This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiaries for the fiscal years ended May 31, 2021 and 2020. The discussion and analysis that follows should be read together with the section entitled "Forward Looking Statements" and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K.

Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company's control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.





Overview

Wewards, Inc. ("Wewards" or "the Company") was incorporated in Nevada on September 10, 2013, as Betafox Corp.On January 8, 2018, we changed our name to Wewards, Inc.

We have developed and are the owner of a web-based platform accessible by mobile apps (the "Platform") that will enable consumers to purchase goods from merchants and earn rebates payable in the form of Bitcoin. The Platform provides an innovative Bitcoin rewards ecosystem. It is designed to transform traditional concepts of commerce into a cooperative society where both merchants and consumers are collaborating, utilizing Bitcoin to reward consumers. The ecosystem provides consumers with rewards each time they complete a challenge defined by a merchant. This is intended to make the ecommerce process beneficial to all market participants, and to help distribute commercial wealth among and between the merchants and consumers. We intend to generate revenue by licensing "white-label" versions of the Platform to third parties. However, to date, no such license agreement has been entered into, and we have not generated any revenues from the Platform.

On April 2, 2020, we purchased intellectual property rights ("IP") from United Power, a Nevada corporation under common ownership with Lei Pei, our sole officer and director and majority shareholder, for cash consideration of $179,300, based on a price determined by an independent valuation.

The IP consists of technology and related rights associated with the game Megopoly, an MMO (Massively Multiplayer Online Game). Megopoly is an MMO board game where players are able to earn fractions of Bitcoins (satoshi) through buying, selling, and managing virtual real estate properties using in-game currency (Megopoly Coins). The game is similar in some respects to Monopoly.

The game allows players around the world to interact with each other online. Players travel (move) through different parts of a city, earning profit by investing in properties, charging rent, acquiring bonus assets, and selling their properties to other players for in-game currency. A player is able to progress to higher levels of "cities" at any time.

The player's goal in Megopoly is to earn Megopoly Coins by investing in properties and collecting rent from other players. Players can keep playing the game using their Megopoly Coins for the opportunity to earn more coins, or they can exchange those coins for Bitcoins based on real-time market exchange rates.

Megopoly is playable at any time through a web browser on a PC, tablet or smart phone, in both Chinese and English. The game has been designed for players of all skill levels.





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We began generating revenues in the fourth quarter of our fiscal year ended May 31, 2020 from licensing Megopoly and related IP to Sandbx Corp., a separate company owned by the Chief Operating Officer of United Power and FL Galaxy, related parties of the Company, as our Chief Executive Officer, Lei Pei, is also the Chief Executive Officer of United Power and FL Galaxy. Pursuant to our license agreement with Sandbx Corp., we received a $50,000 initial setup fee, and a monthly royalty payment in the amount of 10% of net revenues from the sale of in-game assets by the licensee, or $5,000, whichever was greater, resulting in total revenues of $83,454 and $4,166 under this license agreement during the years ended May 31, 2021 and 2020, respectively. The license agreement was terminated on May 16, 2021. The Company also entered into an agreement in January of 2021 with Sandbx Corp. to further develop the Megopoly game, whereby the Company has paid Sandbx Corp. monthly fees of $168,500, resulting in $842,500 of related party software development costs for the year ended May 31, 2021.





Critical Accounting Policies

The establishment and consistent application of accounting policies is a vital component of accurately and fairly presenting our financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"), as well as ensuring compliance with applicable laws and regulations governing financial reporting. While there are rarely alternative methods or rules from which to select in establishing accounting and financial reporting policies, proper application often involves significant judgment regarding a given set of facts and circumstances and a complex series of decisions.

Concentrations of Credit Risk

The Company maintains our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 under current regulations. The Company had approximately $2,499,798 and $3,768,042 in excess of FDIC insured limits at May 31, 2021 and 2020, respectively. The Company has not experienced any losses in such accounts.





Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 - Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the licensing of our software by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. All revenues to date have been recognized from licensing Megopoly and related IP to Sandbx Corp., a separate company owned by the Chief Operating Officer of United Power and FL Galaxy, related parties of the Company, as our Chief Executive Officer, Lei Pei, is also the Chief Executive Officer of United Power and FL Galaxy.

We derive revenue principally from licensing our intellectual property, including our game, and related extra content and services that can be utilized by players of our game. Our product and service offerings include, but are not limited to, licensing to third parties ("software license") to distribute and host our games and content ("Online-Hosted Service Games").

