Last10K.com

Nextplay Technologies Inc. (NXTP) SEC Filing 10-K Annual Report for the fiscal year ending Monday, February 28, 2022

SEC Filings

NXTP Annual Reports

  • 10-K Annual Report June 2022

Nextplay Technologies Inc.

CIK: 1372183 Ticker: NXTP

Exhibit 99.1

 

 

 

 

NextPlay Technologies Reports Fiscal Q3 2022 Record Revenue of $4.2 Million, up 59% Sequentially; Gross Margin Increases to 53.5%

 

SUNRISE, FL – January 13, 2022 – NextPlay Technologies, Inc. (NASDAQ: NXTP), a digital business ecosystem for digital advertisers, consumers, video gamers and travelers, reported results for the third quarter of fiscal 2022 ended November 30, 2021.

 

Fiscal Q3 Financial Highlights

Achieved record quarterly revenue of $4.2 million, +59% from the previous quarter. This compares very favorably to $0 revenue in the same period last year.
Gross profit totaled $2.2 million, with consolidated gross margin improving to 53.5% from 51.9% in the previous quarter.
Assets totaled $121.0 million.
Cash, cash equivalents and restricted cash totaled $21.4 million, up from $8.9 million at the end of the previous quarter as the result of an equity offering completed during the quarter.

Fiscal Q3 Operational Highlights

Received conditional approvals for insurance and reinsurance licenses. The licensing enables NextPlay’s NextShield LTD business unit to establish digital primary insurance and reinsurance operations and to offer blockchain-delivered products like parametric comprehensive travel insurance and bank deposit insurance.
Launched NextPlay X Soma Labs, an innovation and design platform bringing together non-fungible tokens (NFTs), social games, and Metaverse virtual worlds for major brands, creators, and agencies. 
Announced the MedTrek Fund, a blockchain securitized closed-end fund focused on building medical facilities designed to lower the likelihood of infection for four medical asset classes including primary care, tertiary care, long term care and resort convalescent facilities.
Appointed Jorge E. Miro Hernandez as president and COO of NextBank International and Carla P. Mendez as chief administrative officer.

Management Commentary

“The increase in our third quarter revenues and significant gross margin expansion demonstrate that we’ve arrived at a major inflection point in our growth and development strategy as we gradually and successfully integrate several components of recent synergistic acquisitions to transform our business,” commented NextPlay co-CEO, Nithinan ‘Jessie’ Boonyawattanapisut. “This was the first full quarter that showed 100% contribution from these acquisitions, and we believe that it represents the foundation for further growth and expansion. We are now focused on actualizing operational and sales efficiencies by deepening operations integration, and by cross-selling new products across divisions.”

 

“During the quarter, our digital interactive media division, NextMedia, delivered Blockbuster 2048, its first in-house casual game, out of the 16 games currently in the pipeline that are scheduled to be released during fiscal Q4 2022 and Q1 2023, to iOS and Android app stores. In conjunction, we have now released HotPlay 2.0, our next-generation in-game advertising platform to our internal teams. It will deliver advertisements and real-world rewards into video games without disrupting gameplay, offering new revenue streams to publishers and advertisers alike. With the continued development of the HotPlay platform and integration of the MakeItGames AI animation platform we anticipate the platform will introduce disruptive and game-changing capabilities to game, virtual reality, metaverse and other immersive experiences as we begin to release HotPlay 2.0 to select partners during the first half of this calendar year and beyond. We also worked on the deeper integration of HotPlay into other parts of our ecosystem to enable digital advertisers and brands to use HotPlay to reach a vast global consumer base.

“Our Fintech division comprises our insurance, reinsurance, online banking and crypto portal operations. Led by successful insurance and banking industry executives, the Fintech division is bringing a diversified set of fintech solutions to market that will offer asset banking, asset management, mobile payment, and a range of retail banking services to customers around the world. NextBank welcomes blockchain industry participants and is focused on providing enabling capabilities to clients in the DeFi, NFT and exchange verticals. We expect NextBank to provide significant contributions to earnings and to cash flow beginning in fiscal Q1 2023. Our Longroot crypto portal is in active negotiations with a number of prospective clients (issuers) who target issuances by fiscal Q2 and Q3 2023. We also plan to issue our own digital insurance tokens, which allow customers to purchase any of our insurance products, as well as a series of stable coins to facilitate remittance services that NextBank will provide. We see considerable synergies between NextBank’s services and our Longroot crypto portal services to meet the financial and operational needs of blockchain centric companies, providing a range of services to blockchain industry participants.”

In fiscal Q3, our fintech division received conditional approval of its general insurance and reinsurance licenses application from the Labuan Financial Services Authority (Labuan FSA). The licensing advances our mission of pushing the boundaries of insurance and reinsurance innovation with a product portfolio that will be unique to the industry, and it keeps us on track to launch our first two blockchained insurance products in fiscal Q2 and Q3 2023.”

“Our travel division is in the process of integrating NextPlay’s NextTrip ConNextions booking engine with a number of online travel agencies (OTAs). Several are already in the certification process, which is the final step before OTAs gain access to our travel inventory via their platforms. Our global inventory of vacation rental properties provides many new lodging options to OTAs around the world. We anticipate these integrations to help increase our booking volumes as the resurgence in the travel and tourism sector continues following the pandemic related lockdowns.”

“The major equity offering we completed in the quarter fortified our balance sheet and supported our many growth initiatives. We have launched an expense reduction program to eliminate redundant systems and processes due to the acquisitions. Certain one-time expenses related to post-merger activities incurred during this quarter are not anticipated to recur in the future. For these reasons, we anticipate a significant reduction in SG&A expenses and progression to positive cash flow by the end of the second half of fiscal 2023.

 

“We have scheduled a special shareholder meeting on January 28, 2022, and we encourage all shareholders to submit their votes. We are seeking shareholder approval to complete our previously announced acquisition of certain game-industry intellectual property from Fighter Base Publishing Inc. and certain distributed ledger intellectual property from Token IQ Inc. Both entities are majority-owned by NextPlay’s Chief Technology Officer, Mark Vange, who is a visionary leader in both industries.

