2012. Because Rent Pay is deemed to be the acquirer for accounting purposes, the consolidated financial statements are presented as a continuation of Rent Pay and include the results of operations of Rent Pay since incorporation on February 1, 2012, and the results of operations of the Company since the date of acquisition on November 4, 2015. On March 2, 2022, the Company acquired a controlling interest in Miway Finance Inc. (“Miway”), which was determined to be a transaction between entities under common control. On May 30, 2023, the Company incorporated a wholly-owned subsidiary, taking a controlling interest in Huntpal LLC (“Huntpal”). On May 28, 2024, the Company acquired a controlling interest in AML Go (Pty) Ltd (“AML”) which was incorporated on July 3, 2023. AML was determined to be an entity under common control, and the transaction was considered immaterial due to the nominal assets and liabilities at the time of acquisition.
Rent Pay operates principally in South Africa and engages in software development and licensing and provides services to the credit provider industry.
|
2.
|
Summary of Significant Accounting Policies
|
|
a)
|
Basis of Presentation
|
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year end is February 28. The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, Rent Pay, and its controlled subsidiaries, Miway, Huntpal, and AML. The Company owns
48
% of Miway, and
51
% of both Huntpal and AML. All significant intercompany transactions and accounts have been eliminated in consolidation.
|
b)
|
Interim Financial Statements
|
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end February 29, 2024, have been omitted.
|
c)
|
Use of Estimates
|
The preparation of consolidated financial statements in conformity with U.S. 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 of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
|
d)
|
Going Concern
|
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of May 31, 2024, the Company does not have revenues sufficient to execute its business plan. The Company intends to fund operations through equity financing arrangements. There is no assurance that this will be successful. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
e)
|
Recent Accounting Pronouncements
|
The Company has implemented all new accounting pronouncements that are in effect and that may impact its unaudited consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-7 |
|
3.
|
Property and Equipment, Net
|
Property and equipment, net, consists of the following:
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
May 31,
2024
Net Carrying Value
|
|
|
February 29,
2024
Net Carrying Value
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Computer equipment
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
|
Computer software
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
Motor vehicle
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
During the three months ended May 31, 2024, the Company recorded depreciation expense of $
1,904
(2023
–
$
9,719
). During the three months ended May 31, 2024, the Company acquired $
nil
(2023
–
$
1,182
) of computer equipment and $
nil
(2023
–
$
21,991
) of motor vehicles.
|
4.
|
Right-Of-Use Assets, Net
|
Right-of-use assets, net, consist of the following:
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
May 31,
2024
Net Carrying
Value
|
|
|
February 29,
2024
Net Carrying
Value
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Right-of-use building (operating lease)
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
|
Right-of-use vehicles (finance lease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
During the three months ended May 31, 2024, the Company recorded rent expense of $
5,268
(2023 - $
5,022
) related to Company’s right-of-use building and amortization expense of $
nil
(2023 - $
888
) related to the Company’s right-of-use vehicles. During the year ended February 29, 2024, the Company settled a lease obligation on a right-of-use vehicle with a carrying value of $
1,894
and a remaining lease liability of $
2,936
, which resulted in a gain on settlement of lease of $
1,042
.
|
5.
|
Due to Related Parties
|
|
a)
|
On March 24, 2021, the Company entered into a promissory note with the Chief Executive Officer (“CEO”) of
the
Company for $
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
b)
|
On September 7, 2021, the Company entered into a promissory note with the CEO of the Company for $
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
c)
|
On February 11, 2022, the Company entered into a promissory note with the CEO of the Company for $
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
d)
|
On April 14, 2021, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $
October 13, 2023
. As at
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
e)
|
On February 11, 2022, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $
February 11, 2023
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-8 |
|
f)
|
During the year ended February 28, 2022, a third-party lender purchased a promissory note from a company controlled by a significant shareholder of the Company in the amount of $
October 13, 2023
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
g)
|
On May 2, 2022, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $
May 31, 2024
, the outstanding principal is $
February 29, 2024
– $
February 29, 2024
– $
|
|
h)
|
On September 9, 2022, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $
May 31, 2024
, the outstanding principal is $
February 29,
2024
– $
– $
|
|
i)
|
During the three months ended May 31
, 2024
, the Company incurred salary expenses of $
2023
–
$
) to the CEO of the Company.