We evaluate and recognize revenue by:





      ·   identifying the contract(s) with the customer;
      ·   identifying the performance obligations in the contract;
      ·   determining the transaction price;
      ·   allocating the transaction price to performance obligations in the
          contract; and
      ·   recognizing revenue as each performance obligation is satisfied through
          the transfer of a promised good or service to a customer (i.e.,
          "transfer of control").

Online-Hosted Service Games. Sales of our Online-Hosted Service Games are determined to have one distinct performance obligation: the online hosting. We recognize revenue from these arrangements as the service is provided through our licensing agreement(s).





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Licensing Revenue

We utilize third-party licensees to distribute and host our games and content in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee and/or sales-based royalties. These arrangements typically include multiple performance obligations, such as a time-based license of software and future update rights. We recognize as revenue a portion of the minimum guarantee when we transfer control of the license of software (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights. Any sales-based royalties are generally recognized as the related sales occur by the licensee.

Significant Judgments around Revenue Arrangements

Identifying performance obligations. Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, we must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation.

Determining the transaction price. The transaction price is determined based on the consideration that we will be entitled to receive in exchange for transferring our goods and services to the customer. Determining the transaction price often requires judgment, based on an assessment of contractual terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. In addition, the transaction price does not include an estimate of the variable consideration related to sales-based royalties. Sales-based royalties are recognized as the sales occur.

Allocating the transaction price. Allocating the transaction price requires that we determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective, especially in situations where we do not sell the performance obligation on a stand-alone basis (which occurs in the majority of our transactions). In those situations, we determine the relative stand-alone selling price based on various observable inputs using all information that is reasonably available. Examples of observable inputs and information include: historical internal pricing data, cost plus margin analyses, third-party external pricing of similar or same products and services such as software licenses and maintenance support within the enterprise software industry. The results of our analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation.

Determining the Estimated Offering Period. The offering period is the period in which we offer to provide the future update rights and/or online hosting for the game. Because the offering period is not an explicitly defined period, we must make an estimate of the offering period for the service-related performance obligations (i.e., future update rights and online hosting). Determining the Estimated Offering Period is inherently subjective and is subject to regular revision. Generally, we consider the specified contract period of our software licenses and therefore, the offering period is estimated to be over the term of the license. We recognize revenue for future update rights and online hosting performance obligations ratably on a straight-line basis over this period as there is a consistent pattern of delivery for these performance obligations.





Software Development Costs

The Company expenses software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the function intended. Capitalization ends, and amortization begins when the product is available for general release to customers.





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Results of Operations for the Years Ended May 31, 2021 and 2020:

The following table summarizes selected items from the statement of operations for the years ended May 31, 2021 and 2020.





                                              Years Ended
                                        May 31,         May 31,       Increase /
                                          2021            2020        (Decrease)
Revenues, related party               $     83,454     $    4,166     $    79,288

Operating expenses:
General and administrative                   3,139          6,375          (3,236 )
Software development, related party        842,500              -         842,500
Rent expense                               180,000        180,000               -
Professional fees                           92,209        245,666        (153,457 )
Total operating expenses:                1,117,848        432,041         685,807

Operating loss                          (1,034,394 )     (427,875 )       606,519

Total other income                        (502,171 )     (469,506 )        32,665

Net loss                              $ (1,536,565 )   $ (897,381 )   $   639,184




Revenues, Related Party

We began to generate revenues from the licensing of our Megopoly game platform to a company owned by United Power's Chief Operating Officer during the fourth fiscal quarter of 2020. Revenues were $83,454 and $4,166 for the years ended May 31, 2021 and 2020, respectively. However, the license agreement under which we generated these revenues was terminated on May 16, 2021. Accordingly, we are not currently engaged in revenue producing activities.

General and Administrative Expenses

General and administrative expenses for the year ended May 31, 2021 were $3,139, compared to $6,375 during the year ended May 31, 2020, a decrease of $3,236, or 51%. The expenses consisted primarily of office, travel, compliance and business development expenses. General and administrative expense decreased during the current period due to decreased office expenses.

Software Development, Related Party

Software development expenses for the year ended May 31, 2021 was $842,500, compared to $-0- during the year ended May 31, 2020, an increase of $842,500. The $842,500 of software development costs relate to improvements in the Megopoly game performed by Sandbx.