 

“We expect the addition of Token IQ’s technology to become the core to our products and services, from our Longroot asset-based cryptocurrencies, our digital insurance tokens and HotPlay in-game tokens, to future NextBank fintech services and NextTrip medical tourism offerings. Token IQ also brings valuable technology and software development talent to support the technology integration between our platforms and our partners, as well as further our IP development. We believe Fighter Base Publishing’s AI driven animation technology will bring unique capabilities to our HotPlay platform and significant cost reduction to our game studio operations.

 

As we complete our final quarter of fiscal 2022 ending in February, we expect to be exceptionally well-positioned for growth across all three divisions: interactive digital media, fintech and travel. We see near-term revenue growth and margin expansion being further fueled by new HotPlay deployments and Longroot cryptocurrency offerings, and we believe that these developments will steadily advance us toward strong cash flow and profitability.”

Fiscal Q3 2022 Financial Summary

Revenue for the third quarter of fiscal 2022 totaled $4.2 million, an increase of 59% from $2.6 million in the previous quarter and compares very favorably to no revenue in the same year-ago quarter. The increase was primarily the result of the company’s acquisition of Reinhart TV/Zappware completed on June 23, 2021, and NextBank (formerly International Financial Enterprise Bank) completed on July 21, 2021.

NextMedia, the company’s digital interactive media division, contributed revenue of $3.7 million driven by organic growth of digital media globally. The company’s NextFinTech division contributed revenue of $0.4 million, and the NextTrip travel division contributed revenue of $0.1 million.

Consolidated gross profit totaled $2.2 million or 53.5% of revenue, as compared to none in the same period a year-ago. The margin improvement was due to high margin products in digital media and financial services from recent acquisitions.

Operating expenses totaled $11.1 million, compared to $0.46 million in the same year-ago period. The increase was primarily due to the consolidation of expenses from business combinations of HotPlay, Reinhart TV/Zappware, and NextBank, as well as one-time post-merger related expenses.

Net loss attributable to the Company was $9.06 million or $(0.1) per basic and diluted share, as compared to a net loss of $0.5 million or $(5.09) per basic and diluted share in the same year-ago period which only represented HotPlay’s financials per accounting standard.

Cash and cash equivalents as of November 30, 2021, totaled $20.5 million, compared to $8.9 million as of August 31, 2021. The increase was due to an equity offering completed during the quarter.

The Company’s quarterly report for the quarter ended November 30, 2021, and other reports the company files with the SEC, including reports on Forms 10-Q, 10-K and 8-K, can be accessed at sec.gov and on NextPlay’s website in the IR section.

 

 

 

About NextPlay Technologies

NextPlay Technologies, Inc. (Nasdaq: NXTP) is a technology solutions company offering games, in-game advertising, crypto-banking, connected TV and travel booking services to consumers and corporations within a growing worldwide digital ecosystem. NextPlay’s engaging products and services utilize innovative AdTech, Artificial Intelligence and Fintech solutions to leverage the strengths and channels of its existing and acquired technologies. For more information about NextPlay Technologies, visit www.nextplaytechnologies.com and follow us on Twitter @NextPlayTech and LinkedIn.

 

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of, and within the safe harbor provided by the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations, opinions, belief or forecasts of future events and performance. A statement identified by the use of forward-looking words including “will,” “may,” “expects,” “projects,” “anticipates,” “plans,” “believes,” “estimate,” “should,” and certain of the other foregoing statements may be deemed forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, these statements involve risks and uncertainties that may cause actual future activities and results to be materially different from those suggested or described in this news release. Factors that may cause such a difference include risks and uncertainties including, and not limited to, our need for 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; the fact that the COVID-19 pandemic has had, and is expected to continue to have, a significant material adverse impact on the travel industry and our business, operating results and liquidity; amounts owed to us by third parties which may not be paid timely, if at all; certain amounts we owe under outstanding indebtedness which are secured by substantially all of our assets and penalties we may incur in connection therewith; the fact that we have significant indebtedness, which could adversely affect our business and financial condition; our revenues and results of operations being subject to the ability of our distributors and partners to integrate our alternative lodging rental (ALR) properties with their websites, and the timing of such integrations; uncertainty and illiquidity in credit and capital markets which may impair our ability to obtain credit and financing on acceptable terms and may adversely affect the financial strength of our business partners; the officers and directors of the Company have the ability to exercise significant influence over the Company; stockholders may be diluted significantly through our efforts to obtain financing, satisfy obligations and complete acquisitions through the issuance of additional shares of our common or preferred stock; if we are unable to adapt to changes in technology, our business could be harmed; our travel business depends substantially on property owners and managers renewing their listings; if we do not adequately protect our intellectual property, our ability to compete could be impaired; our long-term success depends, in part, on our ability to expand our property owner, manager and traveler bases outside of the United States and, as a result, our business is susceptible to risks associated with international operations; unfavorable changes in, or interpretations of, government regulations or taxation of the evolving ALR, Internet and e-commerce industries which could harm our operating results; risks associated with the operations of, the business of, and the regulation of, Longroot and NextBank International (formerly IFEB); the market in which we participate being highly competitive, and because of that we may be unable to compete successfully with our current or future competitors; our potential inability to adapt to changes in technology, which could harm our business; the volatility of our stock price; the fact that 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; and that we have incurred significant losses to date and require additional capital which may not be available on commercially acceptable terms, if at all. More information about the risks and uncertainties faced by NextPlay are detailed from time to time in NextPlay’s periodic reports filed with the SEC, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, under the headings “Risk Factors”. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on the Company’s future results and/or could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from those projected. The forward-looking statements in this press release are made only as of the date hereof. The Company takes no obligation to update or correct its own forward-looking statements, except as required by law, or those prepared by third parties that are not paid for by the Company. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

 

SOURCE: NextPlay Technologies, Inc.

 

Company Contacts:

Richard Marshall

Director of Corporate Development

NextPlay Technologies, Inc.