|
|
j)
|
During the three months ended May 31
, 2024
, the Company incurred directors’ fees of
|
|
k)
|
During the three months ended May 31
, 2024
, the Company incurred directors’ fees of $
R
) (2023 – $
|
|
l)
|
During the three months ended May 31
, 2024
, the Company incurred management fees of $
|
|
6.
|
Notes Payable
|
|
a)
|
On May 20, 2020, the Company entered into a promissory note with a third-party lender for $
May 31, 2024
, the Company has recognized accrued interest of $
February 29, 2024
–
$
|
|
|
b)
|
On May 27, 2020, the Company entered into a promissory note with the U.S. Small Business Administration for $
February 29, 2024
– $
|
|
c)
|
On October 22, 2021, the Company entered into a promissory note with a third-party lender for $
May 31, 2024
, the Company has recognized accrued interest of $
(
February 29, 2024
–
$
included in accounts payable and accrued liabilities.
|
|
7.
|
Lease Liabilities
|
The Company commenced the leasing of a motor vehicle on October 10, 2018, for a term of five years. The monthly minimum lease payments were $
505
(R
9,456
). The motor vehicle lease was classified as a finance lease. The interest rate underlying the obligation in the lease was
11.25
% per annum. During the three months ended May 31, 2024, the Company paid a total of $
nil
(2023 - $
1,021
) in principal and interest payments on the motor vehicle lease.
On May 10, 2023, the Company settled the motor vehicle finance leases for a settlement fee of $
2,549
(R
47,204
) resulting in a gain on settlement of $
1,052
(R
19,480
). Upon the payment of the settlement fee, the vehicle title was transferred immediately to the Company and has been allocated to the Company’s property and equipment to be depreciated over the remainder of its useful life.
On February 1, 2021, the Company entered a
two-year
lease with a renewal option for office space in South Africa. The term of the renewal agreement is for an additional
two years
and commenced on February 1, 2023. Rental payments are due at the beginning of each month and increase at an annual rate of
7
%. The base monthly rental rate is $
1,176
(R
22,000
) for the first year, $
1,258
(R
23,540
) in the second year, $
1,346
(R
25,188
) in the third year, and $
1,440
(R
26,951
) in the final year of the lease. On January 26, 2023, the Company executed the renewal option for two additional years of its lease, commencing on February 1, 2023. Rental payments are due at the beginning of each month. The base monthly rental rate is $
1,657
(R
31,000
) for the first year and $
1,756
(R
32,860
) in the second year. The office space lease was classified as an operating lease. The interest rate underlying the obligation in the lease was
7
% per annum.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-9 |
The following is a schedule by years of future minimum lease payments under the remaining finance leases together with the present value of the net minimum lease payments as of February 29, 2024:
|
Years ending February 28:
|
|
|
Building Lease
(Operating Lease)
|
|
|
|
|
|
|
|
|
2025
|
|
$
|
|
|
|
|
|
|
|
|
|
Net minimum lease payments
|
|
|
|
|
|
Less: amount representing interest payments
|
|
|
(
|
)
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
|
|
|
Less: current portion
|
|
|
(
|
)
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
|
|
|
8.
|
Common Stock
|
Share transactions for the three months ended May 31, 2024:
|
a)
|
The Company accrued
pursuant to a Director Agreement (Note 10(b)) and a Director and Officer Agreement (Note 10(c))
.
|
Share transactions for the three months May 31, 2023:
|
b)
|
On As at May 31, 2023, the Company received common stock subscriptions of $
which have been included in common stock issuable.
|
|
9.
|
Concentrations
|
The Company’s revenues were concentrated among two customers for the three months ended May 31, 2024, and four customers
for
the three months ended May 31, 2023.
|
Customer
|
|
Three Months
Ended
May 31, 2024
|
|
|
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
Customer
|
|
Three Months
Ended
May 31, 2023
|
|
|
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
The Company’s receivables were concentrated among two customers as at May 31, 2024, and one customer as at February 29, 2024:
|
Customer
|
|
May 31,
2024
|
|
|
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
Customer
|
|
February 29
,
2024
|
|
|
|
|
|
|
|
1
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-10 |
|
10.