Rent Expense

Rent expense was $180,000 during both years ended May 31, 2021 and 2020. Rent expense consisted of office space that was subleased from a company owned by Mr. Lei through August 31, 2020, and directly from the building's owner thereafter, who is not a related party, under substantially the same terms.





Professional Fees

Professional fees for the year ended May 31, 2021 were $92,209, compared to $245,666 during the year ended May 31, 2020, a decrease of $153,457, or 62%. Professional fees decreased primarily due to cost savings related to transitioning to new compliance professionals and reductions in fees paid to software developers during the current period.





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Operating Loss

Our operating loss for the year ended May 31, 2021 was $1,034,394, compared to $427,875 during the year ended May 31, 2020, an increase of $606,519, or 142%. Our operating loss increased primarily due to $842,500 of software development fees, partially offset by revenues and cost savings related to reductions in professional fees as we transitioned to new compliance team members during the current year.





Other Income (Expense)

Other expense, on a net basis, for the year ended May 31, 2021 was $502,171, compared to other expense, on a net basis, of $469,506 during the year ended May 31, 2020, an increase of $32,665, or 7%. Other expense consisted of $525,000 of interest expense on related party loans, as offset by $22,829 of interest income for the year ended May 31, 2021. Other expense consisted of $539,556 of interest expense on related party loans, as offset by $70,050 of interest income for the year ended May 31, 2020. Other expense, on a net basis, increased primarily due to diminished interest income on cash balances, as partially offset by reductions in interest expense.





Net Loss

Net loss for the year ended May 31, 2021 was $1,536,565, compared to $897,381 during the year ended May 31, 2020, an increase of $639,184, or 71%. The increased net loss was primarily due to $842,500 of software development fees incurred during the current period, as partially offset by cost savings related to reductions in business development fees professional fees, and an increase in revenues.

Liquidity and Capital Resources

As of May 31, 2021, the Company had current assets of $3,000,047, comprised almost entirely of cash. The Company's current liabilities as of May 31, 2021 were $2,122,564, consisting of $15,670 of accounts payable, $1,944,467 of accrued interest and $162,427 of current maturities of operating lease obligations.

The following table summarizes our total current assets, liabilities and working capital at May 31, 2021 and 2020.





                                May 31,
                         2021            2020
Current Assets        $ 3,000,047     $ 4,017,107

Current Liabilities   $ 2,122,564     $ 1,590,611

Working Capital       $   877,483     $ 2,426,496




The following table summarizes our cash flows during the years ended May 31,
2021 and 2020, respectively.



                                                Years Ended
                                                  May 31,
                                            2021            2020

Net cash used in operating activities $ (1,017,309 ) $ (311,990 ) Net cash used in investing activities

              -       (179,300 )
Net cash used in financing activities              -              -

Net change in cash                      $ (1,017,309 )   $ (491,290 )




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Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. During the year ended May 31, 2021, net cash flows used in operating activities was $1,017,309. For the year ended May 31, 2020, net cash flows used in operating activities was $311,990. The increase in cash used in operating activities is primarily attributable to our increased net loss.

Net Cash Used in Investing Activities

During the year ended May 31, 2021, we did not use any cash in investing activities. During the year ended May 31, 2020, net cash flows used in investing activities was $179,300. The decrease is attributable to the purchase of software developed by a related party in the prior year.

Net Cash Used in Financing Activities

During the years ended May 31, 2021 and 2020, we did not use any cash in financing activities.

Satisfaction of our Cash Obligations for the Next 12 Months

As of May 31, 2021, our balance of cash on hand was $2,999,798. We currently have sufficient funds to fund our operations at their current levels for the next twelve months. Since our CEO and majority shareholder, Mr. Pei, acquired control over the Company in May 2015, we have been wholly dependent upon him and his affiliated companies, to provide financing to us when needed, generally in the form of convertible loans. There can be no assurance that Mr. Pei will continue to make additional financing available to us when needed.

We will need additional funds to repay our related party debts should they not be converted to equity. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing (whether from our affiliates or third parties), the terms of such financing may contain undue restrictions on our operations and result in substantial dilution for our stockholders. We cannot guarantee that we will ever become profitable. Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability, and our failure to do so would adversely affect our business, including our ability to raise additional funds.

Off-Balance Sheet Arrangements

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

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