Tel (954) 888-9779

Email: richard.marshall@nextplaytechnologies.com

 

 


The following information was filed by Nextplay Technologies Inc. (NXTP) on Thursday, January 13, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark one)

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: February 28, 2022

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                     

 

Commission File Number 001-38402

 

(Exact name of registrant as specified in its charter)

 

Nevada   26-3509845
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Incorporation No.)

 

1560 Sawgrass Corporate Parkway
Suite 130

Sunrise, Florida

  33323
(Address of principal executive offices)   (Zip Code)

 

(954) 888-9779

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.00001 Par Value Per Share   NXTP   The NASDAQ Stock Market LLC
(Nasdaq Capital Market)

 

Securities registered under Section 12(g) of the Exchange Act: None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller reporting company
Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on August 31, 2021, based on a closing sales price of $2.00 on such date, was approximately $55 million. For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 5% or greater stockholders. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 5% or greater stockholders are, in fact, affiliates of our company, or that there are no other persons who may be deemed to be affiliates of our company.

 

As of June 17, 2022, the registrant had 117,436,081 shares of its common stock, par value $0.00001 per share, outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

NEXTPLAY TECHNOLOGIES, INC.,

formerly MONAKER GROUP, INC.

FORM 10-K

FOR THE YEAR ENDED FEBRUARY 28, 2022

 

TABLE OF CONTENTS

 

  Page No.:
   
Cautionary Note Regarding Forward-Looking Statements ii
Where You Can Find Other Information v
     
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 25
Item 1B. Unresolved Staff Comments 48
Item 2. Properties 48
Item 3. Legal Proceedings 48
Item 4. Mine Safety Disclosures 48
     
PART II 49
     
Item 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities 49
Item 6. [Reserved] 50
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55
Item 8. Financial Statements and Supplementary Data F-1
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 56
Item 9A. Controls and Procedures 56
Item 9B. Other Information 56
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 56
     
  PART III 57
     
Item 10. Directors, Executive Officers and Corporate Governance 57
Item 11. Executive Compensation 69
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 77
Item 13. Certain Relationships and Related Transactions, and Director Independence 80
Item 14. Principal Accountant Fees and Services 83
     
  PART IV 84
     
Item 15. Exhibits, Financial Statement Schedules 84
Item 16. Form 10-K Summary 91

 

Definitions

 

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “NextPlay” in this Report refer specifically to NextPlay Technologies, Inc. and its consolidated subsidiaries.

 

In addition, unless the context otherwise requires and for the purposes of this Annual Report on Form 10-K 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;

 

Securities Act” refers to the Securities Act of 1933, as amended; and

 

FYE” means fiscal year end.

 

i

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Discussions in this Annual Report on Form 10-K (this “Report”), including, without limitation, those under the captions “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, or management strategies) based on our management’s current beliefs and assumptions. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. These factors include those set forth below under “Summary Risk Factors” and those disclosed under “Risk Factors,” below.

 

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. You should read the matters described in “Risk Factors” and the other cautionary statements made in this Report, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

 

Risk Factors Summary

 

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found in Item 1A., “Risk Factors,” of this Annual Report and should be carefully considered, together with other information included in this Report.

 

  We will need to raise additional funding to support our operations, which funding may not be available on favorable terms, if at all;
     
  We have a limited operating history in certain of the industries that we currently operate in and have incurred significant operating losses since inception. We may never become profitable or, if achieved, be able to sustain profitability;
     
  We have significant indebtedness, which could adversely affect our business and financial condition;
     
  We owe significant amounts to Streeterville Capital, LLC, which is secured by a security interest over substantially all of our assets, and we are subject to requirements, penalties and damages under its agreements with Streeterville;
     
  Our long-term success depends, in part, on our ability to continue to expand our operations outside of the United States and, as a result, our business is susceptible to risks associated with international operations;
     
  Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements;
     
  The industries in which we participate are highly competitive;
     
  Our failure to be current in our filings with the SEC could pose significant risks to our business, which could, individually or in the aggregate, materially and adversely affect our financial condition and results of operations.
     
  Our common stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements;

 

ii

 

 

  If we do not successfully implement our acquisition strategies, the businesses and/or assets that we have acquired or invested in do not perform as expected, or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed;
     
  Some members of our senior management team have limited experience in the day-to-day operations of the industries in which our businesses operate;
     
  Our future success depends on the continuing efforts of our key employees and our ability to attract, hire, retain and motivate highly skilled employees in the future; 
     
  We rely on relationships with developers to provide an extensive game portfolio and sufficient advertising spaces;
     
  Our 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 our business;
     
  Our business partners may be unable to honor their obligations to us, or their actions may put us at risk;
     
  We derive a significant portion of our revenues from advertisements, and if any events occur that negatively impact our relationships with advertisers, our advertising revenues and operating results would be negatively impacted;
     
  HotPlay’s go to market strategy and corresponding timeline is dependent on being able to successfully recruit substantial additional resources within Q2 of FY23. Failure to do this could result in the revenues generated from HotPlay being delayed beyond FY23;
     
  Zappware’s revenue forecast has a dependency on the availability of dedicated encoding hardware underpinning their TVaaS business. Given the ongoing worldwide microchip shortage due to COVID-19, the availability of such hardware could be delayed, which would in turn impact the revenues apportioned to Zappware within our media division;
     
  Although Longroot is a licensed ICO Portal in Thailand, it has not yet closed any offerings, and there can be no assurances that it will;
     
  Longroot operations are subject to risks associated with digital asset exchanges being a new industry, regulatory changes and/or restrictions, potential illegal uses of digital assets, cyber security risks, and reliance on open source blockchain technologies;
     
  Our ability to generate revenue through the sale of digital assets is subject to risk associated with economic and market conditions, the acceptance and widespread use of digital assets, and investor confidence levels;
     
  The performance of the digital assets issued is dependent on the performance of the issuer and underlying asset which is unpredictable and may result in reputation damage should they underperform;
     
  There are cyber security risks related to digital asset trading;
     
  We depend on third party cryptographic and algorithmic protocols governing the issuance of and transactions in digital assets;
     