|
Commitments and Contingencies
|
|
a)
|
On February 3, 2022 (the “Effective Date”), the former CEO of the Company and the Company entered into a Share Purchase and Separation Agreement (the “Agreement”) with the following terms: (a) former CEO sells the Company
|
On September 1, 2023, the Company amended the Agreement with the former CEO of the Company. The amendment stipulates a revised payment structure, with the Company agreeing to pay a total of $
170,000
for the Purchased Shares, including a $
150,000
cash payment post-closing and two $
10,000
monthly payments from April 1, 2022, all of which have been paid at the amendment date. As a result of the amendment, a total of $
70,000
was forgiven related to the revised payments for the Purchased Shares resulting in a corresponding reduction in accounts payable and accrued liabilities, and additional paid-in capital. The Company and the former CEO of the Company have mutually released each other from all claims and liabilities related to the former CEO’s employment and termination, excluding those specified in the agreement. Additionally, the Company agreed to repurchase a total of
2,035,000
shares of common stock held by the former CEO of the Company in consideration for $
23,500
. All other terms of the original agreement remain in effect unless specifically modified by this addendum. On September 19, 2023, the Company repurchased and cancelled the
2,035,000
shares of common stock.
|
b)
|
On September 1, 2022, the Company entered into an agreement with a Director of the Company for a term of 12 months. In consideration for the services to be provided, the Company agreed to pay the Director
February 29, 2024
, the Company recognized board member compensation of $
February 29, 2024
, another
|
On August 16, 2023, the Company extended its Agreement with the Director for a new term of 12 months, effective September 1, 2023. In consideration of services to be rendered, the Company shall pay the director
100,000
restricted shares of common stock, of which
50,000
shares will vest every
6
months over the term. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $
25,000
, representing a fair value of
25,000
shares of common stock issuable for services rendered for the period from March 2024 to May 2024. As at
May 31, 2024
, a total of
91,667
shares (February 29, 2024 –
66,667
shares) of common stock remain issuable to the director.
|
c)
|
On March 1, 2023, the Company entered into agreements with a Director and COO of the Company for director services and management services for a term of
|
Management has evaluated commitments and contingencies and is unaware of any legal matters or other contingencies requiring disclosure through period-end.
|
11.
|
Deposit
|
On October 15, 2021, the Company paid a R
800,000
deposit to set up an electronic funds transfer debit facility with a vendor, which does not require a physical facility. During the year ended February 29, 2024, R
600,000
of the deposit was returned to the Company. As at May 31, 2024, the balance of the deposit was $
10,608
(R
200,000
) (February 29, 2024
–
$
10,408
(R
200,000
). The deposit will remain for as long as the Company uses the facility.
|
12.
|
Subsequent Event
|
Management has evaluated subsequent events through the date that these financial statements were issued, and none were identified.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-11 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.
Although we believe that the expectations reflected in any of our forward- looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
|
|
·
|
Our results are vulnerable to economic conditions;
|
|
|
·
|
Our ability to raise adequate working capital;
|
|
|
·
|
Loss of customers or sales weakness;
|
|
|
·
|
Inability to achieve sales levels or other operating results;
|
|
|
·
|
The unavailability of funds for expansion purposes;
|
|
|
·
|
Operational inefficiencies;
|
|
|
·
|
Increased competitive pressures from existing competitors and new entrants.
|
DESCRIPTION OF BUSINESS
Corporate Background
We were formed on July 8, 2018 in the state of Nevada. On November 4, 2018, we conducted a share exchange (the “Share Exchange”) with Rent Pay (Pty), Ltd (“Rent Pay”), a South African company, and Rent Pay’s shareholders. In the Share Exchange, we exchanged 200,000 shares of our common stock for all of Rent Pay’s 1,000 outstanding shares, 500 of which were in the name of Loantech Trust, a trust controlled by our officer, Wouter Fouche, and 500 shares in the name of Folscher Family Trust, a trust controlled by our other officer, Jaco Folscher. As a result of the Share Exchange, Rent Pay become our wholly owned subsidiary. Apart from the Share Exchange, we have never been the subject of a material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business. Further, we have never been the subject of a bankruptcy, receivership or similar proceeding. Rent Pay was registered as a South Africa closed corporation on July 21, 2008. In South Africa, a closed corporation is a business entity usually associated with smaller businesses. On February 1, 2012, Rent Pay was converted into a South Africa Limited Liability or private company, which in South Africa is the equivalent of a limited liability company in the US and denotes a larger entity since the shareholders are not limited as with a closed corporation.
