UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: November 30, 20212022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to _______
Commission File No. 001-38402
(Exact name of registrant as specified in its charter)
| Nevada | 26-3509845 | |
| (State or other jurisdiction of incorporation or formation) | (I.R.S. Employer Identification Number) |
1560 Sawgrass Corporate Parkway, Sunrise, | 33323 | |
| (Address of principal executive offices) | (Zip Code) |
(954) 888-9779
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, $0.00001 Par Value Per Share | NXTP | The NASDAQ Stock Market LLC (Nasdaq Capital Market) |
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 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 ☐ 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 ☐ 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“large accelerated filer,” “accelerated filer”“accelerated filer” and “smaller“smaller reporting company”company” and “emerging“emerging growth company”company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | 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
AsThe number of shares of the registrant’s Common Stock Outstanding as of January 13, 202218, 2023 was 5,939,894 as adjusted for the registrant had 109,247,388 shares of its commonCompany’s 1-for-20 reverse stock par value $0.00001 per share, outstanding.split, which was effective on January 6, 2023.
NEXTPLAY TECHNOLOGIES, INC.,
formerly MONAKER GROUP, INC.
FORM 10-Q
For the Quarter Ended NOVEMBERNovember 30, 20212022
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,,” contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of NextPlay Technologies, Inc., formerly Monaker Group, Inc. (the “Company”“Company”), that are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,“expects,” “anticipates,“anticipates,” “targets,“targets,” “goals,“goals,” “projects,“projects,” “intends,“intends,” “plans,“plans,” “believes,“believes,” “seeks,“seeks,” “estimates,“estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. In particular, as discussed in greater detail below, our financial condition and results could be materially adversely affected by the continued impacts and disruptions caused by the novel coronavirus (COVID-19) global pandemic and governmental responses thereto. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements included in this Report. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under the section entitled “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”SEC”), including the Company’s Annual Report on Form 10-K for the year ended February 28, 2021,2022, as filed with the SEC on June 8, 202121, 2022 (under the heading “Risk Factors” and in other parts of that report) and in the Company’s Quarterly ReportsReport on Form 10-Q for the quarter ended May 31, 2021, as filed with the SEC on July 14, 2021 (under the heading “Risk Factors”), and for the quarter ended August 31, 2021,2022, as filed with the SEC on October 20, 202124, 2022 (under the heading “Risk Factors”). The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason, except as otherwise required by law.
The following discussion is based upon our unaudited Condensed Consolidated Financial Statements included elsewhere in this Report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, derivative liabilities and related disclosure of contingencies. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. On an on-going basis, we evaluate our estimates, including those related to allowances for doubtful accounts, impairmentthe fair value of long-term assets, especially goodwill andinvestments, the carrying amounts of intangible assets, assumptions useddepreciation and amortization, deferred income taxes, purchase price allocation in the valuation of stock-based compensation, revenue, leases,connection with business combinations and litigation.allowance for credit losses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, andincluding in our most recent Annual Report on Form 10-K. All references to years relate to the Company’s fiscal year ended February 28 or 29 (during leap years) of the particular year.
ii
Summary Risk Factors
We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:
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| ● | Currently pending or future litigation or governmental proceedings could result in | |
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| ● | Our future success depends on the continuing efforts of our key employees and our ability to attract, hire, retain and motivate highly skilled employees in the future; | |
| ● | We rely on relationships with developers to provide | |
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| ● | Our business partners may be unable to honor their obligations to us, or their actions may put us at risk; | |
| ● | HotPlay’s go-to-market strategy and corresponding timeline are dependent on being able to successfully recruit substantial additional resources within FY23. Failure to do this could result in the revenues generated from HotPlay being delayed beyond FY23; |
iii
| ● | Although Longroot | |
| ● | Longroot | |
| ● | Our ability to generate revenue through the sale of digital assets is subject to risk associated with economic and market conditions, the acceptance and widespread use of | |
| ● | The performance of the digital assets issued is dependent on the performance of the issuer and underlying asset, which is unpredictable and may result in reputation damage should they underperform; | |
| ● | There are cyber security risks related to digital asset trading; | |
| ● | Our tokens might be used for illegal or improper purposes, which could expose us to additional liability and | |
| ● | Developing NextBank into a comprehensive FinTech solution provider involves a high level of complexity, may require substantial resources and costs, and is subject to obtaining regulatory approval; | |
| ● | NextBank’s ability to originate loans is subject to risk associated with economic and market conditions; | |
| ● | NextBank uses correspondent banks and is subject to risk associated with termination of such relationships, which may negatively impact its operations; | |
| ● | Our success is subject to the development of new or upgraded products, services and features over time; | |
| ● | Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, and consumer protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business; | |
| ● | Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully respond to these regulations, our business could be negatively impacted; | |
| ● | NextBank is subject to various regulatory capital requirements. Regulatory changes or actions may alter the requirements for capital; | |
| ● | NextBank faces a risk of non-compliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering, customer due diligence, and combating the financing of terrorism statutes and regulations; | |
| ● | We are subject to anti-bribery, anti-corruption and similar laws, and non-compliance with such laws could subject us to criminal penalties or significant fines and harm our business and reputation; | |
| ● | If we do not adequately protect our intellectual property, our ability to compete could be impaired; | |
| ● | Certain of our products are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent us from enforcing or defending our proprietary technologies; |
iv
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| ● | Stockholders may be diluted significantly as a result of the issuance of additional shares of our common stock or securities convertible into, or exercisable for, shares of our common stock; | |
| ● | The | |
| ● | If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price; | |
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v
WHERE YOU CAN FIND OTHER INFORMATION
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended.amended, with the SEC. The SEC maintains a website (https:(https://www.sec.gov)www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. Additional information about us is available on our website at www.nextplaytechnologies.com. We do not incorporate the information on or accessible through our websites into this filing, and you should not consider any information on, or that can be accessed through, our websites as part of this filing.
vi
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
NextPlay Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| November 30, | February 28, | |||||||
2021 (Unaudited) | 2021 (Audited) | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalent | $ | 20,472,178 | $ | 444,920 | ||||
| Restricted cash | 945,224 | — | ||||||
| Prepaid expenses and other current assets | 3,142,958 | 235,746 | ||||||
| Accounts receivable, net | 1,220,964 | — | ||||||
| Unbilled receivables | 4,369,424 | — | ||||||
| Other receivable, related parties | 160,036 | — | ||||||
| Advance for investment | 3,227,117 | — | ||||||
| Investment in unconsolidated affiliate: Short-term | 10,072 | — | ||||||
| Convertible notes receivable, related party | 7,657,024 | 3,000,000 | ||||||
| Loans receivable | 9,126,612 | — | ||||||
| Total current assets | $ | 50,331,609 | $ | 3,680,666 | ||||
| Non-current assets | ||||||||
| Investment in unconsolidated affiliates: Long-term | 45,996 | — | ||||||
| Intangible assets, net | 18,893,957 | 7,759,603 | ||||||
| Goodwill | 46,373,194 | — | ||||||
| Computers, furniture and equipment, net | 680,320 | 25,793 | ||||||
| Operating lease right-of-use asset | 4,195,864 | — | ||||||
| Security Deposits | 440,378 | — | ||||||
| Total non-current asset | $ | 70,629,709 | $ | 7,785,396 | ||||
| Total assets | $ | 120,961,318 | $ | 11,466,062 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Line of credit & notes payable, net | $ | 6,773,028 | $ | — | ||||
| Accounts payable and accrued expenses | 7,716,322 | 343,941 | ||||||
| Other current liabilities | 117,866 | 11,163 | ||||||
| Deferred revenue | 517,310 | — | ||||||
| Current portion of operating lease liability | 869,533 | — | ||||||
| Other current liabilities-customer deposits | 9,638,613 | — | ||||||
| Other liabilities affiliate | — | 38,260 | ||||||
| Notes payable - related party | 742,611 | 1,053,082 | ||||||
| Total current liabilities | $ | 26,375,283 | $ | 1,446,446 | ||||
| Non-current liabilities | ||||||||
| Line of Credit and Notes Payable Long Term, net | 322,318 | — | ||||||
| Note payable long term, related parties | 966,314 | — | ||||||
| Operating lease liability, non-current portion | 3,350,955 | — | ||||||
| Total non-current liabilities | $ | 4,639,587 | $ | — | ||||
| Total liabilities | $ | 31,014,870 | $ | 1,446,446 | ||||
| Commitments and Contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Series A Preferred stock, $0.01 par value; 3,000,000 authorized; 0 and 0 shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | — | — | ||||||
| Series B Preferred stock, $0.00001 par value; 10,000,000 authorized; 0 and 10,000,000 shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | — | — | ||||||
| Series C Preferred stock, $0.00001 par value; 3,828,500 authorized; 0 and 3,828,500 shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | — | — | ||||||
| Series D Preferred stock, $0.00001 par value; 6,100,000 authorized; 0 and 0 shares issued and outstanding at November 30, 2021 and February 28, 2021, respectively | — | — | ||||||
| Common stock, $0.00001 par value; 500,000,000 shares authorized; 109,247,388 and 62,400,000 shares outstanding at November 30, 2021 and February 28, 2021, respectively | 1,092 | 624 | ||||||
| Treasury stock | (771,456 | ) | — | |||||
| Additional paid-in-capital | 105,662,478 | 11,599,357 | ||||||
| Accumulated other comprehensive income | (276,038 | ) | 10,221 | |||||
| Accumulated deficit | (19,469,705 | ) | (1,200,309 | ) | ||||
| Stockholders’ equity attributable to parent | $ | 85,146,371 | $ | 10,409,893 | ||||
| Non-controlling interest in consolidated affiliates | 4,800,077 | (390,277 | ) | |||||
| Total stockholders’ equity | 89,946,448 | 10,019,616 | ||||||
| Total liabilities and stockholders’ equity | $ | 120,961,318 | $ | 11,466,062 | ||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 2,563,125 | $ | 4,282,110 | ||||
| Short term investments | 305,412 | 304,509 | ||||||
| Loans receivable, net | 21,500,012 | 16,556,288 | ||||||
| Loans receivable - related parties, net | 705,000 | 725,000 | ||||||
| Unbilled receivables | 7,316 | 2,179 | ||||||
| Other receivables | 572,490 | 339,233 | ||||||
| Other receivables, related parties | - | 155,425 | ||||||
| Prepaid expenses and other current assets | 1,225,397 | 826,419 | ||||||
| Advances for investments | 1,977,213 | 3,227,117 | ||||||
| Investments in unconsolidated affiliates: Short-term | 42,763 | 8,722 | ||||||
| Assets held for sale - current | 32,171,727 | 7,332,994 | ||||||
| Total current assets | $ | 61,070,455 | $ | 33,759,996 | ||||
| Non-current assets | ||||||||
| Investments in unconsolidated affiliates: Long-term | 4,415 | 6,258 | ||||||
| Convertible notes receivable, related party, net | 4,594,214 | 4,594,214 | ||||||
| Intangible assets, net | 17,172,910 | 9,883,789 | ||||||
| Goodwill | 19,740,037 | 27,949,554 | ||||||
| Computers, furniture and equipment, net | 315,395 | 366,499 | ||||||
| Operating lease right-of-use assets | 515,246 | 1,894,654 | ||||||
| Security deposits | 437,012 | 177,972 | ||||||
| Assets held for sale - non current | - | 21,120,557 | ||||||
| Total non-current assets | $ | 42,779,229 | $ | 65,993,497 | ||||
| Total assets | $ | 103,849,684 | $ | 99,753,493 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Line of credit and notes payable, net | $ | 5,330,781 | $ | 4,463,471 | ||||
| Accounts payable and accrued expenses | 9,739,651 | 4,288,575 | ||||||
| Accounts payable and accrued expenses - related parties | 95,936 | 433,814 | ||||||
| Other current liabilities | 134,576 | 127,779 | ||||||
| Current portion of operating lease liability | 192,669 | 218,181 | ||||||
| Other current liabilities - customer demand deposits payable | 27,275,501 | 7,497,465 | ||||||
| Notes payable - related party | 1,143,518 | 765,040 | ||||||
| Liabilities held for sale - current | 13,632,727 | 9,708,053 | ||||||
| Total current liabilities | $ | 57,545,359 | $ | 27,502,378 | ||||
| Non-current liabilities | ||||||||
| Note payable long term, related parties | - | 966,314 | ||||||
| Operating lease liability, net of current portion | 337,439 | 1,543,627 | ||||||
| Other long-term liability | 14,529 | 6,087 | ||||||
| Liabilities held for sale - non current | - | 1,873,889 | ||||||
| Total non-current liabilities | $ | 351,968 | $ | 4,389,917 | ||||
| Total liabilities | $ | 57,897,327 | $ | 31,892,295 | ||||
| Commitments and Contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Series A Preferred stock, $0.01 par value; 3,000,000 authorized; 0 and 0 shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively | - | - | ||||||
| Series B Preferred stock, $0.00001 par value; 10,000,000 authorized; 0 and 0 shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively | - | - | ||||||
| Series C Preferred stock, $0.00001 par value; 3,828,500 authorized; 0 and 0 shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively | - | - | ||||||
| Series D Preferred stock, $0.00001 par value; 6,100,000 authorized; 0 and 0 shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively | - | - | ||||||
| Common stock, $0.00001 par value; 25,000,000 shares authorized; 5,665,861 and 5,418,001 shares outstanding at November 30, 2022 and February 28, 2022, respectively (1) | 57 | 55 | ||||||
| Treasury stock | (771,453 | ) | (771,453 | ) | ||||
| Additional paid-in-capital | 98,140,556 | 104,394,390 | ||||||
| Accumulated other comprehensive income | (1,009,004 | ) | (218,703 | ) | ||||
| Accumulated deficit | (57,166,790 | ) | (39,173,079 | ) | ||||
| Stockholders’ equity attributable to parent | $ | 39,193,366 | $ | 64,231,210 | ||||
| Non-Controlling Interest in consolidated subsidiaries | 1,151,999 | 182,805 | ||||||
| Non-Controlling Interest in held for sale | 5,606,992 | 3,447,183 | ||||||
| Total stockholders’ equity | 45,952,357 | 67,861,198 | ||||||
| Total liabilities and stockholders’ equity | $ | 103,849,684 | $ | 99,753,493 | ||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Operations, Net and Comprehensive Loss
(Unaudited)
| For the nine months ended | For the three months ended | |||||||||||||||
| November 30, 2022 | November 30, 2021 | November 30, 2022 | November 30, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue | ||||||||||||||||
| Interest and financial services | 1,551,620 | 713,879 | 628,672 | 420,522 | ||||||||||||
| Total revenue | 1,551,620 | 713,879 | 628,672 | 420,522 | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Interest and financial services | 1,115,177 | 295,571 | 447,153 | 208,232 | ||||||||||||
| Total Cost of Revenue | 1,115,177 | 295,571 | 447,153 | 208,232 | ||||||||||||
| Gross Profit | 436,443 | 418,308 | 181,519 | 212,290 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 7,305,321 | 5,774,588 | 622,048 | 4,225,235 | ||||||||||||
| Salaries and benefits | 4,037,251 | 3,441,496 | 1,149,068 | 1,699,139 | ||||||||||||
| Technology and development | 783,971 | 285,149 | 262,648 | 162,384 | ||||||||||||
| Stock-based compensation | 1,024,819 | 880,435 | 401,393 | 665,202 | ||||||||||||
| Selling and promotions expense | 55,011 | 38,719 | 5,371 | 33,328 | ||||||||||||
| Depreciation and amortization | 1,123,324 | 1,448,967 | 332,757 | 764,802 | ||||||||||||
| Total operating expenses | 14,329,697 | 11,869,354 | 2,773,285 | 7,550,090 | ||||||||||||
| Operating Loss | (13,893,254 | ) | (11,451,046 | ) | (2,591,766 | ) | (7,337,800 | ) | ||||||||
| Other Income/ (Expense) | ||||||||||||||||
| Valuation loss, net | (33,282 | ) | (2,339,071 | ) | (30,115 | ) | 2,283,865 | |||||||||
| Allowance for credit loss | - | (3,126,543 | ) | - | (3,126,543 | ) | ||||||||||
| Interest income (expense) | (631,306 | ) | 56,431 | (245,532 | ) | 55,224 | ||||||||||
| Realized loss on sale of marketable securities | - | (59,586 | ) | - | - | |||||||||||
| Other income/(expense) | (297,129 | ) | 45,552 | (239,394 | ) | 155,348 | ||||||||||
| Total other income/(expense) | (961,717 | ) | (5,423,217 | ) | (515,041 | ) | (632,106 | ) | ||||||||
| Net loss before tax from continuing operations | (14,854,971 | ) | (16,874,263 | ) | (3,106,807 | ) | (7,969,906 | ) | ||||||||
| Estimated corporate taxes | - | (6,343 | ) | - | (2,961 | ) | ||||||||||
| Net Loss after tax from continuing operations: | (14,854,971 | ) | (16,880,606 | ) | (3,106,807 | ) | (7,972,867 | ) | ||||||||
| Share of non-controlling interest | (239,706 | ) | (764,633 | ) | (49,489 | ) | (284,156 | ) | ||||||||
| Net loss from continuing operations attributable to parent | (14,615,265 | ) | (16,115,973 | ) | (3,057,318 | ) | (7,688,711 | ) | ||||||||
| Net Loss after tax from discontinued operation: | (5,685,680 | ) | (2,776,366 | ) | (188,589 | ) | (1,697,952 | ) | ||||||||
| Share of loss to non-controlling interest for discontinued operation | (2,307,234 | ) | (622,943 | ) | (92,408 | ) | (327,031 | ) | ||||||||
| Net loss from discontinued operation attributable to parent | (3,378,446 | ) | (2,153,423 | ) | (96,181 | ) | (1,370,921 | ) | ||||||||
| Net loss attributable to parent | (17,993,711 | ) | (18,269,396 | ) | (3,153,499 | ) | (9,059,632 | ) | ||||||||
| Other Comprehensive (loss) income | ||||||||||||||||
| Foreign currency translation gain (loss) from continuing operations | (381,722 | ) | 33,309 | 116,203 | (88,762 | ) | ||||||||||
| Foreign currency translation loss from discontinued operations | (894,772 | ) | (643,879 | ) | 188,589 | (381,312 | ) | |||||||||
| Total other comprehensive loss | (1,276,494 | ) | (610,570 | ) | 304,792 | (470,074 | ) | |||||||||
| Comprehensive Loss | (21,817,145 | ) | (20,267,542 | ) | (2,990,604 | ) | (10,140,893 | ) | ||||||||
| Currency translation allocated to: | ||||||||||||||||
| Equity holders of the Company | (790,301 | ) | (286,259 | ) | 215,652 | (145,763 | ) | |||||||||
| Non-controlling interests of the subsidiaries | (486,193 | ) | (324,311 | ) | 89,140 | (324,311 | ) | |||||||||
| Total foreign currency translation | (1,276,494 | ) | (610,570 | ) | 304,792 | (470,074 | ) | |||||||||
| Total comprehensive loss attributable to: | ||||||||||||||||
| Equity holders of the Company | (18,784,011 | ) | (18,555,655 | ) | (2,937,848 | ) | (9,205,395 | ) | ||||||||
| Non-controlling interests of the subsidiaries | (3,033,134 | ) | (1,711,887 | ) | (52,756 | ) | (935,498 | ) | ||||||||
| Total comprehensive loss | (21,817,145 | ) | (20,267,542 | ) | (2,990,604 | ) | (10,140,893 | ) | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic (1) | 5,583,350 | 4,515,712 | 5,666,476 | 4,430,351 | ||||||||||||
| Diluted (1) | 5,583,350 | 4,515,712 | 5,666,476 | 4,430,351 | ||||||||||||
| Basic net (loss) per share from continuing operations: (1) | (2.62 | ) | (3.57 | ) | (0.54 | ) | (1.74 | ) | ||||||||
| Basic net (loss) per share from discontinued operations: (1) | (0.61 | ) | (0.48 | ) | (0.01 | ) | (0.31 | ) | ||||||||
| Total basic net (loss) per share | (3.22 | ) | (4.05 | ) | (0.55 | ) | (2.05 | ) | ||||||||
| Diluted net (loss) per share from continuing operations: (1) | (2.62 | ) | (3.57 | ) | (0.54 | ) | (1.74 | ) | ||||||||
| Diluted net (loss) per share from discontinued operations: (1) | (0.61 | ) | (0.48 | ) | (0.01 | ) | (0.31 | ) | ||||||||
| Total diluted net (loss) per share | (3.22 | ) | (4.05 | ) | (0.55 | ) | (2.05 | ) | ||||||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
For the three months ended November 30, 2022
| Common Stock Shares(1) | Common Stock Amount(1) | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total stockholders’ equity | Non-controlling interest | Stockholders’ equity | ||||||||||||||||||||||||||||
| Balances, August 31, 2022 | 5,635,090 | 57 | (771,453 | ) | 97,735,040 | (54,013,291 | ) | (1,224,656 | ) | 41,725,697 | 6,811,748 | 48,537,445 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (3,153,499 | ) | - | (3,153,499 | ) | (141,897 | ) | (3,295,396 | ) | |||||||||||||||||||||||
| Shares issued for compensation | 25,808 | 1 | - | 126,806 | - | - | 126,807 | - | 126,807 | |||||||||||||||||||||||||||
| Shares issued for consulting services | 3,689 | - | - | 274,588 | - | - | 274,588 | - | 274,588 | |||||||||||||||||||||||||||
| Shares issued for assets acquisition | 1,274 | (1 | ) | - | 4,122 | - | - | 4,121 | - | 4,121 | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 215,652 | 215,652 | 89,140 | 304,792 | |||||||||||||||||||||||||||
| Balances, November 30, 2022 | 5,665,861 | 57 | (771,453 | ) | 98,140,556 | (57,166,790 | ) | (1,009,004 | ) | 39,193,366 | 6,758,991 | 45,952,357 | ||||||||||||||||||||||||
For the nine months ended November 30, 2022
| Common Stock Share(1) | Common stock value(1) | Treasury Stock | Additional Paid in Capital | Accumulated deficit | Accumulated other comprehensive income | Total Shareholders’ equity | Minority interest | Total Shareholders’ equity | ||||||||||||||||||||||||||||
| Balances, February 28, 2022 | 5,418,001 | 55 | (771,453 | ) | 104,394,390 | (39,173,079 | ) | (218,703 | ) | 64,231,210 | 3,629,988 | 67,861,198 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (17,993,711 | ) | - | (17,993,711 | ) | (2,546,941 | ) | (20,540,652 | ) | |||||||||||||||||||||||
| Fair value adjustment from valuation report | - | - | - | (6,923,296 | ) | - | - | (6,923,296 | ) | 4,540,291 | (2,383,005 | ) | ||||||||||||||||||||||||
| Shares issued for compensation | 60,738 | 1 | - | 383,120 | - | - | 383,121 | - | 383,121 | |||||||||||||||||||||||||||
| Shares issued for consulting services | 29,018 | - | - | 641,700 | - | - | 641,700 | - | 641,700 | |||||||||||||||||||||||||||
| Shares issued for assets acquisition | 158,104 | 1 | - | 1,266,488 | - | - | 1,266,489 | - | 1,266,489 | |||||||||||||||||||||||||||
| Increase in ownership of subsidiary - HotPlay | - | - | - | (1,621,846 | ) | - | - | (1,621,846 | ) | 1,621,846 | - | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | (790,301 | ) | (790,301 | ) | (486,193 | ) | (1,276,494 | ) | |||||||||||||||||||||||
| Balances, November 30, 2022 | 5,665,861 | 57 | (771,453 | ) | 98,140,556 | (57,166,790 | ) | (1,009,004 | ) | 39,193,366 | 6,758,991 | 45,952,357 | ||||||||||||||||||||||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares(1) | Common Stock Amount(1) | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total shareholders’ equity | Minority interest | Total Shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||
| Balances, August 31, 2021 | - | - | - | - | 4,484,699 | 45 | (771,453 | ) | 77,519,351 | (10,410,073 | ) | (130,275 | ) | 66,207,595 | 4,230,235 | 70,442,830 | ||||||||||||||||||||||||||||||||||||
| Shares issued for consulting and bonus | - | - | - | - | 28,303 | - | - | 1,194,344 | - | - | 1,194,344 | - | 1,194,344 | |||||||||||||||||||||||||||||||||||||||
| Stock issued for direct offering | - | - | - | - | 949,367 | 10 | - | 27,849,812 | - | - | 27,849,822 | - | 27,849,822 | |||||||||||||||||||||||||||||||||||||||
| Warrant Cancellation | - | - | - | - | - | - | - | (900,000 | ) | - | - | (900,000 | ) | - | (900,000 | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | - | - | - | (145,763 | ) | (145,763 | ) | (324,311 | ) | (470,074 | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | - | - | (9,059,632 | ) | - | (9,059,632 | ) | (611,187 | ) | (9,670,819 | ) | |||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | - | - | - | - | - | - | - | - | - | - | - | 1,500,340 | 1,500,340 | |||||||||||||||||||||||||||||||||||||||
| Balances, November 30, 2021 | - | - | - | - | 5,462,369 | 55 | (771,453 | ) | 105,663,507 | (19,469,705 | ) | (276,038 | ) | 85,146,366 | 4,800,077 | 89,946,443 | ||||||||||||||||||||||||||||||||||||
For the nine months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares(1) | Common Stock Amount(1) | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total shareholders’ equity | Minority interest | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||||
| Balances, February 28, 2021 | - | - | - | - | 3,120,000 | $ | 31 | - | $ | 11,600,386 | $ | (1,200,309 | ) | $ | 10,221 | $ | 10,410,329 | $ | (390,277 | ) | $ | 10,020,052 | ||||||||||||||||||||||||||||||
| Reduction of share capital | - | - | - | - | (520,000 | ) | (5 | ) | - | (2,999,896 | ) | - | - | (2,999,901 | ) | - | (2,999,901 | ) | ||||||||||||||||||||||||||||||||||
| Reverse acquisition recapitalization | - | - | - | - | 1,192,710 | 12 | - | 62,813,297 | - | - | 62,813,309 | 5,401,901 | 68,215,210 | |||||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares | - | - | - | - | 562,310 | 6 | - | (112 | ) | - | - | (106 | ) | - | (106 | ) | ||||||||||||||||||||||||||||||||||||
| Shares issued for consulting and bonus | - | - | - | - | 44,953 | - | - | 1,816,091 | - | - | 1,816,091 | - | 1,816,091 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for debt payment | - | - | - | - | 16,750 | - | - | 669,997 | - | - | 669,997 | - | 669,997 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for business combination | - | - | - | - | 96,279 | 1 | - | 4,813,933 | - | - | 4,813,934 | - | 4,813,934 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for private placement | - | - | - | - | 949,367 | 10 | - | 27,849,811 | - | - | 27,849,821 | - | 27,849,821 | |||||||||||||||||||||||||||||||||||||||
| Warrant Cancellation | - | - | - | - | - | - | - | (900,000 | ) | - | - | (900,000 | ) | - | (900,000 | ) | ||||||||||||||||||||||||||||||||||||
| Share repurchase | - | - | - | - | - | - | (771,453 | ) | - | - | - | (771,453 | ) | - | (771,453 | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | - | - | - | (286,259 | ) | (286,259 | ) | (324,311 | ) | (610,570 | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | - | - | (18,629,396 | ) | - | (18,269,396 | ) | (1,387,576 | ) | (19,656,972 | ) | |||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | - | - | - | - | - | - | - | - | - | - | - | 1,500,340 | 1,500,340 | |||||||||||||||||||||||||||||||||||||||
| Balances, November 30, 2021 | - | - | - | - | 5,462,369 | 55 | (771,453 | ) | 105,663,507 | (19,469,705 | ) | (276,038 | ) | 85,146,366 | 4,800,077 | 89,946,443 | ||||||||||||||||||||||||||||||||||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Operations, Net and Comprehensive LossCash Flows
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| November 30, | November 30, | November 30, | November 30, | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Media subscription and services | $ | 3,698,329 | — | $ | 6,015,365 | — | ||||||||||
| Interest and bank services | 420,522 | — | 713,879 | — | ||||||||||||
| Travel services | 80,249 | — | 117,139 | — | ||||||||||||
| Total revenue | $ | 4,199,100 | — | $ | 6,846,383 | — | ||||||||||
| Cost of Revenue | ||||||||||||||||
| Media subscription and services | 1,675,419 | — | 2,828,189 | — | ||||||||||||
| Interest and bank services | 208,232 | — | 295,571 | — | ||||||||||||
| Travel services | 69,281 | — | 103,512 | — | ||||||||||||
| Total Cost of Revenue | $ | 1,952,932 | — | $ | 3,227,272 | — | ||||||||||
| Gross Profit | $ | 2,246,168 | — | $ | 3,619,111 | — | ||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | 4,792,330 | 230,338 | 7,038,226 | 453,331 | ||||||||||||
| Salaries and benefits | 2,913,939 | 91,716 | 5,042,481 | 203,393 | ||||||||||||
| Technology and development | 344,890 | 115 | 596,143 | 336 | ||||||||||||
| Stock-based compensation | 665,202 | — | 880,435 | — | ||||||||||||
| Selling and promotions expense | 441,096 | 954 | 802,725 | 954 | ||||||||||||
| Depreciation and amortization | 1,963,855 | 139,332 | 3,490,595 | 333,446 | ||||||||||||
| Total operating expenses | 11,121,312 | 462,455 | 17,850,605 | 991,460 | ||||||||||||
| Operating Loss | (8,875,144 | ) | (462,455 | ) | (14,231,494 | ) | (991,460 | ) | ||||||||
| Other Income/ (Expense) | ||||||||||||||||
| Valuation loss, net | (842,678 | ) | — | (2,339,071 | ) | — | ||||||||||
| Impairment loss | — | — | (3,126,543 | ) | — | |||||||||||
| Interest income (expense) | 55,224 | (14,937 | ) | 56,431 | (39,765 | ) | ||||||||||
| Realized loss on sale of marketable securities | — | — | (59,586 | ) | — | |||||||||||
| Foreign Exchange gain | — | 56,835 | — | 56,835 | ||||||||||||
| Other expense | (13,537 | ) | (281 | ) | (11,398 | ) | — | |||||||||
| Total other (expenses)/income | (800,991 | ) | 41,617 | (5,480,167 | ) | 17,070 | ||||||||||
| Net loss before tax | $ | (9,676,135 | ) | (420,838 | ) | $ | (19,711,661 | ) | (974,390 | ) | ||||||
| Estimated corporate taxes | 5,316 | — | 54,689 | — | ||||||||||||
| Net loss | (9,670,819 | ) | (420,838 | ) | (19,656,972 | ) | (974,390 | ) | ||||||||
| Share of non-controlling interest | (611,187 | ) | 111,762 | (1,387,576 | ) | (243,170 | ) | |||||||||
| Net loss attributable to parent | $ | (9,059,632 | ) | (532,600 | ) | $ | (18,269,396 | ) | (731,220 | ) | ||||||
| Other Comprehensive (loss) income: | ||||||||||||||||
| Foreign currency translation (loss) | (145,763 | ) | (44,382 | ) | (286,259 | ) | (23,296 | ) | ||||||||
| Total other comprehensive (loss) | (145,763 | ) | (44,382 | ) | (286,259 | ) | (23,296 | ) | ||||||||
| Comprehensive loss | (9,816,582 | ) | (465,220 | ) | (19,943,231 | ) | (997,686 | ) | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic | 94,544,672 | 104,563 | 104,368,960 | 104,563 | ||||||||||||
| Diluted | 94,544,672 | 104,563 | 104,368,960 | 104,563 | ||||||||||||
| Basic net loss per share | $ | (0.10 | ) | (5.09 | ) | $ | (0.18 | ) | (6.99 | ) | ||||||
| Diluted net loss per share | $ | (0.10 | ) | (5.09 | ) | $ | (0.18 | ) | (6.99 | ) | ||||||
| For the Nine months Ended | ||||||||
| November 30, | November 30, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from operations | $ | (17,993,711 | ) | (18,269,396 | ) | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,302,165 | 3,310,293 | ||||||
| Valuation loss, net | 31,439 | 2,416,176 | ||||||
| Stock based compensation | 1,024,819 | 880,435 | ||||||
| Gain on Sale of assets | - | (25 | ) | |||||
| Share of non-controlling interest | (2,546,940 | ) | (1,387,576 | ) | ||||
| Gain on currency translation | (1,276,494 | ) | (610,570 | ) | ||||
| Allowance for credit loss | - | 3,126,543 | ||||||
| Provision from employee benefits | 5,461 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Amounts due from related parties | 155,425 | 46,953 | ||||||
| Amounts due to related party | (2,496 | ) | 73,188 | |||||
| Accounts receivable | - | 4,863,328 | ||||||
| Other Receivables | (233,257 | ) | - | |||||
| Unbilled receivable | (5,137 | ) | (4,369,424 | ) | ||||
| Loans receivable | (4,923,724 | ) | (1,389,808 | ) | ||||
| Prepaid expenses and other current assets | (1,104,288 | ) | 197,587 | |||||
| Security deposits | (256,901 | ) | (67,518 | ) | ||||
| Operating lease liabilities | 131,541 | 49,924 | ||||||
| Accounts payable & accrued expenses | 5,256,909 | 751,155 | ||||||
| Deferred revenue - related party | - | (450,152 | ) | |||||
| Other current liabilities | 12,660 | (1,745,492 | ) | |||||
| Other Liabilities - Customer Deposits | 20,096,877 | - | ||||||
| Cash used in operating activities | $ | (325,652 | ) | (12,574,379 | ) | |||
| Cash flows from investing activities: | ||||||||
| Short term investment | (762 | ) | 235,658 | |||||
| Investment in unconsolidated affiliate | - | 952,550 | ||||||
| Payment in advance for investment | - | (1,000,000 | ) | |||||
| Additions of intangible assets - related party | (86,063 | ) | (919,357 | ) | ||||
| Additions of intangible assets | (4,711,175 | ) | (970,630 | ) | ||||
| Purchase of computer, furniture, and equipment | (94,975 | ) | (250,636 | ) | ||||
| Proceeds from disposal of computer, furniture, and equipment | 75,621 | 1,460 | ||||||
| Effects of a business combination of NextBank | - | 4,200,006 | ||||||
| Effects of a business combination of NextPlay (Monaker) | - | 9,323,686 | ||||||
| Cash (used in) provided by investing activities | $ | (4,817,354 | ) | 11,572,737 | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable - related party | 1,362,478 | 700,000 | ||||||
| Repayment of notes payable - related party | (1,045,276 | ) | (213,155 | ) | ||||
| Treasury stock transaction | - | (500,000 | ) | |||||
| Proceeds from promissory notes - related party | - | 1,680,504 | ||||||
| Proceeds from promissory notes | 1,066,228 | 1,987,318 | ||||||
| Proceeds from promissory notes - related party | - | (1,330,967 | ) | |||||
| Payments on promissory notes | (296,250 | ) | (8,199,576 | ) | ||||
| Proceeds from sale of stock | - | 27,850,000 | ||||||
| Cash provided by (used in) financing activities | $ | 1,087,180 | 21,974,124 | |||||
| Cash and Cash Equivalents | ||||||||
| Net change during the period | (4,055,826 | ) | 20,972,482 | |||||
| Balance, beginning of period – continuing operations | 5,645,372 | 444,920 | ||||||
| Balance, beginning of period – discontinued operations | 973,579 | - | ||||||
| Balance, beginning of period | 6,618,951 | 444,920 | ||||||
| Balance, end of period from continued operations | $ | 2,563,125 | 21,417,402 | |||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | $ | 108,785 | 520,785 | |||||
| NON-CASH TRANSACTIONS | ||||||||
| Addition of intangible assets through the advance investment | 1,250,000 | - | ||||||
| Settle (a) Convertible note receivable and (b) note payable due to closing share exchange transaction | - | 12,000,000 | ||||||
| Settle (a) Convertible note receivable and (b) share capital increase due to closing share exchange transaction | - | 3,000,000 | ||||||
| Share issuances for asset acquisition – Fighter Base and Token IQ | 1,266,489 | - | ||||||
| Share issuances for consulting and compensation | 1,024,821 | 1,816,100 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the nine months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares | Common Stock $ Value | Treasury Stock | Subscription receivable | Additional Paid In Capital | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | Minority interest | Total shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance at February 28, 2021 | — | — | — | — | 62,400,000 | $ | 624 | — | $ | — | $ | 11,599,357 | $ | (1,200,309 | ) | $ | 10,221 | $ | 10,409,893 | $ | (390,277 | ) | $ | 10,019,616 | ||||||||||||||||||||||||||||||||
| Reduction of share capital | (10,400,000 | ) | (104 | ) | — | — | (2,999,896 | ) | — | — | (3,000,000 | ) | — | (3,000,000 | ) | |||||||||||||||||||||||||||||||||||||||||
| Reverse acquisition recapitalization | 10,000,000 | 100 | 3,828,500 | 38 | 23,854,203 | 239 | — | — | 62,813,297 | — | — | 62,813,536 | 5,401,901 | 68,215,437 | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred | (10,000,000 | ) | (100 | ) | (3,828,500 | ) | (38 | ) | 11,246,200 | 112 | — | — | (112 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares issued for compensation | — | — | — | — | 499,062 | 5 | — | — | 1,061,095 | — | — | 1,061,100 | — | 1,061,100 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for consulting | — | — | — | — | 400,000 | 4 | — | — | 754,996 | — | — | 755,000 | — | 755,000 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for debt payment | — | — | — | — | 335,000 | 3 | — | — | 669,997 | — | — | 670,000 | — | 670,000 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for business acquisition | — | — | — | — | 1,925,581 | 19 | — | — | 4,813,933 | — | — | 4,813,952 | — | 4,813,952 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for private placement | — | — | — | — | 18,987,342 | 190 | — | — | 27,849,811 | — | — | 27,850,001 | — | 27,850,001 | ||||||||||||||||||||||||||||||||||||||||||
| Warrant cancellation | — | — | — | — | — | — | — | — | (900,000 | ) | — | — | (900,000 | ) | — | (900,000 | ) | |||||||||||||||||||||||||||||||||||||||
| Share repurchase | — | — | — | — | — | — | (771,456 | ) | — | — | — | (771,456 | ) | — | (771,456 | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (286,259 | ) | (286,259 | ) | (324,311 | ) | (610,570 | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | — | — | (18,269,396 | ) | — | (18,269,396 | ) | (1,387,576 | ) | (19,656,972 | ) | ||||||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | — | — | — | — | — | — | — | — | — | — | — | — | 1,500,340 | 1,500,340 | ||||||||||||||||||||||||||||||||||||||||||
