UPAY Q2 loss widens to $770K; going-concern warning
UPAY reported a $144,731 working capital deficit at August 31, 2026, and estimated funding needs of approximately $350,000 over the next 12 months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
UPAY, Inc. reported second-quarter revenue of $285,256, compared with $188,947 a year earlier, while net loss was $770,446 versus $117,252. For the six months ended August 31, 2026, revenue was $511,603 versus $359,361, and operating cash used was $74,279 versus $188,768. Acheron Systems, acquired on June 17, 2026, contributed $42,776 of revenue; UPAY attributed higher general and administrative expenses, $426,234 versus $247,260, primarily to share-based compensation and Acheron overhead.
On August 28, 2026, UPAY issued 1,000,000 common shares with a fair value of $900,000 to settle related-party notes and accrued interest totaling $384,405, recording a $515,595 noncash loss. After quarter-end, UPAY borrowed $50,000 on October 1, 2026, from a company controlled by a significant shareholder for South African working capital and public-company costs.
At August 31, 2026, UPAY had $117,304 cash and a $144,731 working capital deficit; it estimated approximately $350,000 in funding needs over the next 12 months and said no financing sources are committed. The company disclosed substantial doubt about its ability to continue as a going concern. Disclosure controls were not effective because of a material weakness related to the control environment, absence of independent directors and absence of an audit committee financial expert.
2 points · 0 major3 major · 5 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly revenue increased to $285,256 from $188,947.
- Moderate pointOperating cash used decreased to $74,279 from $188,768.
Negative
- Major pointGoing-concern note cites substantial doubt about UPAY's ability to continue.
- Major pointMaterial weakness left disclosure controls not effective at August 31, 2026.
- Major pointAt August 31, 2026, defaults totaled $128,300 principal and $45,606 accrued interest.
- Moderate pointQuarterly net loss increased to $770,446 from $117,252.
- Moderate pointRelated-party note settlement generated a $515,595 noncash loss. 2.9% of market cap
Filing Explained
Defaulted obligations total $128,300 principal and $45,606 interest; UPAY reports no lender demand or enforcement notice.
This unaudited 10-Q reports
UPAY reports receiving no lender demand for payment or enforcement notice on these defaulted obligations as of the report date.
Key Figures
Revenue: $285,256
Revenue: $511,603
Net loss: $770,446 loss
+5 more
8 metrics
Revenue
$285,256
Three months ended August 31, 2026; $188,947 for 2025
Revenue
$511,603
Six months ended August 31, 2026; $359,361 for 2025
Net loss
$770,446 loss
Three months ended August 31, 2026; $117,252 loss for 2025
Net cash used in operating activities
$74,279 used
Six months ended August 31, 2026; $188,768 used in 2025
Cash and cash equivalents
$117,304
As of August 31, 2026
Working capital deficit
$144,731 deficit
As of August 31, 2026
Loss on settlement of notes payable
$515,595 noncash loss
Recorded on August 28, 2026, in connection with the related-party note settlement
Estimated funding needs
Approximately $350,000
Over the next twelve months
Key Terms
going concern, working capital deficit, noncontrolling interest, preliminary purchase price allocation
4 terms
going concern financial
"substantial doubt about the Company's ability to continue as a going concern"
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
working capital deficit financial
"a working capital deficit of $144,731"
A working capital deficit occurs when a company's short-term obligations—like bills, supplier payments and near-term debt—are larger than its readily available short-term resources such as cash, money expected from customers, and inventory that can be sold. Like a household whose monthly bills exceed its checking account, it signals potential difficulty paying immediate expenses, which matters to investors because it raises the chance the company will need outside financing or cut operations, affecting risk and value.
noncontrolling interest financial
"Noncontrolling interest represents the portion of the equity in consolidated subsidiaries"
The portion of a business owned by investors other than the controlling owner when one company has control of another; it represents outside shareholders’ share of the subsidiary’s assets and profits. For investors, it matters because those outside claims reduce the amount of profit and net assets attributable to the parent owner — similar to saying part of a pizza belongs to someone else — and thus affects earnings, book value and valuation.
preliminary purchase price allocation financial
"The preliminary purchase price allocation for the acquisition of Acheron"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much funding does UPYY estimate it needs?
UPAY estimated that it would need approximately $350,000 over the next twelve months for working capital for its South African operations and public-company costs, including audit, legal and OTC Markets fees. It also reported a $50,000 borrowing on October 1, 2026, from a company controlled by a significant shareholder and said it had no committed financing sources.
How was UPYY's Acheron acquisition structured?
On June 17, 2026, Petra Software (Pty) Ltd., a subsidiary under UPAY's majority control, acquired all issued and outstanding shares of Acheron Systems (Pty) Ltd. in exchange for 2,900,000 ordinary no-par-value Petra shares. The related-party transaction was accounted for as a business combination, with preliminary consideration of $33,828 and a purchase price allocation subject to refinement.
How did UPYY settle its related-party notes?
On August 28, 2026, UPAY issued 1,000,000 common shares with a fair value of $900,000 to settle related-party note principal and accrued interest totaling $384,405. The transaction produced a $515,595 loss on settlement, which UPAY described as noncash.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2026
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: 333-212447
(Exact name of registrant as specified in its charter)
Nevada | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(972 ) 888-6052
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None | N/A | N/A |
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 every Interactive Data File required to be submitted 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 such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
x | Smaller reporting company | ||
Emerging growth company |
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
As of October , 2026, the registrant had 18,665,211 shares of common stock, $0.001 par value, issued and outstanding.
