UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended May 31, 2019

or

For the transition period from ____to ___.

333-212447
Commission File Number

UPAY, Inc.

(Exact name of small business issuer as specified in its charter)

3010 LBJ Freeway, 12^th Floor

Dallas, Texas 75234

(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.

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 x

The Company has 26,030,310 shares outstanding as of July 24, 2019.

TABLE OF CONTENTS

UPAY, Inc.

Consolidated Financial Statements

(unaudited)

UPAY, Inc.

Consolidated Balance Sheets

(Expressed in U.S. dollars)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UPAY, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UPAY, Inc.

Consolidated Statement of Stockholders’ Equity and Accumulated Other Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UPAY, Inc.

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

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.

Rent Pay operates principally in South Africa and engages in software development and licensing and provides services to the credit provider industry.

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 financial statements include the accounts of the Company and its subsidiary Rent Pay. All significant intercompany transactions and accounts have been eliminated in consolidation.

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 28, 2019, have been omitted.

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.

Cash includes cash on hand and cash held with banks. The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

Trade accounts receivable are recorded at net invoice value and such receivables are non-interest bearing. Receivables are considered past due based on the contractual payment terms. Receivables are reviewed and specific amounts are reserved if collectability is no longer reasonably assured.

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

Property and equipment are stated at cost, less accumulated depreciation and any impairment in value. Depreciation is computed using the straight-line method over the following estimated lives of the assets:

The Company periodically performs impairment testing on its long-lived assets either annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with ASC 360. All property and equipment assets were deemed recoverable at May 31, 2019, and February 28, 2019.

Right-of-use Assets are stated at cost, less accumulated amortization and any impairment in value. Amortization is computed using the straight-line method over the following estimated lives of the assets:

The Company periodically performs impairment testing on its long-lived assets either annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with ASC 360. All right-of-use assets were deemed recoverable at May 31, 2019, and February 28, 2019.

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy in accordance with ASC 820, “Fair Value Measurements and Disclosures”. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available.

The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets.

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets.

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, taxes payable, lease liabilities, and obligations under finance lease. There were no transfers into or out of “Level 3” during the three months ended May 31, 2019, or 2018. The recorded values of all financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Management has adopted ASC 830, “Foreign Currency Translation Matters”, as the functional currency of the Company is the South African rand and the reporting currency is U.S. dollars. Assets and liabilities are translated into U.S. dollars at rates of exchange in effect at the balance sheet date. Average rates for the period are used to translate revenues and expenses. The cumulative translation adjustment is reported as a component of accumulated other comprehensive loss.

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

The Company adopted ASC 842, “Leases”, and its amendments and applied the transition provisions as of March 1, 2019, which included recognizing a cumulative-effect adjustment through opening retained earnings as of that date. Prior year amounts were not recast under this transition approach and, therefore, prior year amounts are excluded from the leased properties footnote. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company elected a policy of not recording leases on its consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to purchase the leased asset. The Company recognizes payments on these leases within general and administrative expenses on a straight-line basis over the lease term.

For contracts entered into before March 1, 2019, the Company determined whether the arrangement contained a lease under Topic 840. Prior to the adoption of ASC 842, these leases were classified as operating or finance leases based on an assessment of whether the lease transferred significantly all the risks and rewards of ownership of the underlying asset. The Company leases office space and vehicles.

On transition, the Company elected to apply the practical expedient to grandfather the determination of which contract is or contains a lease and applied ASC 842 to those contracts that were previously identified as leases. Upon transition to the new standard, right-of-use assets and lease liabilities were measured at the present value of the remaining lease payments discounted by the Company’s incremental borrowing rate as at March 1, 2019. The non-cash adjustment has been excluded from the consolidated statement of cash flows. The weighted average incremental borrowing rate applied to lease liabilities recognized under ASC 842 was 10.25%.

Adoption of ASC 842 had the following impact on the financial position as at March 1, 2019:

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

The Company derives revenue through licensing its software and by collecting various transaction fees from third party debit orders. The Company has several revenue streams and they are recognized as below:

Branch Setup Fees

This is a once off, non-refundable cost that the company charges when a customer is onboarded. Revenue is recognized immediately and is collected in the same month. This results in no accounts receivable at the end of the month as revenue is recognized and collected immediately.