| Balance at November 30, 2021 | — | — | — | — | 109,247,388 | $ | 1,092 | $ | (771,456 | ) | $ | — | $ | 105,662,478 | $ | (19,469,705 | ) | $ | (276,038 | ) | $ | 85,146,371 | $ | 4,800,077 | $ | 89,946,448 | ||||||||||||||||||||||||||||||
For the three months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares | Common Stock $ Value | Treasury Stock | Subscription receivable | Additional Paid In Capital | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | Minority interest | Total shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2021 | — | — | — | — | 89,693,984 | $ | 895 | (771,456 | ) | $ | — | $ | 77,518,323 | $ | (10,410,073 | ) | $ | (130,275 | ) | $ | 66,207,414 | $ | 4,235,235 | $ | 70,442,649 | |||||||||||||||||||||||||||||||
| Shares issued for compensation | — | — | — | — | 491,062 | 6 | — | — | 1,045,095 | — | — | 1,045,101 | — | 1,045,101 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for consulting | — | — | — | — | 75,000 | 1 | — | — | 149,250 | — | — | 149,251 | — | 149,251 | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for private placement | — | — | — | — | 18,987,342 | 190 | — | — | 27,849,810 | — | — | 27,850,000 | — | 27,850,000 | ||||||||||||||||||||||||||||||||||||||||||
| Warrant cancellation | — | — | — | — | — | — | — | — | (900,000 | ) | — | — | (900,000 | ) | — | (900,000 | ) | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (145,763 | ) | (145,763 | ) | (324,311 | ) | (470,074 | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | — | — | (9,059,632 | ) | — | (9,059,632 | ) | (611,187 | ) | (9,670,819 | ) | ||||||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | — | — | — | — | — | — | — | — | — | — | — | — | 1,500,340 | 1,500,340 | ||||||||||||||||||||||||||||||||||||||||||
| Balance at November 30, 2021 | — | — | — | — | 109,247,388 | $ | 1,092 | (771,456 | ) | $ | — | $ | 105,662,478 | $ | (19,469,705 | ) | $ | (276,038 | ) | $ | 85,146,371 | $ | 4,800,077 | $ | 89,946,448 | |||||||||||||||||||||||||||||||
For the nine months ended November 30, 2020
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares | Common Stock $ Value | Treasury Stock | Subscription receivable | Additional Paid In Capital | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | Minority interest | Total shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 6, 2020 (inception) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Share contribution cash | — | — | — | — | 13,000,000 | 132 | — | 2,150,752 | — | — | 2,150,884 | 32,184 | 2,183,068 | |||||||||||||||||||||||||||||||||||||||||||
| Intangible assets | — | — | — | — | 39,000,000 | 390 | — | — | 6,403,004 | — | — | 6,403,394 | — | 6,403,394 | ||||||||||||||||||||||||||||||||||||||||||
| Unpaid capital | — | — | — | — | — | — | — | (955,783 | ) | — | — | — | (955,783 | ) | (32,184 | ) | (987,967 | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | — | — | (731,220 | ) | — | (731,220 | ) | (243,170 | ) | (974,390 | ) | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (11,415 | ) | (11,415 | ) | (11,881 | ) | (23,296 | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at November 30, 2020 | — | — | — | — | 52,000,000 | $ | 522 | $ | — | $ | (955,783 | ) | $ | 8,553,756 | $ | (731,220 | ) | $ | (11,415 | ) | $ | 6,855,860 | $ | (255,051 | ) | $ | 6,600,809 | |||||||||||||||||||||||||||||
For the three months ended November 30, 2020
| Preferred B Shares | Preferred B Amount | Preferred C Shares | Preferred C Amount | Common Stock Shares | Common Stock $ Value | Treasury Stock | Subscription receivable | Additional Paid In Capital | Accumulated deficit | Accumulated other comprehensive income | Total shareholders’ equity | Minority interest | Total shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of August 31, 2020 | — | — | — | — | 52,134,541 | 522 | — | (1,878,113 | ) | 8,584,804 | (198,620 | ) | 21,086 | 6,529,679 | (354,932 | ) | 6,174,747 | |||||||||||||||||||||||||||||||||||||||
| Share contribution cash | — | — | — | — | (134,541 | ) | — | — | 31,048 | (31,048 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Intangible assets | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Unpaid capital | — | — | — | — | — | — | — | 891,282 | — | — | — | 891,282 | — | 891,282 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | — | — | (532,600 | ) | — | (532,600 | ) | 111,762 | (420,838 | ) | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | — | — | — | — | (32,501 | ) | (32,501 | ) | (11,881 | ) | (44,382 | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at November 30, 2020 | — | — | — | — | 52,000,000 | $ | 522 | $ | — | $ | (955,783 | ) | $ | 8,553,756 | $ | (731,220 | ) | $ | (11,415 | ) | $ | 6,855,860 | $ | (255,051 | ) | $ | 6,600,809 | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the nine months ended | ||||||||
| November 30, 2021 | November 30, 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (18,269,396 | ) | $ | (731,220 | ) | ||
| Adjustments to reconcile net income to net cash used for operating activities: | ||||||||
| Depreciation and amortization | 3,310,293 | 337,187 | ||||||
| Foreign exchange gain, net | — | (56,195 | ) | |||||
| Valuation loss, net | 2,416,176 | — | ||||||
| Stock based compensation | 880,435 | — | ||||||
| Goodwill | 76,961 | — | ||||||
| Loss from computer, furniture and equipment written off | — | 12,751 | ||||||
| Gain on sale of computer, furniture and equipment | (25 | ) | — | |||||
| Loss on minority interest | (1,387,576 | ) | (243,170 | ) | ||||
| Loss on currency translation | (610,571 | ) | — | |||||
| Impairment loss | 3,126,543 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Amounts due from related parties | 46,953 | (4,192 | ) | |||||
| Amounts due to related party | 73,188 | 76,393 | ||||||
| Accounts receivable | 4,863,328 | — | ||||||
| Unbilled receivable | (4,369,424 | ) | — | |||||
| Loans receivable | (1,389,808 | ) | — | |||||
| Prepaid expenses and other current assets | 120,627 | (172,686 | ) | |||||
| Security deposits | (67,518 | ) | — | |||||
| Operating lease liabilities | 49,924 | 8,846 | ||||||
| Accounts payable & accrued expenses | 751,155 | 105,119 | ||||||
| Deferred revenue - related party | (450,152 | ) | — | |||||
| Other current liabilities | (1,745,492 | ) | 10,760 | |||||
| Cash used in operating activities | $ | (12,574,379 | ) | $ | (656,407 | ) | ||
| Cash flows from investing activities: | ||||||||
| Short term investment - related party | 235,658 | — | ||||||
| Investment in unconsolidated affiliate | 952,550 | — | ||||||
| Payment in advance for investment | (1,000,000 | ) | — | |||||
| Convertible notes receivable - related party | — | (2,500,000 | ) | |||||
| Additions of intangible assets – related party | (919,357 | ) | (2,035,425 | ) | ||||
| Additions of intangible assets | (970,630 | ) | (7,226 | ) | ||||
| Purchase of computer, furniture, and equipment | (250,636 | ) | (29,513 | ) | ||||
| Proceeds from disposal of fixed assets | 1,460 | — | ||||||
| Effects of a business combination of NextBank | 4,200,006 | — | ||||||
| Effects of a business combination of NextPlay (Monaker) | 9,323,686 | — | ||||||
| Cash provided by (used in) investing activities | $ | 11,572,737 | $ | (4,572,164 | ) | |||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of ordinary shares | — | 2,044,217 | ||||||
| Proceed from notes payable - related party | 700,000 | 1,883,420 | ||||||
| Advance received from related parties for share subscription | — | 2,500,000 | ||||||
| Repayment of notes payable - related party | (213,155 | ) | (1,123,443 | ) | ||||
| Treasury stock transaction | (500,000 | ) | — | |||||
| Proceeds from promissory notes - related party | 1,680,504 | — | ||||||
| Proceeds from promissory notes | 1,987,318 | — | ||||||
| Payments on promissory notes – related party | (1,330,967 | ) | — | |||||
| Payments on promissory notes | (8,199,576 | ) | — | |||||
| Proceeds from sale of stock | 27,850,000 | — | ||||||
| Cash provided by financing activities | $ | 21,974,124 | $ | 5,304,194 | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | — | (5,028 | ) | |||||
| Cash, Cash Equivalents, and Restricted Cash | ||||||||
| Net change during the period | 20,972,482 | 70,595 | ||||||
| Balance, beginning of period | 444,920 | — | ||||||
| Balance, end of period | $ | 21,417,402 | $ | 70,595 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | $ | 520,785 | $ | 36,468 | ||||
| NON-CASH TRANSACTIONS | ||||||||
| Addition of intangible assets through exchanging shares | — | 5,554,278 | ||||||
| Settle (a) Convertible note receivable and (b) note payable due to closing share exchange transaction | 12,000,000 | — | ||||||
| Settle (a) Convertible note receivable and (b) share capital increase due to closing share exchange transaction | 3,000,000 | — | ||||||
| Operating lease right to use assets obtained in exchange for new operating lease liabilities | — | 8,755 | ||||||
| Share issues for consulting and employee compensation | 1,816,100 | — | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| For the nine months ended | ||||||||
| November 30, | ||||||||
| 2021 | 2020 | |||||||
| Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position | ||||||||
| Cash and cash equivalents | $ | 20,472,178 | $ | 70,595 | ||||
| Restricted cash | $ | 945,224 | $ | - | ||||
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 21,417,402 | $ | 70,595 | ||||
NextPlay Technologies, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Summary of Business Operations and Significant Accounting Policies
Nature of Operations and Business Organization
NextPlay Technologies, Inc. and, together with its consolidated subsidiaries (“NextPlay,(collectively, “NextPlay,” “we,“we,” “our,“our,” “us,“us,” or the “Company”“Company”), is building a technology solutions company, offering games, in-game advertising, digital asset products and services, and connected TV and travel booking services to consumers and corporations within a growing worldwide digital ecosystem. NextPlay’s engaging products and services utilize innovative advertising technology (“AdTech”AdTech”), Artificial Intelligence (“AI”AI”) and financial technology (“FinTech”FinTech”) solutions to leverage the strengths and channels of its existing and acquired technologies.
As of November 30, 2022, NextPlay is organized into three (3)two divisions: (i) NextMedia, the Company’s Interactive Digital Media Division;Division and (ii) NextFinTech, the Company’s Finance and Technology Division; and (iii) NextTrip, the Company’s Travel Division.
| (i) | NextMedia, the Company’s Interactive Digital Media Division |
In the Interactive Digital Media Division, NextPlay closed its acquisition of HotPlay Enterprise Limited and its In-Game Advertising (“IGA”IGA”) platform on June 30, 2021 and acquired a 51% interest in Reinhart TV AG (“Reinhart”) on June 23, 2021. Reinhart owns 100 percent of Zappware, a 20-year-old interactive Digital TV solutions company based in Belgium. The acquisition of Reinhart gives NextPlay potential reach into tens of millions of households with its IGA, Video Game, FinTech, and Travel products.
| (ii) | NextFinTech, the Company’s Finance and Technology Division |
In the Finance and Technology Division, the Company’s acquisition of International Financial Enterprise Bank (“IFEB”IFEB”), now called NextBank International, Inc. (“NextBank”NextBank”), and the conditional approval from the Labuan Financial Services Authority (“Labuan FSA”) to operate a general insurance and reinsurance business, is expected to allow NextPlay to offer individuals and households asset management and banking services, and travel related services such as travel finance and travel insurance, subject to regulatory approval and licensing.
Our Company, in accordance with Thailand foreign ownership laws, holds an indirect control of Longroot (Thailand) Company Limited (“Longroot”Longroot”), which operates in financial advisory service and owns an Initial Coin Offering (“ICO”ICO”) Portal which is approved and regulated by the Thai Securities and Exchange Commission (“Thai SEC”SEC”). The Portal enables us to crypto-securitize an array of high qualityhigh-quality alternative assets, such as video games, insurance contracts, and real estate. These digital assets serve as a new asset class, which the Company’s management believes will create significant opportunities to accelerate products and services within the FintechFinTech division’s asset management business.
Leveraging Longroot Thailand’s blockchain technology, NextPlay is developing blockchain products and solutions to support its other business units, such as a next generation insurance solution to be offered through our Travel division.
Our Travel division currently offers booking solutions for both business and leisure travel and plans to expand its product and services offerings by integrating multiple technologies from other NextPlay divisions.
On October 14, 2021, “Longroot Inc.” (a subsidiary company) changed its name to “Next Fintech Holdings, Inc.”
Conditional Approval for License to Carry on General Insurance and Reinsurance Business
Effective November 16, 2021, the Labuan FSAFinancial Services Authority (the “Labuan FSA”) approved the Company’s application to carry on general insurance and reinsurance business, subject to certain conditions including (i) payment of a $15,000 annual license fee, (ii) submission of evidence reflecting paid up capital amounting to MYR 10.0$10.0 mil (approximately to $2,390,000$2,260,000 US), (iii) submission of proof of registration as a member of Labuan International Insurance Association, and (iv) submission of a Management Services Agreement with the appointed insurance manager, (v) submission of a Letter of Undertaking, and (vi) submission of constituent documents to the Registration of Company Unit. The conditions arewere to be met within 3 months of November 29, 2021, the date Labuan FSA issued a letter confirming the conditional approval. In August 2022, the Company received a permission letter from Labuan FSA to extend the establishment until November 30, 2022. The Company plans to use the general insurance license to issue primary insurance products and the reinsurance license to issue crypto-securitized insurance in collaboration with Longroot.
On October 14, 2021, “Longroot Inc.” (a subsidiary of the Company) changed its name to “Next Fintech Holdings, Inc.” The Company plans to use Next Fintech Holdings, Inc. as the holding company for its FinTech division.
Reverse Stock Split
Effective January 6, 2023, the Company implemented a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.00001 per share (the “Common Stock”), at a ratio of 1-for-20 (the “Reverse Split”). In order to implement the Reverse Split, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effectuate the Reverse Split in accordance with Nevada Revised Statutes (“NRS”) Section 78.209. The Company is effecting the Reverse Split to satisfy the $1.00 minimum bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2), for continued listing on The Nasdaq Capital Market.
In connection with the reverse stock split, the number of authorized shares of common stock and the number of issued and outstanding shares of common stock are proportionally reduced without change in par value per share of $0.00001. Also on the Effective Date, all options, warrants and other convertible securities of the Company that are outstanding immediately prior to the Reverse Split will be adjusted by dividing the number of shares of Common Stock into which the options, warrants and other convertible securities are exercisable or convertible by 20, and multiplying the exercise or conversion price thereof by 20, all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share. Accordingly, all historical per share data, number of shares outstanding and other common stock equivalents for the periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split.
Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc.
On June 28, 2022, the Company entered into a series of agreements, including a securities exchange agreement, with William Kerby, the Company’s co-Chief Executive Officer and director, Donald P. Monaco, a director of the Company, and British Columbia-based TGS E-Sports Inc. (TSX-V: TGS, OTC: TGSEF) (“TGS”), a public company whose securities are listed for trading on the Canadian TSX Venture Exchange, pursuant to which the Company has agreed to sell the Company’s travel business, NextTrip Group, LLC (“NextTrip”), and its 51% ownership of Reinhart Digital TV (the 100% owner of Zappware) to TGS in exchange for securities of TGS as discussed in further detail below. TGS, is a leading esports tournament solutions provider.
Prior to the execution of the securities exchange agreement, NextTrip issued an aggregate of 915,000 units in NextTrip to Messrs. Kerby and Monaco to resolve certain management unit issuances provided for in NextTrip’s Operating Agreement as consideration for services rendered.
As consideration for the sale of Reinhart and NextTrip, upon closing of the transaction, (i) the Company will receive 232,380,952 shares of newly created nonvoting convertible preferred stock of TGS (the “TGS Preferred”), valued at $12.2 million, and (ii) Messrs. Kerby and Monaco, both of whom hold certain equity interests in NextTrip (discussed above), will receive an aggregate of 69,714,286 TGS common shares, valued at $3.66 million, of which 11,619,048 TGS common shareswill be held in escrow for a period of time. The TGS Preferred shares will be redeemable in certain situations, can be sold subject to certain transfer restrictions (including a right of first refusal in favor of TGS), and may be converted into shares of TGS common shares in certain limited circumstances, including mandatory conversion upon the occurrence of certain events. In the event that the TGS Preferred shares are converted into shares of TGS common shares by the Company at any time, the Company is obligated to distributed all such shares of TGS common shares in a stock dividend to its shareholders. Concurrently with a determination to convert the TGS Preferred shares into shares of TGS common shares, if ever, the Company will set a shareholder record date for a special dividend to distribute all of the common shares of TGS held by the Company to the Company’s shareholders, on a pro-rata basis.
In addition to the securities exchange agreement, the Company, NextTrip, Reinhart and TGS also entered into a separation agreement on June 28, 2022, to further document the separation of NextTrip and Reinhart from the Company and to assign, transfer and convey certain assets and liabilities held in NextTrip or the Company’s name, respectively, to NextTrip or the Company, respectively, to allow for the separation of the businesses in accordance with the securities exchange agreement at closing of the transaction. The separation agreement also provides for the termination of certain intercompany agreements and accounts by and between the parties at closing of the transaction, sets rights related to confidentiality, non-disclosure and maintenance of attorney-client privilege matters, and also provides for a mutual release by and among the Company, NextTrip and Reinhart for all pre-closing claims between themselves and their officers, directors, affiliates, successors and assigns.
In addition, the separation agreement provides for the contribution of (i) $1.5 million to NextTrip and (ii) an additional $1.5 million in ten (10) equal monthly installments beginning July 1, 2022, in exchange for NextTrip, as of May 1, 2022, agreeing to assume the ongoing operating expenses of NextTrip and Reinhart. NextTrip has also agreed to assume payments under that certain payment obligation of the Company pursuant an Amendment to Intellectual Property Purchase Agreement effective May 18, 2021, by and between the Company, IDS Inc., TD Assets Holding LLC, and Ari Daniels in the approximate amount of $2,500,000, provided, however, that, if the Company fails to make any of the above installment payments within five (5) business days of being due, that such IDS payment obligation reverts back to the Company. As of November 30, 2022, the Company has not made the requisite installment payments to NextTrip and, as such, the IDS payment obligation has reverted back to the Company.
Closing of the transaction remains subject to various conditions, including (without limitation) regulatory approvals, approval of certain related matters by TGS’ shareholders and consummation of a financing by TGS, and is expected to occur in Q4 2022. No assurances can be provided that the closing conditions will be satisfied, or that the transaction will be consummated on the anticipated timeline, or at all.
The transaction, once consummated, is expected to streamline the Company’s business operations and management, improve capital allocation, and is expected to unlock shareholder value by offering investors a pure-play investment in the Digital Media and Financial Technology sectors.
As a result of the foregoing, as of November 30, 2022, Reinhart/Zappware and NextTrip were no longer treated as a division of the Company; accordingly, for the nine-month and three-month periods ended November 30, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia. Assets and liabilities of Reinhart TV AG/Zappware and NextTrip were classified as held for sale according to Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc.
Reverse Acquisition of HotPlay Enterprise Ltd.
On July 23, 2020, the Company (then known as Monaker Group, Inc. (“Monaker”Monaker”)) entered into a Share Exchange Agreement (as amended from time to time, the “Share“Share Exchange Agreement”Agreement”) with HotPlay Enterprise Limited (“HotPlay”HotPlay”) and the stockholders of HotPlay (the “HotPlay Stockholders”“HotPlay Stockholders”). Pursuant to the Share Exchange Agreement, Monaker exchanged 52,000,000 shares of its common stock for 100% of the issued and outstanding capital of HotPlay, with HotPlay continuing as a wholly owned subsidiary of Monaker. The reverse acquisition between HotPlay and Monaker was completed on June 30, 2021. After the reverse acquisition, effective July 9, 2021, Monaker changed its name to “NextPlay Technologies, Inc.” The HotPlay acquisition was accounted for as a reverse acquisition with HotPlay being deemed the acquiring company for accounting purposes. The comparative figures included in the accompanying condensed consolidated financial statements for the period as from incorporation date to June 30, 2021 represents financial position and operating results of HotPlay Enterprise Ltd.
During the nine-month period ended November 30, 2022, the Company completed the fair value assessment (Purchase Price Allocation) of the net identifiable assets and liabilities assumed by an independent appraiser. In order to reflect the adjustment to the provisional fair value of the identifiable assets and liabilities of the reverse acquisition of HotPlay Enterprise Ltd. at the acquisition date, the adjustments were made as follows:
The following table summarizes the fair value of consideration transferred:
| Number of Monaker common shares outstanding as of 6/30/2021(1) | 1,192,710 | |||
| Monaker share price as of 6/30/2021(1) | $ | 44.80 | ||
| Fair value of common shares | $ | 53,433,415 |
| (1) | Reflects retroactively the 1-for-20 reverse stock split for number of shares and share prices that became effective January 6, 2023. Refer to Note 1 - Nature of Operations and Business Organization. |
| Reverse Acquisition of HotPlay Enterprise Ltd. (6/30/21) | ||||
| Fair Value of Monaker assets acquired | ||||
| Cash | $ | 9,323,686 | ||
| Current assets | $ | 24,082,699 | ||
| Non-current assets | $ | 26,247,848 | ||
| Net assets acquired | $ | 59,654,233 | ||
| Fair Value of Monaker liabilities assumed | ||||
| Current liabilities | $ | 32,482,320 | ||
| Non-current liabilities | $ | 5,420,131 | ||
| Net liabilities assumed | $ | 37,902,451 | ||
| Net assets acquired | $ | 21,751,782 | ||
| Purchase consideration | ||||
| Number of Monaker common shares outstanding as of 6/30/2021 | 23,854,203 | |||
| Monaker share price as of 6/30/2021 | $ | 2.24 | ||
| Preliminary estimate of fair value of common shares | $ | 53,433,415 | ||
| Fair value of total estimated consideration transferred | $ | 53,433,415 | ||
| Purchase Price Allocation | ||||
| Fair value of Monaker net assets acquired as of 6/30/2021 | $ | 21,751,782 | ||
| Fair value of total estimated consideration transferred | $ | 53,433,415 | ||
| Goodwill | $ | 31,681,633 | ||
| As of June 30, 2021 | ||||||||||||
| Provisional fair value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | 7,837,802 | - | 7,837,802 | ||||||||
| Current assets | 25,568,584 | (9,571 | ) | 25,559,013 | ||||||||
| Intangible assets | 11,932,042 | 1,809,023 | 13,741,065 | |||||||||
| Goodwill | 40,554,998 | (1,799,452 | ) | 38,755,546 | ||||||||
| Non-current assets | 5,442,439 | - | 5,442,439 | |||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | (32,482,319 | ) | - | (32,482,319 | ) | |||||||
| Non-current liabilities | (5,420,131 | ) | - | (5,420,131 | ) | |||||||
| Total fair value of net assets from reverse acquisition | 53,433,415 | - | 53,433,415 | |||||||||
| Fair value of non-controlling interests of the subsidiaries | $ | 5,433,783 | 6,018,273 | 11,452,056 | ||||||||
The business combination accounting is provisionally complete for allFair value adjustments were from the increase in fair value of intangible assets which are developed software and liabilities acquired ongoodwill upon the acquisitioncompletion of fair value assessment (Purchase Price Allocation) of the subsidiaries subsequent to the closing date and we will continueof reverse acquisition. As a result, non-controlling interests of the subsidiaries amounting to evaluate$6.0 million were adjusted to reflect the fair values withinvalue as of June 30, 2021 by recognizing the 1-year timeframe as providedadjustment in the applicable guidance.additional paid-in capital in consolidated statement of stockholders’ equity.
Interim Financial Statements
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principlesUS GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended February 28, 2021,2022 and notes thereto and other pertinent information contained in the annual reportCompany’s Annual Report on Form 10-K, which the Company has filed with the Securities and Exchange Commission (the “SEC”“SEC”) on June 8, 2021.21, 2022.
The results of operations for the three and nine months ended November 30, 20212022 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2022.2023.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include the fair value of investments, the carrying amounts of intangible assets, depreciation and amortization, the valuation of stock options, and deferred income taxes.taxes, purchase price allocation in connection with the business combination and allowance for credit losses.
Cash and Cash Equivalents
For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company had no cash equivalents on November 30, 2021,2022, and February 28, 2021.2022.
Restricted CashShort Term Investments
Restricted cash represents cash retained in an escrow accountThe short term investments are a short-term certificate of deposit with a maturity date more than three months, as required by the Office of the Commissioner of Financial Institutions (“OCIF”) for business purposes for more than 90 days. The outstanding restricted cash aspurpose of November 30, 2021 was $945,224, and was $0 asone of February 28, 2021.the Company’s subsidiaries.
AccountsOther Receivable, and Unbilled Receivables
A receivable is recognized when the Company has an unconditional right to receive consideration. If revenue has been recognized before the Company has an unconditional right to receive consideration, the amount is presented as an unbilled receivable. A receivable is measured at transaction price less impairmentcredit loss, and unbilled receivables are measured at the amount of consideration that the GroupCompany is entitled to, less impairmentcredit loss. The Company calculates its allowance for current expected credit losses (“CECL”) based on lifetime expected credit losses at each reporting date. CECLs are calculated based on its historical credit loss experience and adjusted for forward-looking factors specific to the debtors and the economic environment. A receivable is written off when there is no reasonable expectation of recovering the contractual cash flows.
Prepaid ExpensesLoans Receivable and Other Current Assets
The Company records cash paid in advanceAllowance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are expensed over time according to the period where it is indicated on the contract.
Convertible Notes Receivable .Loan Losses
Loans Receivable
Loans that the Company has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are stated at their outstanding principal amount adjusted for charge-offs and the allowance for loan losses. Interest is accrued as earned based upon the daily outstanding principal balance.
The accrual of interest is generally discontinued at the time a loan is 90 days past due, unless the credit is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged- offcharged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans placed on nonaccrual or charged-off is reversed against interest income. Interest on these loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
As of November 30, 2021, there were no loans placed on non-accrual.Allowance for Loan Losses
The allowance for loan losses is evaluated on a regular basis by management and is based upon collectability of loans, based on historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This represents management’s estimate of CECL in the Company’s loan portfolio over its expected life, which is the contract term being the reasonable and supportable period that we can reasonably and supportably forecast future economic conditions to estimate expected credit losses. The historical loss experience is to be adjusted for asset-specific risk characteristics and economic conditions, including both current conditions and reasonable and supportable forecasts of future conditions.
Advance for InvestmentThis evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Due to potential changes in conditions, it is possible that changes in estimates will occur and that such changes could be material to the amounts reported in the Company’s financial statements.
AdvancePrepaid Expenses and Other Current Assets
The Company records cash paid in advance for investment representsgoods and/or services to be received in the future as prepaid expenses. Prepaid expenses are expensed over time according to the period indicated on the respective contract. Other current assets are recognized when it is probable that the future economic benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over the expected number of periods during which economic benefits will be realized.
Advances for Investments
Advances for investments represent cash deposits transferred to the investmentpotential seller as a deposit payment, as stipulated in the relevant investment purchase agreement.agreement, mainly for potential acquisitions of assets or businesses.
Investment in Unconsolidated Affiliates
Investment in unconsolidated affiliates is recognized at cost less valuation loss.
Computer, Furniture and Equipment
The Company purchases computers, laptops, furniture and fixture.fixtures. These are originally recorded at cost and stated at cost less accumulated depreciation.depreciation and impairment, if any. The computers and laptops are depreciated over a useful life of 3 and- 5 years, respectively. The furniture and fixturefixtures are depreciated over a useful life of 5 and 10 years, respectively. Straight-line depreciation is used for all computers, laptops, furniture and equipment.
Intangible Assets
Software Development Costs
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25”“ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification (ASC)(“ASC”) 350-50 “Website“Website Development Costs”Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day-to-day operation of the website are expensed as incurred. All costs associated with the websites are subject to straight-line amortization over a three-year period.
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that is not individually identified and separately recognized as an asset. Adjustments made to the acquisition accounting during the measurement period may affect the recognition and measurement of assets acquired and liabilities assumed, any NCI,non-controlling interest (“NCI”), consideration transferred and goodwill or any bargain purchase gain, as well as the remeasurement of any pre-existing interest in the acquiree.
In our assessment, goodwill arisen from reverse acquisition is allocated systematically and reasonably to reporting segments which are regularly reviewed by the Company’s Chief Operating Decision Maker (“CODM”). The CODM allocates resources and assess performance of the business and other activities at the single operating segment level. The reporting units for impairment testing purpose are determined as the lowest level of cash generating unit below the operating segments since the components constitute a business for which discrete financial information is available, and the CODM regularly reviews the operating results of the components. Certain components share similar economic characteristic and are deemed to be a single reporting unit.
The Company assigned assets and liabilities to each reporting unit based on either specific identification or by using judgment for the remaining assets and liabilities that are not specific to a reporting unit. Goodwill was assigned to the reporting units based on a combination of specific identification and relative fair values. Goodwill associated with reporting units being sold are included in the carrying amount of assets held for sale at the reporting date.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill“Goodwill and Other Intangible Assets”Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:
| 1. | Significant underperformance compared to historical or projected future operating results; |
| 2. | Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and |
| 3. | Significant negative industry or economic trends. |
When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have finite useful lives are amortized over their useful lives. The Company incurred amortization expense of $3,310,293 and $337,187 during the nine months ended November 30, 2021 and 2020, respectively.
In impairment testing, goodwill acquired in a business combination is allocated to each of the Company’s reporting units that are expected to benefit from the synergies of the combination. The Company estimates the recoverable amount of each reporting unit to which the goodwill and intangible assets relates. Where the recoverable amount of the reporting unit is less than the carrying amount, an impairment loss is recognized in profit or loss. Impairment losses cannot be reversed in future periods. During the fourth quarter of each fiscal year, the Company carries out annual impairment reviews at the reporting unit level in respect of goodwill and intangible assets by performing qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If those impairment indicators exist, the quantitative assessment is required to assess the recoverable amount of the reporting unit by performing step 1 of the two-step goodwill impairment test. If we perform step 1 and the carrying amount of the reporting unit exceeds its fair value, we would perform step 2 to measure such impairment. In determining value in use, the estimated future cash flows are discounted to their present value to reflect current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.
In determining allowance for impairment of goodwill and intangible assets, the management is required to exercise judgements regarding determination of the recoverable amount of the asset, which is the higher of its fair value less costs of disposal and its value in use.
Accounts payable, note payablesPayable, Notes Payable and accrued expensesAccrued Expenses
Accounts payable note payablesare recognized when the Company receives invoices, and accrued expenses are recognized when they occurit is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at cost.which the settlement will take place can be measured reliably.
Notes payable are recognized at cost, net transaction costs. Transaction costs are amortized over the terms of notes payable using effective interest rate method.
Customer depositDemand Deposits Payable
Customer deposit represents cash demand deposits payable received from customers at NextBank.
Business Combination
The Company uses the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”805”). ASC 805 requires, among other things, that assets acquired, and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, Fair Value Measurements, as of the closing date. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.
Non-controlling interestsNon-Controlling Interests
Non-controlling interests represent the equity in a subsidiary that is not attributable directly or indirectly to the parent. At the acquisition date, the Company measures any non-controlling interest at its proportionate interest in the identifiable net assets of the acquiree. Changes in the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.fair value.
Foreign Currency Translation
The Company prepares the consolidated financial statements using U.S. dollars as the functional currency. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet date with the resulting translation adjustments included as a separate component of stockholders’ equity through other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss.
Income and expenses are translated at the average monthly rates of exchange. The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statements of net and comprehensive loss.
The effect of foreign currency translation on cash and cash equivalents is reflected in cash flows from operating activities on the consolidated statements of cash flows.
Reclassification
Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassification has no impact on the total assets, total liabilities, stockholders’ equity and net loss for the period.