20
UPAY, INC.
FORM 10-Q
For the Quarterly Period Ended August 31, 2026
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | ||
Item 1. | Financial Statements (Unaudited) | 3 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 23 |
Item 4. | Controls and Procedures | 23 |
PART II – OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 24 |
Item 1A. | Risk Factors | 24 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 24 |
Item 3. | Defaults Upon Senior Securities | 24 |
Item 4. | Mine Safety Disclosures | 24 |
Item 5. | Other Information | 24 |
Item 6. | Exhibits | 25 |
SIGNATURES | 26 | |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include, without limitation, statements about our expected revenues, expenses, liquidity and capital needs, our ability to continue as a going concern, the integration and expected contribution of Acheron Systems (Pty) Ltd., our plans to fund operations through equity financing, and other statements that are not historical facts. Words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should," "will," "would" and similar expressions identify forward-looking statements.
Forward-looking statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. These include our history of losses and the substantial doubt about our ability to continue as a going concern; our dependence on loans and advances from related parties; our ability to raise additional capital on acceptable terms; customer concentration; fluctuations in the South African rand against the U.S. dollar; economic, regulatory and political conditions in South Africa and in the credit provider industry we serve; competition; our ability to integrate acquired businesses; and the other risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026 (the "2026 Annual Report"). Readers should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Except as required by law, we undertake no obligation to update them.
Unless the context otherwise requires, references in this report to "UPAY," the "Company," "we," "us" and "our" refer to UPAY, Inc. and its consolidated subsidiaries. All dollar amounts are in U.S. dollars unless otherwise indicated; "R" or "ZAR" refers to the South African rand. Our fiscal year ends on February 28 (or February 29). "Fiscal 2027" refers to the fiscal year ending February 28, 2027.
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited interim consolidated financial statements of UPAY, Inc. as of August 31, 2026 and for the three and six months ended August 31, 2026 and 2025 follow. They should be read together with the audited consolidated financial statements and notes in the 2026 Annual Report.
Consolidated Balance Sheets as of August 31, 2026 (unaudited) and February 28, 2026 | 4 |
Consolidated Statements of Operations and Comprehensive Loss (unaudited) | 5 |
Consolidated Statements of Stockholders' Deficit and Accumulated Other Comprehensive Loss (unaudited) | 6 |
Consolidated Statements of Cash Flows (unaudited) | 8 |
Notes to the Consolidated Financial Statements (unaudited) | 9 |
| 3 |
UPAY, INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
(unaudited)
August 31, | February 28, | |||||||
2026 | 2026 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowance | ||||||||
Prepaid expenses and other current assets | ||||||||
Total Current Assets | ||||||||
Property and Equipment, Net (Note 4) | ||||||||
Right-of-use Assets, Net (Note 5) | ||||||||
Deposit (Note 12) | ||||||||
Total Assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | $ | ||||||
Due to related parties (Note 6) | ||||||||
Current portion of lease liabilities (Note 8) | ||||||||
Current portion of notes payable (Note 7) | ||||||||
Current portion of notes payable in default (Note 7) | ||||||||
Notes payable – Related parties (Note 6) | ||||||||
Total Current Liabilities | ||||||||
Non-Current Liabilities | ||||||||
Lease liabilities (Note 8) | ||||||||
Notes payable (Note 7) | ||||||||
Notes payable – Related parties (Note 6) | ||||||||
Total Liabilities | $ | $ | ||||||
Stockholders' Deficit | ||||||||
Preferred Stock, $ | ||||||||
Common Stock, $ | ||||||||
Common Stock Issuable | ||||||||
Additional Paid-in Capital | ||||||||
Accumulated Deficit | ( | ) | ( | ) | ||||
Accumulated Other Comprehensive Loss | ( | ) | ( | ) | ||||
Total UPAY Stockholders' Deficit | ( | ) | ( | ) | ||||
Noncontrolling Interest | ||||||||
Total Stockholders' Deficit | ( | ) | ( | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
UPAY, INC.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. dollars)
(unaudited)
Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
August 31, 2026 | August 31, 2025 | August 31, 2026 | August 31, 2025 | |||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gross Profit | ||||||||||||||||
Expenses | ||||||||||||||||
Depreciation (Note 4) | ||||||||||||||||
General and administrative | ||||||||||||||||
Total Expenses | ||||||||||||||||
Loss Before Other Income (Expenses) and Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Income (Expenses) | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Loss on settlement of notes payable – related party (Notes 7 and 9) | ( | ) | ( | ) | ||||||||||||
Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Provision for income taxes | ||||||||||||||||
Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net loss attributable to noncontrolling interest | ||||||||||||||||
Net loss attributable to UPAY Inc. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Comprehensive Income (Loss) | ||||||||||||||||
Foreign currency translation adjustments attributable to noncontrolling interest | ||||||||||||||||
Foreign currency translation adjustments attributable to UPAY Inc. | ( | ) | ( | ) | ( | ) | ||||||||||
Comprehensive Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive Loss attributable to noncontrolling interest | ||||||||||||||||
Comprehensive Loss attributable to UPAY Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Net Loss Per Share attributable to UPAY Inc. shareholders – Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted-average Common Shares Outstanding – Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
UPAY, INC.