| 3 |
Our Mission
Our mission is to provide loan administration software to credit providers, retail stores, provisional service industry (doctors, lawyers, accountants) with a high-quality credit management software systems and customer support that will enable such industries to effectively operate and manage their business and credit risk in compliance with applicable US federal and state laws and the National Credit Act in South Africa.
Business
We are a fintech company and provider of cloud-based loan and client administration software solutions, fully integrated with payment gateways and credit bureaus as well as other decision making and risk management tools. Our business has operated in South Africa since July 2008. We have not earned any revenue in the US yet but plan to begin selling our products in the US by August 2024, through our wholly owned subsidiary Huntpal LLC. We recently acquired full ownership of Huntpal LLC, which is a registered Seller of Travel company in Florida. Huntpal LLC also has a wholly owned South African subsidiary, Huntpal (Pty) ltd, that acts as operational arm of our Africa based business. Huntpal’s main client base and target market is the US hunting and adventure travel industry.
Rent Pay (Pty), offers a comprehensive software solution to small medium and large organizations to limit risk, improve collections on instalment loans and comply fully with South Africa regulations. Rent Pay, is a wholly owned subsidiary of UPAY. Rent Pay is a software company that offers services to “small dollar loan” South Africa credit facilities, including store fronts that provide such loans (“Store Fronts”). Rent Pay provides a loan management service to its South Africa storefronts and online lenders and assists them in all loan cycle segments.
Recent Developments
(b) Completed new software integration with a US payment system, namely Payliance. We also integrated with a US credit bureau, Decision Logic.
We recently launched the new website of Huntpal, at
www.huntpal.net
.
Huntpal is an online platform designed to cater to the needs of hunters in the United States. The recent launch of its website marks an important milestone, offering a comprehensive suite of services for the hunting community.
Huntpal connects US hunters with reputable hunting outfitters and premier hunting destinations in South Africa.
The platform promotes responsible hunting practices and provides resources on sustainable hunting and wildlife management strategies.
Huntpal offers "Hunt now - Pay later" options on all outfitter packages, allowing hunters to book packages with interest-free payments, providing financial flexibility.
Overall, Huntpal aims to be a one-stop solution for hunters, offering planning tools, community engagement, educational resources, and enhanced hunting experiences both domestically and internationally.
UPAY recently took a controlling stake in AML GO (Pty) Ltd, a South African Limited Liability Company. The company focusses of AML (Anti-Money Laundering) screening and compliance solutions and offer credit vetting and credit risk tools for South African businesses.
Products and Services
South African Business Operation:
Our South African Subsidiary, Rent Pay (Pty) Ltd currently provides a web-based client and loan administration software platform, the Automated Credit Provider Administration System to registered lenders in South Africa, which we market under the name “ACPAS”.
Our customer base consists of customers with physical branch outlets as well as online customers with lending websites. ACPAS was designed to bridge the gap between traditional standalone administration platforms, payment gateways, credit bureaus and other third-party service providers through this fully automated software platform.
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We provide a cloud-based loan origination software system that is compliant with all applicable legislation and enables our customers to grant loans, sell products, pay bills or pay monthly subscriptions on terms, all within our software system. Our software platform features integrated third-party service providers are, for example, registered payment gateways, credit bureaus, two-way texting, credit protection insurance and decision-making platforms. We also develop tailor-made web sites for our customers that is fully integrated with our ACPAS system. Our system also includes basic accounting and bookkeeping functionality.
Products in South Africa
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1.
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Loan Origination System
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ACPAS – Automated Credit Provider Administration System. This is our management software system that we lease on a monthly basis to our customers that they use to manage their businesses, clients and processes.
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2.
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Theme Studio - Business Online
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Customized websites that we develop for our customers that are fully integrated with our ACPAS system to provide our customers with a public platform to interact and transact with their clients daily.
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3.