Data Migration Fees

This only applies to a customer applying to migrate client data from a previous system to our system. We invoice for this service as soon as data is successfully transferred, imported and verified by our customer. Revenue is recognized upon invoicing and payment is collected within two days due to debit order mandates signed by the customer as part of the agreement. This results in no outstanding accounts receivable as of the end of each month.

Monthly Rental Fees

Our software is made available on a web-based software platform and is offered as software as a service. Our agreement is an evergreen agreement (auto-renewed) and if not terminated by a customer, remains intact. Termination may occur by either party at any point with 30 days’ notice. The monthly software rental fee is payable every month per branch. Monthly software rental fees are payable in the beginning of each month. The monthly rental fees are invoiced during the first few days of a month and is recognized over the period of the month. Payments are collected via debit order a few days later, prior to the end of that month, due to debit order mandate signed by the customer. This results in no accounts receivable as invoicing and payment happens within the same month.

Development Service Fee

We have some clients that we do custom software development for, on some versions of our software. Here we adopt a scrum methodology with 2-week development sprints. We agree on a price per hour for development with these clients, typically through email communication. We send an invoice for the work completed and usually get paid within the same month. On this revenue stream we do not run a debit order, but clients need to pay invoices before we continue with the next development increment. Payments are due and revenue is recognized upon invoicing. At times collecting payment can take up to 30 days. Unpaid invoices, if any, are recorded to accounts receivable at the end of each month but invoicing and payment usually happen within the same month.

Transactional Fees

We offer an integrated debit order facility built into our software. When our clients (lenders) create loans with consumers, the consumer contracts directly with us on a separate agreement. We then act as a third-party payment provider, to facilitate the repayment of loans from the consumer to the lender by debit order.

We are registered as a third-party payment provider and all payments collected on this stream are settled by the bank directly into our bank account. We only charge a fee on successful debit order collections and retain that fee when we distribute funds collected on behalf of consumers. The transaction fees charged for these transactions are called CTC and they are displayed on the signed agreement that the consumer signs with us. The CTC fees are paid by the consumer, in addition to the loan installment collected. The loan installment and CTC are collected as one amount, but the CTC is retained by us upon distribution of funds to lenders. Revenue is recognized as each new order is processed and the transaction fee is charged. Our software system counts and accounts for each individual transaction and its amount and this is generated on a report on our Acpas software. We use this report to confirm the revenue recognition in our billing system. If there are any CTC that has yet to be collected at an end of a period, it is recorded as accounts receivable.

Credit Protection Insurance Commission

Some insurance companies offer insurance products on loans that cover the consumer for the full repayment of his debt to the lender, in case of unforeseen events. There is an insurance product from one of our suppliers (an insurance company) that we make available for the insurance company on our software program. In return for making this product available the insurance company would pay us monthly commission on premiums they received. This is a product offered by the insurance company directly to the consumer and we only make it available on our software platform. If this option is selected when a loan is created, an additional fee is added to the loan repayment amount. The software system calculates the insurance premiums and all premiums for a given month are paid by lenders to the insurance company, or lenders use our payment service and instruct us to manage the payments on their behalf.

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

After receiving the premiums and supporting reports, the insurance company will then calculate and verify the premiums paid and premium claw back to this point and work out the commission payable based on the premiums received. Upon collection of the premiums, the insurance company will complete their final calculations and the insurance company will then pay all commissions earned by us and the lenders. We distribute the commission amounts due to the lenders within two days of receiving such payments from the insurance company. Revenue is recognized upon collection of the premiums from the consumers.

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. 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.

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive income (loss) and its components in the financial statements. As at May 31, 2019, and 2018, the only item that represents comprehensive income (loss) was foreign currency translation.

The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share on the face of the statement of operations. EPS is calculated using the weighted-average number of common shares outstanding during the period. Diluted EPS if applicable is calculated by dividing net income available to common stockholders for the period by the diluted weighted-average number of common shares outstanding during the period. Diluted EPS would reflect the potential dilution from common shares issuable through stock options, performance-based restricted stock units that have satisfied their performance factor and restricted stock units using the treasury stock method.

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, 2019, 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.

In February 2016, Topic 842, “Leases” was issued to replace the leases requirements in Topic 840, “Leases”. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. The Company adopted Topic 842 on March 1, 2019. See note 2(j) for details of the impact of the adoption of Topic 842 on the Company’s consolidated financial statements.