Earnings per Share
Basic earnings per share are computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. For the nine months ended November 30,31, 2022 and 2021, convertible notes payableswarrants were excluded from the computation of diluted net loss per share, as the result of the computation was anti-dilutive. The Company presents earnings per share from continuing operation and discontinued operation separately.
Assets and liabilities held for sale
In accordance with ASC 306, the potential sale of Reinhart/Zappware and NextTrip qualified as assets and liabilities held for sale as: (i) the Company has committed to a plan to sell, (ii) the disposal entities are available for immediate sale, (iii) the buyer has been identified and has committed to purchase, subject to satisfaction of certain closing conditions, and (iv) it is probable to occur within 1 year from the date of the classification. Assets and liabilities held for sale are measured at the lower of carrying amount and the fair value less cost to sell. Computer and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
Where the fair value less cost to sell of assets held for sale exceed the asset’s carrying amounts, a gain shall be recognized for which not exceeding the cumulative loss previously recognized.
Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position as well as for prior period. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of comprehensive loss.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, which involves identifying the contracts with customers, identifying performance obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation, and recognizing revenue when the performance obligation is satisfied. Types of revenue consist of:
Digital Media
Revenue is generated from subscriptionsInterest and Financial services rendered. Subscription revenues are deferred and recognized as the service is performed each month. Revenue from services is recognized when the contractual performance obligation is met.
Finance and Technology
NextBank International provides traditional banking services in niche-focused businesses, including commercial and residential real estate and the origination and sale of loans, and receivables financing, among other types of lending services. Revenue is recognized from two sources,Revenues are categorized as interest income and financial services. NextBank is primarily responsible for fulfilling the services to clients, bears risks on its loan fees.products, has discretion in establishing the price, hence it acts as principal, and recognizes revenues at the gross amount received for the services.
Interest is accrued as earned based upon the daily outstanding principal balance. The accrual of interest is generally discontinued at the time a loan is 90 days past due, unless the credit is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged- off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans placed on nonaccrual or charged-off is reversed against interest income. Interest on these loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. As of November 30, 2021, there were no loans placed on non-accrual.
Revenue is also recognized on service fees suchFinancial services are categorized as loan origination fees, brokering fees, and deposit account fees.follows:
As of November 30, 2021, the Company had interest and non-interest- bearing deposits received from customers with interest rates ranging from 0% to 4% payable per annum.
| - | Origination fee is recognized at point of time when the loan contract is mutually originated between a customer and the Company. |
Travel
We recognize revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired, the sales price is fixed or determinable and collectability is reasonably assured.
Revenue for customer travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
We generate our revenues from sales directly to customers as well as through other distribution channels of tours and activities at destinations throughout the world.
Payments for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
| - | Deposit account fees and other administrative fees are generally recognized upon completion of services (wire in/out processing, certain deposit condition met, etc.). |
Cost of Revenue
Cost revenue from digital media mainly consists of cost of employees - software developer and other sub-contractors.
Cost of revenue from finance and technology mainly consists of interest expense, loan related commissions.
Costcommissions, amortization of revenue from travel mainly consists of cost of the tourscore banking software and activities, commissionstechnology facilities and merchant fees charged by credit card processors.infrastructures.
Selling and Promotions Expense
Selling and promotion expenses consist primarily of advertising and promotional expenses, expenses related to our participation in industry conferences, and public relations expenses. Theexpenses; the expense for the nine months ended November 30, 2021 and November 30, 2020 was $802,725 and $954, respectively.is recognized when incurred.
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, “Compensation“Compensation – Stock Compensation”Compensation”, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.award and recognizes forfeitures as when they occur.
Warrants
The Company adopted ASU No. 2018-7, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting awards (“ASU 2018-7”). Asaccounts for the warrants in accordance with the guidance contained in ASC 815, under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. Most of warrant agreements contain fixed strike prices and a result, awards are measured based on the grant date closing pricefixed number of shares that may be issued upon exercise of the Company’s common stock consistentwarrants at the fixed strike price, with awards madecertain provisions that may result in changes to the Company’s employeesstrike price in certain circumstances, subject to stockholder approval. All such warrant agreements are exercisable at the option of the holder and directors.settled in shares of the Company. The Company recognizeswarrants are qualified as equity-linked instrument embedded in a host instrument, whereby they do not meet definition of derivative; therefore, it is not required to separate the remaining unrecognized value of unvested awards over the remaining performance period, with no further remeasurement through the performance completion date.
Warrant Modificationsembedded component from its host.
The Company treats a modification of the terms or conditions of an equity award in accordance with ASC Topic 718-20-35-3, by treating the modification as an exchange of the original award for a new award. In substance, the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation cost for any incremental value. Incremental compensation cost is measured as the excess, if any, of the fair value of the modified award determined in accordance with the provisions of ASC Topic 718-20-35-3 over the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date.
Fair Value of Financial Instruments
The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but it does provide guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).
The hierarchy consists of three levels:
| ● | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities.liabilities, if any.
Financial instruments consist principally of cash, accounts receivable, investments in unconsolidated affiliates, other receivable,receivables, net, accounts payable, accrued liabilities, notes payable, related parties, line of credit and certain other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
Leases
The Company utilizes operating leases for its offices. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s contractual obligation to make lease payments under the lease. Operating leases are included in operating lease right-to-use assets, non-current, and operating lease liabilities current and non-current captions in the consolidated balance sheets.
Operating lease right-to-use assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. Lease agreements may contain periods of free rent or reduced rent, predetermined fixed increases in the minimum rent and renewal or termination options, all impacting the determination of the lease term and lease payments to be used in calculating the lease liability. Lease cost is recognized on a straight-line basis over the lease term. The Company uses the implicit rate in the lease when determinable. As most of the Company’s leases do not have a determinable implicit rate, the Company uses a derived incremental borrowing rate based on borrowing options under its credit agreement. The Company applies a spread over treasury rates for the indicated term of the lease based on the information available on the commencement date of the lease.
Segment Reporting
Accounting Standards Codification 280-10 “Segment Reporting”“Segment Reporting” established standards for reporting information about operating segments in annual consolidated financial statements and required selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
An operating segment component has the following characteristics:
| a. | It engages in business activities from which it may recognize revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). |
| b. | Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. |
| c. | Its discrete financial information is available. |
TheAs of November 30, 2022, the Company has threehad two operating segments consisting of (i) the NextMedia Division, which consists of HotPlay and Reinhart/Zappware, (ii) the NextFinTech Division, which consists of Longroot and NextBank, and (iii) NextTrip Division, which includes NextTrip holdings.
| (i) | NextMedia segment, consisting of: |
| - | HotPlay Enterprise Ltd. and HotPlay (Thailand) Co., Ltd., |
| (ii) | NextFinTech segment, consisting of: |
| - | Next Fintech Holdings, Inc. (formerly Longroot Inc.) |
| - | Longroot Limited |
| - | Longroot Holding (Thailand) Co., Ltd. |
| - | Longroot (Thailand) Co., Ltd. |
| - | NextBank International, Inc. |
The Company’s chief operating decision makers are considered to be the Co-Chief Executive Officers. The chief operating decision makers allocate resources and assesses performance of the business and other activities at the single operating segment level.
As a result of the proposed strategic sale of Reinhart/Zappware and NextTrip, as of November 30, 2022, those entities were no longer treated as a division of the Company; accordingly, for the nine-month period ended November 30, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia.
See Note 12 Business Segment Reporting for details on each segment unit.
Comparative figures
Certain comparative figures have been reclassified to conform with the current period presentation.
Recent Accounting Pronouncements
In August 2020,June 2022, the FASB issued ASU 2020-06,2022-03, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The standard reducedFASB is issuing this Update (1) to clarify the numberguidance in Topic 820, Fair Value Measurement, when measuring the fair value of accounting modelsan equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for convertible debt instruments and convertible preferred stock. Convertible instrumentsequity securities subject to contractual sale restrictions that continueare measured at fair value in accordance with Topic 820.
Stakeholders asserted that the language in the illustrative example resulted in diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring that equity security’s fair value. Some stakeholders apply a discount to the price of an equity security subject to a contractual sale restriction, whereas other stakeholders consider the application of a discount to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related toinappropriate under the host contract, that meetprinciples of Topic 820.
For public business entities, the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this updateUpdate are effective for fiscal years beginning after December 15, 2021, including2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, includingfor both interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidatedand annual financial statements.statements that have not yet been issued or made available for issuance.
The Company has considered all other recently issued accounting pronouncements and does not believeis still evaluating the adoptionimpact of such pronouncements will have a material impactthis pronouncement on itsthe consolidated financial statements.
Note 2 - Going Concern
As of November 30, 2021,2022, and February 28, 2021,2022, the Company had an accumulated deficit of $19,469,705$57.17 million and $1,200,309,$39.17 million, respectively. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
We have limited financial resources. As of November 30, 2021,2022, we have working capital of $23,956,326, which we believe is adequate to cover our$3.53 million. Our monthly cash requirement is approximately $1.4 million. The monthly cash requirement decreased by approximately $0.4 million beginning May 1, 2022 as a result of approximately $1,450,000 for over twelve months.the proposed sale of Reinhart/Zappware and NextTrip.
We will need to raise additional capital or borrow loans to support the on-going operation,operations, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs until our planned revenue streams from all businesses and products are fully implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all, would negatively impact our business, financial condition, and liquidity. We currently have limited resources to satisfy these obligations, and our inability to do so could have a material adverse effect on our business and ability to continue as a going concern. As indicated by the increase of the Company’s deferred revenue balance as of November 30, 2021, $517,310, we expect to see an increase in revenue in the 4th quarter.
Management’s plans with regard to this going concern are as follows:
| (i) | the Company plans to continue to raise funds with third parties by way of public or private offerings, |
| (ii) | the Company is working aggressively to increase the viewership of its |
| (iii) | the Company expects growth in revenue from interest and non-interest income through organic growth and new business initiatives in the finance and technology |
| (iv) | the Company |
| (v) | the Company is tightening its spending on expenses, which is expected to help in the cost reduction of the operations. |
The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan and generate greater revenues. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2022 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to the fiscal year 2021 ended February 28, 2021. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently.
Note 3 – Notable Financial Information
Short term investment
As of November 30, 2022 and February 28, 2022, NextBank had short-term certificate of deposit of $0.3 million and $0.3 million, respectively, with an original maturity in February 2023 and an interest rate of 0.05% per annum.
Loans Receivable
Loans receivable related to the provision of traditional banking services in niche-focused businesses, including commercial and residential real estate and the origination and sale of loans and receivables financing, among other types of lending services of NextBank. As of November 30, 2022 and February 28, 2022, the Company had loans receivable of $22.2 million and $17.3 million, respectively, and the allowance for loan losses of $0.4 million and $0.1 million, respectively. The interest rate ranges from 5.5% to 17.9%.
As of November 30, 2022, most of the loans were performing, and a general allowance was established at appropriate rate on the principal amount outstanding at year end. Due to limited outstanding loans, they are analyzed one by one to determine if the general reserve covers the related risk of such loans. As of November 30, 2022, the Company’s management deemed the reserve as sufficient when compared to the risk assessment.
As of November 30, 2022, there were loans placed on a non-accrual basis of $0.04 million.
Unbilled Receivables
As of November 30, 2022 and February 28, 2022, the Company had unbilled receivables of $0.007 million and $0.002 million, respectively.
Prepaid Expenses and Other Current Assets
As of November 30, 20212022 and February 28, 2021,2022, the Company had prepaid expenses of $2,390,581$0.9 million and $11,590,$0.5 million, respectively. As of November 30, 20212022 and February 28, 2021,2022, the Company had other current assets of $752,377$0.3 million and $224,156,$0.3 million respectively.
AccountsConvertible Notes Receivable, Related Party, net
As of November 30, 20212022 and February 28, 2021,2022, the Company had accounts receivableConvertible Notes Receivable, related party, net allowance for expected credit loss of $1,220,964 and $0, respectively.$4.6 million relating to receivables from Axion. As of November 30, 20212022 and February 28, 2021,2022, the allowance for doubtful accountexpected credit loss was $292,530 and $0, respectively.$3.1 million.
Goodwill
The Company had total goodwill as allocated to units as follows:
| Reporting unit | November 30, 2022 | February 28, 2022 | ||||||
| HotPlay | $ | 2,125,648 | $ | 4,209,381 | ||||
| Longroot | 6,634,936 | 7,966,005 | ||||||
| NextBank | 10,979,453 | 15,774,168 | ||||||
| Total | $ | 19,740,037 | $ | 27,949,554 | ||||
As a result of completion of fair value assessment of certain acquisitions during this period, the Company has reassigned the goodwill to the reporting units to reflect the change in fair value of net assets acquired.
Unbilled Receivables
As of November 30, 2021 and February 28, 2021, the Company had unbilled receivables of $4,369,424 and $0, respectively.
Loans Receivable
As of November 30, 2021 and February 28, 2021, the Company had loans receivable of $9,126,612 and $0, respectively, relating to NextBank.
Goodwill
As of November 30, 2021 and February 28, 2021, the Company had total goodwill of $46,373,194 and $0, respectively. The year-over-year increase resulted from the following:
Summary of changes in fair value allocation resulted below:
Computer,Computers, Furniture and Equipment
As of November 30, 20212022 and February 28, 2021,2022, the Company had net computer,computers, furniture and equipment of $680,320$0.3 million and $25,793,$0.4 million, of which $86,240$0.4 million and $1,381$0.1 million included depreciation expense, respectively.
Operating Lease Right-to-Use asset and Operating Lease Liability
The Company’s lease agreements are for office space used in its operation. The following schedule represents outstanding balance of operating lease Right-to-Use asset and operating lease liability of the Company as of November 30, and February 28, 2022, respectively:
| Operating lease Right-to-Use asset | November 30, 2022 | February 28, 2022 | ||||||
| Net Carrying Value | $ | 515,246 | $ | 1,894,654 | ||||
| Operating lease liability | November 30, 2022 | February 28, 2022 | ||||||
| Current portion | $ | 192,669 | $ | 218,181 | ||||
| Noncurrent portion | 337,439 | 1,543,627 | ||||||
| Totals | $ | 530,108 | $ | 1,761,808 | ||||
Accounts Payable and Accrued Expenses
As of November 30, 20212022 and February 28, 2021,2022, the Company had accounts payable of $3,726,801$3.5 million and $81,779,$1.9 million, respectively. As of November 30, 20212022 and February 28, 2021,2022, the Company had accrued expenses of $3,989,521$6.3 million and $262,162,$2.8 million, respectively.
Other Liabilities – Customer Demand Deposits Payable
As of November 30, 20212022 and February 28, 2021,2022, the Company had other current liabilities – customer demand deposits payable of $9,638,613$27.3 million and $0,$7.5 million, respectively, relating to NextBank.
As of November 30, 2022, the Company had interest and non-interest- bearing deposits received from customers with interest rates ranging from 0% to 4% payable per annum.
Deferred RevenueLine of credit and notes payable
As of November 30, 20212022, and February 28, 2021,2022, the Company had deferred revenuea Line of $517,310credit and $0,notes payable of $5.3 million and $4.5 million, respectively, relating to travelMcCarthy Tetrault LLP. The notes payable are unsecured, accrue interest at a rate of 18% per annum. The first note matured on July 31, 2022, and digital future sales.the second note matured on September 1, 2022. The Company is in the process of re-negotiating the payment schedules.
Short Term Note Payable – Related Parties
As of November 30, 20212022, and February 28, 2021,2022, the Company had a short term note payable – related party of $742,611$1.1 million and $1,053,082,$0.8 million, respectively, relating to Tree Roots Entertainment and MQDC.Magnolia Quality Development Corporation Limited. The notes payables are unsecured, accrue interest at a rate of 9.00% - 9.75% per annum, due at call and secured, accrue interest at a rate of 15.00% per annum, due on November 11 and 30, 2022.
Long Term Note Payable – Related Parties
As of November 30, 20212022 and February 28, 2021,2022, the Company had a long term note payable – related party of $966,314$0 and $0,$1.0 million, respectively, mainly related to note payable of preferred dividends in arrears.arrears which was repaid during the nine-months ended November 30, 2022.
The note payable had an interest rate of 12% per annum, compounded monthly at the end of calendar month, with such interest payable at maturity or upon conversion.
Revenue
Disaggregation of revenue information was as follows:
| November 30, 2022 | November 30, 2021 | |||||||
| NextFinTech | ||||||||
| Interest income | $ | 1,331,691 | 350,316 | |||||
| Financial services | 219,929 | 363,563 | ||||||
| Total revenue | $ | 1,551,620 | 713,879 | |||||
Note 4 – Acquisitions and Dispositions
Reinhart Interactive TV AG and Zappware N.V. Acquisition
On January 15, 2021, we entered into a Founding Investment and Subscription Agreement (the “Investment Agreement”“Investment Agreement”) with Reinhart, and Jan C. Reinhart, the founder of Reinhart (“Founder”Founder”).
The Investment Agreement contemplated the Company acquiring 51% of the ownership of Reinhart, in consideration for 10,000,000 Swiss Francs (approximately $10.7 million US). The closing ofOn March 31, 2021, the transactions contemplated by the Investment Agreement was to take place on April 1, 2021, or earlier if the conditions to closing were earlier satisfied. Conditions to closing included the Company paying the required capital contribution, approval of the transaction by the board of directors of the Company and Reinhart, and certain requirements and confirmations required by Swiss law. The Investment Agreement included customary representations and warranties of the parties. We also agreed to reimburse the Founder’s legal fees of up to 30,000 Swiss Francs (approximately $33,670 US) in connection with the transaction. Additionally, in the event we failed to close the transactions contemplated by the Investment Agreement by April 1, 2021, we agreed to pay the Founder 500,000 Swiss Francs (approximately $560,000 US), as a break-up fee.
We paid the founder $10.7 million in cash on March 31, 2021; however,and received the transfer of the shares of Reinhart were not transferred to the Company untilon June 23, 2021. The consideration paid to the Founder came largely from funds advanced by HotPlay pursuant to the HotPlay Convertible Notes (defined and described in “Note 9—Notes Payable”, under “HotPlay Convertible Notes”). As of June 23, 2021, all the closing conditions had been satisfied and this transaction was completed.
In accordance with ASC 805, as described in “Note 1 – Summary of Business Operations and Significant Accounting Policies”,During the nine-month period ended November 30, 2022, the Company has accounted for this business combination utilizingcompleted the following values in connection withfair value assessment (Purchase Price Allocation) of the business acquisition of Reinhart as of June 23, 2021. The business combination accounting is provisionally complete for allnet identifiable assets and liabilities assumed by an independent appraiser. The fair value assessment was taken into account the entirety of the valuation of the acquired on the acquisition datecompany and we will continue to evaluate the fair values within the 1-year timeframe as providedtherefore resulted in the applicable guidance.
| Acquisition of Reinhart TV AG/Zappware | ||||
| Total Identifiable Assets | $ | 23,458,222 | ||
| Total liabilities | $ | 12,750,462 | ||
| Net Assets | $ | 10,707,760 | ||
| Total Consideration transferred | $ | 10,707,760 | ||
Reinhartincrease in fair value of intangible assets which is in the business of providing a software-based TVdeveloped software and video distribution platform to telecom companies and digital content owners, and providing services to telecom companies and digital content owners for user interaction design, as well as software development, deployment and support.non-controlling interests.
In connection with our entry intoorder to reflect the Investment Agreement, we entered into a Founding Shareholders’ Agreement with the Founder (the “Shareholders’ Agreement”). The Shareholders’ Agreement set forth certain rules for the governance and control of Reinhart. The Shareholders’ Agreement provides: (i) that the board of directors of Reinhart will consist of five members, three of which will be appointed by the Founder and other shareholders of Reinhart, and two of which will be appointed by the Company, which include William Kerby, the Company’s Co-Chief Executive Officer, and Mark Vange, the then Chief Technology Officer of HotPlay and current Chief Technology Officer of the Company; (ii) that any material shareholder matters are required to be approved by shareholders holding at least 66 2/3% of the total outstanding vote of Reinhart; (iii) that in the event Reinhart issues, within five years after the closing date, any equity or convertible equity, with a price less than the most recent valuation of Reinhart’s shares, the shares held by each director who is appointed by the Founder are subject to weighted average anti-dilution protection; and (iv) provides for various restrictions on transfers of shares of Reinhart, including right of first refusal rights, tag-along rights, and drag-along rights, as well as certain rights which would trigger the right of the other partiesadjustment to the Shareholders’ Agreement to acquire the shares held by an applicable shareholder, for the higher of the fair market value and the nominalprovisional value of the shares (except inidentifiable assets and liabilities of Reinhart Interactive TV AG and Zappware N.V. at the case of (c) whereacquisition date, the purchase price is the lower of such amounts), if such shareholder (a) commits a criminal act against the interests of another party, Reinhart or its affiliates; (b) breaches the Shareholders’ Agreement, and fails to cure such breach 20 days after notice thereof is provided; or (c) the employment of any employed shareholder is terminated for certain reasons.adjustments were made as follows:
| As of June 23, 2021 | ||||||||||||
| Provisional value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | 3,086,212 | - | 3,086,212 | ||||||||
| Current assets | 8,083,041 | - | 8,083,041 | |||||||||
| Right-of-use assets | 2,537,789 | - | 2,537,789 | |||||||||
| Non-current assets | 6,681,714 | 1,413,272 | 8,094,986 | |||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | (9,931,882 | ) | - | (9,931,882 | ) | |||||||
| Lease liabilities | (2,537,789 | ) | - | (2,537,789 | ) | |||||||
| Non-current liabilities | (302,815 | ) | - | (302,815 | ) | |||||||
| Total identifiable net assets | 7,616,270 | 1,413,272 | 9,029,542 | |||||||||
| Add: Goodwill | 3,091,490 | 8,874,576 | 11,966,066 | |||||||||
| Fair value of non-controlling interests | - | (10,287,848 | ) | (10,287,848 | ) | |||||||
| Total fair value of purchase consideration | 10,707,760 | - | 10,707,760 | |||||||||
The Shareholders’ Agreement also provides a right for the Founders to sell their sharesAs of November 30, 2022, with regards to the Company,strategic decision sale of Reinhart/Zappware in 2022, assets and liabilities including goodwill of Zappware and Reinhart, were presented in assets and liabilities held for sale at which time the Company will be required to purchase such shares (the “Founder’s Shares”), based on the following schedule:
The Shareholders’ Agreement also allows the parties to file for an initial public offering on any internationally recognized exchange. The Shareholders’ Agreement has a term of 10 years, extendable thereafter for successive five-year periods, unless terminated by either party with 12 months prior written notice (provided that any such termination shall only be applicable to the terminating shareholder), subject to earlier termination in connection with certain initial public offerings.balance sheet date.
NextBank International (formerly IFEB) Acquisition
On April 1, 2021, wethe Company entered into a Bill of Sale for Common Stock, effective March 22, 2021 (the “Bill“Bill of Sale”Sale”), with certain third parties, pursuant to which the Company agreed to purchase 2,191,489 shares (the “IFEB Shares”“IFEB Shares”) of authorized and outstanding Class A Common Stock of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico (“IFEB”IFEB”), which IFEB Shares totaled approximately 57.1%representing 57.16% of the outstanding Class A Common Stock of IFEB. The purchase price of the IFEB Shares was $6,400,000, which amount was paid to the sellers on April 1, 2021.
IFEB was incorporated in 2017 as a corporation under the laws of the Commonwealth of Puerto Rico and received its international financial entity license on June 18, 2017 from the Office of the Commissioner of Financial Institutions of Puerto Rico, in Spanish, “Oficina del Comisionado de Instituciones Financieras” or “OCIF”, as license #51. As a result, IFEB is regulated by OCIF.
On May 6, 2021, in anticipation of the acquisition of the IFEB Shares, and control of IFEB, the Company and IFEB entered into a Preferred Stock Exchange Agreement, which was amended by a First Amendment to Preferred Stock Exchange Agreement entered into May 10, 2021 and effective May 6, 2021, (as amended by the first amendment, the “Original Preferred Exchange Agreement”), pursuant to which the Company agreed to exchange 1,950,000 shares of the Company’s common stock for 5,850 shares of cumulative, non-compounding, non-voting, non-convertible, perpetual Series A Preferred shares of IFEB.
Notwithstanding the terms of the Bill of the Sale, and the payment by the Company of the aggregate purchase price pursuant thereto, the transfer of the Initial IFEB Shares to the Company and the Company’s acquisition of control of IFEB was subject to review of the Company’s financial viability, as well as other matters, by OCIF, which approval of OCIF was received in June 2021, but which acquisition did not close until July 21, 2021.
Separately, onOn July 21, 2021, the Company entered into, and closed the transactions contemplated by, a Share Exchange Agreement with various other holders of shares of Class A Common Stock of IFEB (the “Additional Sellers”“Additional Sellers” and the “IFEB“IFEB Exchange Agreement”Agreement”). Pursuant to the IFEB Exchange Agreement, the Additional Sellers exchanged an aggregate of 1,648,614 of the outstanding Class A Common Stock of IFEB, representing 42.94% of such outstanding Class A Common Stock of IFEB, in consideration for an aggregate of 1,926,750 restricted shares of the Company’s common stock (the “IFEB“IFEB Common Shares”Shares”), with each one share of Class A Common Stock of IFEB being exchanged for 1.168 restricted shares of common stock of the Company, based on an agreed upon value of $2.50 per share for each share of Company common stock and $2.92 per share for each share of Class A Common Stock of IFEB.
As a result of the closing of both transactions, we acquired control of 100% of IFEB as of July 21, 2021.
In accordance with ASC 805, as described in “Note 1 – Summary of Business Operations and Significant Accounting Policies”, the Company has accounted for this business combination utilizing theThe following values in connection with the business acquisition of NextBank as of July 21, 2021. The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date and we will continue to evaluatetable summarizes the fair values within the 1-year timeframe as provided in the guidance.value of consideration transferred:
| Acquisition of NextBank International, Inc. (7/21/21) | ||||
| Fair Value of assets acquired | ||||
| Cash | $ | 4,200,006 | ||
| Current assets | $ | 8,789,072 | ||
| Non-current assets | $ | 224,210 | ||
| Net assets acquired | $ | 13,213,288 | ||
| Fair Value of liabilities assumed | ||||
| Current liabilities | $ | 9,643,436 | ||
| Non-current liabilities | $ | — | ||
| Net liabilities assumed | $ | 9,643,436 | ||
| Net assets acquired | $ | 3,569,852 | ||
| Purchase consideration | ||||
| Cash | $ | 6,400,000 | (1) | |
| Common stock (1,925,581 shares @ $2.50 per share) | $ | 4,813,953 | ||
| Fair value of total consideration transferred | $ | 11,213,953 | ||
| Purchase Price Allocation | ||||
| Fair value of net assets acquired as of 7/21/2021 | $ | 3,569,852 | ||
| Fair value of total consideration transferred | $ | 11,213,953 | ||
| Goodwill | $ | 7,644,101 | ||
| Cash | $ | 6,400,000 | ||
| Common stock (96,279 shares @ $40.60, closing price of NXTP common stock on July 21, 2021(1)) | $ | 3,908,929 | ||
| Fair value of consideration paid | $ | 10,308,929 |
| (1) |
TheDuring the nine-month period ended November 30, 2022, the Company completed the fair value assessment of the net identifiable assets and liabilities assumed by an independent appraiser which primarily resulted in a decrease in goodwill due to the change in fair value of purchase consideration. During the year ended February 28, 2022, the purchase consideration of common stock was calculated based on $50 per share, according to the IFEB Exchange Agreement required that:
(a) three legacy board membersAgreement. Considering fair value of IFEB remain onconsideration paid, the Boardshare price of DirectorsNXTP common stock has been adjusted to its closing price as of IFEB for a period of one year after the closing date of the IFEB Exchange Agreement, subjectacquisition on July 21, 2021 without any changes in number of shares issued. As a result, the change in purchase consideration were adjusted by $0.9 million to rightsreflect the fair value as of removal if such continued appointment/service as board members would violateJuly 21, 2021 by recognizing the fiduciary dutiesadjustment in additional paid-in capital in consolidated statement of any other board members;
(b) certain outstanding loans held by one of the legacy board members be extended, and be subject to a further extension;
(c) that Ms. Nithinan Boonyawattanapisut, Mr. J. Todd Bonner, Mr. Donald P. Monaco and Mr. William Kerby (each a member of the Board of Directors of the Company) and Mr. Jan Reinhart, the founder of Reinhart, be appointed as members of the Board of Directors of IFEB;
(d) that Mr. Ronald Poe will be appointed as Vice President of Next Fintech Holdings Inc. (formerly Longroot, Inc.), the Company’s wholly-owned subsidiary, and be provided a salary of $120,000 per year, pursuant to an employment agreement; and
(e) that Mr. Robert Fiallo, will be hired by an affiliate of the Company pursuant to an employment agreement, and be paid a base salary of $300,000 per year, plus a bonus of 3% of the profits from projects he works with or assists in developing.stockholders’ equity.
On September 28, 2021,In order to reflect the adjustment to the provisional value of the identifiable assets and liabilities of NextBank International (formerly IFEB) at the acquisition date, the adjustments were made as follows:
| As of July 21, 2021 | ||||||||||||
| Provisional value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | 7,039,001 | 483,930 | 7,522,931 | ||||||||
| Current assets | 7,584,013 | (483,930 | ) | 7,100,083 | ||||||||
| Non-current assets | 148,842 | - | 148,842 | |||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | (11,474,443 | ) | - | (11,474,443 | ) | |||||||
| Non-current liabilities | - | - | - | |||||||||
| Total identifiable net assets | 3,297,413 | - | 3,297,413 | |||||||||
| Adjustment: Goodwill | 7,916,540 | (905,024 | ) | 7,011,516 | ||||||||
| Total fair value of purchase consideration | $ | 11,213,953 | (905,024 | ) | 10,308,929 | |||||||
Sales plan - Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc
In connection with the potential sale plan, the Company entered into a Preferred Stock Exchange Agreement (the “Preferred Exchange Agreement”) with NextBank,has reclassified assets and liabilities to present as held for sale. As of November 30, 2022, the Company has classified goodwill and intangible assets as held for sale in current assets as follows:
| As of November 30, 2022 | ||||||||||||
| Reinhart/ Zappware | NextTrip | Total | ||||||||||
| Goodwill | ||||||||||||
| Carrying amount | $ | 23,887,059 | $ | 1,295,400 | 25,182,459 | |||||||
| Accumulated translation adjustment | (292,685 | ) | — | (292,685 | ) | |||||||
| Impairment loss | (8,936,142 | ) | (1,295,400 | ) | (10,231,542 | ) | ||||||
| Goodwill, net | $ | 14,658,232 | $ | — | $ | 14,658,232 | ||||||
| Intangible assets | ||||||||||||
| Net book value | $ | 10,551,909 | $ | 4,372,085 | 14,923,994 | |||||||
| Impairment loss | — | (1,681,873 | ) | (1,681,873 | ) | |||||||
| Valuation adjustment of held-for-sale assets | (5,835,380 | ) | 2,636,960 | (3,198,420 | ) | |||||||
| Intangible assets, net | $ | 4,716,529 | $ | 5,327,172 | $ | 10,043,701 | ||||||
The fair value completion of the acquisition of Reinhart/Zappware and Reverse Acquisition disclosed in Note 1 and 4 resulted in an increase in goodwill of $8.2 million and intangible assets of $1.8 million for Reinhart/Zappware and increase in intangible assets of $10 thousand for NextTrip.
During the nine-month period ended November 30, 2022, the Company performed the impairment assessment and recognized the impairment loss in operation loss from discontinued operations to reflect the expected recoverable amount upon the classification to held-for-sale assets, comprised of impairment loss on intangible assets of NextTrip amounting to $0.5 million, and impairment loss on goodwill of Reinhart/Zappware, amounting to $0.1 million and has recorded the valuation adjustment of net asset held-for-sale at the lower of carrying amount and the Company agreedfair value less cost to exchange 5,070,000 restricted sharessell in operation loss from discontinued operations amounting to $3.2 million.
As of the Company’s common stock (the “Exchanged Common Shares”), for 10,140 shares of cumulative, non-compounding, non-voting, non-convertible, perpetual Series A preferred stock of NextBank (the “NextBank Preferred Shares”). The NextBank Preferred Shares have an aggregate face value of $10,140,000, and accrue a 2% dividend, payable quarterly in arrears. The NextBank Preferred Shares are non-redeemable; however, NextBank may, by the vote of the holders of a majority of its common stock, call and redeem the NextBank Preferred Shares in exchange for the Exchanged Common Shares plus accrued interest at the time of any such redemption. Additionally, the NextBank Preferred Shares include a change of control provision, whereby upon a change of control (as defined in the Preferred Exchange Agreement),February 28, 2022, the Company may cause NextBankhas reclassified goodwill and intangible assets as held for sale in non-current assets as follows:
| As of February 28, 2022 | ||||||||||||
| Reinhart/ Zappware | NextTrip | Total | ||||||||||
| Goodwill | ||||||||||||
| Carrying amount | $ | 16,818,456 | $ | 5,191,082 | $ | 22,009,538 | ||||||
| Accumulated translation adjustment | (844,568 | ) | — | (844,568 | ) | |||||||
| Impairment loss | (4,977,023 | ) | (5,191,082 | ) | (10,168,105 | ) | ||||||
| Goodwill, net | $ | 10,996,865 | $ | — | $ | 10,996,865 | ||||||
| Intangible assets | ||||||||||||
| Net book value | $ | 6,468,491 | $ | 2,525,142 | 8,993,633 | |||||||
| Impairment loss | — | (1,215,746 | ) | (1,215,746 | ) | |||||||
| Intangible assets, net | $ | 6,468,491 | $ | 1,309,396 | $ | 7,777,887 | ||||||
During the year ended February 28, 2022, the Company performed the impairment assessment and recognized the impairment loss for goodwill and intangible assets of Reinhart/Zappware and NextTrip units, as we assessed that the fair value from expected recoverable selling price was lower than the book value, therefore recorded impairment on goodwill amounted to repurchase the NextBank Preferred Shares$10.2 million, comprised Reinhart/Zappware in exchange for the Exchanged Common Shares, plus accrued interest.amount $5.0 million and NextTrip in amount $5.2 million and impairment loss on intangible assets of NextTrip amounting to $1.2 million.
The Preferred Exchange Agreement included customary representations, covenants and warrantiesbusiness of NextTrip represented the entirety of the parties,NextTrip operating segment and closing conditions which wouldReinhart Digital TV was a part of NextMedia operating segment until February 28, 2022. Comparative figures included in the accompanying condensed consolidated financial statements have been reclassified as held for sale related to Reinhart/Zappware and NextTrip to conform with current period presentation.
The detail of assets and liabilities classified as held for sale as of November 30, 2022 and February 28, 2022 were as follows:
| Reinhart/Zappware | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | $ | 942,905 | 2,185,719 | |||||
| Accounts receivable, net | 704,250 | 839,612 | ||||||
| Unbilled receivables | 1,861,360 | 3,275,229 | ||||||
| Other receivable | — | 3,251 | ||||||
| Work in progress | 401,616 | 691,863 | ||||||
| Prepaid expenses and other current assets | 140,682 | 123,084 | ||||||
| Intangible assets, net | 4,716,529 | — | ||||||
| Goodwill, net | 14,658,231 | — | ||||||
| Computers, furniture and equipment, net | 55,224 | — | ||||||
| Operating lease right-of-use asset | 2,037,281 | — | ||||||
| Security deposits | 59,350 | — | ||||||
| Total current assets held for sale | 25,577,428 | 7,118,758 | ||||||
| Intangible assets, net | — | 6,468,491 | ||||||
| Goodwill, net | — | 10,996,865 | ||||||
| Computers, furniture and equipment, net | — | 149,791 | ||||||
| Operating lease right-of-use asset | — | 2,067,942 | ||||||
| Security deposits | — | 71,401 | ||||||
| Total non current assets held for sale | — | 19,754,490 | ||||||
| Total assets | $ | 25,577,428 | 26,873,248 | |||||
| Liabilities | ||||||||
| Line of credit and notes payable, net | $ | 2,805,498 | 2,878,274 | |||||
| Accounts payable and accrued expenses | 4,402,960 | 3,557,080 | ||||||
| Other current liabilities | — | 264,905 | ||||||
| Deferred revenue | 333,690 | 2,040,787 | ||||||
| Current portion of operating lease liability | 2,037,280 | 493,622 | ||||||
| Total current liabilities held for sale | 9,579,428 | 9,234,668 | ||||||
| Line of Credit and Notes Payable Long Term, net | — | 270,808 | ||||||
| Operating lease liability, net of current portion | — | 1,574,320 | ||||||
| Other long term liability | — | 28,761 | ||||||
| Total non current liabilities held for sale | — | 1,873,889 | ||||||
| Total liabilities | $ | 9,579,428 | 11,108,557 | |||||
| Net asset | $ | 15,998,000 | 15,764,691 | |||||
| NextTrip | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | $ | 30,674 | 151,122 | |||||
| Accounts receivables, net | 87,884 | 1,056 | ||||||
| Other receivables | — | 1,197 | ||||||
| Prepaid expenses and other current assets | 82,414 | 60,861 | ||||||
| Advance for investments | 50,000 | — | ||||||
| Intangible assets, net | 5,327,172 | — | ||||||
| Computers, furniture and equipment, net | 29,428 | — | ||||||
| Operating lease right-of-use asset | 971,727 | — | ||||||
| Security deposits | 15,000 | — | ||||||
| Total current assets held for sale | 6,594,299 | 214,236 | ||||||
| Intangible assets, net | — | 1,309,396 | ||||||
| Computers, furniture and equipment, net | — | 41,671 | ||||||
| Security deposits | — | 15,000 | ||||||
| Total non current assets held for sale | — | 1,366,067 | ||||||
| Total assets | $ | 6,594,299 | 1,580,303 | |||||
| Liabilities | ||||||||
| Accounts payable and accrued expenses | 1,385,573 | 315,595 | ||||||
| Accounts payable and accrued expenses – related parties | 292,980 | — | ||||||
| Deferred revenue | 1,323,987 | 157,790 | ||||||
| Current portion of operating lease liability | 1,050,759 | — | ||||||
| Total current liabilities held for sale | 4,053,299 | 473,385 | ||||||
| Total liabilities | $ | 4,053,299 | 473,385 | |||||
| Net asset | 2,541,000 | 1,106,918 | ||||||
| Total assets and liabilities held for sale | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | 973,579 | 2,336,841 | ||||||
| Accounts receivables, net | 792,134 | 840,668 | ||||||
| Unbilled receivables | 1,861,360 | 3,275,229 | ||||||
| Other receivables | — | 4,448 | ||||||
| Work in progress | 401,616 | 691,863 | ||||||
| Prepaid expenses and other current assets | 223,096 | 183,945 | ||||||
| Advance for investments | 50,000 | — | ||||||
| Intangible assets, net | 10,043,701 | — | ||||||
| Goodwill, net | 14,658,231 | — | ||||||
| Computers, furniture and equipment, net | 84,652 | — | ||||||
| Operating lease right-of-use asset | 3,009,008 | — | ||||||
| Security deposits | 74,350 | — | ||||||
| Total current assets held for sale | 32,171,727 | 7,332,994 | ||||||
| Intangible assets, net | — | 7,777,887 | ||||||
| Goodwill, net | — | 10,996,865 | ||||||
| Computers, furniture and equipment, net | — | 191,462 | ||||||
| Operating lease right-of-use asset | — | 2,067,942 | ||||||
| Security deposits | — | 86,401 | ||||||
| Total non current assets held for sale | — | 21,120,557 | ||||||
| Total assets | 32,171,727 | 28,453,551 | ||||||
| Liabilities | ||||||||
| Line of credit and notes payable, net | 2,805,498 | 2,878,274 | ||||||
| Accounts payable and accrued expenses | 5,788,533 | 3,872,675 | ||||||
| Accounts payable and accrued expenses – related parties | 292,980 | — | ||||||
| Other current liabilities | — | 264,905 | ||||||
| Deferred revenue | 1,657,677 | 2,198,577 | ||||||
| Operating lease liability | 3,088,039 | 493,622 | ||||||
| Total current liabilities held for sale | 13,632,727 | 9,708,053 | ||||||
| Line of Credit and Notes Payable Long Term, net | — | 270,808 | ||||||
| Operating lease liability, net of current portion | — | 1,574,320 | ||||||
| Other long term liability | — | 28,761 | ||||||
| Total non current liabilities held for sale | — | 1,873,889 | ||||||
| Total liabilities | 13,632,727 | 11,581,942 | ||||||
| Net asset | 18,539,000 | 16,871,609 | ||||||
The Consideration expected to be customary for a transaction of this type. The transactions contemplatedreceived by the Preferred Exchange Agreement closed on October 1, 2021.Company upon closing of the transaction – Nonvoting convertible preferred shares of TGS compared with net book value of selling assets as of November 30, 2022 were as follows:
| Net asset of Reinhart/Zappware as of November 30, 2022 | 15,998,000 | |||
| Net asset of NextTrip as of November 30, 2022 | 2,541,000 | |||
| Total net asset | 18,539,000 | |||
| Additional cash contribution to TGS per agreement | 3,000,000 | |||
| Cash transferred to NextTrip in May 2022 | (1,500,000 | ) | ||
| 1,500,000 | ||||
| Less: Fair value of Reinhart/Zappware – non-controlling interest | (7,839,000 | ) | ||
| Consideration expected to be received - Nonvoting convertible preferred shares of TGS | 12,200,000 |
The operating results of held-for-sale entities included in the Company’s Statement of Comprehensive Income for the nine-month and three-month period ended November 30, 2022 were as follows:
| For the nine-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | 8,373,027 | $ | 472,114 | $ | 8,845,141 | ||||||
| Cost of Revenue | 1,686,435 | 346,298 | 2,032,733 | |||||||||
| Gross Profit | $ | 6,686,592 | $ | 125,816 | $ | 6,812,408 | ||||||
| Operating expenses | 5,337,159 | 3,240,855 | 8,578,014 | |||||||||
| Valuation adjustment of held-for-sale assets | 5,835,380 | (2,636,960 | ) | 3,198,420 | ||||||||
| Impairment loss | 63,436 | 466,128 | 529,564 | |||||||||
| Other Expense/(income) | 159,260 | 32,830 | 192,090 | |||||||||
| Net profit (loss) before tax for the period from discontinued operations | $ | (4,708,643 | ) | $ | (977,037 | ) | $ | (5,685,680 | ) | |||
| Estimated corporate taxes | $ | — | $ | — | $ | — | ||||||
| Net profit (loss) after tax for the period from discontinued operations | $ | (4,708,643 | ) | $ | (977,037 | ) | $ | (5,685,680 | ) | |||
| Share loss of non-controlling interest | (2,307,234 | ) | — | (2,307,234 | ) | |||||||
| Net loss from discontinued operation attributable to parent | (2,401,409 | ) | (977,037 | ) | (3,378,446 | ) | ||||||
| Other Comprehensive (loss) income: | ||||||||||||
| Currency Translation from discontinued operation | $ | (894,772 | ) | $ | — | $ | (894,772 | ) | ||||
| Comprehensive (loss) income | $ | (5,603,415 | ) | $ | (977,037 | ) | $ | (6,580,452 | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | (456,334 | ) | $ | — | $ | (456,334 | ) | ||||
| Non-controlling interests of the subsidiaries | (438,438 | ) | — | (438,438 | ) | |||||||
| $ | (894,772 | ) | $ | — | $ | (894,772 | ) | |||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | (2,857,741 | ) | $ | (977,037 | ) | $ | (3,834,778 | ) | |||
| Non-controlling interests of the subsidiaries | (2,745,674 | ) | — | (2,745,674 | ) | |||||||
| $ | (5,603,415 | ) | $ | (977,037 | ) | $ | (6,580,452 | ) | ||||
| For the three-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | 2,036,629 | $ | 106,098 | $ | 2,142,727 | ||||||
| Cost of Revenue | 281,490 | 94,253 | 375,743 | |||||||||
| Gross Profit | $ | 1,755,139 | $ | 11,845 | $ | 1,766,984 | ||||||
| Operating expenses | 1,527,225 | 1,041,064 | 2,568,289 | |||||||||
| Valuation adjustment of held-for-sale assets | 405,107 | (1,031,266 | ) | (626,159 | ) | |||||||
| Other Expense | 11,396 | 2,047 | 13,443 | |||||||||
| Net profit (loss) before tax for the period from discontinued operations | $ | (188,589 | ) | $ | — | $ | (188,589 | ) | ||||
| Estimated corporate taxes | $ | — | $ | — | $ | — | ||||||
| Net profit (loss) after tax for the period from discontinued operations | $ | (188,589 | ) | $ | — | $ | (188,589 | ) | ||||
| Share loss of non-controlling interest | (92,408 | ) | — | (92,408 | ) | |||||||
| Net loss from discontinued operation attributable to parent | (96,181 | ) | — | (96,181 | ) | |||||||
| Other Comprehensive income: | ||||||||||||
| Currency Translation from discontinued operation | $ | 188,589 | $ | — | $ | 188,589 | ||||||
| Comprehensive income | $ | — | $ | — | $ | — | ||||||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | 96,181 | $ | — | $ | 96,181 | ||||||
| Non-controlling interests of the subsidiaries | 92,408 | — | 92,408 | |||||||||
| $ | 188,589 | $ | — | $ | 188,589 | |||||||
| Total comprehensive income attributable to: | ||||||||||||
| Equity holders of the Company | $ | — | $ | — | $ | — | ||||||
| Non-controlling interests of the subsidiaries | — | — | — | |||||||||
| $ | — | $ | — | $ | — | |||||||
| For the nine-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | 6,015,365 | $ | 117,139 | $ | 6,132,504 | ||||||
| Cost of Revenue | 2,828,189 | 103,512 | 2,931,701 | |||||||||
| Gross Profit | $ | 3,187,176 | $ | 13,627 | $ | 3,200,803 | ||||||
| Operating expenses | 4,447,135 | 1,534,116 | 5,981,251 | |||||||||
| Other Expense | 72,385 | (15,435 | ) | 56,950 | ||||||||
| Net loss before tax for the period from discontinued operations | $ | (1,332,344 | ) | $ | (1,505,054 | ) | $ | (2,837,398 | ) | |||
| Estimated corporate taxes | $ | 61,032 | $ | — | $ | 61,032 | ||||||
| Net loss after tax for the period from discontinued operations | $ | (1,271,312 | ) | $ | (1,505,054 | ) | $ | (2,776,366 | ) | |||
| Share profit of non-controlling interest | (622,943 | ) | — | (622,943 | ) | |||||||
| Net loss from discontinued operation attributable to parent | (648,369 | ) | (1,505,054 | ) | (2,153,423 | ) | ||||||
| Other Comprehensive loss: | ||||||||||||
| Currency Translation from discontinued operation | $ | (643,879 | ) | $ | — | $ | (643,879 | ) | ||||
| Comprehensive loss | $ | (1,915,191 | ) | $ | (1,505,054 | ) | $ | (3,420,245 | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | (328,378 | ) | $ | — | $ | (328,378 | ) | ||||
| Non-controlling interests of the subsidiaries | (315,501 | ) | — | (315,501 | ) | |||||||
| $ | (643,879 | ) | $ | — | $ | (643,879 | ) | |||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | (976,747 | ) | $ | (1,505,054 | ) | $ | (2,481,801 | ) | |||
| Non-controlling interests of the subsidiaries | (938,444 | ) | — | (938,444 | ) | |||||||
| $ | (1,915,191 | ) | $ | (1,505,054 | ) | $ | (3,420,245 | ) | ||||
| For the three-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | 3,698,329 | $ | 80,249 | $ | 3,778,578 | ||||||
| Cost of Revenue | 1,675,419 | 69,281 | 1,744,700 | |||||||||
| Gross Profit | $ | 2,022,910 | $ | 10,968 | $ | 2,033,878 | ||||||
| Operating expenses | 2,698,599 | 1,029,934 | 3,728,533 | |||||||||
| Other Expense | (2 | ) | 11,576 | 11,574 | ||||||||
| Net loss before tax for the period from discontinued operations | $ | (675,687 | ) | $ | (1,030,542 | ) | $ | (1,706.229 | ) | |||
| Estimated corporate taxes | $ | 8,277 | $ | — | $ | 8,277 | ||||||
| Net loss after tax for the period from discontinued operations | $ | (667,410 | ) | $ | (1,030,542 | ) | $ | (1,697,952 | ) | |||
| Share profit of non-controlling interest | (327,031 | ) | — | (327,031 | ) | |||||||
| Net loss from discontinued operation attributable to parent | (340,379 | ) | (1,030,542 | ) | (1,370,921 | ) | ||||||
| Other Comprehensive loss: | ||||||||||||
| Currency Translation from discontinued operation | $ | (381,312 | ) | $ | — | $ | (381,312 | ) | ||||
| Comprehensive loss | $ | (1,048,722 | ) | $ | (1,030,542 | ) | $ | (2,079,264 | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | (194,469 | ) | $ | — | $ | (194,469 | ) | ||||
| Non-controlling interests of the subsidiaries | (186,843 | ) | — | (186,843 | ) | |||||||
| $ | (381,312 | ) | $ | — | $ | (381,312 | ) | |||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | (534,848 | ) | $ | (1,030,542 | ) | $ | (1,565,390 | ) | |||
| Non-controlling interests of the subsidiaries | (513,874 | ) | — | (513,874 | ) | |||||||
| $ | (1,048,722 | ) | $ | (1,030,542 | ) | $ | (2,079,264 | ) | ||||
The net cashflow of held-for-sale entities are included in the Company’s cash flow statement for the nine-month period ended November 30, 2022 and 2021 were as follows:
| For the nine-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Net cash flows from (used in) operating activities | 7,777,593 | (143,421 | ) | 7,634,172 | ||||||||
| Net cash flows used in investing activities | (2,754,585 | ) | (2,699,122 | ) | (5,453,707 | ) | ||||||
| Net cash flows from (used in) financing activities | (128,290 | ) | 1,500,000 | 1,371,710 | ||||||||
| Net decrease in cash and cash equivalent | $ | 4,894,718 | $ | (1,342,543 | ) | $ | 3,552,175 | |||||
| For the nine-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Net cash flows from operating activities | $ | 3,434,350 | 2,050,665 | 5,485,015 | ||||||||
| Net cash flows used in investing activities | (9,899,377 | ) | (2,048,753 | ) | (11,948,130 | ) | ||||||
| Net cash flows from financing activities | 3,453,686 | - | 3,453,686 | |||||||||
| Net increase (decrease) in cash and cash equivalent | $ | (3,011,341 | ) | 1,912 | (3,009,429 | ) | ||||||
Note 5 – Related Party Transactions
Parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control or joint control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa.
| Name of related parties | Relationship with the Company | |
| Red Anchor Trading Corporation (“RATC”) | A shareholder of the Company and controlled by a Co-CEO of the Company and a director of the Company | |
| Tree Roots Entertainment Group Company Limited (“TREG”) | A significant shareholder of the Company | |
| Axion Ventures Inc. (“Axion”) | An entity shareholding by a Co-CEO of the Company | |
| Axion Interactive Inc. | A subsidiary of Axion | |
| HotNow (Thailand) Company Limited (“HotNow”) | An entity controlled by a Co-CEO of the Company | |
| True Axion Interactive Company Limited (“TAI”) | An entity shareholding by a Co-CEO of the Company | |
| Magnolia Quality Development Corporation Limited (“MQDC”) | A significant shareholder of TREG, which is a significant shareholder of the Company | |
| Nithinan Boonyawattanapisut | Co-CEO of the Company, and a shareholder of the Company, RATC, HotNow, Axion and TAI | |
| Immediate Family Member | Immediate family member with executive officer of the Company |
Other than disclosed elsewhere, the Company had the following significant related party transactions for the nine months ended November 30, 2021.2022 and November 30, 2021:
| For the nine months ended | ||||||||
| November 30, 2022 | November 30, 2021 | |||||||
| Payment of marketing expense: | ||||||||
| Immediate Family Member | $ | 57,600 | 199,200 | |||||
| Payment of consulting expense: | ||||||||
| Immediate Family Member | $ | 110,000 | 82,500 | |||||
| Payment of salary expense: | ||||||||
| Immediate Family Member | $ | 32,160 | 73,057 | |||||
| Purchase of intangible asset: | ||||||||
| HotNow (Thailand) Company Limited | 275,397 | |||||||
| Purchase of equipment: | ||||||||
| HotNow (Thailand) Company Limited | 127,927 | |||||||
| True Axion Interactive Company Limited | 14,115 | |||||||
| Payment of contract cost: | ||||||||
| HotNow (Thailand) Company Limited | $ | — | 671,763 | |||||
| General and admin expense: | ||||||||
| HotNow (Thailand) Company Limited | 250,971 | 15,045 | ||||||
| Rental expense: | ||||||||
| Tree Roots Entertainment Group Company Limited | — | 62,164 | ||||||
| HotNow (Thailand) Company Limited | — | 12,715 | ||||||
| Technology and development expense: | ||||||||
| HotNow (Thailand) Company Limited | 2,621 | — | ||||||
| Operating expense: | ||||||||
| HotNow (Thailand) Company Limited | — | 211,589 | ||||||
| Interest expense (income) of loan from: | ||||||||
| Immediate Family Member | 170 | — | ||||||
| HotNow (Thailand) Company Limited | 381 | — | ||||||
| Magnolia Quality Development Corporation Limited | 28,651 | 31,583 | ||||||
| Tree Roots Entertainment Group Company Limited | $ | 27,604 | 58,504 | |||||
| Other expense: | ||||||||
| HotNow (Thailand) Company Limited | $ | — | 5,454 | |||||
| Payment of marketing expense: | ||||
| Immediate Family Member | $ | 199,200 | ||
| Payment of consulting expense: | ||||
| Immediate Family Member | $ | 82,500 | ||
| Payment of salary expense: | ||||
| Immediate Family Member | $ | 73,057 | ||
| Purchase of intangible asset: | ||||
| HotNow (Thailand) Company Limited | $ | 275,397 | ||
| Purchase of equipment: | ||||
| HotNow (Thailand) Company Limited | $ | 127,927 | ||
| True Axion Interactive Company Limited | $ | 14,115 | ||
| General and admin expense: | ||||
| HotNow (Thailand) Company Limited | $ | 15,045 | ||
| Operating expense: | ||||
| HotNow (Thailand) Company Limited | $ | 211,589 | ||
| Interest expense of loan from: | ||||
| Magnolia Quality Development Corporation Limited | $ | 31,583 | ||
| Tree Roots Entertainment Group Company Limited | $ | 58,504 | ||
| Rental expense: | ||||
| Tree Roots Entertainment Group Company Limited | $ | 62,164 | ||
| HotNow (Thailand) Company Limited | $ | 12,715 | ||
| Other expense: | ||||
| HotNow (Thailand) Company Limited | $ | 5,454 | ||
| Payment of contract cost: | ||||
| HotNow (Thailand) Company Limited | $ | 671,673 | ||
The Company had the following related party balances as of November 30, 2021 as follows:2022 and February 28, 2022:
| Nature | November 30, 2022 | February 28, 2022 | ||||||||||||||
| Amounts due from related parties: | ||||||||||||||||
| HotNow (Thailand) Company Limited | Other receivable | — | 155,425 | |||||||||||||
| Total | $ | — | 155,425 | |||||||||||||
| Nature | November 30, 2021 | |||||||||||||||
| Amounts due to related parties: | ||||||||||||||||
| Immediate Family Member | Accrued expense | 8,783 | — | |||||||||||||
| HotNow (Thailand) Company Limited | Account payable | 3,131 | 393 | |||||||||||||
| Accrued expense | 1,030 | — | ||||||||||||||
| Magnolia Quality Development Corporation Limited | Accrued interest expense | 3,296 | Accrued expense | 25,481 | 3,169 | |||||||||||
| Tree Roots Entertainment Group | Accrued interest expense | 32,791 | Accrued expense | 55,741 | 32,700 | |||||||||||
| HotNow (Thailand) Company Limited | Other liability | 391 | ||||||||||||||
| Axion Interactive Inc. | Other payable | 1,770 | Accrued expense | 1,770 | 1,770 | |||||||||||
| Red Anchor Trading Corporation | Account payable | — | 395,782 | |||||||||||||
| Total | $ | 38,248 | $ | 95,936 | 433,814 | |||||||||||
| Notes receivable: | ||||||||||||||||
| HotNow (Thailand) Company Limited | 52,745 | |||||||||||||||
| Notes payable: | ||||||||||||||||
| Immediate Family Member | — | 966,314 | ||||||||||||||
| Magnolia Quality Development Corporation Limited | 445,567 | 423,525 | 459,024 | |||||||||||||
| Tree Roots Entertainment Group | 297,044 | 719,993 | 306,016 | |||||||||||||
| Total | $ | 795,356 | $ | 1,143,518 | 1,731,354 | |||||||||||
The comparative figure for the nine months ended November 30, 2020 represents significant related party transactions of Hotplay Enterprise Ltd. as follow:
| Advance received for share subscription: | ||||
| Red Anchor Trading Corporation | $ | 2,500,000 | ||
| Short-term Loan from: | ||||
| Tree Roots Entertainment Group Co., Ltd | $ | 660,849 | ||
| Repayment of Short-term Loan: | ||||
| Tree Roots Entertainment Group Co., Ltd | $ | 396,509 | ||
| Interest expense of loan from: | ||||
| Magnolia Quality Development Corporation Limited | $ | 10,682 | ||
| Tree Roots Entertainment Group Company Limited | $ | 6,273 | ||
| Payment of loan interest: | ||||
| Magnolia Quality Development Corporation Limited | $ | 10,799 | ||
| Tree Roots Entertainment Group Co., Ltd | $ | 4,874 | ||
| Payment of contract cost: | ||||
| HotNow (Thailand) Company Limited | $ | 476,037 | ||
| True Axion Interactive Company Limited | $ | 322,515 | ||
Significant agreements with related parties
On March 31, 2021, HotPlay Thailand entered into an asset purchase agreement with HotNow, a related party, which is also under the same common control of HotPlay Thailand, to purchase certain of the assets of HotNow, including all software used in the business and including all rights under licenses and other agreements and employees, for the aggregate price of 19,500,000 Thai Baht (inclusive of 7% value added tax (VAT)) (approximately $624,000 US). On April 30, 2021, HotPlay Thailand made an advanced payment to HotNow in the amount of 5,000,000 Thai Baht (approximately $149,533 US). On June 7, 2021, HotPlay Thailand paid the remaining cost of the asset purchase to HotNow in the amount of 14,500,000 Thai Baht (approximately $474,467 US) pursuant to the terms of the asset purchase agreement.
On March 24, 2021, HotPlay Thailand entered into a short-term loan with MQDC for $480,000 (15,000,000 Thai Baht)THB 15,000,000 (equivalent to $423,525) with an interest rate of 9% per annum, which is payable on demand and unsecured. Accrued interest on this loan was $3,296$25,481 as of November 30, 2021.2022.
DuringIn June and July 2020, HotPlay Thailand entered into a short-term loan with TREG for the aggregate principal amount of $543,000 (17,000,000 Thai Baht)THB 17,000,000 (equivalent to $479,995) with an interest rate of 9.75% per annum, which is payable on demand and unsecured. Accrued interest on this loan was $2,380 as of November 30, 2021. On May 31, 2021, HotPlay Thailand repaid THB 7,000,000 Thai Baht (approximately $223,000 US) in connection with(equivalent to $197,645), hence the remaining short-term loan from TREG.TREG was 10,000,000 Thai Baht (equivalent to $282,350).
On October 28, 2022, HotPlay Thailand entered into another loan agreement with TREG with the principal sum of THB 15,500,000 (equivalent to $437,643) for the Company’s operation. The loan carries interest at 15% per annum and was due on November 11, 2022. Under this loan agreement, HotPlay Thailand has agreed to repay all outstanding convertible notes issued in 2020 of THB 10,000,000 (equivalent to $282,350), together with accrued interest on the same due date. The loan is secured by the mortgage of 2,266,082 shares of Nithinan Boonyawattanapisut (“Guarantor”) in NextPlay Technologies Inc at the value of THB 6.84 per share. In the event that the Guarantor makes the repayment of the company’s obligation, the Guarantor takes on all the rights that the Lender had against the company for reimbursement. As of November 30, 2022, the loans were overdue and the interest of 15% per annum was charged as penalty from the due date up to the date that full repayment is made. The outstanding loan balance was $719,993 and interest payable was $55,741 as of the end of the period.
Next Bank International currently holds a $705,000 loan that was purchased in 2020 at a discounted purchase price of $647,776, when the BankNextBank was not partially or wholly owned by Next Play Technologies.the Company. The borrower is an entity affiliated with a current member of the Bank’s Boardboard of Directors.directors. The Loanloan bears interest at an annual rate of 10%. It is expected to be fully collected in Q1 2022.Q3 FY2023. As of November 30, 2021,2022, the outstanding balance was $705,000.
Management compensation
On April 7, 2021, the board of directors of the Company ratified the current compensation payable to members of the board of directors, which provides that each non-executive member of the Board be paid the following:
In total, an aggregate of 165,000 shares of common stock were issued to the non-executive directors on April 8, 2021, for fiscal 2022 compensation (such shares, the “Fiscal 2022 Board Compensation Shares”). The Fiscal 2022 Board Compensation Shares were issued under the Company’s Amended and Restated 2017 Equity Incentive Plan (the “Plan”).
On April 7, 2021, the Company entered into a Lock-Up Agreement with each of the non-executive members of the board of directors. Pursuant to the Lock-Up Agreements, each non-executive director agreed not to transfer, sell, pledge, or assign any of their applicable Fiscal 2022 Board Compensation Shares until March 1, 2022.
On April 7, 2021, the board of directors of the Company, consistent with the employment agreement of Mr. William Kerby, the Co-Chief Executive Officer of the Company, which provides for Mr. Kerby to receive a base salary of $400,000 per year, and an annual bonus, payable at the discretion of the board of directors, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals), and other bonuses which may be granted from time to time in the discretion of the board of directors, agreed to award Mr. Kerby a discretionary bonus for fiscal 2021 of $400,000, which was payable in cash or shares of common stock, at Mr. Kerby’s option, under the Plan, with a price of $3.02 per share, the closing sales price of the Company’s common stock on the date the board of directors approved such bonus. On April 7, 2021, April 28, 2021, and May 16, 2021, Mr. Kerby elected to receive cash in connection with the bonus of $100,000, $150,000, and $150,000, respectively.
On April 7, 2021, the Company declared dividends in arrears of $1,102,068 on previously outstanding Series A Preferred Stock, that were converted into common stock with the Series A Preferred Stock being redeemed. These dividends were payable when and if declared by the board of directors. The dividends were owed to an entity controlled by Donald P. Monaco, our Co-Chairman at that time, William Kerby, our Co- Chief Executive Officer and a director, and Warren Kettlewell, a former board member.
On April 8, 2021, the Company entered into an Exchange Agreement with William Kerby, its Co-Chief Executive Officer and director, and Monaco Investment Partners II, LP (“MI Partners”), of which Donald P. Monaco, the then Co-Chairman of the board of directors of the Company, is the managing general partner (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the terms of which were approved by the board of directors of the Company, Mr. Kerby and MI Partners exchanged their right to an aggregate of $1,016,314 in accrued dividends (the “Accrued Dividends”), which had accrued on the Company’s outstanding Series A Preferred Stock, which had been held by Mr. Kerby and MI Partners prior to the conversion of such Series A Preferred Stock into common stock of the Company in August 2017, for Convertible Promissory Notes. Specifically, Mr. Kerby exchanged rights to $430,889 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $430,889 and MI Partners exchanged rights to $585,425 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $585,425 (the “Convertible Promissory Notes”).
The Convertible Promissory Notes accrue interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Notes is convertible, at the option of the holders thereof, into shares of the Company’s common stock, at any time beginning seven days after the closing date of the HotPlay Exchange Agreement (which closed on June 30, 2021) and prior to the payment in full of such Convertible Promissory Notes by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes (which was below the $3.02 per share minimum conversion price). The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default. On August 27, 2021, $50,000 cash was drawn by Mr. Kerby against his Convertible Promissory Note. As of November 30, 2021 the outstanding balance of the convertible promissory notes were in amount of $966,314.
On September 16, 2021, the Company’s board of directors approved an updated compensation plan setting forth compensation payable to the non-executive members of the board of directors. Pursuant to the updated compensation plan, each non-executive member of the board of directors will receive:
The compensation is earned and payable on a pro-rata, quarterly basis, with a total of 70% of the compensation payable in shares of Company common stock, based on the closing price of the Company’s common stock on the last day of each fiscal quarter during which consideration is earned, and 30% accrued and paid in cash at such time as the Company has had at least two consecutive profitable quarters. The compensation is payable retroactive to July 1, 2020. Notwithstanding the above, the compensation payable to Mr. Donald P. Monaco, our previous Co-Chairman of the board of directors, is to be reduced by the amount he has already been paid in fiscal 2022. Finally, in addition to the above, non-executive members of the board are eligible for yearly bonuses as approved by the board of directors. All shares issued pursuant to the above will be issued under the Plan and subject thereto.
Significant agreements with managementsmanagement of the Company
On August 19, 2021, |
The agreement includes a non-compete provision, prohibiting Ms. Boonyawattanapisut from competing against the Company duringentered into Intellectual Property Purchase Agreements with Fighter Base Publishing Inc. (“Fighter Base”) and Inc. (“Token IQ”, and together with Fighter Base, the term“IP Sellers”), dated as of the agreementsame date (each an “IPP Agreement”, and for a period of 12 months after termination thereof (subjecttogether the “IPP Agreements”). Pursuant to certain exceptions described below), in any state or country in connection with (i) the commercial sale of products sold byIPP Agreements, the Company during the six (6) months preceding the termination date; and (ii) any services the Company commercially offered during the six (6) months prioragreed to acquire certain intellectual property owned by Fighter Base (relating to the termination date (collectively,games industry) and by Token IQ (relating to the “Non-Compete”).
Duringdistributed ledger industry), both of which entities are owned and controlled by Mark Vange, the termChief Technology Officer of the agreement, Ms. Boonyawattanapisut is to receive (i) a base salary of $400,000 per year, which may be increased at any time at the discretion of the Compensation Committee of the board of directors of the Company without the need to amend the agreement; (ii) an annual bonus payable at the discretion of the Compensation Committee; (iii) other bonuses which may be granted/approved from time to time in the discretion of the Compensation Committee; (iv) $200,000 in cash and 25,000 shares of common stock issued as a sign-on bonus under the terms of the Plan; (v) up to four weeks of annual paid time off, which can be rolled-over year to year, or which in the discretion of Ms. Boonyawattanapisut, can be required to be paid in cash at the end of any year or the termination of the agreement; and (vi) a car allowance equal to an equivalent of $1,500 per month, during the term of the agreement.
The agreement provides Ms. Boonyawattanapisut with the option of receiving some or all of the base salary and/or any bonus in shares of the Company’s common stock, with the value of such shares being based on the higher of (i) the closing sales price per share on the trading day immediately preceding the determination by Ms. Boonyawattanapisut to accept shares in lieu of cash; and (ii) the lowest price at which such issuance will not require stockholder approval under the rules of the stock exchange where the Company’s common stock is then listed or Nasdaq ((i) or (ii) as applicable, the “Share Price” and the “Stock Option”), provided that Ms. Boonyawattanapisut is required to provide the Company at least five business days prior written notice if she desires to exercise the Stock Option as to any payment of compensation, unless such time period is waived by the Company.
The issuance of the shares described above is subject to the approval of the stock exchange where the Company’s common stock is then listed or Nasdaq, and where applicable, stockholder approval, and in the sole discretion of the board of directors, may be issued under, or outside of, a stockholder approved stock plan.
The agreement includes standard provisions relating to the reimbursement of business expenses, indemnification rights, rights to Company property and inventions (which are owned by the Company), dispute resolutions, tax savings, clawback rights and provisions entitling Ms. Boonyawattanapisut to receive any fringe benefits offered by the Company to other executives (subsidized in full by the Company) including, but not limited to, family coverage for health/medical/dental/vision, life and disability insurance.
The agreement terminates upon Ms. Boonyawattanapisut’s death and can be terminated by the Company upon her disability (as described in the agreement), by the Company for Cause (defined below) or by Ms. Boonyawattanapisut for Good Reason (defined below). For the purposes of the agreement, (i) “Cause” means (A) Ms. Boonyawattanapisut’s gross and willful misappropriation or theft of the Company’s or any of its subsidiary’s funds or property, or (B) Ms. Boonyawattanapisut’s conviction of, or plea of guilty or nolo contendere to, any felony or crime involving dishonesty or moral turpitude, or (C) Ms. Boonyawattanapisut materially breaches any obligation, duty, covenant or agreement under the agreement, which breach is not cured or corrected within thirty (30) days of written notice thereof from the Company (except for certain breaches which cannot be cured), or (D) Ms. Boonyawattanapisut commits any act of fraud; and (ii) “Good Reason” means (A) without the consent of Ms. Boonyawattanapisut, the Company materially reduces Ms. Boonyawattanapisut’s title, duties or responsibilities, without the same being corrected within ten (10) days after being given written notice thereof; (B) the Company fails to pay any regular installment of base salary to Ms. Boonyawattanapisut and such failure to pay continues for a period of more than thirty (30) days; or (C) a successor to the Company fails to assume the Company’s obligations under the agreement, without the same being corrected within thirty (30) days after being given written notice thereof.
In the event of termination of the agreement for death or disability by Ms. Boonyawattanapisut without Good Reason, or for Cause by the Company, Ms. Boonyawattanapisut is due all consideration due and payable to her through the date of termination. In the event of termination of the agreement by Ms. Boonyawattanapisut for Good Reason or the Company for any reason other than Cause (or if Ms. Boonyawattanapisut’s employment is terminated other than for Cause within 6 months before or 24 months following the occurrence of a Change of Control (defined in the agreement) of the Company), Ms. Boonyawattanapisut is due (i) all consideration due and payable through the date of termination; (ii) a lump sum payment equal to 12 months of base salary; (iii) continued participation in all benefit plans and programs of the Company for 12 months after termination (or at the option of the Company, reimbursement of COBRA insurance premiums for substantially similar coverage as the Company’s plans); and (iv) the Non-Compete will not apply to Ms. Boonyawattanapisut.
The terms of the agreement were approved by the Company’s Compensation Committee and Audit Committee, each consisting solely of ‘independent’ members of the Company’s board of directors.