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Credit Inquiries
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We are a reseller of credit bureau products. We provide our customers with a base within the ACPAS software system to conduct consumer credit inquiries to make informed credit decisions about whether or not to grant credit to an applicant. We buy these credit inquiries in bulk from the credit bureau and resell the transactions to our customers at a markup price.
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4.
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Credit Protection and Life Insurance
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We act as an agent for a registered insurance company and provide our customers with functionality within the ACPAS software system that enables our customers to sell credit protection insurance or life insurance products to consumers when securing credit. We receive monthly commission on all insurance sales generated through our system on a referral basis.
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5.
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Debit order transaction fees
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In South Africa, we are a registered Third-Party Payment Provider (TPPP) and charge a fee for debit order transactions that we facilitate between parties. This is a percentage-based fee that we charge for every instalment due for repayment, that we successfully collect by debit order from the bank account of consumers for their benefit.
US Business Operation:
We are a holding company for our South African and US operations. Huntpal LLC is a wholly owned subsidiary of UPAY. Huntpal is an online platform designed to cater to the needs of hunters in the United States. Huntpal connects US hunters with reputable hunting outfitters and premier hunting destinations in South Africa. The platform promotes responsible hunting practices and provides resources on sustainable hunting and wildlife management strategies. Huntpal offers "Hunt Now - Pay Later" options on all outfitter packages, allowing hunters to book packages with interest-free payments, providing financial flexibility.
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Planned products in the USA
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1.
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Loan Origination System
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ACPAS – Automated Credit Provider Administration System. This is our management software system that we will lease to our customers on a monthly basis. Our customers will use this platform to manage their businesses, clients and processes.
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2.
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Theme Studio Business Online
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Customized websites that we will develop for our customers. These websites are fully integrated with our ACPAS system that provides our customers with a public platform to interact and transact with their clients daily. Non-traditional credit models like Buy now - Pay later (BNPL) and other purposed-based lending models can be accommodated through Theme Studio.
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3.
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Credit Inquiries
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We will be a reseller of credit bureau products. We will provide our customers with the functionality within the ACPAS software system to do consumer credit inquiries on consumers, in order to make informed credit decisions about whether or not to grant credit to an applicant. We buy these credit inquiries in bulk from the credit bureau and resell the transactions to our customers at a markup price.
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4.
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Credit Protection Insurance
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We plan to act as an agent for a registered insurance company and to provide our customers with functionality within the ACPAS software system that will enable our customers to sell credit protection insurance to consumers when taking out credit. We should receive monthly commission on insurance sales generated through our system.
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5.
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ACPAS Transaction fee
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We will invoice our customers per transaction, for the volume of transactions effected within the ACPAS system during each month. A transaction fee is added with any agreement/loan made on the system and is effected with all receipts made on the system during this period.
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6.
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Debit order transaction fees
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In the US, we plan to charge a service fee for debit order transactions that we plan to facilitate between parties. This will be a percentage-based fee that we will charge for every instalment due for repayment, that we successfully collected by debit order from the bank account of a consumer for the benefit of our customers.
This service will have two billing options.
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¨
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Cost to Client (CTC) - The cost of the transaction is paid by the bank merchant’s client/consumer; and
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¨
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Cost to Merchant (CTM) - The cost of the transaction is paid by our merchant (A merchant is a registered bank merchant and in our business case, a merchant refers to the registered lender or credit access business).
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Revenue
In the US, we plan to charge a debit order transaction fee for debit order transactions between parties to facilitate credit transactions. This will be a percentage-based fee that we will charge for every instalment due for repayment, that we collect by debit order from the bank account of a consumer (borrower) for the benefit of our customers (lenders).
This service will have two billing options:
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¨
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Cost to Client (CTC) - The cost of the transaction is paid by the consumer; and
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¨
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Cost to Merchant (CTM) The cost of the transaction is paid by our customer.
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Planned US Revenue Segments
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Item
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Price
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Monthly software license fee
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$
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500
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Installation and setup (one-time charge)
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2,500.00
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ACPAS Transaction fee (per transaction) (1)
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$
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1.50
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*The average ACPAS volume of transactions/per month/per branch historically has been 500 transactions
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(1)
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Transaction Fee (CTC /CTM per successful transaction) per quote on % basis Transaction Fee (CTC /CTM per successful transaction) per quote on % basis (between 1.5% and 2.5% of transaction amount collected)
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A transaction is calculated when a loan is created on our ACPAS platform but effected when a payment is receipted on our ACPAS platform on that agreement.