  Our tokens might be used for illegal or improper purposes, which could expose us to additional liability and harm our business;
     
  Developing NextBank into a comprehensive FinTech solution provider involves a high level of complexity, may require substantial resources and costs, and is subject to obtaining regulatory approval;
     
  The NextBank mobile application development has, to date, been partially developed by Ukrainian developers, which has been impacted by the ongoing conflict between Ukraine and Russia;
     
  NextBank’s ability to originate loans is subject to risk associated with economic and market conditions;
     
  NextBank uses correspondent banks and is subject to risk associated with termination of such relationships, which may negatively impact its operations;

 

iii

 

 

  Our success is subject to the development of new or upgraded products, services and features over time;
     
  If we are not able to maintain and enhance our NextTrip brand and the brands associated with our websites, our reputation and business may suffer;
     
  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;
     
  Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, and consumer protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business;
     
  Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully respond to these regulations, our business could be negatively impacted;
     
  NextBank is subject to various regulatory capital requirements. Regulatory changes or actions may alter the requirement of the capital;
     
  NextBank faces a risk of non-compliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering, customer due diligence, and combating the financing of terrorism statutes and regulations;
     
  We are subject to anti-bribery, anti-corruption and similar laws, and non-compliance with such laws could subject us to criminal penalties or significant fines and harm our business and reputation;
     
  If we do not adequately protect our intellectual property, our ability to compete could be impaired;
     
  Certain of our products are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent us from enforcing or defending our proprietary technologies;
     
  We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate;
     
  Our ability to acquire and maintain licenses to intellectual property may affect our revenue and profitability;
     
  We use open-source software in connection with certain of our games and services, which may pose particular risks to our proprietary software, products, and services, and which could have a negative impact on our business;
     
  The price of our common stock may fluctuate significantly, and investors could lose all or part of their investments;
     
  Stockholders may be diluted significantly as a result of the issuance of additional shares of our common stock or securities convertible into, or exercisable for, shares of our common stock;
     
  The ownership of our capital stock is highly concentrated, which may prevent other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline;
     
  If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price;
     
  If securities analysts and other industry experts do not publish research or publish negative research about our business, our stock price and trading volume could decline;
     
  Provisions in our amended and restated articles of incorporation limit the liability of our management to stockholders;
     
  Certain of our outstanding warrants include anti-dilutive rights;
     
  Sales of a substantial number of our securities in the public market could cause our stock price to fall; and
     
  We have not paid dividends on shares of our common stock in the past and do not plan to do so in the future.

 

iv

 

 

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.

 

v

 

 

PART I

 

Item 1. Business.

 

Introduction

 

The information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplemental Data” of this Report.

 

Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes certain 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 the section entitled “Item 1A. Risk Factors” in 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.

 

Our fiscal year ends on February 28th (or 29th during leap years). Interim results are presented on a quarterly basis for the quarters ended May 31, August 31, and November 30th, the first quarter, second quarter and third quarter, respectively, with the quarter ending February 28th/29th being referenced herein as our fourth quarter. Fiscal 2022 means the year ended February 28, 2022, whereas fiscal 2021 means the year ended February 28, 2021.

 

Corporate, Organizational and Business Information

 

Executive Offices and Telephone Number

 

Our principal executive offices are located at 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323 and our telephone number is (954) 888-9779. Additional information about us is available on our website at https://www.nextplaytechnologies.com The information on our website is not incorporated herein by reference.

 

Organizational History

 

The Company was originally incorporated in the State of Nevada in on December 29, 2005 under the name Maximus Exploration Corporation (“Maximus”), and was a reporting “shell company” as defined in Rule 405 of the Securities Act.

 

On October 9, 2008, Maximus, a reporting shell company, entered into a Share Exchange Agreement (the “2008 Exchange Agreement”) with Extraordinary Vacation Group, Inc., a wholly-owned subsidiary of Maximus (“EXVG”), and EXVUSA, a wholly-owned subsidiary of EXVG. Pursuant to the 2008 Exchange Agreement, EXVG exchanged 100% of its shares in EVUSA for 13 million shares of common stock of Maximus, resulting in EXVG becoming the majority shareholder of Maximus through a reverse merger. EXVG then proceeded to dividend 13 million shares of Maximus common stock to the stockholders of EXVG, on a pro rata basis. As a result of these transactions, EVUSA became a wholly-owned subsidiary of Maximus. Maximus then amended its Certificate of Incorporation to change its name to Next 1 Interactive, Inc. (“Next 1”). After consummation of the transaction, Next 1 conducted all of its business through EVUSA, its wholly-owned subsidiary.

 

1

 

 

On June 22, 2015, the Company changed its name to Monaker Group, Inc. (“Monaker”).

 

On July 23, 2020, Monaker entered into a Share Exchange Agreement (as amended, the “2020 Exchange Agreement”) with HotPlay Enterprise Limited (“HotPlay”) and the shareholders of HotPlay, pursuant to which the HotPlay shareholders agreed to exchange 100% of the outstanding capital shares of HotPlay (making HotPlay a wholly-owned subsidiary of Monaker through a reverse merger following the closing of the transactions contemplated therein) for 52 million shares of Monaker’s common stock (the “HotPlay Shares”), subject to various closing conditions. The acquisition of HotPlay contemplated by the 2020 Share Exchange closed on June 30, 2021, at which time Monaker acquired 100% of the outstanding capital shares of HotPlay. The HotPlay acquisition was accounted for as a reverse acquisition, with HotPlay being deemed the acquiring company for accounting purposes. After consummation of the transaction, Monaker changed its name to NextPlay Technologies, Inc., and the Company altered its business plan to focus on the travel, cryptocurrency, and an in-game advertising industries.

 

On November 16, 2020, the Company acquired 100% of Longroot pursuant to a Stock Purchase Agreement (the “SPA”) entered into between the Company and Dr. Jason Morton (“Morton”) on November 2, 2020, and for certain limited purposes set forth therein, Longroot. Pursuant to the SPA, the Company purchased, 100% of Longroot, in consideration for (a) $1,650,000 in cash; (b) 200,000 shares of restricted common stock valued at $2.14 per share for a total value of $428,000, as well as 150,000 shares of restricted common stock valued at $3.00 per share, for a total value of $450,000.

 

On January 15, 2021, the Company entered into a Founding Investment and Subscription Agreement (the “Investment Agreement”) with Reinhart Interactive TV AG, a company organized in Switzerland (“Reinhart”), and Jan C. Reinhart, the founder of Reinhart (“Founder”), pursuant to which the Company agreed to pay the Founder 10,000,000 Swiss Francs (approximately $10.8 million U.S. Dollars) as compensation for the purchase of 51% of the ownership of Reinhart. The transaction closed on March 31, 2021, at which time Reinhart became a majority owned subsidiary of the Company.

 

On April 1, 2021, the Company entered into a Bill of Sale for Common Stock, effective March 22, 2021 (the “Bill of Sale”), with certain third parties (the “Initial Sellers”) pursuant to which the Company agreed to purchase 2,191,489 shares (the “Initial IFEB Shares”) of authorized and outstanding Class A Common Stock (the “Class A Stock”) of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico (“IFEB”), which Initial IFEB Shares total approximately 57.06% of the outstanding Class A Stock of IFEB. The purchase price of the Initial IFEB Shares was $6,400,000, which amount was paid to the Initial Sellers on April 1, 2021.

 

On May 6, 2021, in anticipation of the acquisition of the IFEB Shares, and control of IFEB, the Company and IFEB entered into a Preferred Stock Exchange Agreement, which was amended by a First Amendment to Preferred Stock Exchange Agreement entered into May 10, 2021 and effective May 6, 2021 (as amended by the first amendment, the “Original Preferred Exchange Agreement”), pursuant to which the Company agreed to exchange 1,950,000 shares of the Company’s common stock for 5,850 shares of cumulative, non-compounding, non-voting, non-convertible, perpetual Series A Preferred shares of IFEB. Notwithstanding the terms of the Bill of the Sale, and the payment by the Company of the aggregate purchase price pursuant thereto, the transfer of the Initial IFEB Shares to the Company and the Company’s acquisition of control of IFEB was subject to review of the Company’s financial viability, as well as other matters, by OCIF, which approval of OCIF was received in June 2021, but which acquisition did not close until July 21, 2021.

 

Separately, 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 1,648,614 of the outstanding Class A Common Stock of IFEB, representing 42.94% of such outstanding Class A Common Stock of IFEB, in consideration for an aggregate of 1,926,750 restricted shares of the Company’s common stock (the “IFEB Common Shares”), with each one share of Class A Common Stock of IFEB being exchanged for 1.168 restricted shares of common stock of the Company, based on an agreed upon value of $2.50 per share for each share of Company common stock and $2.92 per share for each share of Class A Common Stock of IFEB. As a result of the closing of both transactions, we acquired control of 100% of IFEB as of July 21, 2021. The name of IFEB was subsequently changed to NextBank International, Inc. (“NextBank”).

 

On March 30, 2022, the Company acquired certain assets from Go Game Pte Ltd. pursuant to an Asset Purchase Agreement, including a casual games tournament and gamification platform, a perpetual license to the goPay payment platform, and a range of casual game assets that can be leveraged to distribute the HotPlay In-Game Advertising platform and reward solutions throughout. As consideration for the purchase, the Company agreed to pay the seller $5,000,000, $2,750,000 of which has already been paid and the remainder of which is payable in monthly installments through March 31, 2023.

 

On May 5, 2022, the Company completed the acquisition of certain assets of Fighter Base Publishing, Inc. (“Fighter Base”) and Token IQ, Inc. (“Token IQ”), both of which entities are owned and controlled by Mark Vange, the Company’s Chief Technology Officer, pursuant to Intellectual Property Purchase Agreements executed in August 2021. Both of the acquisitions were contingent upon approval of the Company’s stockholders, which was obtained at the Special Meeting of Stockholders of the Company held on January 28, 2022, and certain other closing conditions. As consideration for the acquisitions, the Company issued 1,666,666 shares of Company common stock to Fighter Base and 1,250,000 shares of Company common stock to Token IQ.

 

2

 

 

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)Media Division, which consists of HotPlay and Reinhart/Zappware,

 

(ii)FinTech Division, which consists of Longroot and NextBank, and

 

(iii)

Travel Division, which includes NextTrip holdings and Extraordinary Vacations USA.

 

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 below, as well as Note 12 Business Segment Reporting, for additional details regarding each segment unit.

 

Overview

 

NextPlay Technologies, Inc. and its consolidated subsidiaries (collectively, “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 3 divisions: (i) NextMedia, the Company’s Interactive Digital Media Division (the “Media Division”); (ii) NextFinTech, the Company’s Finance and Technology (“FinTech”) Division; and (iii) NextTrip, the Company’s Travel Division.

 

Media Division

 

In the Media Division, NextPlay closed its acquisition of HotPlay and its In-Game Advertising (“IGA”) platform on June 30, 2021 and acquired a 51% interest in Reinhart on June 23, 2021. Reinhart owns 100 percent of Zappware, a 20-year-old interactive Digital TV solutions company based in Belgium. The acquisition of Reinhart gives NextPlay potential reach into tens of millions of households with its IGA, Video Game, FinTech, and Travel products.

 

Additionally, on March 30, 2022, NextPlay entered into an asset purchase agreement, pursuant to which it acquired certain assets of goPlay, a casual games tournament and gamification platform that also includes a perpetual license to the goPay payment platform, and a range of casual game assets that can be leveraged to distribute the HotPlay IGA and reward solutions throughout.

 

The Media Division provides multiple products and services focused on the In Game Advertising, In Game Rewards, Gamification, Competitive Gaming Tournaments and Connected TV Middleware solutions that collectively provide a feature rich gaming monetization platform that can be deployed at the Business-to-Business (“B2B”) or Business-to-Consumer (“B2C”) level by targeting game developers, game publishers and Telco operators.