In July 2017, FASB issued ASU 2017-11 “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)”: (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Management believes that Topics 260 and 480 pertains to the Company and the impact will be immaterial.

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

In February 2018, FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220)”. This ASU deals with the reclassification of certain tax effects from Accumulated Other Comprehensive Income. The new guidance is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. The adoption of this standard did not have a significant impact on the Company’s results of operations, financial condition, cash flows, and financial statement disclosures.

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The standard will be effective for us in the first quarter of our fiscal year 2020, although early adoption is permitted (but no sooner than the adoption of Topic 606). The adoption of this standard is not expected to have a significant impact on the Company’s results of operations, financial condition, cash flows, and financial statement disclosures.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its 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.

Property and equipment, net, consists of the following:

The motor vehicles above were acquired under a capital lease and upon the adoption of ASC 842, reclassified to right-of-use assets on March 1, 2019 (see note 4).

During the three months ended May 31, 2019, the Company recorded depreciation expense of $10,996 (2018 - $6,015) and recognized a gain on sale of equipment of $nil (2018 - $4,649).

Right-of-use assets, net, consist of the following:

During the three months ended May 31, 2019, the Company recorded rent expense of $4,524 related to Company’s right-of-use building and amortization expense of $2,757 (2018 - $nil) related to the Company’s right-of-use vehicles. 

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

On April 11, 2018, the Company renewed its lease agreement for office space in South Africa and increased the amount of office space leased. The term of the renewal agreement is for two years commencing May 1, 2018. The monthly base rate is $1,463 (R21,595) in the first year and increased to $1,576 (R23,264) in the second year of the lease. The office space lease is classified as an operating lease. The interest rate underlying the obligation in the lease is 10.25% per annum.

The Company commenced the leasing of two motor vehicles on May 23, 2018, and October 10, 2018, for a term of five years each. The monthly minimum lease payments are for $451 (R6,658) and $641 (R9,456). The motor vehicle leases are classified as finance leases. The interest rate underlying the obligation in the leases are both 11.25% per annum.

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 May 31, 2019:

On April 2, 2019, the Company issued 40,000 units for cash at $0.25 per unit for proceeds of $10,000. Each unit consisted of one share of common stock and one share purchase warrant. Each warrant is exercisable at $0.40 per warrant for a period of one year.

On April 2, 2019, the Company issued 15,000 shares of common stock with a fair value of $3,750 pursuant to an Employee Stock Compensation Agreement.

The following table summarizes the continuity of the Company’s warrants:

UPAY, Inc.

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars)

(unaudited)

On April 18, 2016, the Company entered into a lease agreement for renting office space in Dallas, Texas. The term of the lease was for one year commencing May 1, 2016, renews annually, and the monthly base rate is $715. Lease expense related to this office space for the three months ended May 31, 2019, was $2,156 (2018 - $2,901).

As of May 31, 2019, the future lease commitments are as follows:

On January 18, 2016, the Company entered into a Software Services Agreement whereby a company will provide services to develop software in consideration for 1,800,000 restricted shares of common stock to be issued within ten days of the completion of the software development. As of May 31, 2019, the services and software have not been completed.

The Company’s revenues were concentrated among three customers for the three months ended May 31, 2019, and 2018:

The Company’s receivables were concentrated among three customers for the three months ended May 31, 2019, 2018:

The Company has evaluated subsequent events through the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of May 31, 2019, have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”

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:

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.

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 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 software products in the US by August 2019. Our main client base and target market is the payday and installment loan industry. Our software offers a comprehensive solution to small medium and large organizations to limit risk, improve collections on installment loans and comply fully with new US federal and state and South Africa regulations. Our wholly owned subsidiary, 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 owns its own financial software and provides a loan management service to its South Africa storefronts and online lenders and assists them in all loan cycle segments. We intend to operate the same business as Rent Pay, but we intend to serve “small dollar loan” providers in the US, currently permitted by 33 states. We will use the same software used by Rent Pay but designed for our future US clients. Our US business will initially concentrate on Texas and California and then to Illinois, Florida, Louisiana and Tennessee.