Consolidated Statements of Stockholders' Deficit and Accumulated Other Comprehensive Loss
(Expressed in U.S. dollars)
(unaudited)
For the Three and Six Months Ended August 31, 2025
Accumulated | Total | |||||||||||||||||||||||||||||||||||
Additional | Common | Other | UPAY's | Total | ||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Stock | Accumulated | Comprehensive | Stockholders' | Noncontrolling | Stockholders' | |||||||||||||||||||||||||||||
Shares | Amount | Capital | Issuable | Deficit | Loss | Deficit | Interest | Deficit | ||||||||||||||||||||||||||||
Balance – February 28, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
Common stock issuable for services | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
Net loss | – | – | – | – | ( | ) | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
Balance – May 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
Common stock issuable for services | – | – | – | – | ||||||||||||||||||||||||||||||||
Net loss | – | – | – | – | ( | ) | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments | – | – | – | – | ( | ) | ( | ) | – | ( | ) | |||||||||||||||||||||||||
Balance – August 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
| 6 |
UPAY, INC.
Consolidated Statements of Stockholders' Deficit and Accumulated Other Comprehensive Loss
(Expressed in U.S. dollars)
(unaudited)
For the Three and Six Months Ended August 31, 2026
Accumulated | Total | |||||||||||||||||||||||||||||||||||
Additional | Common | Other | UPAY's | Total | ||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Stock | Accumulated | Comprehensive | Stockholders' | Noncontrolling | Stockholders' | |||||||||||||||||||||||||||||
Shares | Amount | Capital | Issuable | Deficit | Loss | Deficit | Interest | Deficit | ||||||||||||||||||||||||||||
Balance – February 28, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
Common stock issued for services | – | – | – | – | ||||||||||||||||||||||||||||||||
Common stock issuable for services | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
Net loss | – | – | – | – | ( | ) | – | ( | ) | – | ( | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments | – | – | – | – | ( | ) | ( | ) | – | ( | ) | |||||||||||||||||||||||||
Balance – May 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
Common stock issuable for services | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
Common stock issued for services | ( | ) | – | – | – | – | – | |||||||||||||||||||||||||||||
Common stock issued for settlement of notes payable – related party | – | – | – | – | ||||||||||||||||||||||||||||||||
Acquisition of Acheron Systems (Pty) Ltd. – related party | – | – | – | – | – | |||||||||||||||||||||||||||||||
Net loss | – | – | – | – | ( | ) | – | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Foreign currency translation adjustments | – | – | – | – | ( | ) | ( | ) | – | ( | ) | |||||||||||||||||||||||||
Balance – August 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
UPAY, INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(unaudited)
Six Months Ended | Six Months Ended | |||||||
August 31, 2026 | August 31, 2025 | |||||||
Cash Flows from Operating Activities | ||||||||
Net loss attributable to UPAY Inc. | $ | ( | ) | $ | ( | ) | ||
Net loss attributable to noncontrolling interest | ( | ) | ||||||
Net loss | ( | ) | ( | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Common stock issued or issuable for services | ||||||||
Depreciation | ||||||||
Loss on settlement of notes payable – related party | ||||||||
Provision for bad debt | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | ( | ) | ||||||
Prepaid expenses and other current assets | ||||||||
Accounts payable and accrued liabilities | ( | ) | ||||||
Due to related parties | ||||||||
Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities | ||||||||
Purchase of property and equipment | ( | ) | ( | ) | ||||
Cash acquired upon acquisition of Acheron Systems (Pty) Ltd. – related party | ||||||||
Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
Cash Flows from Financing Activities | ||||||||
Proceeds from notes payable to related parties | ||||||||
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 | $ | $ | ||||||
Non-cash Investing and Financing Activities: | ||||||||
Common stock issued for settlement of notes payable – related party | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 8 |
UPAY, INC.
Notes to the Consolidated Financial Statements
August 31, 2026
(Expressed in U.S. dollars)
(unaudited)
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 was a capital transaction in substance and therefore was accounted for as a recapitalization. Rent Pay was incorporated in South Africa on February 1, 2012. Because Rent Pay was 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 51 % controlling interest in Huntpal LLC ("Huntpal"). On June 13, 2024, the Company acquired the remaining non-controlling interest in Huntpal, increasing its ownership to 100 %. 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. On March 30, 2026, the Company incorporated a wholly-owned subsidiary, Petra Software LLC ("Petra USA"). On May 21, 2026, the Company incorporated Petra Software (Pty) Ltd. ("Petra"), a subsidiary under Petra USA, taking an initial controlling interest of 84 %. On June 17, 2026, Petra acquired 100 % interest in Acheron Systems (Pty) Ltd. ("Acheron"), which was determined to be a related party transaction and was accounted for as a business combination. As a result of the acquisition, Petra USA's interest in Petra decreased to 57 %.
Rent Pay and Acheron operate principally in South Africa and engage in software development and licensing and provide 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 and its subsidiaries, as follows:
As of August 31, 2026, the Company's consolidated subsidiaries were as follows:
Entity | Jurisdiction | Parent | Ownership Interest | ||||
Rent Pay (Pty) Ltd. | South Africa | UPAY, Inc. | |||||
Miway Finance Inc. | United States | UPAY, Inc. | |||||
Huntpal LLC | United States | UPAY, Inc. | |||||
AML Go (Pty) Ltd. | South Africa | UPAY, Inc. | |||||
Petra Software LLC | United States | UPAY, Inc. | |||||
Petra Software (Pty) Ltd. | South Africa | Petra Software LLC | |||||
Acheron Systems (Pty) Ltd. | South Africa | Petra Software (Pty) Ltd. | |||||
All significant intercompany transactions and accounts have been eliminated in consolidation.