 

In addition to the various monetization platform components briefly described above, the Media Division’s Game Studio develops a range of casual games that are integrated with the In Game Advertising (“IGA”), In Game Rewards and goPlay gamification platform to enable developers, publishers, operators and brands alike to engage with and monetize their audience via the various go to market channels available to them through our offering or their own channels.

 

3

 

 

These products and services are explained in more detail below.

 

The HotPlay In-Game Advertising and Rewards platform comprises multiple separate but related products that enable advertisements and rewards to be inserted in game, between game and post-game that allow brands to engage their audience in a relevant and inobtrusive fashion.

 

The In Game Advertising Software Developer Kits, available for games built on both the Unity game platform and JavaScript games, is a library that enables Developers to embed our technology within any Unity of JavaScript game that they are developing.

 

Once embedded, the flexible Developer Portal allows the Developer’s to easily configure, map and dynamically manage the In Game Advertising components to the respective “hostable” objects within the game.

 

The In Game Advertising Ad Portal allows advertisers and brands to deliver their campaigns and assign in game ads to the various “hostable” objects in the game within which the ads are to be deployed. These ads can either be traditional display ads, either with or without target links to click through, or digital coupon rewards that are automatically downloaded to the user’s digital wallet for redemption at some point in the future. The Ad Portal allows the advertisers to select their campaign target criteria in terms of demographic, region and impression or conversion targets and monitor the progress and generate campaign reports as the campaign plays out.

 

The HotPlay Redemption mobile application is a digital wallet that is used to collect the HotPlay IGA rewards issued throughout the game via the HotPlay IGA platform. These rewards can be purely digital, such as NFT based rewards, or digital to physical coupons that can be redeemed at competing stores and outlets participating in the campaigns.

 

The goPlay platform is both a gamification platform that encourages users to compete against each other via tournaments and challenges, plus a reward platform that rewards users for their continued loyalty and continuous game play by offering rewards for specific challenges and repeat visits to the platform. This provides brands with an opportunity to establish a longer, more dynamic, and continuous relationship with their consumers.

 

  In addition to the gamification platform, the goPlay assets purchased by the Companyalso include an e-payment solution and gateway to multiple payment providers that allow users to make in game purchases of either digital or physical goods. We intend to extend this e-payment solution in the future to support crypto-currency payments aligned with the vision and roadmap for our FinTech offerings and solutions.

 

The HotPlay Games Studio is a game development studio that develops a range of casual games that include the HotPlay IGA platform features by default. The studio provides us with an in-house capability to deploy our own range of casual games, plus the range of games available through the goPlay asset purchase agreement, providing a comprehensive portfolio of games that can be monetized by game publishers, operators and brands alike.

 

The “TV as a Service” (“TVaaS”) platform available to NextPlay through Zappware is a complete end-to-end solution that includes media source ingest (satellite, terrestrial and digital), encoding and transcoding, packaging, protection, delivery, playback and analytics that provide Telco Operators with a one-stop shop for their digital media processing and delivery capabilities.

 

In addition to the core digital media delivery platform, the TVaaS solution also provides a client side Set Top Box (“STB”) and SMART TV middleware platform, associated application framework and corresponding, supporting Content Management System, that allows Operators to white label their own solutions on top of the Zappware platform to promote their own content through their existing partners and channels.

 

4

 

 

FinTech Division

 

The FinTech Division is developing an integrated digital financial platform (the “NextFinTech Platform”) offering mobile banking, investments into alternative assets, and insurance, to businesses and individuals, subject to regulatory approval.

 

The Company completed the acquisition of International Financial Enterprise Bank in July 2021, and subsequently renamed it NextBank International, Inc. (“NextBank”). Prior to the acquisition, NextBank generated revenue through the origination and selling of real estate loans in the United States and continues to do so. NextBank typically receives an origination fee when issuing a loan and maintains a spread on the interest after the loans are sold. Currently, the Company is digitizing the bank and is configuring NextBank to grow with the rapid expansion of the digital asset industry, developing products and services that appeal to companies that are venturing into that industry. NextBank recently launched the first release of its mobile application in April 2022 and is migrating to DataPro’s core banking system to widen its capabilities and reach its scalability goals.

 

The Company, in accordance with Thailand’s foreign ownership laws, holds an indirect control of Longroot (Thailand) Company Limited (“Longroot”). Longroot is approved and regulated by the Thai Securities and Exchange Commission (“Thai SEC”) to operate as an Initial Coin Offering Portal (“ICO Portal”). The ICO Portal enables Longroot to crypto-securitize assets and conduct issuances of such assets. Through the ICO Portal, Longroot provides financial advisory and token structuring services, and assists projects with regulatory approval and fundraising through sale of tokens. Longroot plans to crypto-securitize an array of high-quality alternative assets, such as video games and insurance. Management believes that these assets will create significant opportunities to accelerate the products and services within the FinTech division’s asset management business and plans to offer users the opportunity to invest in such assets via the NextFinTech Platform.

 

Effective November 16, 2021, the Labuan Financial Services Authority (the “Labuan FSA”)approved the Company’s application to carry on general insurance and reinsurance business, subject to certain conditions including (i) payment of a $15,000 annual license fee, (ii) submission of evidence reflecting paid up capital amounting to MYR $10.0 mil (approximately to $2,390,000 US), (iii) submission of proof of registration as a member of Labuan International Insurance Association, and (iv) submission of a Management Services Agreement with the appointed insurance manager, (v) submission of a Letter of Undertaking, and (vi) submission of constituent documents to the Registration of Company Unit. The conditions are to be met within 3 months of November 29, 2021, the date Labuan FSA issued a letter confirming the conditional approval. In May 2022, the Company received a permission letter from Labuan FSA to extend the establishment until August 31, 2022. The Company plans to use the general insurance license to issue primary insurance products and the reinsurance license to issue crypto-securitized insurance in collaboration with Longroot.

 

On October 14, 2021, “Longroot Inc.” (a subsidiary of the Company) changed its name to “Next Fintech Holdings, Inc.” The Company plans to use Next Fintech Holdings, Inc. as the holding company for the FinTech division.

 

5

 

 

Travel Division

 

Our Travel Division currently offers booking solutions for both business and leisure. We provide travel technology solutions with a primary emphasis on alternative lodging rental (“ALR”) properties. Our proprietary Booking Engine, branded as NextTrip ConNextions, provides travel distributors access to a sizeable inventory of ALR properties allowing them to combine ALR with traditional components of travel (air, car, cruise, etc.).

 

Our industry-leading platform assists property managers in booking, and broadening the market for, their homes. Our Travel Division serves three major constituents: (1) property managers, (2) travelers, and (3) other travel/lodging distributors. Property managers integrate their detailed property listings into the Company’s Booking Engine with the goal of reaching a broad audience of travelers seeking ALRs, through distribution channels they could not access otherwise.

 

All of the Company’s ALRs, also commonly referred to as Vacation Rentals are:

 

(i)Controlled by Property Management Companies. This is a key point of differentiation for the Company, as the sole focus of Property Management Companies is to rent and service their properties, unlike an individual homeowner who often rents out their property on a casual or part-time basis. We believe working with property managers results in four key benefits:

 

  All properties are Instantly Bookable (all Property Management Company inventory is integrated into the Company’s Booking Engine allowing for instant confirmations);
     
  Higher levels of service for renters (property managers are full-time operators);
     
  Higher Quality Assurance (property managers generally have an incentive to eliminate trouble properties); and
     
  Certified Rentable (most property managers are licensed and bonded requiring them to ensure properties are “legal to rent” and are further responsible for paying required taxes on behalf of homeowners.

 

(ii)Exclusively Individual Units. Our vacation homes and residential resort units are never shared, nor do we rent rooms in homes like other ALR companies. All ALR inventory is fully furnished, privately owned residential properties, including homes, condominiums, apartments, villas and cabins that property managers rent to the public on a nightly, weekly or monthly basis.

 

We believe that the Company’s B2B ALR offerings are timely in addressing traditional travel distributors’ needs to protect their client base by allowing them seamless access to ALR products. With the rapid growth of companies like Airbnb, we believe that traditional travel companies are realizing that not having access to this high demand vacation rental inventory means risking the loss of their consumers to other ALR sites. By connecting to the Company’s Booking Engine, travel distributors can sell ALR inventory alongside their existing travel products (i.e., air/car/hotel/cruise/tour bookings). This solves a key issue by allowing the customers of traditional travel distributors to complete their entire vacation package booking on their website versus forcing them to go to an ALR website and potentially lose the entire booking.

 

Direct to Consumer Websites

 

The Company has established a direct-to-consumer presence though a number of websites.

 

These sites include NextTripBusiness.com, our corporate travel management platform focused on small to medium-sized business, that provides companies the ability to book travel, manage travel expenses, and process employee expense reports. A differentiating feature of our NextTripBusiness.com solution is the ability for corporate travelers to book ALR properties as part of their travel itinerary. Beyond access to our ALR inventory, NextTrip Journeys, provides personalized concierge tours and activities at destinations around the world. Our online marketplaces are discussed in greater detail below.

 

6

 

 

The Company identifies and sources ALR properties which it consolidates through its Booking Engine, allowing for instantly bookable properties being packaged alongside other travel products; this is its distinguishing niche. The ALRs are owned and leased by third parties and are available to rent through the Company’s websites as well as through other distributors. The Company’s services include critical elements such as technology, an extensive film library, trusted brands and established partnerships that enhance product offerings and reach. We believe that consumers are quickly adopting video for researching and educating themselves prior to purchases, and the Company has carefully amassed video content, key industry relationships and a prestigious travel brand as cornerstones for the development and deployment of core-technology on both proprietary and partnership platforms.

 

The Company sells travel services to leisure and corporate customers around the world. Our primary focus is to incorporate ALR options into our current offerings of scheduling, pricing and availability information for booking reservations for airlines, hotels, rental cars, as well as other travel products such as sightseeing tours, shows and event tickets, and theme park passes. The Company sells these travel services both individually and as components of dynamically-assembled packaged travel vacations and trips. In addition, the Company provides content that presents travelers with information about travel destinations, maps and other travel details. In December 2020, the Company introduced its corporate travel platform under the NextTrip brand. This platform allows our users to search large travel suppliers of alternative lodging inventories and combine ALR with their air and car booking.

 

In March 2018, the Company introduced Travelmagazine.com, an online travel publication with the aim of giving travelers around the world inspiration for future travel destinations and trips. The publication offers written articles, videos, and podcasts created by staff writers and worldwide content providers. Moving forward, we intend to incorporate the Metaverse into Travelmagazine.com, allowing tourist boards, destination management companies, and other travel suppliers to showcase their products by allowing travelers to virtually explore destinations around the world. This strategy aligns with our goal to make Travelmagazine.com a central hub of content for travelers who are looking to get detailed information on destinations all around the world. The website is expected to generate revenue through advertising by from tourist boards, travel suppliers, and NextTrip.

 

The Company sells its ALR travel inventory through various distribution channels. The primary distribution channel is through its B2B channel partners, which include sales via (i) other travel companies’ websites and (ii) networks of third-party travel agents. Secondary distribution is planned to occur through the Company’s own websites at Nexttripjourneys.com and NextTripbusiness.com. Additionally, we offer high end ALR products along with specialty travel products and services via NextTripjourneys.com, targeting high value inventory to customers with complex or high-end travel needs.

 

The Company’s core travel related holdings have been streamlined into four key platforms: the Company’s Booking Engine branded as NextTrip ConNextions, Nexttripbusiness.com, NextTripJourneys.com and TravelMagazine.com.

 

  Ø The Company’s Booking Engine, branded as NextTrip ConNextions is the Company’s proprietary technology and platform providing access to more than 3.2 million instantly bookable vacation rental homes, villas, chalets, apartments, condos, resort residences, and castles. This ALR product can be accessed by other travel distributors using the Company’s API.
     