Recent Developments

(a) Embarking on a Proof of Concept, web development project with LEWFIN AMERICA for their operations in Texas. We have a December 12, 2018 titled “Proof of Concept (“POC”) to Supply and Develop Software Systems Agreement” with LEWFIN AMERICA LLC to develop an online lending website for them and to further customize and develop our loan management system to the industry needs and the needs of LEWFIN in Texas. The POC will run for a period of 12 months and expire on January 7, 2020. In exchange for the industry knowledge and input supplied by LEWFIN during this POC, UPAY will make the website and loan management system available to LEWFIN free of charge for a period of 12 months, following the expiration of the POC period. All new development and customization will remain the sole property of UPAY.

(b) Completed new software integrations with two US payment systems, namely Loan Payment Pro and Repay. We also integrated with a US credit bureau, Clarity, and a Global document verifying company, Decision Logic. We are also currently working on integrations with Payliance, a payment system and Dot818, a lead provider in the US.

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.

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

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.

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.

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.

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.

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 installment 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. We have launched our US based software as a Proof of Concept with one lender and are in the process of onboarding a second lender.

Our developers continue their work on the necessary changes and development needed to customize our system for the US environment, which is anticipated to be complete by August 2019 for the State of Texas, at which time we will be able to offer our products in Texas. Once complete, we will provide a web-based client and loan administration software platforms to registered lenders in Texas and thereafter, contingent upon adequate financing, we will offer our software to additional states.

We will provide a cloud-based loan origination software system that will be compliant with all applicable state and federal legislation and will enable our customers to grant loans, sell products, pay bills or pay monthly subscriptions on terms, all within our software system. Our software platform will feature integrated third-party service providers such as registered payment gateways, credit bureaus, two-way texting, credit protection insurance and decision-making platforms in the US. We will also develop tailor-made web sites for our customers that is fully integrated with our system.

Planned products in the USA

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.

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.

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.

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.

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.

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 installment 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.

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 installment 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:

*The average ACPAS volume of transactions/per month/per branch historically has been 500 transactions

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.

(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, 2019 and May 31, 2018.

Reliance Upon One or a Few Customers

During our Fiscal Year 2019, 3 customers accounted for 67.29% of our revenues business in South Africa, as follows:

Trends and Uncertainties

Our business is subject to the following trends and uncertainties:

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 ($165,018) at May 31, 2019. As of May 31, 2019, 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.

Results of Operations: For the 3 months ended May 31, 2019 and May 31, 2018

Revenues

Our revenues for the 3-month period ended May 31, 2019 and 2018 were $357,875 and $238,374, respectively, reflecting increased revenues of $119,501, which increase is primarily attributable to growth in our South African operations.

Net Loss/Profit

We had a net profit of $17,373 and a net loss of $5,061 for the 3-month ended May 31, 2019 and 2018, respectively, an increase to profitability of $22,434, which is primarily attributable to growth in revenue due to increased sales.

Operating Expenses

We incurred total operating expenses of $252,624 and $197,873, respectively, for the 3-month period ended May 31, 2019 and 2018, reflecting a $54,751 increase for the 3 months ended May 31, 2019, which is attributable to a $47,013 increase in general and administrative expenses for the same periods.

Liquidity and Capital Resources

We had working capital of $42,114 at May 31, 2019 and working capital of $13,137 at our fiscal year ended February 28, 2019, representing an increase of $28,977 in working capital.

Our net cash flows provided by operating activities was ($179,134) for the 3 months ended May 31, 2019 compared to ($123,884) for the 3 months ended May 31, 2018, representing an $55,250 increase in negative cash flows provided by operating activities.

Our net cash used in investing activities were $730 and $0 respectively, for the three months ended May 31, 2019 and 2018, reflecting a $730 increase in cash used in investing activities.

Our net cash provided by financing activities was $7,907 for the 3-month period ended May 31, 2019, compared to $0 for the three months ended May 31, 2018 reflecting a $7,907 increase 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.

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.

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.

On April 2, 2019, we sold 40,000 units for cash proceeds of $10,000 at $0.25 per unit, each unit of which consists of one common stock share and one share purchase warrant. Each warrant is exercisable at $0.40 per warrant for a period of one year.

On April 2, 2019, we issued 15,000 common stock shares with a fair value of $3,750 pursuant to an Employee Stock Compensation Agreement.

Item 3.   Defaults Upon Senior Securities

None

Item 4.   Mine Safety Disclosures.

None

Item 5.   Other information

None.

Item 6.   Exhibits.

EXHIBIT INDEX

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 25, 2019