| 9 |
b) Interim Financial Statements
The accompanying unaudited interim consolidated 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 consolidated 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, 2026, 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) Business Combination
The business combination method of accounting is used to account for the acquisition of businesses by the Company. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and debt incurred or assumed at the acquisition date. Costs directly attributable to the acquisition are expensed in the period incurred. The fair value of the assets and liabilities acquired is determined and compared to the fair value of the consideration paid. If the fair value of the consideration paid exceeds the fair value of the net assets acquired, then goodwill is recognized.
e) 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 August 31, 2026, 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.
f) Segment Information
In accordance with the provisions of ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information," the Company is required to report financial and descriptive information about its reportable operating segments. The Company has one operating segment as of August 31, 2026, and February 28, 2026. The Company manages its operations as a single operating segment for the purpose of assessing performance and making operating decisions. Accordingly, all assets are considered to relate to the single operating segment and are consistent with the total assets presented on the Company's consolidated balance sheet. The Company's Chief Operating Decision Maker ("CODM") is its executive management committee. The CODM allocates resources and evaluates the performance of the Company using the information about combined net income from operations. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.
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g) 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.
h) Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”. Share-based awards, including restricted stock units ("RSUs"), are measured at their grant-date fair value and recognized as compensation expense over the requisite service period, which is generally the vesting period of the award. Equity-classified awards are measured at grant-date fair value and are not subsequently remeasured unless the award is modified. Compensation expense is recognized on a straight-line basis over the vesting period for awards subject solely to service-based vesting conditions.
For RSUs, the grant-date fair value is generally determined based on the fair value of the Company's common stock on the grant date. The Company recognizes forfeitures as they occur. Stock-based compensation expense is included within operating expenses in the consolidated statements of operations, with a corresponding increase to additional paid-in capital or stock issuable, as applicable.
Upon settlement of vested RSUs, the related amounts previously recognized in stock issuable or additional paid-in capital are reclassified to common stock and additional paid-in capital within stockholders' equity. Any modifications to outstanding awards are accounted for in accordance with ASC 718, and incremental compensation cost, if any, is recognized over the remaining requisite service period.
i) Noncontrolling Interest
The Company accounts for noncontrolling interests in accordance with ASC 810, “Consolidation”. Noncontrolling interest represents the portion of the equity in consolidated subsidiaries that is not attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component of equity in the consolidated balance sheets. Net income or loss and comprehensive income or loss are attributed to the controlling and noncontrolling interests based on their respective ownership interests.
Changes in the Company's ownership interest in a consolidated subsidiary that do not result in a loss of control are accounted for as equity transactions. Accordingly, any difference between the consideration paid or received and the corresponding adjustment to the carrying amount of the noncontrolling interest is recognized directly in equity attributable to the Company's stockholders.
Losses attributable to the noncontrolling interest are allocated to the noncontrolling interest even if such allocation results in a deficit balance. Upon the loss of control of a subsidiary, the Company derecognizes the assets, liabilities, and noncontrolling interest of the former subsidiary and recognizes any resulting gain or loss in earnings
3. | Acquisition of Acheron Systems (Pty) Ltd. – Related Party |
On June 17, 2026, Petra Software (Pty) Ltd. ("Petra"), a subsidiary under majority control of the Company, entered into a share-for-share exchange agreement with Acheron Systems (Pty) Ltd. ("Acheron") to acquire all the issued and outstanding shares of Acheron in exchange for 2,900,000 ordinary no-par-value shares of Petra (the "Transaction"). The Company accounted for the transaction as a business combination. The transaction was a related party transaction.
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These interim consolidated financial statements include the accounts of Acheron since the date of acquisition and the historical accounts of the Company since inception.
Petra was incorporated for the sole purpose of acquiring Acheron. Prior to the acquisition, Petra had no operating activities and did not own any significant assets, intellectual property, patents, customer relationships, or other identifiable intangible assets. Consequently, management determined that the fair value of the equity interests issued by Petra was best evidenced by the fair value of Acheron acquired in the transaction.
Management performed a preliminary assessment of the identifiable assets acquired and liabilities assumed and concluded that the fair value of Acheron's equity interests approximated the fair value of its identifiable net assets as of the acquisition date. As a result, the preliminary fair value of the consideration transferred was determined to be equal to the preliminary fair value of the net assets acquired.
The preliminary purchase price allocation for the acquisition of Acheron is summarized as follows:
Preliminary acquisition consideration | ||||
Ordinary no-par-value shares of Petra | $ | |||
Total preliminary acquisition consideration | $ | |||
Fair value of net assets acquired | ||||
Cash and cash equivalents | $ | |||
Accounts receivable | ||||
Provisional tax paid | ||||
Property and equipment | ||||
Accounts payable and accrued liabilities | ( | ) | ||
Related party loan | ( | ) | ||
Total fair value of net assets acquired | $ | |||
Noncontrolling interest at acquisition | $ | |||
Company’s share in acquired net assets | ||||
Total fair value of net assets acquired | $ |
In accordance with the business combination method of accounting, the acquisition cost has been allocated to the identifiable underlying assets acquired and liabilities assumed, based upon their estimated fair value at the date of acquisition.
In accordance with ASC 805-30-30-2, the fair value of the ordinary no-par-value shares issued by Petra was determined using the fair value of Acheron's equity interests, which management concluded was more readily determinable than the fair value of the shares issued. Based on management's preliminary assessment, the fair value of the identifiable net assets acquired approximated the fair value of Acheron's equity interests at the acquisition date; therefore, the preliminary acquisition consideration was determined to be $33,828 .
The purchase price allocation is preliminary and subject to refinement during the measurement period. The Company is continuing its assessment of the fair value of acquired assets and assumed liabilities, including customer relationships, developed technology, and other identifiable intangible assets that may exist. Any adjustments resulting from the completion of the purchase price allocation will be recognized in accordance with ASC 805.
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Pro Forma Financial
Information
The following unaudited pro forma consolidated result of operations for the three and six month ended August 31, 2026 assuming the acquisition of Acheron Systems (Pty) Ltd. was completed on March 1, 2026:
Three Month Ended August 31, 2026 | Six Month Ended August 31, 2026 | |||||||
Pro-forma total revenues | $ | $ | ||||||
Pro-forma net income (loss) attributable to UPAY Inc. | $ | ( | ) | $ | ( | ) | ||
The unaudited pro-forma consolidated results above are based on the historical financial statements of Acheron Systems (Pty) Ltd., UPAY Inc., Rent Pay (Pty) Ltd, Miway Finance Inc., Huntpal LLC, AML Go (Pty), Petra Software, Petra Software (Pty) Ltd. are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at March 1, 2026, and are not indicative of the future of the combined company. The pro-forma results of operations also include the effects of the purchase accounting adjustments.
4. | Property and Equipment, Net |
Property and equipment, net, consists of the following:
Accumulated | August 31, 2026 | February 28, 2026 | ||||||||||||||
Cost | Depreciation | Net Carrying Value | Net Carrying Value | |||||||||||||
Computer equipment | $ | $ | ( | ) | $ | $ | ||||||||||
Computer software | ( | ) | ||||||||||||||
Furniture and fixtures | ( | ) | ||||||||||||||
Motor vehicle | ( | ) | ||||||||||||||
Office equipment | ( | ) | ||||||||||||||
Total | $ | $ | ( | ) | $ | $ | ||||||||||
During the six months ended August 31, 2026, the Company recorded depreciation expense of $3,225 (2025 – $3,475 ). During the six months ended August 31, 2026 the Company acquired fixed assets with a fair value of $29,440 pursuant to the acquisition of Acheron (Note 3). During the six months ended August 31, 2026 the Company acquired fixed assets of $1,471 (2025 – $830 ) of computer equipment and $728 (2025 – $nil ) of furniture and fixtures.
5. | Right-of-Use Assets, Net |
Right-of-use assets, net, consist of the following:
Accumulated | August 31, 2026 | February 28, 2026 | ||||||||||||||
Cost | Amortization | Net Carrying Value | Net Carrying Value | |||||||||||||
Right-of-use building (operating lease) | $ | $ | ( | ) | $ | $ | ||||||||||
Total | $ | $ | ( | ) | $ | $ | ||||||||||
During the six months ended August 31, 2026, the Company recorded rent expense of $13,199 (2025 – $11,562 ) related to Company's right-of-use building.
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6. | Due to Related Parties and Notes Payable – Related Parties |
a) | On March 24, 2021, the Company entered into a promissory note with the Chief Executive Officer ("CEO") of the Company for $ |
b) | On September 7, 2021, the Company entered into a promissory note with the CEO of the Company for $ |
c) | On February 11, 2022, the Company entered into a promissory note with the CEO of the Company for $ |
d) | During the year ended February 28, 2022, a company controlled by a significant shareholder of the Company purchased from a third-party lender a promissory note of the Company in the amount of $ |
e) | On May 2, 2022, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
f) | On September 9, 2022, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
g) | On January 31, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
h) | On March 3, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
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i) | On May 9, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
j) | On May 22, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
k) | On July 23, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
l) | On September 12, 2025, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
m) | On March 17, 2026, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
n) | On May 29, 2026, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
o) | On July 27, 2026, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
On August 28, 2026, the Company issued 1,000,000 shares of common stock with a fair value of $900,000 to settle the outstanding principals and accrued interest for the notes payable as discussed in note 6(d) through 6(l) totaling $384,405 and resulting in a loss on settlement of debt of $515,595 (Note 9(b)).
p) | As at August 31, 2026, the Company owes a total of $ |
q) | During the six months ended August 31, 2026, the Company incurred salary expenses of $ |
r) | During the six months ended August 31, 2026, the Company incurred directors' fees of $ |
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s) | During the six months ended August 31, 2026, the Company incurred directors' fees of $ |
t) | During the six months ended August 31, 2026, the Company incurred director fees of $ |
u) | During the six months ended August 31, 2026, the Company incurred director fees of $ |
v) | During the six months ended August 31, 2026, the Company incurred director fees of $ |
w) | During the six months ended August 31, 2026, the Company incurred director fees of $ |
7. | Notes Payable |
a) | On May 20, 2020, the Company entered into a promissory note with a third-party lender for $ |
b) | On May 27, 2020, the Company entered into a promissory note with the U.S. Small Business Administration for $ |
c) | On October 22, 2021, the Company entered into a promissory note with a third-party lender for $ |
8. Lease Liabilities
On February 1, 2025, the Company entered a one-year lease with a two-year renewal option for office space in South Africa. Rental payments are due at the beginning of each month and increase at an annual escalation rate of 6 %. On January 19, 2026, the Company entered into an amendment to the original lease which amended the annual escalation rate to 4 %. The base monthly rental rate is $2,078 (R36,225 ). The interest rate underlying the obligation in the lease was 11 % 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 August 31, 2026:
Building Lease | ||||
(Operating Lease) | ||||
Years ending February 28: | ||||
2027 | $ | |||
2028 | ||||
Net minimum lease payments | ||||
Less: amount representing interest payments | ( | ) | ||
Present value of net minimum lease payments | ||||
Less: current portion | ( | ) | ||
Long-term portion | $ | |||
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9. | Common Stock |
Share transactions for the six months ended August 31, 2026:
a) | On July 17, 2026, the Company issued |
b) | On August 28, 2026, the Company issued |
c) | During the six months ended August 31, 2026, the Company accrued |
d) | During the six months ended August 31, 2026, the Company issued |
Share transactions for the six months ended August 31, 2025:
e) | During the six months ended August 31, 2025, the Company accrued |
10. | Concentrations |
The Company's revenues were concentrated among four customers for the six months ended August 31, 2026 and two customers for the six months ended August 31, 2025.