We will also provide custom website development services on a per quote basis.
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Description
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South Africa
Revenue Segment |
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ACPAS - Monthly License Fee
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$
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42.85
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ACPAS Installation and Setup fee (One-time charge)
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$
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35.71
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Transaction Fee (CTC /CTM per successful transaction)
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2.55
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%
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Ave volume of transactions/per month/per branch
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500
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Commission on insurance
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Variable
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(A transaction is defined as a successful debit order collection through our debit order platform)
We will also provide custom website development services on a per quote basis.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – 3 Month Periods Ending May 31, 2024 and May 31, 2023.
Reliance Upon One or a Few Customers
During our Fiscal Year 2024, 4 customers accounted for 67.63% of our revenues business in South Africa, as follows:
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Customer 1
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29.43
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%
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Customer 2
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19.53
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%
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Customer 3
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11.40
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%
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Customer 4
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7.27
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%
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Trends and Uncertainties
Our business is subject to the following trends and uncertainties:
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·
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Whether our system will be adaptable to US needs
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·
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Whether we will develop interest in our software system in the US
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·
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The level of activity of credit facilities and their need for our software
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Going Concern
Our financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. We had an accumulated deficit of ($1,773,866) at May 31, 2024. As of May 31, 2024, we do not have revenues sufficient to execute our business plan. We intend to fund operations through equity financing arrangements; however, there is no assurance that we will be successful.
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Results of Operations: For the 3 months ended May 31, 2024 and May 31, 2023
Revenues
Our revenues for the 3-month period ended May 31, 2024 and 2023 were $257,249 and $332,576, respectively, reflecting decreased revenues of $75,327, which increase is primarily attributable to a decline in transactional revenue from our South African operations.
Net Loss/Profit
We had a net loss of $150,677 and a net loss of $32,220 for the 3-month ended May 31, 2024 and 2023, respectively, an increase of net loss of $118,457, which is primarily attributable to decreased revenue in our South African operations.
Operating Expenses
We incurred total operating expenses of $266,914 and $199,505, respectively, for the 3-month period ended May 31, 2024 and 2023, reflecting a $67,409 increase for the 3 months ended May 31, 2024, which is attributable to a $76,112 increase in general and administrative expenses for the same periods.
Liquidity and Capital Resources
We had negative working capital of $288,324 at May 31, 2024 and negative working capital of $229,865 at our fiscal year ended February 28, 2023, representing a decrease of $58,459 in working capital.
Our net cash flows provided by operating activities was ($425,730) for the 3 months ended May 31, 2024 compared to ($134,044) for the 3 months ended May 31, 2023, representing a $291,686 increase in negative cash flows provided by operating activities.
Our net cash used in investing activities were $0 and ($23,171) respectively, for the three months ended May 31, 2024 and 2023, reflecting a $23,171 decrease in cash used in investing activities.
Our net cash provided by financing activities was $0_for the 3-month period ended May 31, 2024, compared to $12,979 for the three months ended May 31, 2023 reflecting a $12,979 decrease in financing activities.
Off-Balance sheet arrangements
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer/Chief Accounting Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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As required by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our report as of the end of the period covered by this report. This is because we have not sufficiently developed our segregation of duties and we do not have an audit committee.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material pending legal proceedings to which our company or our subsidiary is a party or of which any of our properties, or the properties of our subsidiary, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our us or has a material interest adverse to our company or our subsidiary.
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Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures.
None
Item 5. Other information
None.
Item 6. Exhibits.
EXHIBIT INDEX
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Exhibit
Number
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Description
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 15, 2024
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UPAY, INC.
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By:
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/s/ Jaco C. Folscher
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Jaco C. Folscher
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Chief Executive Officer
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(Principal Executive Officer & Chief Executive Officer)
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By:
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/s/ Jaco C. Folscher
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Jaco C. Folscher
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Chief Financial Officer
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(Chief Financial Officer/Chief Accounting Officer)
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TABLE OF CONTENTS
Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem PriceItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits