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NEXTPLAY TECHNOLOGIES, INC.,
formerly MONAKER GROUP, INC.
FORM 10-Q
For the Quarter Ended NOVEMBER 30, 2021
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“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”) 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,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “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”), including the Company’s Annual Report on Form 10-K for the year ended February 28, 2021, as filed with the SEC on June 8, 2021 (under the heading “Risk Factors” and in other parts of that report) and in the Company’s Quarterly Reports 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, as filed with the SEC on October 20, 2021 (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, impairment of long-term assets, especially goodwill and intangible assets, assumptions used in the valuation of stock-based compensation, revenue, leases, and litigation. 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, and 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.
1
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:
● | The Company will need to raise additional funding to support its operations, which funding may not be available on favorable terms, if at all; | |
● | Uncertainty and illiquidity in credit and capital markets can impair our ability to obtain credit and financing on acceptable terms and can adversely affect the financial strength of our business partners; | |
● | Various third parties owe the Company a significant amount of money, which may not be timely paid, if at all; | |
● | The Company owes significant amounts to Streeterville Capital, LLC (“Streeterville”), which is secured by a security interest over substantially all of the Company’s assets, and the Company is subject to requirements, penalties and damages under its agreements with Streeterville; | |
● | The Company’s operations have been negatively affected by, and have experienced material declines as a result of, COVID-19 and the governmental responses thereto; | |
● | Currently pending and future litigation affecting the Company may have a material adverse effect on the Company; | |
● | The Company’s operations are subject to uncertainties and risks outside of its control; | |
● | The Company is subject to extensive government regulations and rules, both within the United States and internationally, and the failure to comply with such regulations and rules could have a material adverse effect on the Company; | |
● | The Company’s businesses are subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to the Company’s business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm the Company’s business; | |
● | The success of the Company is subject to the development of new or upgraded products, services and features over time; | |
● | HotPlay uses open-source software in connection with certain of its games and services, which may pose particular risks to its proprietary software, products, and services in a manner that could harm its business; | |
● | HotPlay’s products are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent it from enforcing or defending proprietary technologies; | |
● | HotPlay relies on relationships with developers to provide it with an extensive game portfolio and sufficient advertising spaces; | |
● | HotPlay derives a significant portion of its revenues from advertisements and if any events occur that negatively impact its relationships with advertisers, its advertising revenues and operating results would be negatively impacted; | |
● | HotPlay’s products and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in such systems, could adversely affect its business; | |
● | Longroot Holding (Thailand) Company Limited’s (“Longroot”) operations are subject to risks associated with cryptocurrency exchanges being a new industry, regulatory changes and/or restrictions, potential illegal uses of cryptocurrencies, the acceptance and widespread use of cryptocurrencies, cyber security risks, and competing blockchain technologies; |
2
● | The Company’s travel division revenue, expenses and operating results could be negatively affected by changes in travel, real estate and ALR markets, as well as general economic conditions; | |
● | The Company is subject to competition with competitors who have significantly more resources, more brand recognition and a longer operating history than the Company; | |
● | The Company is subject to risks associated with failures to maintain intellectual property and claims by third parties relating to an allegation that the Company violated such third parties’ intellectual property rights; | |
● | Fluctuations in currency exchange rates could negatively impact the Company’s business; | |
● | The Company relies on third party service providers and the failure of such third parties to provide the services contracted for, on the terms contracted, or otherwise, could have a material adverse effect on the Company; | |
● | The Company relies on the internet, internet infrastructure, servers and networkers for its operations and in order to generate revenues; | |
● | The Company’s ability to raise funding, and dilution caused by such fundings, anti-dilution rights included in outstanding warrants; | |
● | If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price; | |
● | The trading price of the Company’s common stock is subject to numerous risks, including volatility and illiquidity, amongst other things; | |
● | The price of our common stock may fluctuate significantly, and you could lose all or part of your investment; | |
● | Nevada law and our Articles of Incorporation authorize us to issue shares of common and preferred stock, which shares may cause substantial dilution to our existing stockholders; | |
● | Our Common Stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements; | |
● | The officers and directors of the Company have the ability to exercise significant influence over the Company; | |
● | The market in which we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors; | |
● | If we are unable to adapt to changes in technology, our business could be harmed; | |
● | We may be subject to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating costs; | |
● | We have incurred significant losses to date and require additional capital which may not be available on commercially acceptable terms, if at all; | |
● | Our ability to integrate the operations of NextBank International, Inc., and regulatory and other risks associated therewith; and | |
● | Those discussed under the caption “Risk Factors” of this Report. |
3
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. The SEC maintains a website (https://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.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
NextPlay Technologies, Inc.
Condensed Consolidated Balance Sheets
November 30, | February 28, | |||||||
2021 (Unaudited) | 2021 (Audited) | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalent | $ | $ | ||||||
Restricted cash | ||||||||
Prepaid expenses and other current assets | ||||||||
Accounts receivable, net | ||||||||
Unbilled receivables | ||||||||
Other receivable, related parties | ||||||||
Advance for investment | ||||||||
Investment in unconsolidated affiliate: Short-term | ||||||||
Convertible notes receivable, related party | ||||||||
Loans receivable | ||||||||
Total current assets | $ | $ | ||||||
Non-current assets | ||||||||
Investment in unconsolidated affiliates: Long-term | ||||||||
Intangible assets, net | ||||||||
Goodwill | ||||||||
Computers, furniture and equipment, net | ||||||||
Operating lease right-of-use asset | ||||||||
Security Deposits | ||||||||
Total non-current asset | $ | $ | ||||||
Total assets | $ | $ | ||||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities | ||||||||
Line of credit & notes payable, net | $ | $ | ||||||
Accounts payable and accrued expenses | ||||||||
Other current liabilities | ||||||||
Deferred revenue | ||||||||
Current portion of operating lease liability | ||||||||
Other current liabilities-customer deposits | ||||||||
Other liabilities affiliate | ||||||||
Notes payable - related party | ||||||||
Total current liabilities | $ | $ | ||||||
Non-current liabilities | ||||||||
Line of Credit and Notes Payable Long Term, net | ||||||||
Note payable long term, related parties | ||||||||
Operating lease liability, non-current portion | ||||||||
Total non-current liabilities | $ | $ | ||||||
Total liabilities | $ | $ | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ equity | ||||||||
Series A Preferred stock, $ | ||||||||
Series B Preferred stock, $ | ||||||||
Series C Preferred stock, $ | ||||||||
Series D Preferred stock, $ | ||||||||
Common stock, $ | ||||||||
Treasury stock | ( | ) | ||||||
Additional paid-in-capital | ||||||||
Accumulated other comprehensive income | ( | ) | ||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Stockholders’ equity attributable to parent | $ | $ | ||||||
Non-controlling interest in consolidated affiliates | ( | ) | ||||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Operations, Net and Comprehensive Loss
(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 | $ | $ | ||||||||||||||
Interest and bank services | ||||||||||||||||
Travel services | ||||||||||||||||
Total revenue | $ | $ | ||||||||||||||
Cost of Revenue | ||||||||||||||||
Media subscription and services | ||||||||||||||||
Interest and bank services | ||||||||||||||||
Travel services | ||||||||||||||||
Total Cost of Revenue | $ | $ | ||||||||||||||
Gross Profit | $ | $ | ||||||||||||||
Operating Expenses | ||||||||||||||||
General and administrative | ||||||||||||||||
Salaries and benefits | ||||||||||||||||
Technology and development | ||||||||||||||||
Stock-based compensation | ||||||||||||||||
Selling and promotions expense | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Income/ (Expense) | ||||||||||||||||
Valuation loss, net | ( | ) | ( | ) | ||||||||||||
Impairment loss | ( | ) | ||||||||||||||
Interest income (expense) | ( | ) | ( | ) | ||||||||||||
Realized loss on sale of marketable securities | ( | ) | ||||||||||||||
Foreign Exchange gain | ||||||||||||||||
Other expense | ( | ) | ( | ) | ( | ) | — | |||||||||
Total other (expenses)/income | ( | ) | ( | ) | ||||||||||||
Net loss before tax | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
Estimated corporate taxes | ||||||||||||||||
Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Share of non-controlling interest | ( | ) | ( | ) | ( | ) | ||||||||||
Net loss attributable to parent | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
Other Comprehensive (loss) income: | ||||||||||||||||
Foreign currency translation (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total other comprehensive (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Weighted average number of common shares outstanding | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Basic net loss per share | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
Diluted net loss per share | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
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 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||
Reduction of share capital | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Reverse acquisition recapitalization | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for consulting | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for debt payment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for business acquisition | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for private placement | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant cancellation | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Share repurchase | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Changes in ownership interest from acquisition | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at November 30, 2021 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ |
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 | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Shares issued for compensation | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for consulting | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for private placement | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrant cancellation | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Changes in ownership interest from acquisition | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at November 30, 2021 | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ |
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 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid capital | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance at November 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ |
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 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Share contribution cash | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid capital | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance at November 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net income to net cash used for operating activities: | ||||||||
Depreciation and amortization | ||||||||
Foreign exchange gain, net | ( | ) | ||||||
Valuation loss, net | ||||||||
Stock based compensation | ||||||||
Goodwill | — | |||||||
Loss from computer, furniture and equipment written off | ||||||||
Gain on sale of computer, furniture and equipment | ( | ) | ||||||
Loss on minority interest | ( | ) | ( | ) | ||||
Loss on currency translation | ( | ) | — | |||||
Impairment loss | ||||||||
Changes in operating assets and liabilities: | ||||||||
Amounts due from related parties | ( | ) | ||||||
Amounts due to related party | ||||||||
Accounts receivable | ||||||||
Unbilled receivable | ( | ) | ||||||
Loans receivable | ( | ) | ||||||
Prepaid expenses and other current assets | ( | ) | ||||||
Security deposits | ( | ) | ||||||
Operating lease liabilities | ||||||||
Accounts payable & accrued expenses | ||||||||
Deferred revenue - related party | ( | ) | ||||||
Other current liabilities | ( | ) | ||||||
Cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
Cash flows from investing activities: | ||||||||
Short term investment - related party | ||||||||
Investment in unconsolidated affiliate | ||||||||
Payment in advance for investment | ( | ) | ||||||
Convertible notes receivable - related party | ( | ) | ||||||
Additions of intangible assets – related party | ( | ) | ( | ) | ||||
Additions of intangible assets | ( | ) | ( | ) | ||||
Purchase of computer, furniture, and equipment | ( | ) | ( | ) | ||||
Proceeds from disposal of fixed assets | ||||||||
Effects of a business combination of NextBank | ||||||||
Effects of a business combination of NextPlay (Monaker) | ||||||||
Cash provided by (used in) investing activities | $ | $ | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of ordinary shares | ||||||||
Proceed from notes payable - related party | ||||||||
Advance received from related parties for share subscription | ||||||||
Repayment of notes payable - related party | ( | ) | ( | ) | ||||
Treasury stock transaction | ( | ) | ||||||
Proceeds from promissory notes - related party | ||||||||
Proceeds from promissory notes | ||||||||
Payments on promissory notes – related party | ( | ) | ||||||
Payments on promissory notes | ( | ) | ||||||
Proceeds from sale of stock | ||||||||
Cash provided by financing activities | $ | $ | ||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | — | ( | ) | |||||
Cash, Cash Equivalents, and Restricted Cash | ||||||||
Net change during the period | ||||||||
Balance, beginning of period | ||||||||
Balance, end of period | $ | $ | ||||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid for interest | $ | $ | ||||||
NON-CASH TRANSACTIONS | ||||||||
Addition of intangible assets through exchanging shares | ||||||||
Settle (a) Convertible note receivable and (b) note payable due to closing share exchange transaction | ||||||||
Settle (a) Convertible note receivable and (b) share capital increase due to closing share exchange transaction | ||||||||
Operating lease right to use assets obtained in exchange for new operating lease liabilities | ||||||||
Share issues for consulting and employee compensation |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
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 | $ | $ | ||||||
Restricted cash | $ | $ | ||||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | $ |
9
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 its consolidated subsidiaries (“NextPlay,” “we,” “our,” “us,” or the “Company”) 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”), Artificial Intelligence (“AI”) and financial technology (“FinTech”) solutions to leverage the strengths and channels of its existing and acquired technologies.
NextPlay is organized into three (3) divisions: (i) NextMedia, the Company’s Interactive Digital Media Division; (ii) NextFinTech, the Company’s Finance and Technology Division; and (iii) NextTrip, the Company’s Travel Division.
In the Interactive Digital Media Division, NextPlay
closed its acquisition of HotPlay Enterprise Limited and its In-Game Advertising (“IGA”) platform on June 30, 2021
and acquired a
In the Finance and Technology Division, the Company’s acquisition of International Financial Enterprise Bank (“IFEB”), now called NextBank International, Inc. (“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”), which operates an Initial Coin Offering (“ICO”) Portal which is approved and regulated by the Thai Securities and Exchange Commission (“Thai SEC”). The Portal enables us to crypto-securitize an array of high 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 Fintech 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, Labuan FSA approved the Company’s
application to carry on general insurance and reinsurance business subject to certain conditions including (i) payment of a $
Reverse Acquisition of HotPlay Enterprise Ltd.
On July 23, 2020, the Company (then known as Monaker
Group, Inc. (“Monaker”)) entered into a Share Exchange Agreement (as amended from time to time, the “Share
Exchange Agreement”) with HotPlay Enterprise Limited (“HotPlay”) and the stockholders of HotPlay (the “HotPlay
Stockholders”). Pursuant to the Share Exchange Agreement, Monaker exchanged
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Reverse Acquisition of HotPlay Enterprise Ltd. (6/30/21) | ||||
Fair Value of Monaker assets acquired | ||||
Cash | $ | |||
Current assets | $ | |||
Non-current assets | $ | |||
Net assets acquired | $ | |||
Fair Value of Monaker liabilities assumed | ||||
Current liabilities | $ | |||
Non-current liabilities | $ | |||
Net liabilities assumed | $ | |||
Net assets acquired | $ |
Purchase consideration | ||||
Number of Monaker common shares outstanding as of 6/30/2021 | ||||
Monaker share price as of 6/30/2021 | $ | |||
Preliminary estimate of fair value of common shares | $ | |||
Fair value of total estimated consideration transferred | $ | |||
Purchase Price Allocation | ||||
Fair value of Monaker net assets acquired as of 6/30/2021 | $ | |||
Fair value of total estimated consideration transferred | $ | |||
Goodwill | $ |
The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date and we will continue to evaluate the fair values within the 1-year timeframe as provided in the applicable guidance.
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”) 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 principles 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, and notes thereto and other pertinent information contained in the annual report on Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”) on June 8, 2021.
The results of operations for the nine months ended November 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2022.
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.
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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, and February 28, 2021.
Restricted Cash
Restricted cash represents cash retained in an escrow account for business
purposes for more than 90 days. The outstanding restricted cash as of November 30, 2021 was $
Accounts 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 impairment loss and unbilled receivables are measured at the amount of consideration that the Group is entitled to, less impairment loss.
Prepaid Expenses and Other Current Assets
The Company records cash paid in advance 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 .
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- 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.
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Advance for Investment
Advance for investment represents cash deposits transferred to the investment seller as a deposit payment as stipulated in the investment purchase agreement.
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. These
are originally recorded at cost and stated at cost less accumulated depreciation. The computers and laptops are depreciated over a useful
life of
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” 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) 350-50 “Website Development 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, consideration transferred and goodwill or any bargain purchase gain, as well as the remeasurement of any pre-existing interest in the acquiree.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible 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 $
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Accounts payable, note payables and accrued expenses
Accounts payable, note payables and accrued expenses are recognized when they occur at cost.
Customer deposit
Customer deposit represents cash deposits received from customers at NextBank.
Business Combination
The Company uses the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 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 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.
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, 2021, convertible notes payables were excluded from the computation of diluted net loss per share, as the result of the computation was anti-dilutive.
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 subscriptions and 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.
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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, interest income and loan fees.
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 such as loan origination fees, brokering fees, and deposit account fees.
As of November 30, 2021, the Company had interest
and non-interest- bearing deposits received from customers with interest rates ranging from
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).
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.
Cost of revenue from travel mainly consists of cost of the tours and activities, commissions and merchant fees charged by credit card processors.
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.
The expense for the nine months ended November 30, 2021 and November 30, 2020 was $
15
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, “Compensation – Stock 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.
The Company adopted ASU No. 2018-7, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting awards (“ASU 2018-7”). As a result, awards are measured based on the grant date closing price of the Company’s common stock consistent with awards made to the Company’s employees and directors. The Company recognizes the remaining unrecognized value of unvested awards over the remaining performance period, with no further remeasurement through the performance completion date.
Warrant Modifications
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.
Financial instruments consist principally of cash, accounts receivable, investments in unconsolidated affiliates, other receivable, 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.
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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” 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. |
The Company has three 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. 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.
See Note 12 Business Segment Reporting for details on each segment unit.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet 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 update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.
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Note 2 - Going Concern
As of November 30, 2021, and February 28, 2021,
the Company had an accumulated deficit of $
We have limited financial resources. As of November
30, 2021, we have working capital of $
We will need to raise additional capital 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, 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,
$
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 travel and gaming products by promoting it across other mediums, |
(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 division |
(iv) | the Company plans to issue tokens under its Longroot entity during the year 2022, which is expected to result in generating revenues; and |
(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
Prepaid Expenses and Other Current Assets
As of November 30, 2021 and February 28, 2021,
the Company had prepaid expenses of $
Accounts Receivable
As of November 30, 2021 and February 28, 2021,
the Company had accounts receivable of $
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Unbilled Receivables
As of November 30, 2021 and February 28, 2021,
the Company had unbilled receivables of $
Loans Receivable
As of November 30, 2021 and February 28, 2021,
the Company had loans receivable of $
Goodwill
As of November 30, 2021 and February 28, 2021,
the Company had total goodwill of $
(i) | the reverse acquisition of HotPlay of $ |
(ii) | the acquisition of NextBank International of $ |
(iii) | the acquisition of Zappware by Reinhart of $ |
(iv) | the recognition of goodwill from Longroot acquisition on
November 16, 2020 in which the Purchase Price Allocation (PPA) was completed by an independent appraiser and the Company recorded the
fair value of assets and liabilities, as a result, goodwill increased in amount $ |
Summary of changes in fair value allocation resulted below:
Amount | ||||
Goodwill increased | ||||
Net other assets decreased | ( | ) | ||
Intangible assets decreased | ( | ) | ||
Non-controlling interest increased | ( | ) | ||
Computer, Furniture and Equipment
As of November 30, 2021 and February 28, 2021,
the Company had net computer, furniture and equipment of $
Accounts Payable and Accrued Expenses
As of November 30, 2021 and February 28, 2021,
the Company had accounts payable of $
Other Liabilities – Customer Deposits
As of November 30, 2021 and February 28, 2021,
the Company had other current liabilities – customer deposits of $
Deferred Revenue
As of November 30, 2021 and February 28, 2021,
the Company had deferred revenue of $
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Short Term Note Payable – Related Parties
As of November 30, 2021 and February 28, 2021,
the Company had a short term note payable – related party of $
Long Term Note Payable – Related Parties
As of November 30, 2021 and February 28, 2021,
the Company had a long term note payable – related party of $
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”) with Reinhart, and Jan C. Reinhart, the founder of Reinhart (“Founder”).
The Investment Agreement contemplated the Company
acquiring
We paid the founder $
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 the following values in connection with the business acquisition of Reinhart as of June 23, 2021. The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date and we will continue to evaluate the fair values within the 1-year timeframe as provided in the applicable guidance.
Acquisition of Reinhart TV AG/Zappware | ||||
Total Identifiable Assets | $ | |||
Total liabilities | $ | |||
Net Assets | $ | |||
Total Consideration transferred | $ |
Reinhart is in the business of providing a software-based TV 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.
In connection with our entry into 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.
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The Shareholders’ Agreement also provides a right for the Founders to sell their shares to the Company, at which time the Company will be required to purchase such shares (the “Founder’s Shares”), based on the following schedule:
Date right is triggered | Percent of Founder’s Shares eligible to be sold | Required Purchase Price | ||||
% | ||||||
% | ||||||
% | ||||||
% |
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
NextBank International (formerly IFEB) Acquisition
On April 1, 2021, we entered into a Bill of Sale
for Common Stock, effective March 22, 2021 (the “Bill of Sale”), with certain third parties, pursuant to which the
Company agreed to purchase
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
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, on 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” and the “IFEB Exchange Agreement”). Pursuant to the IFEB Exchange
Agreement, the Additional Sellers exchanged an aggregate of
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As a result of the closing of both transactions,
we acquired control of
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 the 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 evaluate the fair values within the 1-year timeframe as provided in the guidance.
Acquisition of NextBank International, Inc. (7/21/21) | ||||
Fair Value of assets acquired | ||||
Cash | $ | |||
Current assets | $ | |||
Non-current assets | $ | |||
Net assets acquired | $ | |||
Fair Value of liabilities assumed | ||||
Current liabilities | $ | |||
Non-current liabilities | $ | |||
Net liabilities assumed | $ | |||
Net assets acquired | $ | |||
Purchase consideration | ||||
Cash | $ | (1) | ||
Common stock ( | $ | |||
Fair value of total consideration transferred | $ | |||
Purchase Price Allocation | ||||
Fair value of net assets acquired as of 7/21/2021 | $ | |||
Fair value of total consideration transferred | $ | |||
Goodwill | $ |
(1) |
The IFEB Exchange Agreement required that:
(a) three legacy board members of IFEB remain on the Board of Directors of IFEB for a period of one year after the closing date of the IFEB Exchange Agreement, subject to rights of removal if such continued appointment/service as board members would violate the fiduciary duties 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 $
(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 $
22
On September 28, 2021, the Company entered into
a Preferred Stock Exchange Agreement (the “Preferred Exchange Agreement”) with NextBank, and the Company agreed to
exchange
The Preferred Exchange Agreement included customary representations, covenants and warranties of the parties, and closing conditions which would be customary for a transaction of this type. The transactions contemplated by the Preferred Exchange Agreement closed on October 1, 2021.
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”) | ||
Tree Roots Entertainment Group Company Limited (“TREG”) | ||
Axion Ventures Inc. (“Axion”) | ||
Axion Interactive Inc. ("AI") | ||
HotNow (Thailand) Company Limited (“HotNow”) | ||
True Axion Interactive Company Limited (“TAI”) | ||
Magnolia Quality Development Corporation Limited (“MQDC”) | ||
Nithinan Boonyawattanapisut | ||
Immediate Family Member |
Other than disclosed elsewhere, the Company had the following significant related party transactions for the nine months ended November 30, 2021.
Payment of marketing expense: | ||||
Immediate Family Member | $ | |||
Payment of consulting expense: | ||||
Immediate Family Member | $ | |||
Payment of salary expense: | ||||
Immediate Family Member | $ | |||
Purchase of intangible asset: | ||||
HotNow (Thailand) Company Limited | $ | |||
Purchase of equipment: | ||||
HotNow (Thailand) Company Limited | $ | |||
True Axion Interactive Company Limited | $ | |||
General and admin expense: | ||||
HotNow (Thailand) Company Limited | $ | |||
Operating expense: | ||||
HotNow (Thailand) Company Limited | $ | |||
Interest expense of loan from: | ||||
Magnolia Quality Development Corporation Limited | $ | |||
Tree Roots Entertainment Group Company Limited | $ | |||
Rental expense: | ||||
Tree Roots Entertainment Group Company Limited | $ | |||
HotNow (Thailand) Company Limited | $ | |||
Other expense: | ||||
HotNow (Thailand) Company Limited | $ | |||
Payment of contract cost: | ||||
HotNow (Thailand) Company Limited | $ |
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The Company had the following related party balances as of November 30, 2021 as follows:
Nature | November 30, 2021 | |||||
Amounts due to related parties: | ||||||
Magnolia Quality Development Corporation Limited | Accrued interest expense | |||||
Tree Roots Entertainment Group | Accrued interest expense | |||||
HotNow (Thailand) Company Limited | Other liability | |||||
Axion Interactive Inc. | Other payable | |||||
Total | $ | |||||
Notes receivable: | ||||||
HotNow (Thailand) Company Limited | ||||||
Notes payable: | ||||||
Magnolia Quality Development Corporation Limited | ||||||
Tree Roots Entertainment Group | ||||||
Total | $ |
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 | $ | |||
Short-term Loan from: | ||||
Tree Roots Entertainment Group Co., Ltd | $ | |||
Repayment of Short-term Loan: | ||||
Tree Roots Entertainment Group Co., Ltd | $ | |||
Interest expense of loan from: | ||||
Magnolia Quality Development Corporation Limited | $ | |||
Tree Roots Entertainment Group Company Limited | $ | |||
Payment of loan interest: | ||||
Magnolia Quality Development Corporation Limited | $ | |||
Tree Roots Entertainment Group Co., Ltd | $ | |||
Payment of contract cost: | ||||
HotNow (Thailand) Company Limited | $ | |||
True Axion Interactive Company Limited | $ |
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
On March 24, 2021, HotPlay Thailand entered into
a short-term loan with MQDC for $
During June and July 2020, HotPlay Thailand entered
into a short-term loan with TREG for the aggregate principal amount of $
Next Bank International currently holds a $
24
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:
(b) | compensation of 5,000 shares of Company common stock per year, if they are the chairperson of any committee of the board of directors; and |
(c) | compensation of 10,000 shares of Company common stock per year, to the Chairman of the Board (collectively, the “Board Compensation Terms”); provided that all shares due to the directors serving as of March 1, 2021, for the fiscal year ending February 28, 2022, were issued up front and were fully-vested/earned on the date of grant, instead of vesting over time, as previously awarded. |
In total, an aggregate of
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,
On April 7, 2021, the Company declared dividends
in arrears of $
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 $
The Convertible Promissory Notes accrue interest
at the rate of
25
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:
(b) | additional compensation of $15,000 per year for chairpersons of each committee of the board of directors; and |
The compensation is earned and payable on a pro-rata,
quarterly basis, with a total of
Significant agreements with managements of the Company
a) | On June 9, 2021, GLM Consulting Ltd (the “Consultant”), of which Andrew Greaves, the
Company’s Chief Operating Officer, serves as the sole officer and director, entered into a Consulting Agreement with the Company
to assist the Company in growing a connected subscriber base and ecosystem across all devices: Digital TV, Set Top Box, Streaming Devices,
PC, Laptop, Tablet and Smartphones, by providing a range of operational expertise. The term of the agreement started on July 6, 2021 and
is effective until June 30, 2022, provided that the agreement may be terminated at any time, by either party, with two weeks written prior
notice. The Company agreed to pay the Consultant a daily consulting fee of $ |
b) | On September 16, 2021, the Company entered into an Employment Agreement with Nithinan “Jess” Boonyawattanapisut, its Co-Chief Executive Officer and member of its board of directors, which agreement has an effective date of October 1, 2021. The agreement remains in effect (renewing automatically on a month-to-month basis), until either party provides the other at least 30 days prior written notice of its intent to terminate the agreement, or until terminated as discussed below. |
The agreement includes a non-compete provision, prohibiting Ms. Boonyawattanapisut from competing against the Company during the term of the agreement and for a period of 12 months after termination thereof (subject to certain exceptions described below), in any state or country in connection with (i) the commercial sale of products sold by the Company during the six (6) months preceding the termination date; and (ii) any services the Company commercially offered during the six (6) months prior to the termination date (collectively, the “Non-Compete”).
During the term 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.
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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.
c) | On August 19, 2021, the Company entered into an Intellectual Property Purchase Agreements with Fighter Base Publishing Inc. (“Fighter Base”) and Inc. (“Token IQ”), and together with Fighter Base, the “IP Sellers”), dated as of the same date (each an “IPP Agreement”, and together the “IPP Agreements”). Pursuant to the 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 entities are owned and controlled by Mark Vange, the Chief Technology Officer of the Company. |
Pursuant to the Fighter Base IPP Agreement,
the intellectual property to be acquired thereunder has a mutually agreed upon value of $
Pursuant to the Token IQ IPP Agreement,
the intellectual property to be acquired thereunder has a mutually agreed upon value of $
27
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.
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.
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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 of Intent”)
with Radiant Ventures Limited, which manages Radiant VC1 Limited and Radiant PV 1 Limited, two stockholders of Axion Ventures, Inc. (“Axion”).
As discussed below, the Company acquired approximately
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
As of November 30, 2021, total payment of cash and shares already paid
by the Company to the sellers was $
Go Game Securities Purchase Agreement
On June 30, 2021, the Company entered into a Securities
Purchase Agreement (the “Go Game SPA”) with David Ng, an individual (the “Seller”). Pursuant to
the Go Game SPA, the Company agreed to acquire a
Pursuant to the Go Game SPA, the Company was
also granted an option (the “Go Game Option”), to purchase up to an additional
29
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
The closing of the acquisition of the Initial Go Game Shares is subject to certain closing conditions and requirements which may not be met on a timely basis, if at all. The Company and Seller have made customary representations and warranties and have agreed to customary covenants in the Go Game SPA. There is no assurance that all of the conditions to the consummation of the Go Game SPA will be satisfied.
In connection with the parties’ entry into
the Go Game SPA, the Seller entered into a lock-up agreement with 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
As of November 30, 2021, the second payment of
$
Letter of Intent of Potential acquisition of
On November 1, 2021, the Company signed a non-binding
Letter of Intent to acquire
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
30
On July 2, 2018, three Secured Convertible Promissory
Notes aggregating $
On February 28, 2021, the
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
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
During the quarter ended November 30, 2021, the
Company sold in open market transactions
On February 28, 2021, the Company owned
Acquisition of Axion Shares
The investment in affiliate of $
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
See Note 7, below, for additional information regarding this transaction.
31
Note 7 – Notes Receivable
Current
$
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 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
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
The Creditor Warrants had cashless exercise rights,
an exercise price of $
(i) | The date the Axion Debt is fully repaid by Axion, and |
(ii) | the date that the Company obtains |
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 $
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 reduce the total claimed to reflect the difference between what is owed and what the Company is claiming (to avoid double-claiming).
32
Note 8 – Intangible Assets
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 | $ | $ | $ | $ | ||||||||||||||
Trademark & License | ||||||||||||||||||
Others | ||||||||||||||||||
CIP – Software development | ||||||||||||||||||
CIP – IDS Project | ||||||||||||||||||
$ | $ | $ | $ |
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 $
Intangible assets are amortized on a straight-line
basis over their expected useful lives, which is estimated to be
Amortization expense related to website development
costs and intangible assets, excluding amortization of debt issuance costs, was $
Based on the carrying value of definite-lived
intangible assets as of November 30, 2021, we estimate our amortization expense for the next
As of November 30, 2021 | Amortization Expense | |||
2022 | $ | |||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
$ |
Note 9 – Notes Payable
Note Purchase Agreements: Streeterville Capital, LLC
On November 23, 2020, the Company entered into
a Note Purchase Agreement (the “November 2020 Note Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”),
pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $
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The November 2020 Streeterville Note bore interest
at a rate of
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
(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 $ |
(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 “November 2020 Note Transaction Conditions”). |
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
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”), 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 $
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On March 22, 2021, we entered into a Note Purchase
Agreement dated March 23, 2021 (the “March 2021 Note Purchase Agreement”) with Streeterville, pursuant to which
the Company sold Streeterville a Secured Promissory Note in the original principal amount of $
The March 2021 Streeterville Note bears interest
at a rate of
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
The March 2021 Note Purchase Agreement required that we complete the purchase of the Reinhart (the “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 $
We made a required equity payment of $
We failed to timely meet the November 2020 Note
Transaction Conditions; however, on June 1, 2021, Streeterville agreed to defer
35
On June 22, 2021, the Company entered into an
Exchange Agreement with Streeterville, pursuant to which Streeterville exchanged $
On July 21, 2021, the Company entered into an
Exchange Agreement with Streeterville, whereby Streeterville exchanged $
On September 1, 2021,
On October 22, 2021, the Company entered into the Note Purchase Agreement (the “October 2021 Note Purchase 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 2021 Streeterville 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”). 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”), 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 “Streeterville Notes”).
If HotPlay has not become a co-borrower on the Streeterville Notes by the Deadline, the outstanding balance on the October 2021 Streeterville
Note automatically increases by an amount equal to
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
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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
On November 3, 2021, the Company closed a registered
direct offering of its securities, resulting in gross proceeds to the Company of approximately $
On November 4, 2021, the Company completely paid
off the November 2020 Streeterville Note in the amount of $
HotPlay Convertible Notes
On September 1, 2020,
On March 16, 2021, March 19, 2021, and April 15, 2021, HotPlay loaned the Company $9 million, $1 million and $2 million, respectively. The loans were made pursuant to 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, in the amount of $9,000,000, $1,000,000, and $2,000,000, respectively. With the April 15, 2021 loan, HotPlay had loaned the Company all $15 million of the funds required to be funded pursuant to the terms of the HotPlay Exchange Agreement.
The advances, and the entry into the HotPlay Convertible Notes, were required conditions to the HotPlay Exchange Agreement.
The HotPlay Notes were automatically forgiven by HotPlay as inter-company loans upon the closing of the HotPlay Exchange Agreement, which occurred on June 30, 2021.
Hudson Bay’s Warrant Exchange Agreement
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
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On October 22, 2021, the Company paid the first
installment of $
Note 10 – Stockholders’ Equity
Preferred Stock
The aggregate number of shares of preferred stock
that the Company is authorized to issue is up to One Hundred Million (
Series A Preferred Stock
The Company has authorized and designated
Dividends in arrears on the previously outstanding
Series A Preferred Stock shares totaled $
The Company had
Series B Preferred Stock
The Company has authorized and designated
As of November 30, 2021 and February 28, 2021,
the Company had
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Series C Preferred Stock
The Company has authorized and designated
As of November 30, 2021 and February 28, 2021,
the Company had
Series D Preferred Stock
On July 21, 2021, the Company designated Series
D Convertible Preferred Stock (“Series D Preferred Stock”), by filing a Certificate of Designation of such Series D
Preferred Stock with the Secretary of State of Nevada (the “Series D Designation”). The Series D Designation, which
was approved by the board of directors of the Company on July 15, 2021, designated
The Company had
Common Stock
The Company issued the initial payment of $
On November 1, 2021,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors
(the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Offering”),
an aggregate of
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 $
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During the three months ended November 30, 2021, the following shares of common stock were issued:
- | 18,987,342 shares issued for public offering valued at $30,000,000. |
- | 5,070,000 shares for investment in subsidiaries valued at $10,140,000 pursuant to the Preferred Exchange Agreement (Note 4 – Acquisitions and Dispositions) which was considered as subsidiary’s ownership interest in Parent (Reciprocal Interest) in accordance with ASC 810, the Company reflected such transaction and have been eliminated in the consolidated financial reporting. |
- | 491,062 shares of common stock for employee compensation valued at $1,045,101. |
- | 75,000 shares for consulting services rendered valued at $149,251. |
The Company had
Common Stock Warrants
The following table sets forth common stock purchase warrants outstanding as of November 30, 2021, and February 28, 2021, and changes in such warrants outstanding for the quarter ending November 30, 2021:
Warrant | Weighted Average Exercise | |||||||
Outstanding, June 30, 2021 | $ | |||||||
Warrants granted | $ | |||||||
Warrants exercised/forfeited/expired | ( | ) | $ | ( | ) | |||
Outstanding, November 30, 2021 | $ | |||||||
Common stock issuable upon exercise of warrants | $ |
Warrants outstanding at February 28,2021 were of Monaker, however as HotPlay merged and became NextPlay, such warrants are presented in comparison as part of NextPlay.
At June 30, 2021, there were warrants outstanding
to purchase
At November 30, 2021, there were warrants outstanding
to purchase
During the quarter ended November 30, 2021, the Company granted:
● | warrants to purchase |
As discussed above, on
November 1, 2021, the Company issued Warrants to purchase an aggregate of
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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 $
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 $
Note 11 – Commitments and Contingencies
The rent for the nine months ended November 30,
2021 and November 30, 2020 was $
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 | |||||||||||
FYE 2022 | FYE 2023 | Totals | ||||||||||
Office Leases | $ | $ | $ | |||||||||
Car Leases | $ | $ | $ | |||||||||
Insurance and Other | $ | $ | $ | |||||||||
Totals | $ | $ | $ |
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 not 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” and the “IP Purchase 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”). In consideration for the purchase, the Company
issued IDS 1,968,000 restricted shares of Company common stock (the “IDS Shares”) valued at $
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On April 27, 2020, the Company filed a verified
complaint for injunctive relief against IDS and TD Assets Holding, LLC (“TD 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
On April 29, 2020, the Company filed a Verified Motion for Temporary Injunction (the “Injunction Motion”). Defendants IDS, TD Assets, and Ari Daniels filed an answer, affirmative defenses, and counterclaims (the “Answer and 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,
Pursuant to the IP Purchase Amendment, on May
19, 2021, the Company made the initial payment of $
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) | $ |
(iii) | $ |
(iv) | NextPlay/(formerly Monaker) was awarded its fees and costs associated with the filing of the Motion. |
As of November 30, 2021, IDS still has not provided any of the necessary documents in order make the stock transfers.
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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 $
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
The Company alleges debts that the defendants
refuse to pay totaling USD $
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 reduce the total claimed to reflect the difference between what is owed and what the Company is claiming (to avoid double-claiming).
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Note 12 – Business Segment Reporting
Accounting Standards Codification 280-10 “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 Company has three 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. 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.
Schedule of segments
For the nine months ended November 30, 2021 | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of Revenue | $ | $ | $ | $ | ||||||||||||
Gross Profit | $ | $ | $ | $ |
For the three months ended November 30, 2021 | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
Sales | $ | $ | $ | $ | ||||||||||||
Cost of Revenu | $ | $ | $ | $ | ||||||||||||
Gross Profit | $ | $ | $ | $ |
For the nine months ended November 30, 2020* | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of Revenue | ||||||||||||||||
Gross Profit | $ | $ | $ | $ |
For the three months ended November 30, 2020* | NextMedia | NextFinTech | NextTrip | Total | ||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of Revenue | ||||||||||||||||
Gross Profit | $ | $ | $ | $ |
* | Due to the reverse acquisition with HotPlay, the year-ago results incorporated only HotPlay's financials. |
There were no reconciling or inter-company items between segments.
Schedule of geographic information
Revenue | For nine months ended November 30, 2021 | For three months ended November 30, | ||||||
United States and Puerto Rico | $ | $ | ||||||
Europe | ||||||||
Thailand | ||||||||
$ | $ |
Long-lived Assets | November 30, 2021 | February 28, 2021 | ||||||
United States and Puerto Rico | $ | $ | ||||||
Europe | ||||||||
Thailand | ||||||||
$ | $ |
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Note 13 – Subsequent Events
Election of a Director
On December 9, 2021, the Company’s board of directors appointed Edward Terrence Gardner, Jr. as an independent director of the Company. Mr. Gardner 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. Gardner and any other person pursuant to which Mr. Gardner 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. Gardner in connection with his appointment to the Board, nor are there any grants 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.
Appointment of Principal Executive Officer
On January 3, 2022, Nithinan “Jess” Boonyawattanapisut, Co-Chief Executive Officer the Company, assumed the role of the Company’s Principal Executive Officer (“PEO”), thereby replacing William Kerby, 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 Officers of the Company and members of the Company’s Board of Directors.
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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”), 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, filed with the Securities and Exchange Commission on June 8, 2021.
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,” “we,” “us,” “our,” and “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. The SEC maintains a website (https://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.
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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”) 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 three and nine months ended November 30, 2021 and 2020. | |
● | 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
NextPlay Technologies, Inc. and 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”), Artificial Intelligence (“AI”) and financial technology (“FinTech”) solutions to leverage the strengths and channels of its existing and acquired technologies.
NextPlay is organized into three divisions: (i) NextMedia, the Company’s Interactive Digital Media Division; (ii) NextFinTech, the Company’s Finance and Technology Division; and (iii) NextTrip, the Company’s Travel Division.
NextMedia Division
HotPlay
HotPlay Enterprise Limited (“HotPlay”), which is wholly-owned by NextPlay, is an in-game advertising (“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”). 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.
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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”), which in turn owns 75% of Longroot Limited, a Cayman Islands company (“Longroot 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”), 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”) 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”). 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”) (previously International Financial Enterprise Bank), which is wholly-owned by NextPlay, is an International Financial Entity (“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”), 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 Division
NextTrip
NextTrip (currently operated through NextPlay) offers booking solutions for both business 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 companies 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.
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 as 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 needs of the Company’s distribution partners.
Travel Magazine
Travel Magazine is an online digital media company whose goal is to inspire travelers to explore the world. Travel Magazine publishes articles, videos, and interactive media highlighting travel destinations throughout the world. Through its interactive media platform, leveraging NextPlay Technology solutions, Travel Magazine also plans to offer non-fungible tokens (“NFTs”).
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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 Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April, many U.S. states and local jurisdictions began issuing ‘stay-at-home’ orders. For example, the state of Florida, where the Company’s principal business operations are, issued a ‘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.
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 having 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
For the Three months Ended November 30, 2021 Compared to three months Ended November 30, 2020
Revenues
Our total revenues increased to $4,199,100 for the three months ended November 30, 2021, as compared to $0 for the three months ended November 30, 2020, an increase of $4,199,100 from the prior period. 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 $420,522 from the loan portfolio growth and increase in bank 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.
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Cost of Revenues
Our total cost of revenues increased to $1,952,932 for the three months ended November 30, 2021, compared to $0 for the three months ended November 30, 2020. Our gross profit was $2,246,168 for the three months ended November 30, 2021, compared to $0 for the three 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, salaries and benefits, technology and development, stock-based compensation, selling and promotion and depreciation and amortization. Our operating expenses increased to $11,121,312 for the three months ended November 30, 2021, as compared to the $462,455 for the three months ended November 30, 2020.
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.
(ii) a $2,822,223 increase in salaries and benefits;
(iii) a $1,824,523 increase in depreciation and amortization;
(iv) a $440,142 increase in selling and promoting expenses;
(v) a $344,775 increase in technology and development expenses; and
(vi) a $665,202 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 $800,991 for the three months ended November 30, 2021, compared to other income of $41,617 for the three months ended November 30, 2020, a change of $842,678 from the prior period. The increase is mainly attributable to the valuation loss, net 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.
Non-Controlling Interest
We had an increase in non-controlling interest of $564,842 for the three months ended November 30, 2021, compared to a decrease in non-controlling interest of $99,881 for the three months ended November 30, 2020, mainly a result from recording Longroot’s fair value of assets and liabilities which affected goodwill and non-controlling interest and loss allocation for the period.
Net Loss
We had a net loss attributable to the Company of $9,059,632 for the three months ended November 30, 2021, 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.
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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 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 related to the acquisition 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 related 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.
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Non-Controlling Interest
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 loss 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.
Net Loss
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, we had $20,472,178 of cash on-hand which was an increase of $20,027,258 from $444,920 on February 28, 2021. The increase in 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 in investing activities, offset by cash used for operating activities of $12,574,379.
As of November 30, 2021, the Company had total current liabilities of $26,375,283, 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.
As of November 30, 2021, we had approximately $121.0 million in total assets, $31.0 million in total liabilities, working capital of $24.0 million and a total accumulated deficit of $19.5 million.
Cash used in operating activities was $12,574,379 for the nine months ended November 30, 2021, compared to $656,407 of cash used in operating activities during the nine months ended November 30, 2020. The increase was mainly due to an increase unbilled receivable of $4,369,424, 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.
Net cash provided by investing activities was $11,572,737 for the quarter ended November 30, 2021, as 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 $21,974,124 for the nine months ended November 30, 2021, compared to net cash provided by financing activities of $5,304,194 for the nine months ended November 30, 2020. The increase was primarily due to proceeds from sale of stock in the amount of $27,850,000, which were offset mainly by the payment on promissory notes in the amount of $8,199,576.
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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 – Subsequent Events”.
We have limited financial resources. We currently have a monthly cash requirement of 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.
We will need additional capital 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, will negatively impact 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, our capital requirements may increase in the near term and long-term due to the impact of the COVID-19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
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, which was filed with the SEC on June 8, 2021, are those that depend most heavily on these judgments and estimates. As of November 30, 2021, 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”.
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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, 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, 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.
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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 1. Legal 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”. The Company believes that the resolution of currently pending matters will not 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, filed with the SEC on June 8, 2021, 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, 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”). 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:
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, the Company had an accumulated deficit of $19,469,705. Net loss for the nine months ended November 30, 2021, amounted to $19,656,972. 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 for the nine months ended November 30, 2021, and as of November 30, 2021, we had working capital of $23,956,326. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
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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. 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, 2021 and February 28, 2021, we had $26,375,283 and $1,446,446, respectively, of current liabilities.
We have derived our funding of operations 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.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Sales of Securities
There have been no sales of unregistered securities during the three months ended November 30, 2021, and from the period from December 1, 2021, 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.
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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. |
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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 13, 2022 | /s/ Nithinan “Jess” Boonyawattanapisut |
Nithinan “Jess” Boonyawattanapisut | |
Co-Chief Executive Officer | |
(Principal Executive Officer) |
Date: January 13, 2022 | /s/ Sirapop “Kent” Taepakdee |
Sirapop ‘Kent’ Taepakdee | |
Chief Financial Officer | |
(Principal Accounting/Financial Officer) |
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