Six Months Ended | Six Months Ended | |||||||
August 31, 2026 | August 31, 2025 | |||||||
Customer 1 | % | % | ||||||
Customer 2 | % | % | ||||||
Customer 3 | % | |||||||
Customer 4 | % | |||||||
The Company's receivables were concentrated among two customers as at August 31, 2026, and two customers as at February 28, 2026:
August 31, 2026 | February 28, 2026 | |||||||
Customer 1 | % | % | ||||||
Customer 2 | % | % | ||||||
11. | Commitments and Contingencies |
a) | 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 |
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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 $50,000 , representing a fair value of 50,000 shares of common stock issuable for services rendered for the period from March 2024 to August 2024. On February 26, 2025, the Company issued the 50,000 shares of common stock issuable.
On September 1, 2024, the Company extended its agreement with the Director for a new term of 24 months, effective September 1, 2024. In consideration of services to be rendered, the Company shall pay the Director 200,000 restricted shares of common stock, of which 100,000 shares will vest every 12 months over the term. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $33,500 , representing a fair value of 50,000 shares of common stock issuable for services rendered for the period from September 2024 to February 2025. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $67,000 , representing a fair value of 100,000 shares of common stock issuable for services rendered for the period from March 2025 to February 2026. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $33,775 , representing a fair value of 49,725 shares of common stock issuable for services rendered for the period from March 2026 to August 2026.
As at August 31, 2026, a total of 199,725 shares (February 28, 2026 – 150,000 shares) of common stock remain issuable to the director.
b) | 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 12 months and 3 years, respectively. In consideration for the services to be provided as a director, the Company agreed to pay the Officer and Director |
On March 1, 2024, the Company extended its agreement with the Director for a new term of 30 months, effective March 1, 2024. In consideration of services to be rendered, the Company shall pay the director 250,000 restricted shares of common stock, of which 100,000 shares will vest on or about September 1, 2025, with the remaining 150,000 shares vesting on or about September 1, 2026. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $70,000 representing a fair value of 100,000 shares of common stock issuable for services rendered for the period from March 2024 to February 2025. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $70,000 representing a fair value of 100,000 shares of common stock issuable for services rendered for the period from March 2025 to February 2026. Pursuant to the terms of the extended agreement, the Company recognized board member compensation of $52,932 representing a fair value of 49,589 shares of common stock issuable for services rendered for the period from March 2026 to August 2026.
As at August 31, 2026, a total of 249,589 shares (February 28, 2026 – 200,000 shares) of common stock remain issuable to the officer and director.
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c) | On September 20, 2025, the Company entered into agreements with a Director of the Company for director services and management services for a term of 36 months . In consideration for the services to be provided by the Director, the Company agreed to pay the Director 6 months . Pursuant to the terms of the agreement, the Company recognized board member compensation of $ |
As at August 31, 2026, a total of 44,565 shares (February 28, 2026 – nil shares) of common stock remain issuable to the Director.
d) | On July 1, 2026, the Company entered into agreements with a Director of the Company for director services and management services for a term of 24 months. In consideration for the services to be provided by the Director, the Company agreed to pay the Director |
As at August 31, 2026, a total of 16,576 shares (February 28, 2026 – nil shares) of common stock remain issuable to the Director.
12. | Deposit |
On October 15, 2021, the Company paid a R800,000 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, R600,000 of the deposit was returned to the Company. As at August 31, 2026, the balance of the deposit was $12,378 (R200,000 ) (February 28, 2026 – $12,584 (R200,000 )). The deposit will remain for as long as the Company uses the facility.
13. | Subsequent Events |
Management has evaluated subsequent events through the date that these financial statements were issued, and identified the following:
a) | By unanimous written Board of Directors consent dated September 21, 2026 and signed by all of the Company's directors between September 22 and 24, 2026, the Board of Directors ratified the subscription by Petra Software LLC for |
b) | On October 1, 2026, the Company entered into a promissory note with a company controlled by a significant shareholder of the Company for $ |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read together with our unaudited consolidated financial statements and related notes in Item 1 of this report, and with the audited consolidated financial statements, related notes and Management's Discussion and Analysis in the 2026 Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements" above. UPAY, Inc. is referred to “we,” “our” or “us.”
Overview
UPAY, Inc. is a Nevada holding company. Through its operating subsidiaries, principally Rent Pay (Pty) Ltd. and, since June 17, 2026, Acheron Systems (Pty) Ltd., it develops and licenses software and provides related services to the credit provider industry, mainly in South Africa. We manage the business as a single operating segment.
Most of our revenue and operating costs are in South African rand, while we report in U.S. dollars. Our reported results are therefore affected by changes in the rand/dollar exchange rate.
We have a history of operating losses. At August 31, 2026, we had an accumulated deficit of $4,452,327, a working capital deficit of $144,731 and a total stockholders' deficit of $287,698. These conditions raise substantial doubt about our ability to continue as a going concern. See "Liquidity and Capital Resources – Going Concern" below.
Results of Operations
Three Months Ended August 31, 2026 Compared to Three Months Ended August 31, 2025
Three Months | Three Months | Change | Change | |||||||||||||
2026 | 2025 | $ | % | |||||||||||||
Revenue | 285,256 | 188,947 | 96,309 | 51.0 | % | |||||||||||
Cost of revenue | 99,146 | 45,201 | 53,945 | 119.3 | % | |||||||||||
Gross profit | 186,110 | 143,746 | 42,364 | 29.5 | % | |||||||||||
Depreciation | 1,604 | 1,757 | (153 | ) | (8.7 | )% | ||||||||||
General and administrative | 426,234 | 247,260 | 178,974 | 72.4 | % | |||||||||||
Total operating expenses | 427,838 | 249,017 | 178,821 | 71.8 | % | |||||||||||
Loss from operations | (241,728 | ) | (105,271 | ) | (136,457 | ) | (129.6 | )% | ||||||||
Interest income | 237 | 1,646 | (1,409 | ) | (85.6 | )% | ||||||||||
Interest expense | (13,360 | ) | (13,627 | ) | 267 | 2.0 | % | |||||||||
Loss on settlement of notes payable | (515,595 | ) | – | (515,595 | ) | n/m | ||||||||||
Net loss | (770,446 | ) | (117,252 | ) | (653,194 | ) | (557.1 | )% | ||||||||
Net loss attributable to noncontrolling interest | 9,371 | – | 9,371 | n/m | ||||||||||||
Net loss attributable to UPAY, Inc. | (761,075 | ) | (117,252 | ) | (643,823 | ) | (549.1 | )% | ||||||||
Costs and expenses are shown as positive amounts; losses and other expense items are shown in parentheses. Percentage changes are calculated on the absolute value of the prior-period amount. "n/m" means not meaningful.
Revenue.
Revenue increased by $96,309, or 51.0%, to $285,256 from $188,947. Acheron, acquired on June 17, 2026, contributed $42,776. Excluding Acheron, revenue increased by $53,533, or 28.3%, to $242,480, which increase is primarily attributable to an increase in development fees charged by our South African operations during the period. Four customers accounted for about 46% of revenue in the six-month period, and our largest customer accounted for 21%.
Cost of revenue and gross profit.
Cost of revenue increased by $53,945, or 119.3%, to $99,146 from $45,201. Gross profit increased by $42,364, or 29.5%, to $186,110. Gross margin fell to 65.2% from 76.1%, which is primarily attributable to the increase in cost of revenue, as we engaged more contractors to assist with development.
General and administrative expenses.
General and administrative expenses increased by $178,974, or 97.4%, to $426,234 from $247,260, which increase is primarily attributable to share-based compensation and the overheads of Acheron, which we acquired on June 17, 2026.
Depreciation.
Depreciation was $1,604, compared with $1,757 in the prior-year quarter.
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Other income (expense).
Net loss.
Six Months Ended August 31, 2026 Compared to Six Months Ended August 31, 2025
Six Months | Six Months | Change | Change | |||||||||||||
2026 | 2025 | $ | % | |||||||||||||
Revenue | 511,603 | 359,361 | 152,242 | 42.4 | % | |||||||||||
Cost of revenue | 158,551 | 87,785 | 70,766 | 80.6 | % | |||||||||||
Gross profit | 353,052 | 271,576 | 81,476 | 30.0 | % | |||||||||||
Depreciation | 3,225 | 3,475 | (250 | ) | (7.2 | )% | ||||||||||
General and administrative | 694,424 | 503,974 | 190,450 | 37.8 | % | |||||||||||
Total operating expenses | 697,649 | 507,449 | 190,200 | 37.5 | % | |||||||||||
Loss from operations | (344,597 | ) | (235,873 | ) | (108,724 | ) | (46.1 | )% | ||||||||
Interest income | 543 | 1,904 | (1,361 | ) | (71.5 | )% | ||||||||||
Interest expense | (26,237 | ) | (25,269 | ) | (968 | ) | (3.8 | )% | ||||||||
Loss on settlement of notes payable | (515,595 | ) | – | (515,595 | ) | n/m | ||||||||||
Net loss | (885,886 | ) | (259,238 | ) | (626,648 | ) | (241.7 | )% | ||||||||
Net loss attributable to noncontrolling interest | 9,371 | – | 9,371 | n/m | ||||||||||||
Net loss attributable to UPAY, Inc. | (876,515 | ) | (259,238 | ) | (617,277 | ) | (238.1 | )% | ||||||||
Costs and expenses are shown as positive amounts; losses and other expense items are shown in parentheses. Percentage changes are calculated on the absolute value of the prior-period amount. "n/m" means not meaningful.
Revenue.
Cost of revenue and gross profit.
General and administrative expenses.
Non-cash share-based compensation paid in UPAY common stock was $185,151, consisting of $171,751 for directors and $13,400 for marketing services, compared with $68,500 in the prior-year period, an increase of $116,651.
Other income (expense).
Net loss.
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Liquidity and Capital Resources
August 31, 2026 | February 28, 2026 | |||||||
Cash and cash equivalents | $ | 117,304 | $ | 96,279 | ||||
Total current assets | 193,849 | 153,611 | ||||||
Total current liabilities | 338,580 | 420,326 | ||||||
Working capital deficit | $ | (144,731 | ) | $ | (266,715 | ) | ||
Total assets | $ | 283,761 | $ | 227,409 | ||||
Total liabilities | 566,171 | 741,267 | ||||||
Total stockholders' deficit | (282,410 | ) | (513,858 | ) | ||||
Accumulated deficit | (4,452,327 | ) | (3,569,874 | ) | ||||
At August 31, 2026, we had cash and cash equivalents of $117,304 and a working capital deficit of $144,731, compared with $96,279 and $266,715 at February 28, 2026. The working capital deficit improved by $121,984, primarily because we settled related-party notes and accrued interest through the issuance of 1,000,000 shares of common stock in August 2026 (see Note 9(b) to the financial statements).
Accounts payable and accrued liabilities increased by $75,388, to $213,705, which is primarily attributable to approximately $99,000 of client collections held in our collection account at August 31, 2026, which we paid out on the first business day after quarter-end.
Our current liabilities include $50,500 of third-party promissory notes that matured in 2023 and remain unpaid. Accrued interest on those notes totalled $28,106 at August 31, 2026. They also include $47,887 due to related parties, consisting of accrued interest and non-interest-bearing advances from directors and officers. Our non-current liabilities include $140,000 of related-party notes and a $77,800 SBA loan bearing interest at 3.75% per annum (including the current portion).
Cash Flows
Six Months Ended | Six Months Ended | |||||||
August 31, 2026 | August 31, 2025 | |||||||
Net cash used in operating activities | $ | (74,279 | ) | $ | (188,768 | ) | ||
Net cash provided by (used in) investing activities | 1,555 | (830 | ) | |||||
Net cash provided by financing activities | 100,000 | 170,000 | ||||||
Effect of exchange rate changes on cash | (6,251 | ) | (246 | ) | ||||
Net change in cash and cash equivalents | $ | 21,025 | $ | (19,844 | ) | |||
Operating activities.
Investing activities.
Financing activities.
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Going Concern and Capital Requirements
Our revenues are not sufficient to fund our operations and execute our business plan, and our independent registered public accounting firm's report on our fiscal 2026 financial statements. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. We plan to fund operations through equity financing and, as needed, continued loans and advances from related parties. On October 1, 2026, we borrowed $50,000 from a company controlled by a significant shareholder (see Note 13 to the financial statements), which we are using as working capital for our South African operations and to cover our costs as a public company, including audit, legal and OTC Markets fees. No related party is obligated to continue providing funding, and we have no committed sources of financing. Additional equity financing, if available, will dilute existing stockholders. If we cannot obtain adequate financing on acceptable terms when needed, we may have to curtail operations, delay growth initiatives, or seek other strategic alternatives. We estimate that we will need approximately $350,000 over the next twelve months to fund working capital for our South African operations and the costs of being a public company, including audit, legal and OTC Markets fees.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Estimates
Preparing financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. Our critical accounting estimates are described in the 2026 Annual Report. Recent accounting pronouncements are discussed in Note 2(g) to the financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of August 31, 2026. Disclosure controls and procedures are designed to ensure that information we are required to disclose in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to management, including our principal executive and principal financial officers, to allow timely decisions about required disclosure.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2026, our disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting described in the 2026 Annual Report, which relates to an inadequate control environment, the absence of independent directors and the absence of an audit committee financial expert.
Changes in Internal Control Over Financial Reporting
Except as described below, there were no changes in our internal control over financial reporting during the quarter ended August 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. On June 17, 2026, we acquired Acheron Systems (Pty) Ltd. We are integrating Acheron's processes and controls into our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any legal proceedings that management believes would have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this Item. Information about risks affecting our business appears in the 2026 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended August 31, 2026, we issued the following securities that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K:
On June 17, 2026, we issued 50,000 shares of common stock, with a fair value of $70,000, to RKP Securities LLC, an entity controlled by a director, pursuant to a Director Agreement. We issued these securities in reliance on the exemption from registration in Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities.
As of August 31, 2026 and the date of this report, we were in default on the following obligations:
· | Promissory note dated May 20, 2020 payable to a third-party lender, with principal of $25,000 and interest at 10% per annum, which matured on May 20, 2023. Accrued interest was $15,712 at August 31, 2026. |
· | Promissory note dated October 22, 2021 payable to a third-party lender, with principal of $25,500 and interest at 10% per annum, which matured on October 13, 2023. Accrued interest was $12,394 at August 31, 2026. |
· | Loan dated May 27, 2020 from the U.S. Small Business Administration, with principal of $77,800 and interest at 3.75% per annum, repayable in monthly instalments of $380. We have not made any payments on this loan since it was made. Accrued interest was $17,500 at August 31, 2026. |
The total principal of these obligations is $128,300, and total accrued interest on them is $45,606 at August 31, 2026. We have not received any demand for payment or notice of enforcement action from any of these lenders.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended August 31, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
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Item 6. Exhibits.
Exhibit No. | Description | |
10.1* | Assignment of Notes Payable, dated July 30, 2026, among Emerging Markets Consulting, LLC, Randall Greene and UPAY, Inc. | |
10.2* | Note Extension Agreement, dated May 28, 2026, between UPAY, Inc. and Jacob Casper Fölscher | |
31.1* | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1* | Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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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.
UPAY, INC. | ||
Date: October 20, 2026 | By: | /s/ Jacob C Folscher |
Name: Jacob C Folscher | ||
Title: Chief Executive Officer (Principal Executive Officer) | ||
Date: October 20, 2026 | By: | /s/ Jacob C Folscher |
Name: Jacob C Folscher | ||
Title: Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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