Pursuant to the Fighter Base IPP Agreement, the intellectual property to be acquired thereunder has a mutually agreed upon value of $5 million, which will be paid by the Company by way of the issuance to Fighter Base of 1,666,66783,333 restricted shares of Company common stock (valued at $3 per share of common stock).
Pursuant to the Token IQ IPP Agreement, the intellectual property to be acquired thereunder has a mutually agreed upon value of $5 million, which will be paid by the Company by way of the issuance to Fighter BaseToken IQ of 1,250,00062,500 restricted shares of Company common stock (valued at $4 per share of common stock).
Pursuant to the IPP Agreements, in the event that the shares of Company common stock issued in connection with the foregoing transactions are still restricted after closing of such transactions, the Company shall file a registration statement with the SEC to register such shares for resale by their respective owners (Token IQ and Fighter Base, as applicable).
The Token IQ IPP Agreement includes the right for Token IQ to license the intellectual property purchased thereunder to third parties, with the approval of the Company, which shall not be unreasonable withheld, provided that any licenses are non-transferable, non-sublicensable and non-exclusive, and that the licenses will not compete with the Company. Any consideration received by Token IQ from such licenses will be split 50/50 between the Company and Token IQ.
The closing of the transactions contemplated by the IPP Agreements are subject to customary closing conditions, which include, due to Mr. Vange’s status as an officer of the Company, the approval of the Company’s shareholders of the transactions contemplated by the IPP Agreements and the issuance of shares of Company common stock thereunder. The Company has scheduled a meeting of its stockholders set for January 28, 2022 which, among other things, includes approval of the IPP Agreements as a proposal for shareholder approval.
Departure and Election of Directors
On November 9, 2021, Stacey Riddell resigned as a member of the Company’s board of directors. Ms. Riddell’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
On November 23, 2021, the Company’s board of directors appointed Farooq Moosa as an independent director of the Company to fill the vacant Board seat resulting from Ms. Riddell’s resignation. Mr. Moosa will hold this position until the Company’s next annual meeting of shareholders or until his successor is elected and qualified, subject to his earlier death, resignation, or removal.
There is no arrangement or understanding between Mr. Moosa and any other person pursuant to which Mr. Moosa was selected as a director of the Company. Other than the Company’s formal plan for compensating its directors for their services, there are no plans, contracts or arrangements or amendments to any plans, contracts or arrangements entered into with Mr. Moosa in connection with his appointment to the board of directors, nor are there any grants or awards made to Mr. Moosa in connection therewith. Mr. Moosa is not a participant in, nor is he to be a participant in, any related-person transaction or proposed related-person transaction required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
On May 2, 2022, the Company completed such assets acquisitions from Fighter Base and Token IQ, and pursuant to the terms of the respective IPP Agreements, the Company issued shares of its common stock as consideration for the purchase from Fighter Base and Token IQ in the amount of 83,333 and 62,500 shares, respectively. The Company recorded at fair value of the common stock issued on May 2, 2022, at a closing price $8.3 per share, as intangible asset under development, as of the recognition date and as of November 30, 2022 the balance amounted to $1,210,417.
Note 6 – Investments in Unconsolidated Affiliates
We assess the potential impairment of our equity method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value.
Note 6.1 – Advances for investments
Letter of Intent to Acquire Axion Shares
On October 28, 2020, the Company entered into a non-binding Letter of Intent (as amended by the first amendment thereto dated March 10, 2021, the “Letter“Letter of Intent”Intent”) with Radiant Ventures Limited, which manages Radiant VC1 Limited and Radiant PV 1 Limited, two stockholders of Axion Ventures, Inc. (“Axion”Axion”). As discussed below, the Company acquired approximately 33.85% of Axion (provided that such ownership of Axion has not been formally transferred to the Company to date) on November 16, 2020, pursuant to the Axion Exchange Agreement (as defined in Note 7, below).
Pursuant to the Letter of Intent, the Company agreed, subject to certain condition precedents, including regulatory approvals and the entry into material agreements with the sellers, to acquire approximately 12,000,000 shares of Axion, equal to 5.7% of Axion’s outstanding shares, from certain of its stockholders for approximately $2,000,000, payable in a combination of stock and cash. In connection with our entry into the Letter of Intent, we paid the sellers a $500,000 non-refundable deposit towards the cash purchase price of the shares in or around October 2020 (representing 25% of such purchase price). We also issued the sellers 235,000 shares of Company common stock in March 2021, representing an additional 25% of the purchase price. Both payments are non-refundable. A final payment of 50% of the purchase price is due 10 days after the British Columbia Securities Commission (“BCSC”BCSC”) lifts a cease trade order on Axion’s shares and is payable at the option of the sellers in cash or shares of the Company’s common stock, based on a 20% discount to the Company’s stock price at the time the election to take such final payment in shares is made, provided that such stock price valuation will not be less than $2.00$40.00 per share and not more than $3.00$60.00 per share. The Letter of Intent was to be terminated if the final payment had not been made by the earlier of June 30, 2021 and 15 days after the BCSC lifts the Axion no trade order; however, the parties have verbally agreed to extend such date. The purchase is also contingent on the sellers granting the Company a proxy to vote the shares of Axion to be purchased through closing. The purchase remains subject to the negotiation of, and entry into, a definitive purchase agreement with the sellers, as well as other closing conditions, which have not been entered into and/or which have not been completed, to date.
On August 11, 2022, the British Columbia Securities Commission (the “BCSC”) announced the revocation order, however, the securities of Axion will remain suspended from trading on the TSX Venture Exchange pending the completion of a reinstatement application to the TSX Venture Exchange. The management has closely monitored Axion’s trading status and will take further action once the stock resumes trading in an active market. As of November 30, 2021,2022, total paymentprepayment was $937,117 which is expected to be recovered in full.
Letter of cash and shares already paid byIntent of Potential acquisition of 100% of a Bank Holding Company
On November 1, 2021, the Company signed a non-binding Letter of Intent to acquire 100% of the capital stock of a bank holding company which is the 100% owner of a community bank. In connection with the execution of the non-binding Letter of Intent, on November 10, 2021, the Company made a non-refundable deposit of $1,000,000 on behalf of itself and other parties to the sellers was $937,117. The Company plans to make the final payment of 50% ofacquisition (as discussed below), which shall be credited against the purchase price after the BCSC lifts a cease trade order on Axion’s shares, provided that the Company cannot estimate when, orat closing, if such cease trade ordercompleted. The acquisition, if completed, will be lifted.made with other parties, to be named subsequently, and it is expected that no individual party will acquire more than 24.9% of said bank holding company. There is no further updatelegal obligation between the parties with respect to the acquisition unless and until the parties enter into a definitive agreement with respect thereto. Closing of the transaction will be subject to regulatory approvals, amongst other things. The balance as of November 30, 2021.2022 was in the amount of $1,000,000.
Note 6.2 – Investment in Unconsolidated Affiliates
Soma Innovation Lab Joint Venture
On March 8, 2021, the Company entered into a Joint Venture Agreement with Soma Innovation Lab (“Soma”). Pursuant to the agreement, the parties agreed to form a joint venture for designing hyper-personalized experiences for targeted gamers. The agreement requires the Company to provide Soma the use of the HotPlay technology, assuming the Company acquire ownership of such technology as a result of the closing of the Company’s pending Share Exchange (as defined below), with HotPlay (as defined below), which technology is owned by HotPlay, and that the Company would issue the principals of Soma 3,600 shares of restricted common stock (valued at $180,000), of which $45,000 was earned immediately and the remaining shares will be earned at the rate of 6,000 per month. Pursuant to the agreement, Soma agreed to provide the Company use of an email client list and other services. The joint venture is owned 50/50 between us and Soma, with net profits/revenues paid pursuant to the same 50/50 split. In the event the joint venture achieves revenue in excess of expenses and the Company recovers the $180,000 value of the shares, then the Company agreed to issue Soma a bonus of 2,500 shares of restricted common stock. The joint venture (and agreement) each have a term of two years. The Company also agreed to use Soma for certain work to be performed on its websites and travel magazine and agreed to pay Soma $75,000 per month ($225,000 in aggregate) for such work, payable by way of the issuance of 4,500 shares of restricted common stock. As of November 30, 2022, no development and activity has been started. Soma is anticipated to continue the project with NextTrip after completion of the sale thereof to TGS.
6,142,856 shares of Bettwork Industries Inc. Common Stock (OTC Pink: BETW)
On July 2, 2018, three Secured Convertible Promissory Notes aggregating $5,250,000, evidencing amounts we were owed by Bettwork Industries Inc. (“Bettwork”), were exchanged for 7,000,000 shares of Bettwork’s common stock at $0.75 per share, for a fair value of $5,250,000 as of July 2, 2018. Bettwork’s common stock has a readily determinable fair value in the market under the symbol “BETW.”
On November 30, 2022, the 6,142,856 shares of Bettwork’s common stock held by the Company were trading at $0.0003 per share, valued at an aggregate of $1,843. Any change in fair value is recognized as other expense in statement of income as of November 30, 2022. At this time, the Company believes Bettwork’s business is defunct and therefore the Company has written off the investment.
Recruiter.com Group, Inc. formerly Truli Technologies Inc (OTCQB: RCRT)
On August 31, 2016, the Company entered into a Marketing and Stock Exchange Agreement with Recruiter.com (“Recruiter”). The agreement required the Company to issue to Recruiter 75,000 shares of the Company’s common stock in exchange for 2,200 shares of Recruiter common stock. The Company issued to Recruiter an additional 75,000 shares of Company common stock for as a prepayment for marketing and advertising within the Recruiter platform. Recruiter was at that time a private company with a platform that companies and individuals use for employment placements.
On January 15, 2019, pursuant to an Agreement and Plan of Merger / Merger Consideration, Truli Technologies Inc., which subsequently changed its name to Recruiter.com Group, Inc. (OTCQB: RCRT) (“Recruiter.com”), acquired Recruiter and Monaker exchanged its 2,200 shares in Recruiter for 139,273 shares of Recruiter.com common stock.
During the year ended February 28, 2022, the Company sold in open market transactions 68,083 shares of Recruiter.com common stock. The sale of these shares resulted in a realized gain of $28,028 for the year ended February 28, 2022.
On November 4, 2022, the Company sold 3,461 shares of Recruiter at $0.635 per share amounted $2,197.73.
Acquisition of Axion Shares
The investment in affiliate at cost of $4,856,825 represents the Company’s acquisition of approximately 33.85% of Axion on November 16, 2020. Pursuant to the Axion Exchange Agreement (as defined in Note 7, below), which closed on November 16, 2020, the Axion Stockholders, exchanged ordinary shares of Axion equal to approximately 33.85% of the outstanding common shares of Axion, in consideration for 500,000 shares of Series B Convertible Preferred Stock of the Company, which automatically converted into 370,885 common shares of the Company on June 30, 2021. As of November 30, 2022, the outstanding amount of this investment was $4,415; there was no change in market price during the nine-month period ended November 30, 2022.
Also pursuant to the Axion Exchange Agreement, which closed on November 16, 2020, the Company granted a warrant to Cern One Limited (one of the Axion Stockholders), to purchase 95,713 shares of the Company’s common stock, with an exercise price of $40.00 per share. The warrants vest on the earlier of (i) the date the Axion debt is fully repaid by Axion or (ii) the date that the Company obtains 51% or more of the voting control of, and economic rights to, Axion, provided that such vesting date must occur before November 16, 2021 or the warrants will terminate. Because the vesting conditions had not been satisfied as of November 16, 2021, the warrants terminated automatically on such date pursuant to their terms. Accordingly, as of November 30, 2022, these warrants are no longer outstanding.
See Note 7, below, for additional information regarding this transaction.
Note 7 – Notes Receivable
Current
$7,657,024 Convertible Notes - Axion Debt Share Exchanges
On July 23, 2020, the Company entered into a Share Exchange Agreement (as amended from time to time, the “HotPlay Exchange Agreement” and the transactions contemplated therein, the “HotPlay Share Exchange”) with HotPlay and the stockholders of HotPlay (the “HotPlay Stockholders”). The transactions contemplated by the HotPlay Exchange Agreement were subject to certain closing conditions, including, the approval of the listing of the combined company’s common stock on the Nasdaq Capital Market following the closing.
On November 12, 2020, the Company entered into an Amended and Restated Share Exchange Agreement (as amended by the first amendment thereto dated January 6, 2021, the “Axion Exchange Agreement”) with certain stockholders holding shares of Axion Ventures, Inc. (“Axion” and the “Axion Stockholders”) and certain debt holders holding debt of Axion (the “Axion Creditors”) (the “Axion Share Exchange,” and collectively with the HotPlay Exchange Agreement, the “Exchange Agreements” and the transactions contemplated therein, the “Share Exchanges”). The transactions contemplated by the Axion Exchange Agreement closed on November 16, 2020.
Pursuant to the Axion Exchange Agreement, (a) the Axion Stockholders (including Cern One Limited (“Cern One”)), exchanged ordinary shares of Axion equal to approximately 33.85% of the then outstanding common shares of Axion, in consideration for 10,000,000 shares of Series B Convertible Preferred Stock of the Company (the “Series B Preferred Stock”); and (b) the Axion Creditors exchanged debt of Axion in the aggregate amount of $7,657,024 (the “Axion Debt”), for (i) 3,828,500 shares of Series C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”); and (ii) a warrant, granted to Cern One, to purchase 95,712 shares of the Company’s common stock (the “Creditor Warrants”), which is only exercisable upon the occurrence of certain events (described below). Although the Axion Share Exchange closed on November 16, 2020, the Company has yet to formally complete the transfer of the ownership of the Axion shares into its name, due to a trading suspension by the TSX Venture Exchange, which impacts Axion.
The closing of the HotPlay Exchange Agreement on June 30, 2021 triggered the automatic conversion of the Company’s outstanding Series B Convertible Preferred Stock and Series C Convertible Preferred Stock into common stock of the Company. Specifically, effective June 30, 2021, the 10,000,000 shares of outstanding Series B Convertible Preferred Stock and 3,828,500 shares of outstanding Series C Convertible Preferred Stock automatically converted into 370,885 and 191,425 shares of common stock of the Company, respectively, in accordance with the terms of such preferred stock (the “Preferred Conversion”).
The Creditor Warrants had cashless exercise rights, an exercise price of $40.00 per share and, a term of two years, beginning on the Vesting Date (defined below). The Creditor Warrants were scheduled to vest on the earlier of:
| (i) | The date the Axion Debt is fully repaid by Axion, and |
| (ii) | the date that the Company obtains 51% or more of the voting control of, and economic rights to, Axion, provided that such vesting date must occur before November 16, 2021, or the Creditor Warrants will terminate (as applicable, the “Vesting Date”). All of the Creditor Warrants were granted to Cern One. |
Because the vesting conditions had not been satisfied as of November 16, 2021, the warrants terminated automatically on such date pursuant to their terms. Accordingly, as of November 30, 2022, these warrants are no longer outstanding.
On August 20, 2021, our counsel sent a demand letter for payment to Axion Ventures Inc., but the Company has not received a response in related to the demand letter.
On September 1, 2021, the Company filed a claim in the Supreme Court of British Columbia demanding payment of $7,657,024.
In November 2021, the Company commenced a new claim for the debt claimed to reflect the difference between what was owed and what the Company is claiming to avoid double-claiming.
In February 2022, the court was receptive to loans related evidence (e.g. loan agreements, bank statements, board resolutions, etc.), and determined that it will be further resolved together with other Axion issues in the next trial. The summary trial judge has advised that he wishes to take case management over this and several related proceedings. It is anticipated that the trial of this action would be reset for 12 weeks sometime in 2023 or early 2024, a new trial date has not been determined. Document and oral discovery are ongoing, which will be necessary for the parties to make full disclosure on all issues. During fiscal year 2022, the Company recorded an allowance for credit losses for the principal amounted to $3.1 million and for the accrued interest receivable amounted to $0.2 million.
As of November 30, 2022, the recoverable amount of Axion receivables net allowance for credit loss were $4.6 million.
Note 8 – Intangible Assets
The following table sets forth the intangible assets, both acquired and developed, including accumulated amortization as of November 30, 2022:
| Useful Life | Cost | Impairment | Accumulated Amortization | Net Carrying Value | ||||||||||||||
| Software development costs | 3.0 - 5.0 years | $ | 823,102 | 200,000 | 15,743 | 607,359 | ||||||||||||
| Trademark & License | 1.0 - 20.0 years | 6,214,935 | - | 1,460,578 | 4,754,357 | |||||||||||||
| CIP – Software development | 11,811,194 | - | - | 11,811,194 | ||||||||||||||
| $ | 18,849,231 | 200,000 | 1,476,321 | 17,172,910 | ||||||||||||||
Intangible assets are amortized on a straight-line basis over their expected useful lives, which is estimated to be 1-20 years. The expected useful lives are determined as to reflect the expected pattern of consumption of the future economic benefits embedded in the assets. CIP – Software development majorly consists of advertising platform, games and financial service digital platform which will be available for general release to customers in 1 – 2 years.
During the nine-month period ended November 30, 2022, the Company recognized impairment loss of $0.2 million on software development costs in the statement of comprehensive income to reduce the carrying amount of the assets to their recoverable amount as they are no longer in use.
Amortization expense related to website development costs and intangible assets, excluding amortization of debt issuance costs, was $0.6 million and $0.9 million for the nine-month periods ended November 30, 2022 and 2021, respectively.
Based on the carrying value of definite-lived intangible assets as of November 30, 2022, we estimate our amortization expense for the next five years will be as follows:
| As of November 30, 2022 | Amortization Expense | |||
| 2023 | $ | 1,249,566 | ||
| 2024 | 1,792,281 | |||
| 2025 | 1,689,180 | |||
| 2026 | 585,689 | |||
| 2027 | - | |||
| $ | 5,316,716 | |||
CIP – Software under development acquired from Go Game Securities Purchase Agreement
On June 30, 2021, the Company entered into a Securities Purchase Agreement (the “Go“Go Game SPA”SPA”) with David Ng, an individual (the “Seller”“Seller”). Pursuant to the Go Game SPA, the Company agreed to acquire a 37% interest in the capital stock of Go Game Pte Ltd, a Singapore private limited company (“Go Game”Game”), a mobile game publisher and technology company, representing an aggregate of 686,868 shares of Go Game’s Class B Preferred shares (the “Initial“Initial Go Game Shares”Shares”). The Go Game SPA also includes an option whereby the Company can acquire additional shares of Go Game, as described in greater detail below. Pursuant to the Go Game SPA, the aggregate consideration to be paid for the Initial Go Game Shares is: (i) 6,100,000 shares of Series D Preferred Stock (representing $6.1 million of value, based on an aggregate liquidation preference of $6.1 million), and (ii) $5 million in cash, with $1.25 million paid on June 30, 2021, $1.25 million payable on or before July 31, 2021, and $2.5 million payable on or before September 30, 2021.
Pursuant to the Go Game SPA, the Company was also granted an option (the “Go“Go Game Option”Option”), to purchase up to an additional 259,895 shares of Go Game’s Class B Preferred shares from the Seller (the “Option Shares”“Option Shares”) (representing 14% of Go Game’s outstanding Class B Preferred shares, or 51% with the Initial Go Game Shares). The Go Game Option is subject to the Seller’s acquisition of the Option Shares subsequent to the date of the Go Game SPA. The Go Game Option is exercisable from time to time after the date that the shareholders of the Company have approved the issuance of shares of common stock upon conversion of the Series D Preferred Stock and in connection with the Go Game Option (the “Approval Date”“Approval Date”), and prior to January 1, 2022. The per share consideration due in connection with an exercise of the Go Game Option is equal to $70 million, divided by the then number of outstanding shares of Go Game ($37.71 per share at the time the agreement was entered into) (the “Call“Call Option Price”Price”). The Call Option Price is to be satisfied by the issuance of shares of Company common stock valued based on the greater of (a) $2.35$47.00 per share and (b) 85% of the average of the closing prices of the Company’s common stock for the prior thirty days (the “30-Day Average”“30-Day Average”). The Seller agreed not to transfer the Option Shares from the date acquired through the exercise or expiration of the Go Game Option. Upon issuance of any shares of common stock upon exercise of the Go Game Option, the Seller agreed to enter into a lock-up agreement restricting any sales or transfers of any shares of common stock of the Company for a period of 18 months following the issuance date.
We agreed pursuant to the Go Game SPA, that upon our purchase of the Initial Go Game Shares, that we would appoint the Seller to the board of directors of the Company, and that we would continue to nominate the Seller as a board nominee for appointment on the board of directors at each subsequent shareholder meeting of the Company, subject to certain exceptions, until the earlier of (i) Seller’s death; (ii) Seller’s resignation from the board of directors; (iii) the date that Seller is no longer qualified to serve as a member of the board of directors; (iv) the date the board of directors, acting in good faith, determines that the continued appointment of Seller to the board of directors would violate the fiduciary duties of such members of the board of directors; (v) the third anniversary of the acquisition of the Initial Go Game Shares; and (vi) the date that the Seller holds less than 2 million shares of Company common stock (including shares of common stock issuable upon conversion shares of Series D Preferred Stock held by Seller).
The closing ofOn March 30, 2022, the acquisition of the InitialCompany, Go Game Shares is subject to certain closing conditions and requirementsthe Seller entered into an asset purchase agreement (the “Asset Purchase Agreement”) which may not be met on a timely basis, if at all. The Companyamends and Seller have made customary representations and warranties and have agreed to customary covenantsrestates in the Go Game SPA. There is no assurance that all of the conditions to the consummation ofits entirety the Go Game SPA will be satisfied.
In connection with the parties’ entry into thedisclosed previously whereby Go Game SPA, the Seller entered into a lock-up agreement withagreed to sell and assign to the Company, whereby the Seller agreed that the Seller would not transfer or sell, any of the Series D Preferred Stock shares and/or shares of common stock issuable upon conversion thereof, until 18 months after the Company’s acquisition of the Initial Go Game Shares (the “Initial Closing”), without the prior written consent of the Company, except that 1,525,000 of such shares may be transferred or sold six months after the Initial Closing, and an additional 1,525,000 shares may be transferred or sold 12 months after the Initial Closing.
As of November 30, 2021, the second payment of $1.25 million payable on or before July 31, 2021 and the third payment of $2.5 million payable on or before September 30, 2021 had not been paid and the shares of Series D Preferred Stock had not been issued, and such payments remained on hold subject to the completion of due diligence and further negotiation by the parties. Total payments made to the Seller as of November 30, 2021 were $1,250,000. It is anticipated that the due diligence and negotiations will be concluded on or about the end of January 2022.
Letter of Intent of Potential acquisition of 100% of a Bank Holding Company
On November 1, 2021, the Company signed a non-binding Letter of Intent to acquire 100% of the capital stock of a bank holding company which is the 100% owner of a community bank. In connection with the execution of the non-binding Letter of Intent, on November 10, 2021, the Company made a non-refundable deposit of $1,000,000 on behalf of itself and other parties to the acquisition (as discussed below), which shall be credited against the purchase price at closing, if completed. The acquisition, if completed, will be made with other parties, to be named subsequently, and it is expected that no individual party will acquire more than 24.9% of said bank holding company. There is no legal obligation between the parties with respect to the acquisition unless and until the parties enter into a definitive agreement with respect thereto. Closing of the transaction will be subject to regulatory approvals, amongst other things.
Note 6.2 – Investment in Unconsolidated Affiliates
Soma Innovation Lab Joint Venture
On March 8, 2021, the Company entered into a Joint Venture Agreement with Soma Innovation Lab (“Soma”). Pursuant to the agreement, the parties agreed to form a joint venture for designing hyper-personalized experiences for targeted gamers. The agreement requires the Company to provide Soma the use of the HotPlay technology, assuming the Company acquire ownership of such technology as a result of the closing of the Company’s pending Share Exchange (as defined below), with HotPlay (as defined below), which technology is owned by HotPlay, and that the Company would issue the principals of Soma 72,000 shares of restricted common stock (valued at $180,000), of which $45,000 was earned immediately and the remaining shares will be earned at the rate of 6,000 per month. Pursuant to the agreement, Soma agreed to provide the Company use of an email client list and other services. The joint venture is owned 50/50 between us and Soma, with net profits/revenues paid pursuant to the same 50/50 split. In the event the joint venture achieves revenue in excess of expenses and the Company recovers the $180,000 value of the shares, then the Company agreed to issue Somapurchase and assume from Go Game substantially all the assets and certain liabilities (but only to the extent such liabilities arise solely from activities or events that occur after the closing date) related to the goPlay platform (the “Go Game Assets”), together with a bonus of 50,000 shares of restricted common stock. The joint venture (and agreement) each have a term of two years. The Company also agreedperpetual license to use Soma for certain work to be performed on its websites and travel magazine, and agreed to pay Soma $75,000 per month ($225,000 in aggregate) for such work, payable by way of the issuance of 90,000 shares of restricted common stock. As of November 30, 2021, the project was still under development by the parties.goPay payment gateway (the “goPay License”).
6,142,856 sharesAs consideration for purchase of Bettwork Industries Inc. Common Stock (OTC Pink: BETW)the Go Game Assets and the receipt of the goPay License, the Company agreed to pay $5,000,000 (the “Purchase Price”) as follows:
| (i) | A cash payment of $1,250,000, which was paid previously by the Company to Go Game/Seller following the execution of the Go Game SPA; |
| (ii) | A cash payment of $1,500,000 at closing by wire transfer of immediately available funds; and |
| (iii) | A cash payment of $2,250,000, which shall be payable monthly by the Company to Go Game with simple interest thereon at the rate of 12.0% per annum until March 31, 2023. |
No stock consideration of Go Game or the Company is being exchanged, as was previously contemplated under the Go Game SPA.
On July 2, 2018, three Secured Convertible Promissory Notes aggregating $5,250,000, evidencing amounts we were owedIn the event the Company defaults on its monthly cash payment obligations under (iii) above, the Company agrees that the Seller shall be given the absolute right to demand for the return by Bettwork Industries Inc. (“Bettwork”), were exchangedway of assigning, transferring, and delivering to Seller all of Purchaser’s right, title, ownership and interest in certain games and source code for 7,000,000 shares of Bettwork’s common stock at $0.75 per share, for a fair value of $5,250,000 as of July 2, 2018. Bettwork’s common stock has a readily determinable fair value ingoPay (without taking away the market under the symbol “BETWperpetual licensing right).”
On February 28, 2021,For a period of six months following the 6,142,856 shares of Bettwork’s common stock held byclosing, Go Game will provide transitional assistance to the Company were tradingto integrate the goPlay platform and associated game titles, together with the goPay payment gateway, at $0.009 per share, valued at an aggregate of $55,286. On November 30, 2021, the 6,142,856 shares of Bettwork’s common stock held by the Company were trading at $0.0003 per share, valued at an aggregate of $1,843. Any change in fair value is recognized in net loss as other income, valuation loss, net for the nine months ended November 30, 2021.no additional charge.
The goPay License allows the Company to exploit the goPay payment gateway to enhance the products and service offerings of the Company. The goPay License does not allow the Company to exploit and sublicense the goPay technology as a stand-alone product.
Prior to the Closing (as defined below), Go Game was engaged in discussions with potential customers of the goPlay platform. At the Closing, the Company and Go Game entered into a revenue share agreement (the “Revenue Share Agreement”), pursuant to which Go Game shall refer such potential customers and any other potential customers to the Company, in exchange for a right to receive fifty percent (50%) of net revenues attributable to such sales.
In addition, the Company and the Seller entered into a restrictive covenant agreement (the “Restrictive Covenant Agreement”), whereby Seller will agree to refrain from competing with the Company and soliciting the Company’s employees at the time of the closing and for a period of time thereafter in order to protect the Company’s legitimate business interests and goodwill in connection with the Asset Purchase Agreement.
The consummation of the transactions contemplated by the Asset Purchase Agreement (the “Closing”) occurred on April 4, 2022, following the execution of the Asset Purchase Agreement on March 30, 2022. The acquired asset had a balance, as of November 30, 2022, in the amount $5,000,000 presented as intangible asset under development as it needed further development to align with its business use and purpose. The consideration paid as of May 21, 2022 amounted to $2,950,000.
Recruiter.com Group, Inc. formerly Truli Technologies Inc (OTCQB: RCRT)CIP – Software under development acquired from Fighter Base and Token IQ.
On August 31, 2016,19, 2021, the Company entered into a Marketingthe IPP Agreements with Fighter Base and Stock Exchange Agreement with Recruiter.com (“Recruiter”). The agreement required the Company to issue to Recruiter 75,000 sharesToken IQ Inc., dated as of the Company’s common stock in exchange for 2,200 shares of Recruiter common stock. The Company issued to Recruiter an additional 75,000 shares of Company common stock for as a prepayment for marketing and advertising within the Recruiter platform. Recruiter was at that time a private company with a platform that companies and individuals use for employment placements.
On January 15, 2019, pursuant to an Agreement and Plan of Merger / Merger Consideration, Truli Technologies Inc., which subsequently changed its name to Recruiter.com Group, Inc. (OTCQB: RCRT) (“Recruiter.com”), acquired Recruiter and Monaker exchanged its 2,200 shares in Recruiter for 139,273 shares of Recruiter.com common stock.
During the quarter ended November 30, 2021, the Company sold in open market transactions 68,083 shares of Recruiter.com common stock. The sale of these shares resulted in a realized gain of $28,028 for the nine months ended November 30, 2021.
On February 28, 2021, the Company owned 78,137 shares of Recruiter’s common stock compared to 3,461 shares of Recruiter’s common stock as of November 30, 2021. As of November 30, 2021, each share of Recruiter’s common stock was valued at $2.96 per share, which changed the fair value of the 3,461 shares of Recruiter common stock to $10,245. The net change in the fair value of $10,245 is recognized in net income as other income as of November 30, 2021.
Acquisition of Axion Shares
The investment in affiliate of $4,856,825 as of February 28, 2021, represents the Company’s acquisition of approximately 33.85% of Axion on November 16, 2020.same date. Pursuant to the Axion Exchange Agreement (as defined in Note 7, below)IPP Agreements, the Company agreed to acquire certain intellectual property owned by Fighter Base (relating to the games industry) and by Token IQ (relating to the distributed ledger industry), both of which closed on November 16, 2020,entities are owned and controlled by Mark Vange, the Axion Stockholders, exchanged ordinary shares of Axion equal to approximately 33.85%Chief Technology Officer of the outstanding common shares of Axion, in consideration for 10,000,000 shares of Series B Convertible Preferred Stock of the Company, which automatically converted into 7,417,700 common shares of the Company on June 30, 2021. As of November 30, 2021, the value of this investment decreased by $838,906 from $883,059 to $44,153, due to the change in the market price of Axion shares.
Also pursuant to the Axion Exchange Agreement, which closed on November 16, 2020, the Company granted a warrant to Cern One Limited (one of the Axion Stockholders), to purchase 1,914,250 shares of the Company’s common stock, with an exercise price of $2.00 per share. The warrants vest on the earlier of (i) the date the Axion debt is fully repaid by Axion or (ii) the date that the Company obtains 51% or more of the voting control of, and economic rights to, Axion, provided that such vesting date must occur before November 16, 2021 or the warrants will terminate. Because the vesting conditions had not been satisfied as of November 16, 2021, the warrants terminated automatically on such date pursuant to their terms. Accordingly, as of November 30, 2021, these warrants are no longer outstanding.
See Note 7, below, for additional information regarding this transaction.
Note 7 – Notes Receivable
Current
$7,657,024 Convertible Notes - Axion Debt Share ExchangesCompany.
On July 23, 2020,May 2, 2022, the Company entered into a Share Exchange Agreement (as amendedcompleted such assets acquisition from timeFighter Base and Token IQ, and pursuant to time, the “HotPlay Exchange Agreement” and the transactions contemplated therein, the “HotPlay Share Exchange”) with HotPlay and the stockholders of HotPlay (the “HotPlay Stockholders”). The transactions contemplated by the HotPlay Exchange Agreement were subject to certain closing conditions, including, the approval of the listing of the combined company’s common stock on the NASDAQ Capital Market following the closing.
On November 12, 2020, the Company entered into an Amended and Restated Share Exchange Agreement (as amended by the first amendment thereto dated January 6, 2021, the “Axion Exchange Agreement”) with certain stockholders holding shares of Axion Ventures, Inc. (“Axion” and the “Axion Stockholders”) and certain debt holders holding unsecured debt of Axion (the “Axion Creditors”) (the “Axion Share Exchange,” and collectively with the HotPlay Exchange Agreement, the “Exchange Agreements” and the transactions contemplated therein, the “Share Exchanges”). The transactions contemplated by the Axion Exchange Agreement closed on November 16, 2020.
Pursuant to the Axion Exchange Agreement, (a) the Axion Stockholders (including Cern One Limited (“Cern One”)), exchanged ordinary shares of Axion equal to approximately 33.85% of the then outstanding common shares of Axion, in consideration for 10,000,000 shares of Series B Convertible Preferred Stock of the Company (the “Series B Preferred Stock”); and (b) the Axion Creditors exchanged unsecured debt of Axion in the aggregate amount of $7,657,024 (the “Axion Debt”), for (i) 3,828,500 shares of Series C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”); and (ii) a warrant, granted to Cern One, to purchase 1,914,250 shares of the Company’s common stock (the “Creditor Warrants”), which is only exercisable upon the occurrence of certain events (described below). Although the Axion Share Exchange closed on November 16, 2020, the Company has yet to formally complete the transfer of the ownership of the Axion shares into its name, due to a Cease Trade Order issued by the BCSC, which impacts Axion.
The closing of the HotPlay Exchange Agreement on June 30, 2021 triggered the automatic conversion of the Company’s outstanding Series B Convertible Preferred Stock and Series C Convertible Preferred Stock into common stock of the Company. Specifically, effective June 30, 2021, the 10,000,000 shares of outstanding Series B Convertible Preferred Stock and 3,828,500 shares of outstanding Series C Convertible Preferred Stock automatically converted into 7,417,700 and 3,828,500 shares of common stock of the Company, respectively, in accordance with the terms of such preferredthe respective IPP Agreements, the Company issued shares of its common stock (the “Preferred Conversion”).
as consideration for the purchase from Fighter Base and Token IQ in the amount of 83,333 and 62,500 shares, respectively. The Creditor Warrants had cashless exercise rights, an exerciseCompany recorded at fair value of the common stock issued on May 2, 2022, at a closing price $8.33 per share. As of $2.00 per sharethe recognition date and a term of two years, beginning on the Vesting Date (defined below). The Creditor Warrants were scheduled to vest on the earlier of:
Because the vesting conditions had not been satisfied as of November 16, 2021, the warrants terminated automatically on such date pursuant to their terms. Accordingly, as of November 30, 2021, these warrants are no longer outstanding.
On August 20, 2021, our counsel sent a demand letter for payment to Axion Ventures Inc. As of November 30, 2021, there has been no response in related to the demand letter.
On September 1, 2021, the Company filed a claim in the Supreme Court of British Columbia demanding payment of $7,657,024.
During the 3rd quarter ended November 30, 2021, the Company has commenced a new claim for the amount of the debt that it acquired. The Company will be amending its claim shortly to reduce2022, the total claimedbalance amounted to reflect the difference between what is owed$1,210,417, presented as intangible asset under development as it needed further development to align with its business use and what the Company is claiming (to avoid double-claiming).purpose.
Note 89 – Intangible AssetsNotes Payable
The following table sets forth the intangible assets, both acquired and developed, including accumulated amortization as of November 30, 2021:
| Useful Life | Cost | Impairment | Accumulated Amortization | Net Carrying Value | ||||||||||||||
| Software development costs | 3.0 - 5.0 years | $ | 32,874,600 | $ | — | $ | 24,203,267 | $ | 8,671,333 | |||||||||
| Trademark & License | 6.0 - 20.0 years | 6,050,082 | — | 1,047,153 | 5,002,929 | |||||||||||||
| Others | 1.0 - 3.0 years | 3,063,994 | — | 1,886,816 | 1,177,178 | |||||||||||||
| CIP – Software development | 4,042,517 | — | — | 4,042,517 | ||||||||||||||
| CIP – IDS Project | 3,126,543 | 3,126,543 | — | — | ||||||||||||||
| $ | 49,157,736 | $ | 3,126,543 | $ | 27,137,236 | $ | 18,893,957 | |||||||||||
As part of the IDS Settlement, the Company reviewed the IDS platform software. As a result of the review, the Company determined to impair the remaining balance of the software platform in the amount of $3,126,543 because it will not have a value in use.
Intangible assets are amortized on a straight-line basis over their expected useful lives, which is estimated to be 1-20 years. The expected useful lives are determined as to reflect the expected pattern of consumption of the future economic benefits embedded in the assets.
Amortization expense related to website development costs and intangible assets, excluding amortization of debt issuance costs, was $1,661,927 and $135,329 for the quarters ended November 30, 2021 and November 30, 2020, respectively.
Based on the carrying value of definite-lived intangible assets as of November 30, 2021, we estimate our amortization expense for the next five years will be as follows:
| As of November 30, 2021 | Amortization Expense | |||
| 2022 | $ | 4,561,873 | ||
| 2023 | 6,315,756 | |||
| 2024 | 5,952,439 | |||
| 2025 | 2,063,889 | |||
| 2026 | — | |||
| $ | 18,893,957 | |||
Note 9 – Notes Payable
| Description | As of November 30, 2022 | As of February 28, 2022 | ||||||
| Streeterville Capital, LLC | $ | 4,555,971 | $ | 4,053,736 | ||||
| Business Brokers, LLC | 589,000 | 725,000 | ||||||
| McCarthy Tetrault LLP | 362,893 | — | ||||||
| Total | 5,507,864 | 4,778,736 | ||||||
| Less: Debt issuance cost | (177,083 | ) | (315,265 | ) | ||||
| Line of Credit and Notes Payable, net | 5,330,781 | 4,463,471 | ||||||
| Less: Current portion of Line of Credit and Notes Payable | (5,330,781 | ) | (4,463,471 | ) | ||||
| Line of Credit and Notes Payable Long Term, net | $ | — | $ | — | ||||
Note Purchase Agreements: Streeterville Capital LLC
On November 23, 2020, the Company entered into a Note Purchase Agreement (the “November“November 2020 Note Purchase Agreement”Agreement”) with Streeterville Capital, LLC (“Streeterville”Streeterville”), pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $5,520,000 (the “November“November 2020 Streeterville Note”Note”). Streeterville paid consideration of an initial cash purchase price of $3,500,000 for the note and issued the Company a promissory note in the amount of $1,500,000 (the “November“November 2020 Investor Note”Note”). The associated debt issuance costs of the note were $370,000 for total amount due $3,870,000. In addition to the $370,000 of debt issuance costs, the Company paid $245,000 for advisory fees, resulting in net proceeds to the Company of $3,255,000.
The November 2020 Streeterville Note bore interest at a rate of 10% per annum and was scheduled to mature 12 months after the date of the note (i.e., on November 23, 2021). From time to time, beginning 6 months after issuance, Streeterville had the right to redeem a portion of the November 2020 Streeterville Note, not to exceed $0.8 million if the November 2020 Investor Note had not been funded and $1.25 million if the November 2020 Investor Note had been funded. In the event we did not pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount was to be added to the outstanding balance of the November 2020 Streeterville Note. Under certain circumstances the Company could defer the redemption payments up to three times, for a duration of 30 days each, provided that upon each such deferral the outstanding balance of the November 2020 Streeterville Note would increase by 2%. Subject to the terms and conditions set forth in the November 2020 Streeterville Note, the Company had the right to prepay all or any portion of the outstanding balance of the November 2020 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the November 2020 Streeterville Note remained outstanding, the Company agreed to pay to Streeterville 20% of the gross proceeds that the Company received from the sale of any of its common stock or preferred stock, which payments were to be applied towards, and would reduce, the outstanding balance of the November 2020 Streeterville Note, which percentage was to increases to 30% upon the occurrence of, and continuance of, an event of default under the November 2020 Streeterville Note (each an “Equity Payment”“Equity Payment”). Each time that we failed to pay an Equity Payment, the outstanding balance of the November 2020 Streeterville Note would automatically increase by 10%. Additionally, in the event we were to fail to timely pay any such Equity Payment, Streeterville had the right to seek an injunction which would prevent us from issuing common or preferred stock until or unless we paid such Equity Payment.
The November 2020 Streeterville Note provided that if any of the following events had not occurred on or before April 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) would increase by an amount equal to 25% of the then-current outstanding balance thereof (the “April“April 2021 Note Increase”Increase”):
| (a) | HotPlay must have become a wholly-owned subsidiary of the Company; |
| (b) | during the period beginning on July 21, 2020, and ending on the date that the HotPlay Share Exchange is consummated, HotPlay must have raised at least $15,000,000 in cash through equity investments; |
| (c) | upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; |
| (d) | HotPlay must have become a co-borrower on the November 2020 Streeterville Note; and |
| (e) | the Company must have paid off all outstanding debt obligations to the Donald P. Monaco Insurance Trust and National Bank of Commerce, in full (collectively, the |
Pursuant to the November 2020 Streeterville Note, we provided Streeterville a right of first refusal to purchase any promissory note, debenture or other debt instrument which we proposed to sell, other than sales to officers or directors of the Company and/or sales to the government. Each time, if ever, that we provided Streeterville such right, and Streeterville did not exercise such right to provide such funding, the outstanding balance of the November 2020 Streeterville Note would increase by 3%. Each time, if ever, that we failed to comply with the terms of the right of first refusal, the outstanding balance of the November 2020 Streeterville Note would increase by 10%. Additionally, upon each major default described in the November 2020 Streeterville Note (i.e., the failure to pay amounts under the November 2020 Streeterville Note when due or to observe any covenant under the November 2020 Note Purchase Agreement (other than the requirement to make Equity Payments)) the outstanding balance of the November 2020 Streeterville Note would automatically increase by 15%, and for each other default, the outstanding balance of the November 2020 Streeterville Note would automatically increase by 5%, provided such increase could only occur three times each as to major defaults and minor defaults, and that such aggregate increase could not exceed 30% of the balance of the Streeterville Note immediately prior to the first event of default.
In connection with the November 2020 Note Purchase Agreement and the November 2020 Streeterville Note, the Company entered into a Security Agreement with Streeterville (the “Security Agreement”“Security Agreement”), pursuant to which the obligations of the Company were secured by substantially all the assets of the Company, subject to a priority lien and security interest in the collateral of the Company.
The November 2020 Investor Note, in the principal amount of $1,500,000, evidenced the amount payable by Streeterville to the Company as partial consideration for the acquisition by the Company of the November 2020 Streeterville Note. The November 2020 Investor Note accrued interest at the rate of 10% per annum, payable in full on November 23, 2021, subject to a 30-day extension exercisable at the option of Streeterville and could be prepaid at any time. The amount of the Investor Note has been offset against the amount of the November 2020 Streeterville Note in the balance sheet as of February 28, 2021, as both notes have substantially similar terms, and the Investor Note was provided in consideration for the acquisition of a portion of the November 2020 Streeterville Note. The November 2020 Investor Note was subsequently funded in full in January 2021.
On March 22, 2021, we entered into a Note Purchase Agreement dated March 23, 2021 (the “March“March 2021 Note Purchase Agreement”Agreement”) with Streeterville, pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $9,370,000 (the “March“March 2021 Streeterville Note”Note”). Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company a promissory note in the amount of $1,500,000 (the “March“March 2021 Investor Note”Note”), in consideration for the March 2021 Streeterville Note, which included an original issue discount of $850,000 (the “OID”“OID”) and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID was fully earned upon issuance and the remaining $150,000 was not fully earned until the March 2021 Investor Note was fully-funded by Streeterville, which occurred on May 26, 2021.
The March 2021 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on March 23, 2022). From time to time, beginning six months after issuance, Streeterville may redeem a portion of the March 2021 Streeterville Note, not to exceed $2.125 million. In the event we do not pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the March 2021 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the March 2021 Streeterville Note is increased by 2%. Subject to the terms and conditions set forth in the March 2021 Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the March 2021 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the March 2021 Streeterville Note remains outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock, which payments will be applied towards and will reduce the outstanding balance of the March 2021 Streeterville Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the March 2021 Streeterville Note (each an “Equity Payment”“Equity Payment”). Each time that we fail to pay an Equity Payment, the outstanding balance of the March 2021 Streeterville Note automatically increases by 10%. Additionally, in the event we fail to timely pay any such Equity Payment, Streeterville mayMay seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment.
The March 2021 Streeterville Note provides that if any of the following events have not occurred on or before June 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof: (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) during the period beginning on July 21, 2020, and ending on the date that the HotPlay Share Exchange is consummated, HotPlay must have raised at least $15,000,000 in cash or debt through equity investments (which has been completed); (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; and (d) HotPlay must have become a co-borrower on the March 2021 Streeterville Note (collectively, the “March“March 2021 Note Transaction Conditions”Conditions”).
The March 2021 Note Purchase Agreement required that we complete the purchase of the Reinhart (the “Reinhart Interest”“Reinhart Interest”), within 10 days of the date of the sale of the March 2021 Streeterville Note, and that the Company pledge the Reinhart Interest to Streeterville pursuant to a pledge agreement thereafter, both of which were timely completed.
Also on May 26, 2021, Streeterville funded the March 2021 Investor Note (in the amount of $1.5 million) in full.
We made a required equity paymentEquity Payment of $1,857,250 to Streeterville under the March 2021 Streeterville Note on May 26, 2021, with funds raised through a May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering.
We failed to timely meet the November 2020 Note Transaction Conditions; however, on June 1, 2021, Streeterville agreed to defer 50% of the April 2021 Note Increase which was otherwise to occur due to the Company’s failure to timely meet all of the November 2020 Note Transaction Conditions. As such, a total of $506,085 was capitalized into the outstanding balance of the November 2020 Streeterville Note effective as of April 30, 2021, and the remaining $506,085 of the April 2021 Note Increase would only be added to the balance of the November 2020 Streeterville Note if the Company failed to meet the November 2020 Transaction Conditions by June 30, 2021. Separately, if the Company did not meet the March 2021 Note Transaction Conditions by June 30, 2021, the March 2021 Streeterville Note would be subject to the June 2021 Note Increase. The Company completed the acquisition of HotPlay effective as of June 30, 2021, and as such the November 2020 Transaction Conditions and the March 2021 Note Transaction Conditions were satisfied.
On June 22, 2021, the Company entered into an Exchange Agreement with Streeterville, pursuant to which Streeterville exchanged $600,000 of a June 2021 requested redemption of $1.25 million under the November 2020 Streeterville Note (which amount was partitioned into a separate promissory note) for 300,000 shares of the Company’s common stock.
On July 21, 2021, the Company entered into an Exchange Agreement with Streeterville, whereby Streeterville exchanged $400,000 owed under a November 2020 promissory note (which amount was partitioned into a separate promissory note) for 200,000 shares of the Company’s common stock.
On September 1, 2021, the Company entered into an Exchange Agreement with Streeterville, whereby Streeterville exchanged $270,000 owed under a November 2020 promissory note (which amount was partitioned into a separate promissory note) for 135,000 shares of the Company’s common stock.
On October 22, 2021, the Company entered into the Note Purchase Agreement (the “October“October 2021 Note Purchase Agreement”Agreement”) with Streeterville, pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $1,665,000 (the “October“October 2021 Streeterville Note”Note”). Streeterville paid consideration of $1,500,000, which represents the original principal amount less a $150,000 original issue discount, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.
The October 2021 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on October 22, 2022). From time to time, beginning six months after issuance, Streeterville may redeem any portion of the October 2021 Streeterville Note, up to a maximum amount of $375,000 per month. In the event the Company fails to pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the October 2021 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral, the outstanding balance of the October 2021 Streeterville Note is increased by 2%. Subject to the terms and conditions set forth in the October 2021 Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the October 2021 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the October 2021 Streeterville Note remains outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock within ten days of receiving such amount, which payments will be applied towards and will reduce the outstanding balance of the October 2021 Streeterville Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the October 2021 Streeterville Note (each an “Equity Payment”“Equity Payment”). Each time that the Company fails to pay an Equity Payment, the outstanding balance of the October 2021 Streeterville Note automatically increases by 10%. Additionally, in the event the Company fails to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent the Company from issuing common or preferred stock until or unless the Company paid all past-due Equity Payments.
The October 2021 Streeterville Note provides that by November 21, 2021 (the “Deadline”“Deadline”), HotPlay must become a co-borrower on (a) the October 2021 Streeterville Note, (b) the November 2020 Streeterville Note, and (c) and the March 2021 Streeterville Note (collectively, the ““2020-2021 Streeterville Notes”Notes”). If HotPlay has not become a co-borrower on the 2020-2021 Streeterville Notes by the Deadline, the outstanding balance on the October 2021 Streeterville Note automatically increases by an amount equal to 25% of the then-current outstanding balance, provided such failure is not deemed an event of default under the October 2021 Streeterville Note. The Company is in discussions with Streeterville on the resolution of these transaction conditions.
Pursuant to the October 2021 Streeterville Note, the Company provided Streeterville a right of first refusal to purchase any promissory note, debenture, or other debt instruments which the Company proposes to sell, other than sales to officers or directors of the Company and/or sales to the government. Each time, if ever, that the Company provides Streeterville such right, and Streeterville does not exercise such right to provide such funding, the outstanding balance of the October 2021 Streeterville Note increases by 3%, unless the proceeds from such sale(s) are used to repay the October 2021 Streeterville Note in full. Each time, if ever, that the Company fails to comply with the terms of the right of first refusal, the outstanding balance of the October 2021 Streeterville Note increases by 10%. Additionally, upon each major default described in the October 2021 Streeterville Note (i.e., the failure to pay amounts under the October 2021 Streeterville Note when due or to observe any covenant under the Note Purchase Agreement (other than the requirement to make Equity Payments)), the outstanding balance of the October 2021 Streeterville Note may be increased, at Streeterville’s option, by 15%, and for each other default, the outstanding balance of the October 2021 Streeterville Note may be increased, at Streeterville’s option, by 5%, provided such increase can only occur three times each as to major defaults and minor defaults, and that such aggregate increase cannot exceed 30% of the balance of the October 2021 Streeterville Note immediately prior to the first event of default.
The October 2021 Note Purchase Agreement and the October 2021 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the October 2021 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the October 2021 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the October 2021 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the October 2021 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The October 2021 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the October 2021 Streeterville Note.
On November 3, 2021, the Company closed a registered direct offering of its securities, resulting in gross proceeds to the Company of approximately $30 million. This offering triggered the provisions of the 2020-2021 Streeterville Notes requiring the Company to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock within 10ten days of receiving such amount, which payments must be applied towards and reduce the outstanding balance of each of the outstanding Streeterville Notes,Notes; however, the condition to pay 20% of the gross proceeds from the sale of any stock were negotiated with the lender and waived for the October 2021 Streeterville Note in November 2021.
On November 4, 2021, the Company completely paid off the November 2020 Streeterville Note in the amount of $3,100,807 and paid down the outstanding balance of the March 2021 Streeterville Note in the amount of $6,000,000. As of November 30, 2021, the remaining principal balance of Streeterville Notes is $4,053,737 and accrued interest of $516,445.
HotPlay Convertible Notes
On September 1, 2020, September 18, 2020, September 30, 2020, on or around November 2, 2020, on November 24, 2020, on around December 28, 2020 and on and around January 6, 2021, HotPlay advanced NextPlay Technologies, Inc $300,000, $700,000, $1,000,000, $400,000, $100,000, $450,000, and $50,000 respectively, under the terms of the HotPlay Exchange Agreement. The advances were evidenced by convertible promissory notes (“HotPlay Convertible Notes”) in the amount of each advance, and an effective date as of the date of each advance. The HotPlay Convertible Notes totaled $3.0 million as of February 28, 2021.
On March 16, 2021, March 19, 2021, and April 15, 2021, HotPlay loaned23, 2022, the Company $9 million, $1 million and $2 million, respectively. The loans were made pursuant tocompletely paid off the terms of the HotPlay Exchange Agreement and were evidenced by Convertible Promissory Notes dated effective March 16, 2021 March 19, 2021, and April 15, 2021,Streeterville Note, outstanding balance in the amount of $9,000,000, $1,000,000, and $2,000,000, respectively. With the$3,002,142.
On April 15, 2021 loan, HotPlay had loaned29, 2022, the Company all $15 millionentered into the Standstill Agreement with Streeterville, pursuant to which, Streeterville agreed not to seek to redeem any portion of the funds requiredOctober 2021 Streeterville Note (in the original principal amount of $1,665,000) until September 18, 2022. As consideration for such agreement, the outstanding balance of the October 2021 Note was increased by $87,639.33 (the “Standstill Fee”); as a result, the outstanding balance of the October 2021 Note as of April 29, 2022 was $1,840,912.84 (including outstanding interest). Subsequently on September 22, 2022, the Company elected the redemption deferral option which added $38,331.27 to be fundedthe principal for a total outstanding principal balance of $1,790,971 as of the same date.
On May 5, 2022, the Company entered into a Note Purchase Agreement (the “May 2022 Note Purchase Agreement”) with Streeterville, pursuant to which the termsCompany sold Streeterville a Secured Promissory Note in the original principal amount of $2,765,000 (the “May 2022 Streeterville Note”). Streeterville paid consideration of $2,500,000, which represents the HotPlay Exchange Agreement.original principal amount less a $250,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.
The advances,May 2022 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on May 5, 2023). From time to time, beginning six months after issuance, Streeterville may redeem any portion of the entry intoMay 2022 Streeterville Note, up to a maximum amount of $625,000 per month. In the HotPlay Convertible Notes, were required conditionsevent the Company fails to pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the HotPlay Exchange Agreement.
The HotPlay Notes were automatically forgiven by HotPlay as inter-company loans upon the closingoutstanding balance of the HotPlay Exchange Agreement, which occurred on JuneMay 2022 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 2021.
Hudson Bay’s Warrant Exchange Agreementdays each, provided that upon each such deferral, the outstanding balance of the May 2022 Streeterville Note is increased by 2%.
On September 22, 2021, the Company entered into an Exchange Agreement (the “Hudson Exchange Agreement”) with Hudson Bay Master Fund Ltd. (the “Holder”), a holder of warrants to purchase 322,000 shares of the Company’s common stock with an exercise price $2.00 per share (the “Warrants”) originally purchased from the Company on September 28, 2018. PursuantSubject to the terms and conditions set forth in the May 2022 Streeterville Note, the Company may prepay all or any portion of the Warrants, the Holder had the right, upon closing of our acquisition of HotPlay, effective on June 30, 2021, to elect to require the redemptionoutstanding balance of the Warrants forMay 2022 Streeterville Note on or before the date that is 6 months from the Effective Date subject to a cash paymentprepayment penalty equal to 5% of the Black Scholes Valueamount of the Warrants (the “Black Scholes Value”), which election was subsequently made by the Holder. Pursuant to the Hudson Exchange Agreement, the Holder agreed to exchange the Warrant (and thereby release the Companyoutstanding balance, and after 6 months from the obligationEffective Date will be subject to pay the Black Scholes Value) for a promissory note in the principal amount of $900,000 (the “Hudson Note”)10%. The Hudson Exchange Agreement included customary representations and warranties of the parties; a restriction prohibiting the Company from undertaking a variable rate transaction forFor so long as the HudsonMay 2022 Streeterville Note remains outstanding; and a favored nations provision, relating to subsequent amendments, modifications, waivers or exchanges of any warrant to purchase common stock ofoutstanding, the Company which applies until the first anniversary of the repayment of the Hudson Note. The Company alsohas agreed to pay $15,000to Streeterville 20% of the legal feesgross proceeds that the Company receives from the sale of any of its common stock or preferred stock within ten days of receiving such amount, which payments will be applied towards and will reduce the outstanding balance of the Holder pursuantMay 2022 Streeterville Note. Each time that the Company fails to pay an Equity Payment, the outstanding balance of the May 2022 Streeterville Note automatically increases by 10%. Additionally, in the event the Company fails to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent the Company from issuing common or preferred stock until or unless the Company paid all past-due Equity Payments.
Additionally, upon each major default described in the May 2022 Streeterville Note (including, without limitation, the failure to pay amounts under the May 2022 Streeterville Note when due or to observe any covenant under the May 2022 Note Purchase Agreement (other than the requirement to make Equity Payments)), the outstanding balance of the May 2022 Streeterville Note may be increased, at Streeterville’s option, by 15%, and for each other default, the outstanding balance of the May 2022 Streeterville Note may be increased, at Streeterville’s option, by 5%, provided such increase can only occur three times each as to major defaults and minor defaults, and that such aggregate increase cannot exceed 30% of the balance of the May 2022 Streeterville Note immediately prior to the Hudson Exchange Agreement.first event of default.
The HudsonMay 2022 Note is payable byPurchase Agreement and the Company, in four equal payments of $225,000 each, with payments due on October 22, 2021, November 22, 2021, December 22, 2021, and on maturity, January 22, 2022. We can prepay any amount due under the HudsonMay 2022 Streeterville Note without penalties, provided we provide the Holder five days prior written notice. The amount due under the Hudson Note does not accrue interest, unless an event of default occurs thereunder, at which time the amount owed under the Hudson Note will accrue interest at 18% per annum, until paid in full. The Hudson Note containscontain customary restrictions (including future payments of indebtedness while the Hudson Note is outstanding and in default), covenants and events of default, including if the Company undertakes a change offundamental transaction (including consolidations, mergers, and certain changes in control of the Company occurs,Company), without Streeterville’s prior written consent. Pursuant to the May 2022 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the May 2022 Streeterville Note will become automatically due and uponpayable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the May 2022 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the Holder can declareMay 2022 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the entire balancemaximum rate permitted under applicable law. The May 2022 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the May 2022 Streeterville Note.
The May 2022 Note Purchase Agreement also provides for cross-indemnification by the parties in the event that they incur loss or damage related to, among other things, a breach of applicable representations, warranties, or covenants under the May 2022 Note Purchase Agreement.
In connection with the May 2022 Note Purchase Agreement and the May 2022 Streeterville Note, the Company entered into a Security Agreement with Streeterville, pursuant to which the obligations of the Hudson Note immediately due and payable, together with a redemption premium of 25% (i.e., the Holder can require the Company to pay 125%are secured by substantially all of the amount due underassets of the Hudson Note). The Hudson Note also includes certain rights which accrue to the Holder upon a fundamental transaction.Company.
On October 22, 2021,June 2, 2022, the Company paidentered into a Global Amendment to satisfy the requirement that HotPlay become a co-borrower on the October 2021 Streeterville Note and the May 2022 Streeterville Note and jointly and severally assume all of the obligations and duties of the Company under those notes. As a result, all references to “Borrower” or the “Company” in such notes now jointly refer to HotPlay and NextPlay. Streeterville also agreed to waive its right to enforce an increase in the balance of the October 2021 Streeterville Note due to the Company’s failure to add HotPlay as a co-borrower on the October 2021 Streeterville Note within the prescribed period of time to do so. The Global Amendment does not alter any other terms of the notes.
As of November 30, 2022, the remaining balances of the outstanding Streeterville notes were as follows:
| i) | The October 2021 Note: principal balance of $1,752,639, accrued interest of $152,778 and accumulated unamortized debt issuance cost of $202,292. |
| ii) | The May 2022 Note: principal balance of $2,765,000, accrued interest of 92,119 and accumulated unamortized debt issuance cost of $165,251. |
Loan agreement with Business Brokers, LLC
Effective November 1, 2021, a subsidiary of the Company obtained a credit facility of $ 0.725 million from Business Brokers, LLC to which it engages regularly in the issuance of construction and commercial loans. The facility is guaranteed by notes receivable. The facility carries a blended interest of 14.05% per annum and is repayable upon the collection of the notes that guarantees it, or the Company decision to repay it in full, whichever comes first, with interest only monthly payments requirement. As of November 30, 2022, the loans had outstanding balance of $0.589 million.
June 2022 Promissory Notes
On June 13, 2022, the Company entered into two promissory notes, each in the principal amount of approximately CAD $231,121 (USD $178,234), with its former legal counsel, which notes were issued, along with a CAD $10,000 (USD $7,712) in lieu of immediate payment of outstanding amounts payable to such counsel for legal services previously rendered to the Company. The first note matured on July 31, 2022, and the second note matured on September 1, 2022; provided, however, that if the Company fails to repay the first installmentnote in full on or before its maturity date, then the second note will automatically become immediately due and payable. Both notes are unsecured and accrue interest at a rate of $225,000. On18% per annum. The Company is in the process of re-negotiating the payment schedules. As of November 4, 2021,30, 2022, the Company paid off the remainingloans had outstanding balance of $675,000.$0.36 million.
Note 10 – Stockholders’ Equity
Preferred Stockstock
The aggregate number of shares of preferred stock that the Company is authorized to issue is up to One Hundred Million (100,000,000), with a par value of $0.00001 per share (the “Preferred Stock”“Preferred Stock”), with the exception of Series A Preferred Stock shares having a par value of $0.01 per share. The Preferred Stock may be divided into and issued in one or more series. The board of directors of the Company is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. The board of directors of the Company is authorized, within any limitations prescribed by law and the articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of Preferred Stock.
Series A Preferred Stock
The Company has authorized and designated 3,000,000 shares of Preferred Stock as Series A 10% Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series“Series A Preferred Stock”Stock”). The holders of record of shares of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Company and shall be entitled to one hundred (100) votes for each share of Series A Preferred Stock.
Dividends in arrears on the previously outstanding Series A Preferred Stock shares totaled $0 and $1,102,068 as of November 30, 20212022 and February 28, 2021,2022, respectively. These dividends will only be payable when and if declared by the Company’s board of directors. Onwere paid in April 7, 2021, the board approved the dividends to be paid.2022.
The Company had 0 shares of Series A Preferred Stock issued and outstanding as of November 30, 20212022 and February 28, 2021.2022.
Series B Preferred Stock
The Company has authorized and designated 10,000,000 shares of Preferred Stock as Series B Convertible Preferred Stock, which shares were issued to certain Axion stockholders in exchange for their ordinary shares of Axion equal to approximately 33.85% of the outstanding common shares of Axion pursuant to the Axion Exchange Agreement (see “Note 6 – Investment in Unconsolidated Affiliates”). Each share of Series B Preferred Stock automatically, and without any required action by any holder, converted into 0.74177 shares of Company common stock upon the closing of the HotPlay Share Exchange on June 30, 2021.
As of November 30, 20212022 and February 28, 2021,2022, the Company had 0 and 10,000,000 shares of Series B Preferred Stock issued and outstanding, respectively.outstanding.
Series C Preferred Stock
The Company has authorized and designated 3,828,500 shares of Preferred Stock as Series C Convertible Preferred Stock. The Series C Preferred Stock was issued to certain debt holders of Axion who are party to the Axion Share Exchange Agreement and who agreed to exchange certain debt owed to such debt holders by Axion for shares of Series C Preferred Stock pursuant to the Share Exchange Agreement. Each share of Series C Preferred Stock automatically, and without any required action by any holder, converted into one share of the Company’s common stock, upon the closing of the HotPlay Share Exchange on June 30, 2021.
As of November 30, 20212022 and February 28, 2021,2022, the Company had 0 and 3,828,500 shares of Series C Preferred Stock issued and outstanding, respectively.outstanding.
Series D Preferred Stock
On July 21, 2021, the Company designated Series D Convertible Preferred Stock (“Series D Preferred Stock”Stock”), by filing a Certificate of Designation of such Series D Preferred Stock with the Secretary of State of Nevada (the “Series“Series D Designation”Designation”). The Series D Designation, which was approved by the board of directors of the Company on July 15, 2021, designated 6,100,000 shares of Series D Preferred Stock, $0.00001 par value per share. The Series D Designation provides that the Series D Preferred Stock has a liquidation preference which is (a) pari passu with respect to the Company’s common stock; and (b) junior to all current and future senior indebtedness and securities of the Company. If the Company determines to liquidate, dissolve or wind-up its business and affairs, the Company will prior to or concurrently with the closing, effectuation or occurrence of any such action, pay the holders of the Series D Preferred Stock, pari passu with the holders of the common stock, an amount equal to the Liquidation Preference per share of Series D Preferred Stock. The “Liquidation Preference”“Liquidation Preference” per share of the Series D Preferred Stock is equal to $1.00 per share, or $6,100,000 in aggregate. Each share of Series D Preferred Stock is automatically convertible on the fifth business day after the date that the shareholders of the Company, as required pursuant to applicable rules and regulations of NASDAQ, has approved the issuance of the shares of common stock upon conversion of the Series D Preferred Stock, and such other matters as may be required by NASDAQ or SEC rules and requirements to allow the conversion of the Series D Preferred Stock, into that number of shares of common stock as equal the Conversion Rate multiplied by the then outstanding shares of Series D Preferred Stock. For the purposes of the following sentence: “Conversion Rate”“Conversion Rate” equals 0.44 shares of Company common stock for each share of Series D Preferred Stock converted, which equals (i) the Liquidation Preference ($1.00 per share of Series D Preferred Stock), divided by (ii) $2.28,$45.60, the average of the closing sales prices for the Company’s common stock on the Nasdaq Capital Market for the 30 days prior to July 15, 2021, rounded to the nearest hundredths place, subject to equitable adjustment for stock splits and combinations.
The Company had 0 shares of Series D Preferred Stock outstanding as of November 30, 20212022 and February 28, 2021.2022.
Common Stock
Effective January 6, 2023, the Company implemented a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.00001 per share (the “Common Stock”), at a ratio of 1-for-20 (the “Reverse Split”). In order to implement the Reverse Split, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effectuate the Reverse Split in accordance with Nevada Revised Statutes (“NRS”) Section 78.209. The Company issuedis effecting the initial payment of $500,000Reverse Split to IDSsatisfy the $1.00 minimum bid price requirement, as per the settlement agreement during the nine months ended November 30, 2021set forth in considerationNasdaq Listing Rule 5550(a)(2), for the first transfer of 344,400 shares to be repurchased. As of the filing date, the transfer of shares has been completed.continued listing on The Nasdaq Capital Market.
On November 1, 2021,In connection with the reverse stock split, the number of authorized shares of common stock and the number of issued and outstanding shares of common stock are proportionally reduced without change in par value per share of $0.00001. Also on the Effective Date, all options, warrants and other convertible securities of the Company enteredthat are outstanding immediately prior to the Reverse Split will be adjusted by dividing the number of shares of Common Stock into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Purchasers”), pursuant to which the Company agreed to issueoptions, warrants and sell,other convertible securities are exercisable or convertible by 20, and multiplying the exercise or conversion price thereof by 20, all in a registered direct offering (the “Offering”), an aggregate of 18,987,342 shares (the “Shares”)accordance with the terms of the Company’splans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share. Accordingly, all historical per share data, number of shares outstanding and other common stock together with warrantsequivalents for the periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to purchase an aggregate of 14,240,508 shares of Company commonreflect the reverse stock (the “Warrants”), at a combined price of $1.58 per Share and accompanying three quarters of a Warrant.split.
The Offering closed on November 3, 2021. The Shares, Warrants and shares of common stock issuable upon exercise of the Warrants were offered pursuant to a prospectus supplement, filed with the SEC on November 3, 2021, to the Company’s effective shelf registration statement on Form S-3 (File No. 333-257457) (the “Registration Statement”), which was initially filed with the Commission on June 25, 2021, was amended on September 24, 2021 and October 27, 2021, and was declared effective on October 29, 2021.
The Offering resulted in gross proceeds to the Company of approximately $30.0 million, before deducting the placement agent fees and related offering expenses, and excluding proceeds to the Company, if any, that may result from the future exercise of Warrants issued in the Offering. The net proceeds to the Company from the Offering, after deducting the placement agent’s fees and expenses and estimated offering expenses (excluding proceeds to the Company, if any, from the future exercise of the Warrants) were approximately $27.85 million.
During the three monthsnine-months ended November 30, 2021,2022, the following shares of common stock were issued:
| - |
| - | 29,018 shares of common stock for consulting services, | |
| - | 158,014 shares of common stock for assets purchased, valued at $1,266,488. |
The Company had 109,247,3885,665,861 and 62,400,0005,418,001 shares of common stock issued and outstanding at November 30, 20212022 and February 28, 2021,2022, respectively.
Changes in ownership interests in subsidiaries without change in control
On March 14, 2022, HotPlay (Thailand) Co., Ltd. (“HPT”) received a promotional privileges approval from the Board of Investment, which permitted majority foreign ownership, and on April 26, 2022, HotPlay Enterprise Ltd. (“HPE”) completed the transfer of shares from existing Thai shareholders without paying consideration in accordance with the HotPlay Exchange Agreement and ultimately owns 100% interest in HPT. Upon the change in ownership interest in its subsidiary, the Company has recognized deficit from changing ownership interest in subsidiaries amounting to $1.6 million in its Consolidated Statements of Stockholders’ Equity, presented as deduction in additional paid-in capital. Subsequently, on May 26, 2022, HPT received foreign business license to operate the reserved business in Thailand.
Common Stock Warrants
The following table sets forth common stock purchase warrants outstanding as of November 30, 2021,2022, and February 28, 2021,2022, and changes in such warrants outstanding for the quarter ending November 30, 2021:2022, effected for the reverse stock split as disclosed in Note 1:
| Warrant | Weighted Average Exercise | |||||||
| Outstanding, June 30, 2021 | 2,982,421 | $ | 2.45 | |||||
| Warrants granted | 14,240,508 | $ | 1.97 | |||||
| Warrants exercised/forfeited/expired | (2,236,250 | ) | $ | (2.00 | ) | |||
| Outstanding, November 30, 2021 | 14,986,679 | $ | 2.06 | |||||
| Common stock issuable upon exercise of warrants | 14,986,679 | $ | 2.06 | |||||
| Warrants | Weighted Average Exercise Price | |||||||
| Outstanding, February 28, 2022 | 740,584 | $ | 41.00 | |||||
| Warrants expired | (19,038 | ) | 103.00 | |||||
| Outstanding, November 30, 2022 | 721,546 | $ | 39.40 | |||||
| Common stock issuable upon exercise of warrants | 721,546 | $ | 39.40 | |||||
On January 28, 2022, the Company held a Special Meeting of Stockholders (the “Special Meeting”) in a virtual format. Stockholders did not approve an amendment to the exercise price provisions of those warrants (the “Warrants”) issued in connection with a registered direct offering of the Company’s securities pursuant to that Stock Purchase Agreement entered into by and among the Company and certain investors on November 1, 2021, and specifically to remove the $39.40 floor price (the “Floor Price”) of the Warrants outstanding at February 28,2021 weresuch that the exercise price of Monaker, however as HotPlay merged and became NextPlay, suchthe Warrants may be reduced below the Floor Price in the event that the Company issues or enters into any agreement to issue securities for consideration less than the then current exercise price of the warrants are presented in comparison as part of NextPlay.(the “Warrant Amendment”).
At JuneOn April 22, 2022, the Company held its 2022 Annual Meeting of Stockholders (the “Annual Meeting”) in a virtual format, at which Annual Meeting the Warrant Amendment was again presented to the Company’s stockholders for approval, amongst other things. Stockholders did not approve the Warrant Amendment at the Annual Meeting.
The Company intends to continue to comply with the requirements related to stockholder approval of the Warrant Amendment, as set forth in the relevant transaction documents.
On November 30, 2021,2022, there were warrants outstanding to purchase 2,982,421an aggregate of 721,546 shares of common stock with a weighted average exercise price of $2.45$39.40 and weighted average remaining life of 1.183.97 years.
At November 30, 2021, there were warrants outstanding to purchase 14,986,679 shares of common stock with a weighted average exercise price of $2.06 and weighted average remaining life of 1.12 year.
During the quarter ended November 30, 2021, the Company granted:
As discussed above, on November 1, 2021, the Company issued Warrants to purchase an aggregate of 14,240,508712,026 shares of Company common stock in connection with the Offering. Each whole Warrantwarrant sold in the Offering will be exercisable for one share of common stock at an initial exercise price of $1.97$39.40 per share (the “Initial“Initial Exercise Price”Price”), the closing sales price of the Company’s common stock on October 29, 2021 (the last trading day prior to the date that the Purchase Agreement was entered into). The Warrants may be exercised commencing six months after the issuance date (the “Initial“Initial Exercise Date”Date”) and terminating on the fifth anniversary of the Initial Exercise Date. The Warrants are exercisable for cash; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the shares of Common Stock issuable upon exercise of the Warrants. The exercise of the Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a purchaser prior to the issuance of any shares, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of the Warrant held by the applicable holder, provided that the holders may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 61 days advance notice to the Company, which 61 day period cannot be waived.
The Warrants also include certain anti-dilution rights, which provide that if at any time the Warrants are outstanding, the Company issues or enters into any agreement to issue, or is deemed to have issued or entered into an agreement to issue (which includes the issuance of securities convertible or exercisable for shares of Common Stock), securities for consideration less than the then current exercise price of the Warrants, the exercise price of such Warrants will be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities; provided, however, that unless and until the Company has received stockholder approval to reduce the exercise price of the Warrants below $1.97$39.40 per share (the “Floor Price”), no such adjustment to the exercise price may be made. Pursuant to the Purchase Agreement, the Company has agreed to use its reasonable best efforts to obtain stockholder approval within 90 days from the date of the prospectus supplement to remove the Floor Price of the Warrants. In the event that such stockholder approval is not obtained within 90 days of the date of the prospectus supplement, the Company has agreed to hold a special meeting of its stockholders every three months thereafter, for so long as the Warrants remain outstanding, to obtain such stockholder approval.
If the Company fails for any reason to deliver shares of Common Stock upon the valid exercise of the Warrants, subject to its receipt of a valid exercise notice and the aggregate exercise price, by the time period set forth in the Warrants, the Company will be required to pay the applicable holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares subject to such exercise (as calculated in the Warrant), $10 per trading day (increasing to $20 per trading day on the third trading day after such liquidated damages begin to accrue) for each trading day that such shares are not delivered. The Warrants also include customary buy-in rights in the event the Company fails to deliver shares of Common Stock upon exercise thereof within the time periods set forth in the WarrantWarrant.
As of November 30, 2022, none of the Warrants have been exercised by the holders thereof.
Note 11 – Commitments and Contingencies
The Company entered into a newan office lease to relocate our executive, administrative, and operating offices located in Sunrise, Florida where we leased approximately 5,279 square feet of office space at 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323. In accordance with the terms of the office space lease agreement, the Company will be renting the commercial office space, for a term of almost eight years from March 1, 2021, through July 31, 2028. As per the Separation Agreement by and between the Company, Reinhart/Zappware and NextTrip, however, the Company has transferred the office lease contract to NextTrip from May 1, 2022 onwards and therefore presented under assets and liabilities held for sale. On August 25, 2022, the Company entered into an office lease in Sunrise, Florida for a term of six months from September 1, 2022, through January 30, 2023. Additionally, the CompanyGroup rents office space located in Puerto Rico Thailand, Belgium, and SwitzerlandThailand with lease terms ranging from five to nine years.
The rent for the nine months ended November 30, 2021 and November 30, 2020 was $75,845 and $69,930, respectively. The Company recorded operating lease Right-to-Use asset amount of $4,195,864 along with operating lease liability amount of $4,220,488 as of November 30, 2021.
The office in Belgium leases cars for its employees and accounts for theses leases similarly to office leases. The Company records operating lease Right-to-Use assets and liabilities for these leases.
The following schedule represents obligations and commitments on the part of the Company:
| Current | Long Term | Current | Long Term | |||||||||||||||||||||
| FYE 2022 | FYE 2023 | Totals | FYE 2023 | FYE 2024 | Totals | |||||||||||||||||||
| Office Leases | $ | 139,024 | $ | 659,695 | $ | 798,719 | $ | 230,432 | $ | 293,842 | $ | 524,274 | ||||||||||||
| Car Leases | $ | 80,193 | $ | 320,773 | $ | 400,966 | ||||||||||||||||||
| Insurance and Other | $ | 61,480 | $ | 138,121 | $ | 199,601 | 1,800 | 7,200 | 9,000 | |||||||||||||||
| Totals | $ | 280,697 | $ | 1,118,589 | $ | 1,399,286 | $ | 232,232 | $ | 301,042 | $ | 533,274 | ||||||||||||
Legal Matters
The Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and vendor matters. The Company believes that the resolution of currently pending matters will notcould individually or in the aggregate, have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change considering the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
IDS Settlement
On August 15, 2019, the Company entered into an Intellectual Property Purchase Agreement with IDS Inc. (“IDS”IDS” and the “IP“IP Purchase Agreement”Agreement”). Pursuant to the agreement, the Company purchased certain proprietary technology from IDS for the reservation and booking of air travel, hotel accommodations, car rentals, and ancillary products, services, and amenities, integration of the same with the providers of such products and services, associated functions, including website addresses, patents, trademarks, copyrights and trade secrets relating thereto, and all goodwill associated therewith (collectively, the “IP Assets”“IP Assets”). In consideration for the purchase, the Company issued IDS 1,968,00098,400 restricted shares of Company common stock (the “IDS Shares”“IDS Shares”) valued at $2.50$50.00 per share, or $4,920,000 in the aggregate.
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS and TD Assets Holding, LLC (“TD Asset”Asset”), Navarro McKown, Aaron McKown and Ari Daniels, which parties are affiliated with IDS, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. CACE-20-007088). Pursuant to the complaint, the Company alleged causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and sought a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,00098,400 IDS Shares issued pursuant to the terms of the IP Purchase Agreement and preventing such persons from selling or transferring any IDS Shares, sought damages from the defendants, rescission of the IP Purchase Agreement, attorneys fees and other amounts. The defendants subsequently filed various counterclaims against the Company.
On April 29, 2020, the Company filed a Verified Motion for Temporary Injunction (the “Injunction Motion”“Injunction Motion”). Defendants IDS, TD Assets, and Ari Daniels filed an answer, affirmative defenses, and counterclaims (the “Answer“Answer and Counterclaim”Counterclaim”). The Answer and Counterclaim included alleged breach of contract and tort claims against the Company. On September 17, 2020, the Company moved to strike the affirmative defenses and dismiss the counterclaims. On October 15, 2020, defendants IDS, TD Assets, and Ari Daniels filed an amended Answer and Counterclaim, including alleged breach of contract, tort, and federal securities claims against the Company, Mr. William Kerby, our Co-Chief Executive Officer and an employee of the Company.
On July 27, 2020, the Company entered into a confidential settlement agreement with certain of the defendants in the IDS matter, Navarro Hernandez, P.L., Aaron M. McKown, and Jeffery S. Bailey. The settlement provided for mutual releases of the parties and amounts payable from such parties to the Company in four tranches, in consideration for such settlement, of which all such payments have been timely paid pursuant to the terms of the settlement.
The remaining parties to the litigation subsequently attempted to mediate their claims pursuant to a court ordered mediation in February 2021.
Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (the “IP“IP Purchase Amendment”Amendment”). Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000 (the “Payment”“Payment”), payable by way of an initial payment of $500,000, and twelve monthly payments of approximately $195,833 (collectively, the “Required Payments”“Required Payments”), with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of the Company or a third-party) (a “Paying Party”), for the benefit of the Company, which shall be treated for all purposes as a payment by the Company. As consideration for such Paying Party making such payment on behalf of the Company, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.68880.03444 as to the first $500,000 payment, and 0.6910.03455 as to the monthly payments (as applicable, the “Applicable Portion”“Applicable Portion” of the IDS Shares). Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment as discussed above by the Company (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company.
Pursuant to the IP Purchase Amendment, on May 19, 2021, the Company made the initial payment of $500,000. Thereafter, the first 344,40017,220 shares of common stock repurchased by the Company were returned to treasury and cancelled.
On September 27, 2021, the Court entered the Agreed Order. The Court ordered that:
| (i) | the Company resume the monthly payment on or before September 28, 2021 (which payment has not been made due to failure of IDS to provide required documents); |
| (ii) | $24,583.33 shall be paid monthly to one of IDS’s counsel and the balance of each payment shall be paid to the IDS Defendants; |
| (iii) | $20,000 of the 12thmonthly payments shall be withheld pending further order of the court; and |
| (iv) |
The entire IDS Settlement, agreements, and amendment are part of the proposed sale of NextTrip, whereby upon closing of the proposed transaction, the IDS settlement will no longer be a responsibility of the Company; provided, however, that, if the Company fails to make certain required installment payments to NextTrip within five (5) business days of being due, such IDS payment obligations will revert back to the Company. As of November 30, 2021, IDS still has not provided any2022, the Company failed to make such payments and is in progress of the necessary documents in order make the stock transfers.mediation.
Litigation between Axion and NextPlay
On January 15, 2021, Axion filed a civil claim in the Supreme Court of British Columbia (Action No. S-209245), against J. Todd Bonner, Chairman of the Company’s board of directors, Nithinan Boonyawattanapisut, our Co-Chief Executive Officer and director, the Company, William Kerby, our Co-Chief Executive Officer, Cern One Limited, Red Anchor Trading Corp., CC Asia Pacific Ventures Ltd., HotPlay, HotPlay (Thailand) Ltd., Next Fintech Holdings, Inc. (formerly Longroot, Inc.). and certain other parties. The claim alleges that Mr. Bonner and his wife, Ms. Boonyawattanapisut, used their positions as directors and officers of Axion and certain of its subsidiaries, together with the other defendants, to unlawfully take ownership of Axion’s subsidiaries and assets, including its intellectual property. Axion’s claim includes causes of action for conspiracy and fraud; theft of Axion intellectual property and ownership of Longroot; an investor scheme; breaches of fiduciary duty by Mr. Bonner and Ms. Boonyawattanapisut and others; negligence; knowing assistance of breach of fiduciary duty; collective trust; knowing receipt of trust property; knowing assistance in dishonest conduct; unjust enrichment; and breach of honest performance. The claim seeks general and special damages for conspiracy, damages for breaches of fiduciary duties, accountings and repayments of amounts alleged improperly paid, including to the Company, interim, interlocutory and permanent injunctions, rescission of the issuance of shares of Longroot Cayman; restitution; the return of Axion’s intellectual property; and other accountings, damages, punitive damages, interest and special costs.
On April 9, 2021, the Company, on behalf of itself, Mr. Kerby and Next Fintech Holdings, Inc. (formerly Longroot, Inc.), filed a response to Axion’s claim whereby all such parties disputed Axion’s claims and argued all such transactions involving the Company, Mr. Kerby and Next Fintech which are the subject of Axion’s claims were legitimate and pleading various other defenses. The Company, Mr. Kerby and Next Fintech dispute Axion’s claims and continue to vigorously defend themselves against the allegations made.
The lawsuit states that J. Todd Bonner, Nithinan ‘Jess’ Boonyawattanapisut, Cern One Limited, and Red Anchor Trading Corp. made loans totaling USD $9,141,372 to the defendants at various times between March 2018 and June 2020. Mr. Bonner is the Co-Chairman of NextPlay, and a past CEO and Director of Axion. His wife, Ms. Boonyawattanapisut, is the Co-CEO of NextPlay. On or about July 21, 2020, the Company and the lenders entered into a share exchange agreement whereby the lenders transferred rights to repayment of USD $7,657,023 of the debt owed by defendants plus interest to the Company, in exchange for Company stock or warrants. On or about August 23, 2021, counsel for NextPlay demanded repayment of the debts owed by the defendants, and defendants have not paid any portion of the amounts due.
On September 1, 2021, the Company filed a lawsuit in the Supreme Court of British Columbia (Action No. S-217835) under the Canadian Foreign Money Claims Act (R.S.B.C. 1996, c. 155). The defendants are Axion; Axion Interactive Inc., a wholly-owned subsidiary of Axion; and Ying Pei Digital Technology (Shanghai) Company Ltd., a Chinese wholly-owned subsidiary of Axion. NextPlay owns approximately 33.85% of the outstanding shares of Axion.
The Company alleges debts that the defendants refuse to pay totaling USD $7,657,023, under various promissory notes and loan agreements acquired by the Company in July 2020. The Company also seeks interest on the past-due amounts and costs associated with collection.
During the 3rd quarter endedIn November 30, 2021, the Company has commenced a new claim for the amount of the debt that it acquired. The Company will be amending its claim shortly to reduce the total claimed to reflect the difference between what iswas owed and what the Company is claiming (toto avoid double-claiming).double-claiming.
In February 2022, the court was receptive to loans related evidence (e.g. loan agreements, bank statements, board resolutions, etc.), and that it will be further resolved together with other Axion issues in the next trial. The summary trial judge has advised that he wishes to take case management over this and several related proceedings, It is anticipated that the trial of this action would be reset for 12 weeks sometime in 2023 or early 2024, a new trial date has not been determined. Document and oral discovery are ongoing, which will be necessary for the parties to make full disclosure on all issues.
As of November 30, 2022, there has been no significant update in the court proceedings.
Note 12 – Business Segment Reporting
Accounting Standards Codification 280-10 “Segment Reporting”“Segment Reporting” established standards for reporting information about operating segments in annual consolidated financial statements and required selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
The
As of November 30, 2022, the Company has threetwo operating segments consisting of (i) the NextMedia Division, which consists of HotPlay, and Reinhart/Zappware, (ii) the NextFinTech Division, which consists of Longroot and NextBank, and (iii) NextTrip Division, which includes NextTrip holdings.NextBank. The Company’s chief operating decision makers are considered to be the Co-Chief Executive Officers. The chief operating decision makers allocate resources and assesses performance of the business and other activities at the single operating segment level. At the reporting date, only NextFinTech generated revenue from operation.
As described in Note 14 for the strategic sales of NextTrip and Reinhart/Zappware units, the business of NextTrip represented the entirety of the NextTrip operating segment and Reinhart Digital TV was a part of NextMedia operating segment prior to being classified as held for sale. As of November 30, 2022, they were classified as held for sale and therefore no longer presented in segment reporting.
Schedule of segments
| For the nine months ended November 30, 2021 | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
| Revenue | $ | 6,015,365 | $ | 713,879 | $ | 117,139 | $ | 6,846,383 | ||||||||
| Cost of Revenue | $ | 2,828,189 | $ | 295,571 | $ | 103,512 | $ | 3,227,272 | ||||||||
| Gross Profit | $ | 3,187,176 | $ | 418,308 | $ | 13,627 | $ | 3,619,111 | ||||||||
| For the nine-month ended November 30, 2022 | NextFinTech | NextMedia | Totals | |||||||||
| Revenue | $ | 1,551,620 | — | 1,551,620 | ||||||||
| Cost of revenue | $ | 1,115,177 | — | 1,115,177 | ||||||||
| Gross profit | $ | 436,443 | — | 436,443 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | $ | 1,712,052 | 355,119 | 2,067,171 | ||||||||
| Salaries and benefits | 2,402,185 | 711,047 | 3,113,232 | |||||||||
| Depreciation and amortization | 84,001 | 450,126 | 534,127 | |||||||||
| Others | 539,606 | 95,303 | 634,909 | |||||||||
| Total operating expenses | $ | 4,737,844 | 1,611,595 | 6,349,439 | ||||||||
| Operating loss | $ | (4,301,401 | ) | (1,611,595 | ) | (5,912,996 | ) | |||||
| Other income/(expense) | $ | (66,488 | ) | (74,509 | ) | (140,997 | ) | |||||
| Net (loss) before tax – reportable segment | $ | (4,367,889 | ) | (1,686,104 | ) | (6,053,993 | ) | |||||
| Unallocated distribution and administrative expenses and finance cost: | ||||||||||||
| - General and administrative | 5,518,607 | |||||||||||
| - Salaries and benefits | 924,019 | |||||||||||
| - Other operating expenses | 1,537,632 | |||||||||||
| - Other expenses | 260,924 | |||||||||||
| - Interest expense | 559,796 | |||||||||||
| 8,800,978 | ||||||||||||
| Net (loss) before tax from continuing operation | (14,854,971 | ) | ||||||||||
| Segment assets | 46,338,663 | 17,977,371 | 64,316,034 | |||||||||
| Unallocated assets | 7,361,923 | |||||||||||
| Assets from discontinued operation | 32,297,381 | |||||||||||
| Total asset | 103,975,338 | |||||||||||
| For the three months ended November 30, 2021 | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
| Sales | $ | 3,698,329 | $ | 420,522 | $ | 80,249 | $ | 4,199,100 | ||||||||
| Cost of Revenu | $ | 1,675,419 | $ | 208,232 | $ | 69,281 | $ | 1,952,932 | ||||||||
| Gross Profit | $ | 2,022,910 | $ | 212,290 | $ | 10,968 | $ | 2,246,168 | ||||||||
| For the three months ended November 30, 2022 | NextFinTech | NextMedia | Totals | |||||||||
| Revenue | $ | 628,672 | — | 628,672 | ||||||||
| Cost of revenue | $ | 447,153 | — | 447,153 | ||||||||
| Gross profit | $ | 181,519 | — | 181,519 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | $ | 90,651 | 45,434 | 136,085 | ||||||||
| Salaries and benefits | 584,275 | 204,385 | 788,660 | |||||||||
| Depreciation and amortization | 28,820 | 153,916 | 182,736 | |||||||||
| Others | 194,923 | 14,940 | 209,863 | |||||||||
| Total operating expenses | $ | 898,669 | 418,675 | 1,317,344 | ||||||||
| Operating loss | $ | (717,150 | ) | (418,675 | ) | (1,135,825 | ) | |||||
| Other expenses | $ | (29,293 | ) | (37,680 | ) | (66,973 | ) | |||||
| Net (loss) before tax – reportable segment | $ | (746,443 | ) | (456,355 | ) | (1,202,798 | ) | |||||
| Unallocated distribution and administrative expenses and finance cost: | ||||||||||||
| - General and administrative | 766,420 | |||||||||||
| - Salaries and benefits | 360,408 | |||||||||||
| - Other operating expenses | 329,113 | |||||||||||
| - Other expenses | 240,471 | |||||||||||
| - Interest expense | 207,597 | |||||||||||
| 1,904,009 | ||||||||||||
| Net (loss) before tax from continuing operation | (3,106,807 | ) | ||||||||||
| For the nine-month ended November 30, 2021 | NextFinTech | NextMedia | Totals | |||||||||
| Revenue | $ | 713,879 | - | 713,879 | ||||||||
| Cost of Revenue | $ | 295,571 | - | 295,571 | ||||||||
| Gross Profit | $ | 418,308 | - | 418,308 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | $ | 1,016,795 | 346,548 | 1,363,343 | ||||||||
| Salaries and benefits | 623,847 | 1,094,049 | 1,717,896 | |||||||||
| Depreciation and amortization | 32,954 | 418,648 | 451,602 | |||||||||
| Others | 206,563 | 142,927 | 349,490 | |||||||||
| Total operating expenses | $ | 1,880,159 | 2,002,172 | 3,882,331 | ||||||||
| Operating loss | $ | (1,461,851 | ) | (2,002,172 | ) | (3,464,023 | ) | |||||
| Other income/(Expense) | $ | 15,717 | (27,694 | ) | (11,977 | ) | ||||||
| Net (loss) before tax - reportable segment | $ | (1,446,134 | ) | (2,029,866 | ) | (3,476,000 | ) | |||||
| Unallocated distribution and administrative expenses and finance cost: | ||||||||||||
| - General and administrative | 4,411,245 | |||||||||||
| - Salaries and benefits | 1,723,600 | |||||||||||
| - Other operating expenses | 1,852,178 | |||||||||||
| - Other expenses (income) | 5,509,376 | |||||||||||
| - Interest expense (income) | (98,136 | ) | ||||||||||
| 13,398,263 | ||||||||||||
| Net (loss) before tax from continuing operation | (16,874,263 | ) | ||||||||||
| Segment assets | 38,453,929 | 14,474,490 | 52,928,419 | |||||||||
| Unallocated assets | 31,290,397 | |||||||||||
| Assets from discontinued operation | 36,742,504 | |||||||||||
| Total asset | 120,961,320 | |||||||||||
| For the three-month ended November 30, 2021 | NextFinTech | NextMedia | Totals | |||||||||
| Revenue | $ | 420,522 | - | 420,522 | ||||||||
| Cost of revenue | $ | 208,232 | - | 208,232 | ||||||||
| Gross profit | $ | 212,290 | - | 212,290 | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | $ | 576,974 | 102,120 | ) | 679,094 | |||||||
| Salaries and benefits | 341,626 | 290,916 | 632,542 | |||||||||
| Depreciation and amortization | 17,884 | 142,583 | 160,467 | |||||||||
| Others | 114,413 | 45,784 | 160,197 | |||||||||
| Total operating expenses | $ | 1,050,897 | 581,403 | 1,632,300 | ||||||||
| Operating loss | $ | (838,607 | ) | (581,403 | ) | (1,420,010 | ) | |||||
| Other income/(expense) | $ | (32,510 | ) | 16,470 | (16,040 | ) | ||||||
| Net (loss) before tax - reportable segment | $ | (871,117 | ) | (564,933 | ) | (1,436,050 | ) | |||||
| Unallocated distribution and administrative expenses and finance cost: | ||||||||||||
| - General and administrative | 3,546,141 | |||||||||||
| - Salaries and benefits | 1,066,597 | |||||||||||
| - Other operating expenses | 1,150,561 | |||||||||||
| - Other expenses (income) | 825,783 | |||||||||||
| - Interest expense | (55,226 | ) | ||||||||||
| 6,533,856 | ||||||||||||
| Net (loss) before tax from continuing operation | (7,969,906 | ) | ||||||||||
There were no reconciling or inter-company items between segments.segments during the three-month and nine-month period ended November 31, 2022.
Schedule of geographic information
| For three-month period ended | For nine-month periods ended | |||||||||||||||||||||||
| Revenue | For nine months ended November 30, 2021 | For three months ended November 30, | November 30, 2022 | November 30, 2021 | November 30, 2022 | November 30, 2021 | ||||||||||||||||||
| United States and Puerto Rico | $ | 831,018 | $ | 500,771 | $ | 628,672 | $ | 420,522 | $ | 1,551,620 | $ | 713,879 | ||||||||||||
| Europe | 6,015,365 | 3,698,329 | ||||||||||||||||||||||
| Thailand | — | — | ||||||||||||||||||||||
| $ | 6,846,383 | $ | 4,199,100 | $ | 628,672 | $ | 420,522 | $ | 1,551,620 | 713,879 | ||||||||||||||
Long-lived Assets | November 30, 2021 | February 28, 2021 | ||||||
| United States and Puerto Rico | $ | 48,088,648 | $ | — | ||||
| Europe | 13,077,926 | — | ||||||
| Thailand | 9,463,135 | 7,785,396 | ||||||
| $ | 70,629,709 | $ | 7,785,396 | |||||
| Long-lived Assets | November 30, 2022 | February 28, 2022 | ||||||
| United States and Puerto Rico | $ | 32,115,001 | $ | 44,128,496 | ||||
| Europe | — | 11,913,658 | ||||||
| Thailand | 10,664,228 | 9,951,343 | ||||||
| $ | 42,779,229 | $ | 65,993,497 | |||||
Note 13 – Subsequent EventsFair Value Measurements
Election of a Director
On December 9, 2021,The Company has adopted the Company’s boardprovisions of directors appointed Edward Terrence Gardner, Jr. as an independent directorASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the Company. Mr. Gardner will hold this position until the Company’s next annual meeting of shareholders or until his successor is electedinformation. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and qualified, subject to his earlier death, resignation or removal.an entity’s own assumptions (unobservable inputs).
There is no arrangement or understanding between Mr. Gardner and any other person pursuant to which Mr. Gardner was selected as a directorThe hierarchy consists of three levels:
| ● | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Our assessment of the Company. Other than the Company’s formal plan for compensating its directors for their services, there are no plans, contracts or arrangements or amendments to any plans, contracts or arrangements entered into with Mr. Gardner in connection with his appointmentsignificance of a particular input to the Board, nor are there any grantsfair value measurement in its entirety requires judgment and considers factors specific to the asset or awards made to Mr. Gardner in connection therewith. Mr. Gardner is not a participant in, nor is he to be a participant in, any related-person transaction or proposed related-person transaction required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended.liability.
AppointmentOther financial instruments of Principal Executive Officerthe Company are short-term in nature or carrying interest at rates close to the market interest rates, their fair value is not expected to be materially different from the amounts presented in the Consolidated Balance Sheet.
Fair value of financial instruments
The methods and assumptions used by the Grouping estimating the fair value of financial instruments are as follows:
a) For financial assets and liabilities which have short-term maturities, including cash and cash equivalents, short term investment, accounts receivable, loans receivable, unbilled receivables, other receivables, line of credit and notes payable and accounts payable, the carrying amounts in the balance sheets approximate their fair value.
b) The fair value of investment in unconsolidated affiliates is generally derived from quoted market prices or based on generally accepted pricing models when no market price is available.
Note 14– Subsequent Events
In accordance with ASC 855-10 “Subsequent Events”, the company has analyzed its operations subsequent to November 30, 2022, to January 18, 2023, the date when the financial statements were issued. The Management of the Company determined that there were no reportable events other than those noted that occurred during that subsequent period to be disclosed or recorded.
On January 3, 2022, Nithinan “Jess” Boonyawattanapisut, Co-Chief Executive Officer the Company, assumed the role4, 2023, Timothy Sikora notified NextPlay Technologies, Inc., a Nevada corporation (the “Company”), of his resignation as the Company’s Principal ExecutiveChief Information Officer, (“PEO”), thereby replacing William Kerby,effective December 30, 2022. Mr. Sikora tendered his resignation in connection with the Company’s other Co-Chief Executive Officer, who stepped down from the PEO role. Ms. Boonyawattanapisut and Mr. Kerby will continue to serve as Co-Chief Executive Officerspending separation of NextTrip Group, LLC, a subsidiary of the Company, from the Company, as previously disclosed in that Current Report on Form 8-K filed by the Company with the Securities and membersExchange Commission on June 29, 2022. Mr. Sikora’s resignation is not the result of any dispute or disagreement with the Company on any matter relating to the Company’s Board of Directors.operations, policies or practices.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General Information
This information should be read in conjunction with the interim unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (the “Report”“Report”), and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended February 28, 2021,2022, filed with the Securities and Exchange Commission on June 8, 2021.21, 2022.
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information - Item 1. Financial Statements”.
Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under, and incorporated by reference in, the section entitled “Item 1A. Risk Factors” of this Report. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to NextPlay Technologies, Inc., is also based on our good faith estimates.
Unless the context requires otherwise, references to the “Company,“Company,” “we,“we,” “us,“us,” “our,“our,” and “NextPlay”“NextPlay” refer specifically to NextPlay Technologies, Inc., formerly Monaker Group, Inc., and its consolidated subsidiaries.
In addition, unless the context otherwise requires and for the purposes of this report only:
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; |
| ● | “SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
Where You Can Find Other Information
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act.Act with the SEC. The SEC maintains a website (https:(https://www.sec.gov)www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. Additional information about us is available on our website at www.nextplaytechnologies.com. We do not incorporate the information on or accessible through our websites into this filing, and you should not consider any information on, or that can be accessed through, our websites as part of this filing.
Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”&A”) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
| ● | Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A. | |
| ● | Results of Operations. An analysis of our financial results comparing the | |
| ● | Liquidity and Capital Resources. An analysis of changes in our consolidated balance sheets and cash flows and discussion of our financial condition. |
| ● | Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
OVERVIEW
During the nine month period ended November 30, 2022, NextPlay Technologies, Inc. and, together with its consolidated subsidiaries, is building a technology solutions company, offering games, in-game advertising, digital asset products and services, connected TV and travel booking services to consumers and corporations within a growing worldwide digital ecosystem. NextPlay’s engaging products and services utilize innovative advertising technology (“AdTech”AdTech”), Artificial Intelligence (“AI”AI”) and financial technology (“FinTech”FinTech”) solutions to leverage the strengths and channels of its existing and acquired technologies.
As of November 30, 2022, NextPlay is organized into threetwo divisions: (i) NextMedia, the Company’s Interactive Digital Media Division;Division and (ii) NextFinTech, the Company’s Finance and Technology Division; and (iii) NextTrip, the Company’s Travel Division.
NextMedia Division
HotPlay
HotPlay Enterprise Limited (“HotPlay”HotPlay”), which is wholly-owned by NextPlay, is an in-game advertising (“IGA”IGA”) platform that delivers advertisements into video games without disrupting gameplay, enabling video games to monetize without compromising on the integrity of the game. The platform enables advertisers and merchants of all sizes to hyper-locally deliver promotional coupons to gamers, offering them real world rewards from playing video games. Video games could also deliver relevant virtual rewards through the platform in order to increase retention rate.
Upon receiving the rewards, gamers are able to access them via the HotPlay redemption mobile application (“Redemption App”App”). The redemption app also features a list of games integrated with HotPlay IGA, giving video games visibility among the HotPlay user base.
In order to increase HotPlay IGA adoption among third party video game developers, HotPlay has established an in-house game development studio dedicated to developing casual and hyper-casual games that help showcase the capabilities of our technology.
Reinhart TV/Zappware
Reinhart TV AG/Zappware NV (“Reinhart”) is an award-winning entertainment service provider. The platform, which is currently deployed on devices across Europe and Latin America, provides end users with an intuitive and personalized multi-screen TV experience across set-top boxes, connected TVs, smartphones, tablets, and PCs. The platform also provides a service management system that enables operators to effectively manage user experience and monetization of their services.
Following the 51% acquisition of Reinhart TV on June 23, 2021, NextPlay is integrating its HotPlay IGA platform with Reinhart, which is anticipated to provide HotPlay access to Reinhart’s significant Pay TV customer base. Furthermore, the integration is expected to provide Reinhart with a more comprehensive offering for operators as they transition from a business-to-business (B2B) model to a business-to-business-to-consumer (B2B2C) model. NextPlay plans to further increase the combined platform suite of services by integrating FinTech and Travel service offerings in the future.
NextFinTech Division
Next Fintech
NextPlay owns 100% of Next Fintech Holdings, Inc. (formerly Longroot, Inc.) (“Next Fintech”Fintech”), which in turn owns 75% of Longroot Limited, a Cayman Islands company (“Longroot Cayman”Cayman”). Longroot Cayman owns 49% of the outstanding ordinary shares (with 51% of the preferred shares owned by two Thai citizen nominee shareholders) of Longroot Holding (Thailand) Company Limited (“Longroot Thailand”Thailand”), provided that Longroot Cayman controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand. Longroot Thailand is an Initial Coin Offering (“ICO”ICO”) Portal that provides digital asset financing and investment services that are fully regulated and licensed by the Securities and Exchange Commission of Thailand (the “Thai SEC”“Thai SEC”). It is focused on creating Thai regulated cryptocurrencies backed by high quality assets that are designed to be more resistant to market declines. The initial class of assets includes video games, insurance, precious metals, and real estate.
Longroot Thailand is a licensed ICO Portal under the Thai SEC and is regulated under the Thai Digital Asset Law which stipulates that all offerings of digital assets have to be conducted via a Thai SEC licensed ICO Portal.
NextBank International
NextBank International (“NextBank”NextBank”) (previously International Financial Enterprise Bank), which is wholly-owned by NextPlay, is an International Financial Entity (“IFE”IFE”) operating under the laws of the Commonwealth of Puerto Rico. Licensed under Act 273 by the Office of the Commissioner of Financial Institutions (“OCIF”OCIF”), NextBank currently offers concierge services to high net worth individuals and entrepreneurs, and loan products.
Following the completed acquisition of NextBank on July 21, 2021, NextPlay plans to create a diversified FinTech solution company that offers asset banking, asset management and mobile payment and banking services.
NextTrip DivisionDeparture of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
NextTripOn November 18, 2022, Kent Taepakdee resigned from his position as the Chief Financial Officer of NextPlay Technologies, Inc., a Nevada corporation (the “Company”). Mr. Taepakdee’s resignation is not a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices, or any issues regarding the Company’s accounting policies or practices.
NextTrip (currently operated through NextPlay) offers booking solutions for both businessOn November 28, 2022, the board of directors of NextPlay Technologies, Inc., a Nevada corporation (the “Company”) appointed Mr. Nutthaphol Rungsakhon to serve as the Company’s interim Chief Financial Officer (the “Interim CFO”), effective immediately. His appointment fills the vacant position resulting from Kent Taepakdee’s resignation on November 18, 2022, as disclosed in that Current Report on Form 8-K filed by the Company on November 25, 2022. Mr. Rungsakhon will hold this interim position until his successor is duly elected and leisure travel via NextTrip Business and NextTrip Journeys, respectively. NextTrip Business offers corporate travel management solutions for small- and medium- sized businesses and allows companiesqualified, subject to manage travel expenses, travel booking, expense reports, and provides access to concierge-like travel support services, while NextTrip Journeys provides an online travel agency portal where Personal Journey Consultants book and manage vacation packages with concierge like services.his earlier death, resignation, or removal.
Reverse Stock Split
The platform is powered by a proprietary booking engine that has approximately $3.4 million instantly confirmed vacation rental units. Some fluctuation in inventory may occur asEffective January 6, 2023, the Company continues to rationalize the number of available units based upon several factors including the ongoing impact of the pandemic, the uniqueness of inventory from supplier partners, and the needsimplemented a reverse stock split of the Company’s distribution partners.authorized, issued and outstanding shares of common stock, par value $0.00001 per share (the “Common Stock”), at a ratio of 1-for-20 (the “Reverse Split”). In order to implement the Reverse Split, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effectuate the Reverse Split in accordance with Nevada Revised Statutes (“NRS”) Section 78.209. The Company is effecting the Reverse Split to satisfy the $1.00 minimum bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2), for continued listing on The Nasdaq Capital Market.
Travel MagazineIn connection with the reverse stock split, the number of authorized shares of common stock and the number of issued and outstanding shares of common stock are proportionally reduced without change in par value per share of $0.00001. Also on the Effective Date, all options, warrants and other convertible securities of the Company that are outstanding immediately prior to the Reverse Split will be adjusted by dividing the number of shares of Common Stock into which the options, warrants and other convertible securities are exercisable or convertible by 20, and multiplying the exercise or conversion price thereof by 20, all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share. Accordingly, all historical per share data, number of shares outstanding and other common stock equivalents for the periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split.
Travel Magazine is an online digital mediaStrategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc.
On June 28, 2022, the Company entered into a series of agreements, including a securities exchange agreement, with William Kerby, the Company’s co-Chief Executive Officer and director, Donald P. Monaco, a director of the Company, and British Columbia-based TGS E-Sports Inc. (TSX-V: TGS, OTC: TGSEF) (“TGS”), a public company whose goalsecurities are listed for trading on the Canadian TSX Venture Exchange, pursuant to which the Company has agreed to sell the Company’s travel business, NextTrip Group, LLC (“NextTrip”), and its 51% ownership of Reinhart Digital TV (the 100% owner of Zappware) to TGS in exchange for securities of TGS (discussed in further detail below. TGS is a leading esports tournament solutions provider.
Prior to inspire travelersthe execution of the securities exchange agreement, NextTrip issued an aggregate of 915,000 units in NextTrip to exploreMessrs. Kerby and Monaco to resolve certain management unit issuances provided for in NextTrip’s Operating Agreement as consideration for services rendered.
As consideration for the world. Travel Magazine publishes articles, videos,sale of Reinhart and interactive media highlighting travel destinations throughoutNextTrip, upon closing of the world. Throughtransaction, (i) the Company will receive 232,380,952 shares of newly created nonvoting convertible preferred stock of TGS (the “TGS Preferred”), valued at $12.2 million, and (ii) Messrs. Kerby and Monaco, both of whom hold certain equity interests in NextTrip (discussed above), will receive an aggregate of 69,714,286 shares of TGS common shares, valued at $3.66 million, of which 11,619,048 TGS common shares will be held in escrow for a period of time. The TGS Preferred shares will be redeemable in certain situations, can be sold subject to certain transfer restrictions (including a right of first refusal in favor of TGS), and may be converted into shares of TGS common shares in certain limited circumstances, including mandatory conversion upon the occurrence of certain events. In the event that the TGS Preferred shares are converted into TGS common shares by the Company at any time, the Company is obligated to distributed all such TGS common shares in a stock dividend to its interactive media platform, leveraging NextPlay Technology solutions, Travel Magazine also plansshareholders. Concurrently with a determination to offer non-fungible tokens (“NFTs”).convert the TGS Preferred shares into shares of TGS common stock, if ever, the Company will set a shareholder record date for a special dividend to distribute all of the common shares of TGS held by the Company to the Company’s shareholders, on a pro-rata basis.
In addition to the securities exchange agreement, the Company, NextTrip, Reinhart and TGS also entered into a separation agreement on June 28, 2022, to further document the separation of NextTrip and Reinhart from the Company and to assign, transfer and convey certain assets and liabilities held in NextTrip or the Company’s name, respectively, to NextTrip or the Company, respectively, to allow for the separation of the businesses in accordance with the securities exchange agreement at closing of the transaction. The separation agreement also provides for the termination of certain intercompany agreements and accounts by and between the parties at closing of the transaction, sets rights related to confidentiality, non-disclosure and maintenance of attorney-client privilege matters, and also provides for a mutual release by and among the Company, NextTrip and Reinhart for all pre-closing claims between themselves and their officers, directors, affiliates, successors and assigns.
In addition, the separation agreement provides for the contribution of (i) $1.5 million to NextTrip and (ii) an additional $1.5 million in ten (10) equal monthly installments beginning July 1, 2022, in exchange for NextTrip, as of May 1, 2022, agreeing to assume the ongoing operating expenses of NextTrip and Reinhart. NextTrip has also agreed to assume payments under that certain payment obligation of the Company pursuant an Amendment to Intellectual Property Purchase Agreement effective May 18, 2021, by and between the Company, IDS Inc., TD Assets Holding LLC, and Ari Daniels in the approximate amount of $2,500,000, provided, however, that, if the Company fails to make any of the above installment payments within five (5) business days of being due, that such IDS payment obligation reverts back to the Company.
Closing of the transaction remains subject to various conditions, including (without limitation) regulatory approvals, approval of certain related matters by TGS’ shareholders and consummation of a financing by TGS, and is expected to occur in the second half of 2022. No assurances can be provided that the closing conditions will be satisfied, or that the transaction will be consummated on the anticipated timeline, or at all.
The transaction, once consummated, is expected to streamline the Company’s business operations and management, improve capital allocation, and is expected to unlock shareholder value by offering investors a pure-play investment in the Digital Media and Financial Technology sectors.
As a result of the foregoing, since June 28, 2022, Reinhart/Zappware and NextTrip were no longer treated as a division of the Company; accordingly, for the nine-month period ended November 30, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia.
Novel Coronavirus (COVID-19)
In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public“Public Health Emergency of International Concern”Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April 2020, many U.S. states and local jurisdictions began issuing ‘stay-at-home’’stay-at-home’ orders. For example, the state of Florida, where the Company’s principal business operations are, issued a ‘stay-at-home’’stay-at-home’ order effective on April 1, 2020, which remained in place, subject to certain exceptions, through June 2020, when the order was gradually lifted. Since then, many states have implemented various restrictions in order to minimize the spread of COVID-19, many of which have been fully lifted as of the date of this filing. There can be no assurances that additional restrictions will not be implemented again in the future.
The COVID-19 pandemic, and governmental responses thereto, including travel restrictions, ‘stay-at-home’ orders and required social distancing orders, severely restricted the level of economic activity around the world, and is havinghad an unprecedented effect on the global travel industry. Additionally, the ability to travel has been curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines, and may be further limited through additional voluntary or mandated closures of travel-related businesses, the majority of which have now been lifted.
The measures implemented to contain the COVID-19 pandemic have had, and may in the future have continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position.
The duration and severity of the COVID-19 pandemic are still uncertain and difficult to predict at this time. The pandemic could continue to negatively affect global economic activity for an extended period of time, even as restrictions have been lifted in most jurisdictions and vaccines are widely available in the United States and certain other countries. The effects of COVID-19 may significantly reduce discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
The Company’s liquidity could also be adversely impacted by delays in payments of outstanding accounts receivable amounts beyond normal payment terms and insolvencies.
It is difficult to estimate COVID-19’s impact on future revenues, results of operations, cash flows, liquidity or financial condition, but such impacts have been, and likely will continue to be, significant and could continue to have a material adverse effect on our business, financial condition, results of operations, cash flows and liquidity position for the foreseeable future. In the near term, we do expect that the COVID-19 pandemic will continue to negatively affect our operating results and year-over-year results.
As a result of the above, we may be forced to scale back our operations, adjust our plan of operations, borrow or raise additional funding, which may not be available on favorable terms if at all. In the event we require and are unable to raise additional funding in the future, we may be forced to seek bankruptcy protection.
RESULTS OF OPERATIONS
As discussed elsewhere in this report, as a result of the proposed sale of NextTrip and Reinhart/Zappware to TGS, Reinhart/Zappware and NextTrip were no longer treated as a division of the Company, and instead have been classified as assets held for sale; accordingly, unless otherwise stated, the results of continuing operations included herein for the nine-month period ended November, 2022 exclude the results of NextTrip and Reinhart/Zappware.
For the ThreeNine months Ended November 30, 20212022 Compared to threeNine months Ended November 30, 20202021
Revenues
Our total revenues increased to $4,199,100$1.55 million for the threenine months ended November 30, 2021,2022, as compared to $0$0.71 million for the threenine months ended November 30, 2020, an increase of $4,199,100 from the prior period.2021. The increase in sales is a result of the Company’s acquisition of HotPlay, now part of NextPlay Technologies, which included the acquisitions of Reinhart TV, NextBank, and Longroot. Digital interactive media revenue increase $3,698,329 from the organic growth of digital media globally, FinTech revenue increased $420,522derived from the loan portfolio organic growth and increase in bankfinancial services transactions and travel revenue increased $80,249. Travel revenue is being affected less as travel destinations lift COVID-19 restrictions, as we have experienced an increase in travel reservations during the 3rd quarter. Some travelling schedules have been postponed to later in the year, or the beginning of next year; however, the ultimate effect, duration and effects of the COVID-19 pandemic are currently unknown at this time.NextBank.
Cost of Revenues
Our total cost of revenues increased to $1,952,932$1.11 million for the threenine months ended November 30, 2021,2022, compared to $0$0.30 million for the threenine months ended November 30, 2020.2021. Our gross profit was $2,246,168$0.44 million for the threenine months ended November 30, 2021,2022, compared to $0$0.42 million for the threenine months ended November 30, 2020.2021. Cost of revenues and gross profit increased in line with revenue.revenue of NextBank.
Operating Expenses
Our operating expenses include general and administrative, salaries and benefits, technology and development, stock-based compensation, selling and promotion and depreciation and amortization. Our operating expenses increased to $11,121,312$2.46 million for the threenine months ended November 30, 2021,2022, as compared to the $462,455$11.87 million for the threenine months ended November 30, 2020.2021.
This increase was mainly related to:
(i) general and administrative expenses, which increased $4,561,992 to $4,792,330 for the three months ended November 30, 2021, as compared to $230,338 for the three months ended November 30, 2020. The increase is mainly due to loan related expenses of $1,916,860, professional fees of $1,158,559, and consultant fees of $735,780.
| (i) | General and administrative expenses, which increased to $1.53 million for the nine months ended November 30, 2022, as compared to $5.78 million for the nine months ended November 30, 2021. The increase is mainly due to professional and consultant fees; |
(ii) a $2,822,223 increase in salaries and benefits;
| (ii) | $0.60 million increase in salaries and benefits, due to having an increased number of employees 2022 compared to 2021; |
(iii) a $1,824,523 increase in depreciation and amortization;
| (iii) | $0.50 million increase in technology and development, due to professional fees and software license expenses; |
(iv) a $440,142 increase in selling and promoting expenses;
| (iv) | $0.14 million increase in stock-based compensation given to consultants and business vendors; |
(v) a $344,775 increase in technology and development expenses; and
| (v) | $0.016 million increase in selling and promotion expenses, due to the operation for the prior period from NextTrip; and |
(vi) a $665,202 increase in stock-based compensation.
| (vi) | $0.33 million decrease in depreciation and amortization from a write-off some assets of the Company. |
Other Income and Expenses
Our other income and expenses include valuation gain or loss on investments, impairment loss, interest income or expense, and other income.income or expense. Our total other expenses increasedamounted to $800,991$0.96 million for the threenine months ended November 30, 2021,2022, compared to other incomeexpenses of $41,617$5.42 million for the threenine months ended November 30, 2020, a2021. The period over period change of $842,678 from the prior period. The increase is mainly attributable to the valuation loss neton investments of our holdings in Axion, Bettwork, Verus (defined below) and Recruiter.com, as described in greater detail in “Note 6 – Investment in Unconsolidated Affiliates”, which resulted in a loss of $842,608.$2.34 million.
Non-Controlling Interest
We had an increase in loss in non-controlling interest of $564,842$1.16 million for the threenine months ended November 30, 2022, compared to a loss in non-controlling interest of $1.39 million for the nine months ended November 30, 2021, comparedmainly due to a decrease in non-controlling interest of $99,881loss from operation for the three months ended November 30, 2020, mainly a resultperiod from recording Longroot’s fair value of assets and liabilities which affected goodwill and non-controlling interest and loss allocation forReinhart/Zappware in the 2022 period.
Net Loss after tax from continuing operation
We had a net loss attributable to the Company of $9,059,632$14.62 million for the threenine months ended November 30, 2021,2022, compared to a net loss attributable to the Company of $532,600 for the three months ended November 30, 2020, resulting in an increase in net loss of $8,527,032 from the prior period. The increase in the net loss was primarily due to the increase in operating expenses of $10,658,857.
For the Nine months Ended November 30, 2021 Compared to the Nine months Ended November 30, 2020
Revenues
Our total revenues increased to $6,846,383$16.12 million for the nine months ended November 30, 2021, as compared to $0 for the nine months ended November 30, 2020. The increase in sales is a result of the reverse acquisition of HotPlay which include Reinhart TV, IFEB Bank, and Longroot. Digital Interactive Media Revenue increase $6,015,365 (mainly a result of Reinhart acquisition in 2nd quarter) from the organic growth of digital media globally, FinTech revenue increased $713,879 from the loan portfolio growth and increase in bank services transactions and travel revenue increased $117,139. Travel revenue is being affected less as travel destinations lift COVID-19 restrictions, as we have experienced an increase in travel reservations. Some travelling schedules have been postponed to later in the year, or the beginning of next year; however, the ultimate effect and duration of the COVID-19 pandemic are currently unknown at this time.
Cost of Revenues
Our total cost of revenues increased to $3,227,272 for the nine months ended November 30, 2021, compared to $0 for the nine months ended November 30, 2020. Our gross profit was $3,619,111 for the nine months ended November 30, 2021, compared to $0 for the nine months ended November 30, 2020. Cost of revenues and gross profit increased in line with revenue.
Operating Expenses
Our operating expenses include general and administrative expenses, salaries and benefits, technology and development, stock-based compensation, selling and promotions expenses, and depreciation and amortization. Our operating expenses increased by $16,859,145 to $17,850,605 for the nine months ended November 30, 2021, as compared to $991,460 for the nine months ended November 30, 2020.
This increase was mainly relatedprimarily due to the acquisitiondecrease in 2021 compared to 2020 representing only HotPlay business, hence all operating expenses increased as detailed below:
(i) General and administrative expenses as a result of the Company’s reverse acquisition of HotPlay which increased $6,584,895 to $7,038,226, for the nine months ended November 30, 2021, as compared to $453,331 for the nine months ended November 30, 2020. The increase is mainly due to loan relatedother expenses of $2,176,221, professional fees of $1,687,634, and consultant fees of $1,151,839.
(ii) a $4,839,088 increase in salaries and benefits related;
(iii) a $3,157,149 increase in depreciation and amortization;
(iv) a $801,771 increase in selling and promoting expenses;
(v) a $595,807 increase in technology and development expenses; and
(vi) a $880,435 increase in stock-based compensation.
Other Income and Expenses
Our other income and expenses include valuation gain or loss on investments, interest expense, and other income.
Our total other expenses increased to $5,480,167 for the nine months ended November 30, 2021, compared to other income of $17,070 for the nine months ended November 30, 2020, a change of $5,497,237 from the prior period. The increase is mainly attributable to the valuation loss, net of our holdings in Axion, Bettwork, and Recruiter.com, as described in greater detail in "Note 6 - Investment in Unconsolidated Affiliates", which resulted in a loss of $2,339,071, and impairment loss on intangible assets of $3,126,543 for the nine months ended November 30, 2021.$4.46 million.
Non-Controlling InterestNet Loss after tax from discontinued operation
We had an increase in non-controlling interest of $5,190,354 for the nine months ended November 30, 2021, compared to an increase in lossLoss from non-controlling interest of $255,051 for the nine months ended November 30, 2020, mainly a result from reverse acquisition recapitalization, recording Longroot’s fair value of assets and liabilities which affected goodwill and non-controlling interest and loss allocation for the period.discontinued operations $5.69 million represents 2 reporting entities below:
| (i) | Reinhart/Zappware: net loss from operation of $4.71 million and |
Net Loss
| (ii) | NextTrip: net loss from operation of $0.98 million, as the global travel demand slowly recovered. |
The discontinued operations classified as held for sale were considered for its impairment since March 1, 2022 and did not continue to depreciate/amortize their fixed assets per accounting standard, this primarily resulted in net profit for Reinhart/Zappware.
We had a net loss attributable to the Company of $18,269,396 for the nine months ended November 30, 2021, compared to a net loss attributable to the Company of $731,220 for the nine months ended November 30, 2020, resulting in an increase in net loss of $17,538,176 from the prior period. The increase in the net loss was primarily due to the increase in operating expenses of $16,859,145 and an increase in other expenses of $5,497,237, of which $3,126,543 related to impairment on intangible assets and $2,339,071 related to impairment on investment.
LIQUIDITY AND CAPITAL RESOURCES
On November 30, 2021,2022, we had $20,472,178$2.56 million of cash on-handand cash equivalents, which was an increasedecreased from $1.72 million as of $20,027,258 from $444,920 on February 28, 2021. The increase in2022 due primarily to cash on hand was mainly attributable to the business acquisition activity, where there was an increase of $21,974,124 in financing activities, an increase of $11,572,737 inout flow from investing activities offset by cash usedof $4.82 million for operating activities of $12,574,379.intangible asset acquisition.
As of November 30, 2021,2022, the Company had total current liabilities of $26,375,283,$57.90 million, which were mainly attributed to the Company’s reverse acquisition of HotPlay as well as the business combination of the IFEB and Reinhart TV and Zappware. The total liabilities consists of the Secured Promissory Notes owed to Streeterville Capital LLC in principal amount of $4,053,737 (and additional accrued interest of $516,445 as of November 30, 2021), short-term loans $3,653,724 related to the Reinhart/Zappware acquisition, an increase of accounts payable and accrued expense of $5,393,554, accrued payroll of $855,096 and accrued interest from notes of $918,762 due to the reverse acquisition and business combination of IFEB and Reinhart/Zappware. Deferred revenue increased $517,310 from $0 as of November 30, 2020. IFEB increased other current liabilities in the amount of $9,638,613 due to customer deposit.represented:
| - | Line of credit and notes payable of $5.33 million, mainly consisting of notes payable to Streeterville; |
| - | Accounts payable and accrued expense of $9.74 million; |
| - | Customer deposits of $27.28 million from NextBank; and |
| - | Liabilities classified as held for sale of $13.76 million, mainly consisting of liabilities of Reinhart/Zappware and NextTrip. |
As of November 30, 2021,2022, we had approximately $121.0$103.985 million in total assets, $31.0$57.90 million in total liabilities working capital of $24.0 million and a total accumulated deficit of $19.5$57.17 million.
Cash used in operating activities was $12,574,379$0.33 million for the nine months ended November 30, 2021,2022, compared to $656,407$12.57 million of cash used in operating activities during the nine months ended November 30, 2020.2021. The increasedecrease was mainly due to an increase unbilled receivable of $4,369,424,operating expense and other current liabilities of $1,745,492, and increase of loans receivable of $1,389,808, which were offset mainly by accounts receivable of $4,863,328 which are mainly due to the reverse acquisition and the new entities being consolidated in the quarter.related activities.
Net cash provided byused in investing activities was $11,572,737$4.82 million for the quarter ended November 30, 2022, as compared to net cash generated in investing activities of $11.57 million for nine months ended November 30, 2021. The cash used in investing activities are mainly attributable to the intangible asset acquisition of GoGame and travel platform in 2022 while 2021 asrepresented HotPlay’s cashflow for reverse takeover activities.
Net cash generated in financing activities was $1.09 million for the nine months ended November 30, 2022, compared to net cash used in investing activities of $4,572,164 for nine months ended November 30, 2020. The increase in cash provided by investing activities can be attributed mainly to the effects of the business combination as part of the reverse acquisition in the amount of $9,323,686 and $4,200,006 which represents the cash from the business combination with NextPlay and IFEB, respectively.
Net cash provided by financing activities was $21,974,124of $21.97 million for the nine months ended November 30, 2021, compared to netthe significant cash provided by financing activitiesused in previous year came from the proceeds from the sale of $5,304,194 forcommon stock and warrants in a registered public offering. In 2022, the nine months ended November 30, 2020. The increasedecrease was primarily due to proceedsproceed from salenotes payable - related party of stock$1.36 million while 2021 represented HotPlay’s cashflow received from shareholders in conjunction with the amount of $27,850,000, which were offset mainly by the payment on promissory notes in the amount of $8,199,576.reverse takeover activities.
Additional information regarding our acquisitions and dispositions, notes receivable, investments in equity instruments, notes payable can be found under “Part I. Financial Statements—Item 1. Financial Statements”, “Note 4 – Acquisitions and Dispositions”, “Note 5 – Related party transactions”, “Note 6 – Investment in Unconsolidated Affiliates”, “Note 7 – Notes Receivable”, and “Note 9 – Notes Payable”, and “Note13“Note 14 – Subsequent Events”.
We have limited financial resources. We currentlyAs of November 30, 2022, we have aworking capital of $3.53 million. Our monthly cash requirement ofis approximately $1,450,000, exclusive of capital expenditures. Management intends to seek additional capital or obtain additional credit facilities or loans. However, we may be unable to raise additional capital upon terms acceptable to us. The sale of additional equity will result in additional dilution to our shareholders. A portion of our cash may be used to acquire or invest in complementary businesses, or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies.$1.4 million.
We will need to raise additional capital or borrow loans to support the on-going operation, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs until our planned revenue streams from all businesses and products are fully implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all, willwould negatively impact on our business, financial condition, and liquidity. As of November 30, 2021, we had approximately $26.4 million of current liabilities. We currently have limited resources to satisfy these obligations, and our inability to do so could have a material adverse effect on our business and ability to continue as a going concern.
To date, we have funded our operations with the proceeds from equity and debt financings and we anticipate we will need to meet our funding requirements through the sale of additional equity or debt financing, which funds may not be available on favorable terms, if at all. We anticipate that we would need several millions of dollars to properly market our services and fund the operations for the next 12 months.
Separately,
Known Trends or Uncertainties
Although we have not seen any significant reduction in revenues to date, we have seen some consolidation in our capital requirementsindustry during economic downturns. These consolidations have not had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.
As discussed in the Risk Factors section of this Report, the world has been affected due to the COVID-19 pandemic. Until the pandemic has passed, there remains uncertainty as to the effect of COVID-19 on our business in both the short and long-term.
The potential for growth in new markets is uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would be more efficiently used elsewhere.
Inflation
Inflation has increased during the periods covered by this Report, and is expected to continue to increase for the near future. Inflationary factors, such as increases in interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, employee availability and wage increases.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations and Commitments
Note Purchase Agreements: Streeterville Capital, LLC
March 2021 Note Purchase Agreement
On March 22, 2021, we entered into the March 2021 Note Purchase Agreement dated March 23, 2021 with Streeterville, pursuant to which the Company sold Streeterville the March 2021 Streeterville Note in the original principal amount of $9,370,000. Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company the March 2021 Investor Note in the amount of $1,500,000, in consideration for the March 2021 Streeterville Note, which included an OID of $850,000 and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID was fully earned upon issuance and the remaining $150,000 was not fully earned until the March 2021 Investor Note was fully-funded by Streeterville, which occurred on May 26, 2021. Also on May 26, 2021, Streeterville funded the March 2021 Investor Note (in the amount of $1.5 million) in full.
We made a required Equity Payment of $1,857,250 to Streeterville under the March 2021 Streeterville Note on May 26, 2021, with funds raised through a May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering. On November 4, 2021, the Company paid down the outstanding balance of the March 2021 Streeterville Note in the amount of $6,000,000 with funds raised through the November 2021 registered direct offering.
As of November 30, 2022, the remaining aggregate principal balance of the March 2021 Streeterville Notes was $0.
October 2021 Note Purchase Agreement
On October 22, 2021, the Company entered into the October 2021 Note Purchase Agreement with Streeterville, pursuant to which the Company sold Streeterville the October 2021 Streeterville Note in the original principal amount of $1,665,000. Streeterville paid consideration of $1,500,000, which represents the original principal amount less a $150,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.
The October 2021 Note Purchase Agreement and the October 2021 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the October 2021 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the October 2021 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the October 2021 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the October 2021 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The October 2021 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the October 2021 Streeterville Note.
On April 29, 2022, the Company entered into the Standstill Agreement with Streeterville, pursuant to which, Streeterville agreed not to seek to redeem any portion of the October 2021 Streeterville Note (in the original principal amount of $1,665,000) until September 18, 2022. As consideration for such agreement, the outstanding balance of the October 2021 Note was increased by $87,639.33 (the “Standstill Fee”); as a result, the outstanding balance of the October 2021 Note as of April 29, 2022 was $1,840,912.84 (including outstanding interest). Subsequently on September 22, 2022, the Company elected the redemption deferral option which added $38,331.27 to the principal in which increased the outstanding principal balance to $1,790,971 as of the same date.
As of November 30, 2022, the remaining aggregate principal balance of the October 2021 Streeterville Notes was $1,752,639, plus accrued interest of $152,778.
May 2022 Note Purchase Agreement
On May 5, 2022, the Company entered into the May 2022 Note Purchase Agreement with Streeterville, pursuant to which the Company sold Streeterville the May 2022 Streeterville Note in the original principal amount of $2,765,000. Streeterville paid consideration of $2,500,000, which represents the original principal amount less a $250,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.
The May 2022 Note Purchase Agreement and the May 2022 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the May 2022 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the May 2022 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the May 2022 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the May 2022 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The May 2022 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the May 2022 Streeterville Note.
As of November 30, 2022, the remaining aggregate principal balance of the May 2022 Streeterville Notes was $2,765,000, plus accrued interest of $92,119.
On June 2, 2022, the Company entered into a Global Amendment to satisfy the requirement that HotPlay become a co-borrower on the October 2021 Streeterville Note and the May 2022 Streeterville Note and jointly and severally assume all of the obligations and duties of the Company under those notes. As a result, all references to “Borrower” or the “Company” in such notes now jointly refer to HotPlay and NextPlay. Streeterville also agreed to waive its right to enforce an increase in the near term and long-termbalance of the October 2021 Streeterville Note due to the impactCompany’s failure to add HotPlay as a co-borrower on the October 2021 Streeterville Note within the prescribed period of time to do so. The Global Amendment does not alter any other terms of the COVID-19 pandemic,notes.
June 2022 Promissory Notes
On June 13, 2022, the resulting reduced demandCompany entered into two promissory notes, each in the principal amount of approximately CAD $231,121 (USD $178,234), with its former legal counsel, which notes were issued, along with a CAD $10,000 (USD $7,712) in lieu of immediate payment of outstanding amounts payable to such counsel for travellegal services previously rendered to the increases in cancellations and re-bookings,Company. The first note matured on July 31, 2022, and the extentsecond note matured on September 1, 2022; provided, however, that if the Company fails to whichrepay the first note in full on or before its maturity date, then the second note will automatically become immediately due and payable. Both notes are unsecured and accrue interest at a rate of 18% per annum. The Company is in the process of re-negotiating the payment schedules.
Operating Leases Obligation
The Company entered into an office lease in Sunrise, Florida where we leased approximately 5,279 square feet of office space at 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323. In accordance with the terms of the office space lease agreement, the Company will be renting the commercial office space, for a term of almost eight years from March 1, 2021, through July 31, 2028, with rental costs amounting to approximately $17,380 per month for the duration of the lease. As per the Separation Agreement by and between the Company, Reinhart/Zappware and NextTrip, however, the Company has transferred the office lease contract to NextTrip from May 1, 2022 onwards and therefore presented under assets and liabilities held for sale. On August 25, 2022, the Company entered into an office lease in Sunrise, Florida for a term of six months from September 1, 2022, through January 30, 2023. Additionally, the Group rents office space located in Puerto Rico, Thailand with lease terms ranging from five to nine years, with rental costs for all such pandemic may further impact the abilityproperties amounting to an aggregate of our customers to fulfill their payment obligations.approximately $19,546.14 per month.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, accrued liabilities, convertible promissory notes and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2021,2022, which was filed with the SEC on June 8, 2021,21, 2022, are those that depend most heavily on these judgments and estimates. As of November 30, 2021,2022, there had been no material changes to any of the critical accounting policies contained therein.
Recently Issued Accounting Standards
For more information on recently issued accounting standards, see in “Note 1 – Summary of Business Operations and Significant Accounting Policies”, to the Notes to Consolidated Financial Statements included herein under “Part I - Financial Information - Item 1. Financial Statements”.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk
This represents the risk of loss that may result from the potential change in value of a financial instrument because of fluctuations in interest rates and market prices. We do not currently have any trading derivatives, nor do we expect to have any in the future. We have established policies and internal processes related to the management of market risks, which we use in the normal course of our business operations.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed by the Company in reports that it files or submits 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 the Company’s management, including the Principal Executive Officer (Ms. Boonyawattanapisut, our Co-Chief Executive Officer) and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Co-Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Co-Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of November 30, 2021,2022, the end of the period covered by this Quarterly Report on Form 10-Q, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits 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 the Company’s management, including the Principal Executive Officer (Ms. Boonyawattanapisut our Co-Chief Executive Officer) and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
As of November 30, 2021,2022, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions, and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and vendor matters.
Such current litigation and prior settlements are described in, and incorporated by reference in, this “Item“Item 1. Legal Proceedings”Proceedings” from, Part I, Item 1 of this Quarterly Report on Form 10-Q in the Notes to Consolidated Financial Statements in “Note 11 - Commitments and Contingencies”, under the heading “Legal Matters”“Legal Matters”. The Company believes that the resolution of currently pending matters will notcould individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended February 28, 2021,2022, filed with the SEC on June 8, 2021,21, 2022, under the heading “Risk Factors” and our Quarterly Reports on Form 10-Q for the quarter ended May 31, 2021, as filed with the Commission on July 14, 2021, and the quarter ended August 31, 2021, as filed with the SEC on October 20, 2021, under the heading “Risk Factors”, which risk factors are incorporated by reference herein, except as discussed below, and investors should review the risks provided in the Form 10-K, Form 10-Qs,10-Q, and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Annual Report on Form 10-K for the year ended February 28, 2021, Quarterly Report on Form 10-Qs for the quarter ended May 31, 2021 and for the quarter ended August 31, 2021, (under the heading “Risk Factors”).2022, or below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
Risks Relating to Our Business:Business Generally:
We need additional capital which may not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.
As of November 30, 2021,2022, the Company had an accumulated deficit of $19,469,705.$57.17 million. Net loss after tax from continuing operation and from discontinued operations for the nine months ended November 30, 2021,2022, amounted to $19,656,972.$14.85 million and $5.69 million, respectively. Our Digital Media Division generated gross profits of $3,187,176, our FinTech Division generated gross profits of $418,308 and our Travel division generated gross profits of $13,627$0.44 million for the nine months ended November 30, 2021,2022, and as of November 30, 2021,2022, we had working capital of $23,956,326.$3.53 million. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven. We may never ever achieve profitable operations or generate significant revenues. Our future operating results depend on many factors, including demand for our products, the level of competition, and the ability of our officers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively impact the ability of the Company to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, achieve, or sustain profitability, or continue as a going concern. Furthermore, due to our relatively small size and market footprint, we may be more susceptible to issues affecting the global travel, cryptocurrency, gaming and banking industries in general such as COVID-19, contractions in the global travel industry, cryptocurrency, gaming and banking regulatory changes, as compared to larger competitors.
We currently have a monthly cash requirement of approximately $1,450,000.$1.4 million. We believe that in the aggregate, we could require several millions of dollars to support and expand the marketing and development of our products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from all products are fully implemented and begin to offset our operating costs. We require additional funding in the future and if we are unable to obtain additional funding on acceptable terms, or at all, it will negatively impact our business, financial condition, and liquidity. As of November 30, 20212022 and February 28, 2021,2022, we had $26,375,283$57.67 million and $1,446,446, respectively,$27.50 million of current liabilities.liabilities, respectively.
We have derived our funding of operations mainly with equity transactions and with the proceeds from debt offerings.
We have experienced liquidity issues due to, among other reasons, our limited ability to raise adequate capital on acceptable terms. We have historically relied upon the sale of common stock and other equity securities and the issuance of promissory notes to fund our operations and have devoted significant efforts to reduce that exposure. We anticipate that we will need to issue equity to fund our operations and continue to repay our outstanding debt for the foreseeable future. If we are unable to achieve operational profitability or are not successful in securing other forms of financing, we will have to evaluate alternative actions to reduce our operating expenses and conserve cash.
These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The financial statements included herein also include a going concern footnote from our auditors.
In the event we are unable to raise adequate funding in the future for our operations and to pay our outstanding debt obligations, we may be forced to scale back our business plan and/or liquidate some or all of our assets or may be forced to seek bankruptcy protection, which could result in the value of our outstanding securities declining in value or becoming worthless.
The sale of the Company’s travel and media businesses is contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.
On June 29, 2022, we announced that we had entered into a series of agreements with TGS, pursuant to which the Company agreed to sell TGS its travel and media businesses, subject to satisfaction of various closing conditions. The transaction may not be completed as currently contemplated, or at all, and may not provide the benefits that we intend. Completion of the proposed sale is subject to certain closing conditions, including, without limitation, TSXV’s consent and approval of the transaction, approval of the transaction and certain related matters by TGS’ shareholders and consummation of a financing by TGS. The proposed transaction is complex in nature, and may be affected by unanticipated developments, disruptions in the credit or equity markets, or changes in general economic conditions. These or other unanticipated developments could delay or prevent the transaction from closing or cause it to occur on terms or conditions that are less favorable than anticipated.
Even if the transaction is completed, it may not be successful in accomplishing our objectives. Additionally, even if completed, no assurances can be provided that the TGS Preferred shares will ever be converted into shares of TGS common stock and distributed to our stockholders through a special dividend, sold by the Company or redeemed by TGS at any point. Additionally, there is the potential for business disruption to each company and significant separation costs. Planning and executing the transaction will require significant additional time, effort and expense, and may divert the attention of our management and employees, and those of TGS from other aspects of the business operations, and any delays in the completion of the transaction may increase the amount of time, effort, and expense that is devoted to the transaction. The sale of our travel and media businesses to TGS could cause our customers or customers of TGS to delay or defer decisions to purchase products or renew contracts, or to end their relationships. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows or the price of shares of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Securities
There have been no sales of unregistered securities during the threenine months ended November 30, 2021,2022, and from the period from December 1, 2021,2022, to the filing date of this report, which have not previously been disclosed in our periodic reports or a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| Incorporated By Reference | ||||||||||||
| Furnished | ||||||||||||
| or Filed | Filing | |||||||||||
| Exhibit No. | Description | Herewith | Form | Exhibit | Date | File No. | ||||||
| 4.1 | Form of Common Stock Purchase Warrant. | 8-K | 4.1 | 11/3/2021 | 001-38402 | |||||||
| 10.1 | Form of Securities Purchase Agreement, dated November 1, 2021, by and between NextPlay Technologies, Inc. and the investors party thereto | 8-K | 10.1 | 11/3/2021 | 001-38402 | |||||||
| 10.2 | Placement Agency Agreement, dated November 1, 2021, by and between NextPlay Technologies, Inc. and EF Hutton, a division of Benchmark Investments, LLC | 8-K | 10.2 | 11/3/2021 | 001-38402 | |||||||
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | X | ||||||||||
| 32.1** | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 32.2** | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 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. | X | ||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||
| 104 | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set | X | ||||||||||
| * | Filed herewith. |
| ** | Furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEXTPLAY TECHNOLOGIES, INC. | |
| Date: January | /s/ Nithinan “Jess” Boonyawattanapisut |
| Nithinan “Jess” Boonyawattanapisut | |
| Co-Chief Executive Officer | |
| (Principal Executive Officer) |
| Date: January | /s/ |
| Chief Financial Officer | |
| (Principal Accounting/Financial Officer) |
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