  Ø NextTripbusiness.com is targeted at small to midsized businesses offering them an enterprise-travel solution for business travel to meetings, conferences, conventions or even vacation travel and gives the companies lower costs, better expense control and in the future the option for a “self-branded” website. The website was launched in August 2021, and continues to be updated with features requested by our corporate travel customers.
     
  Ø NextTripJourneys.com is the Company’s leisure product website. The travel services and products currently offer high-end personalized land tour packages, cruise vacations, and specialized ALRs that cannot be booked on a real-time basis. These ALRs tend to be sourced from owners and managers who have not invested in a reservation management system and/or the owner or manager prefers to personally vet the customer before accepting a booking; typically, because the ALR is a high value property.  In fall 2022, the Company will launch a packages product focused on key leisure destinations around the world.  The packages product will provide customers discounted travel by combining air and hotel into a single package price.  Additionally, the Company expects to offer a travel agent portal in late 2022 to allow third-party agencies access to our packages, tours, and cruise inventory.
     
  Ø Travelmagazine.com, an online travel publication with the aim of giving travelers around the world inspiration for future travel destinations and trips. The publication offers written articles, videos, and podcasts. Moving forward, we plan for Travelmagazine.com to become a central hub of information for travelers who are looking to get detailed information on destinations all around the world.

 

7

 

 

Travel Products and Services

 

The Company’s concentration on ALRs is driven by contracts with vacation home (including timeshare) unit owners and managers that make their properties available to consumers and to other travel portals (Distributors) for nightly or extended stays. In addition, we offer travelers activities and tours through NextTripJourneys.com. Therefore, not only can we assist a traveler with identifying a destination and the lodging at the destination, but we can provide options of activities while at the destination. We also provide the means for making arrangements for airline tickets, car rentals and lodging. In summary, we offer travelers the complete travel package made easy or... Travel Made EasyTM.

 

The average ALR search and booking takes a few hours while the average vacation planning process typically involves the consumer visiting up to seven travel websites and spending over 10 hours to book their vacation (according to Susan Ho, Founder of Journy). We believe the NextTripBusiness.com and NextTripJourneys.com websites using the above features should reduce ALR/Vacation planning time from hours to minutes and with the convenience of one site (truly “Travel Made Easy”).

 

Products and Services for Property Owners and Managers

 

ListingsProperty owners and managers are able to list a property, with no initial upfront fees, and provide those listings to us at a negotiated preferential rate for traveler bookings generated on our websites. Listings that are ‘real-time online bookable’ properties will be managed by the property owner or manager through an application program interface (“API”), which will provide real-time updates to each property and immediately notify the property owner or manager of all information regarding bookings, including modifications and cancellations. Information such as content, descriptions and images are provided to us through that API.

 

Listings that are “request-accept” properties will require communication and approval from the property owner or manager and will not be managed through an API (as discussed above). We will provide a set of tools for the property owner or manager that will enable them to manage an availability calendar, reservations, inquiries and the content of the listing. These tools will allow the property owner or manager to create the listing by uploading photographs, text descriptions or lists of amenities, a map showing the location of the property, and property availability, all of which can be updated throughout the term of the listing. Each listing will provide travelers the ability to use email or other methods to contact property owners and managers.

 

The listings include tools and services to help property owners and managers run their vacation rental businesses more efficiently: responding to and managing inquiries, preparing and sending rental quotes and payment invoices, allowing travelers to book online and, enter into rental agreements, and processing online payments. Property owners and managers who elect to process online payments will be subject to a transaction fee.

 

Redistribution of ListingsWe make selected, online bookable properties available to online travel agencies as well as channel partners (jointly referred to as “Distributors”). We are compensated for these services by receiving a commission that is added to the negotiated net rate for each booking.

 

Products and Services for Travelers

 

Search Tools and Ability to Compare. Our online marketplace NextTripJourneys.com provide travelers with tools to search for and filter several travel products including air, car, accommodations (including ALRs) and activities based on various criteria, such as destination, travel dates, type of property, number of bedrooms, amenities, price, or keywords.

 

Traveler LoginTravelers are able to create accounts on our website(s) that give them access to their booking activity through the website.

 

Travel BlogTravel guides, videos and pictures as well as travel articles can be accessed through Travelmagazine.com.

 

SecurityWe use a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or fraud with the goal of providing only accurate and trustworthy information to travelers. Our company is Payment Card Industry (“PCI”) compliant to ensure the safety and security of our customer credit card data.

 

CommunicationTravelers who create an account on our website will receive regular communications, including notices about places of interest, special offers, new listings, and an email newsletter. The newsletter will be available to any traveler who agrees to receive it and offers introductions to new destinations and vacation rentals, as well as tips and useful information when staying in vacation rentals.

 

8

 

 

Mobile Websites and ApplicationsWe provide versions of our websites formatted for web browsers, smart-phones and tablets so that property owners, managers and travelers can access our websites and tools from mobile devices.

 

To date, we have focused on developing our booking engine and establishing relationships with suppliers to increase the size of our instantly bookable inventory. The booking engine has produced little revenue to date because, among other reasons, of the limited number of widely-used distribution partners with which we have been able to establish relationships. We are finalizing certification with established, widely-used distribution partners to make our inventory available through their distribution channels. The success of the booking engine will depend on users of those distribution partners booking properties supplied by our booking engine, and on our ability to expand the number of such distribution partners that utilize our booking engine.

 

The Company has completed integrating several distributors for the booking of our ALR products and the Company continues to integrate suppliers of ALR products. We now have more than 3.2 million properties listed on our booking engine.

 

Competition

 

Media Division

 

With the large global gamer population, the rising trend of digital advertising, and growing interest in the Metaverse, HotPlay expects increasing competition as companies seek to deliver in-game advertising that do not disrupt game play. Currently, HotPlay competes directly with: 

 

games that manually insert native advertisements in the form of:

 

static in-game ads that could not be changed once games are released; or

 

campaigns where brands integrate advertising content with gameplay, requiring high upfront investment and development effort;

 

games created specifically to promote a brand; and

 

in-game advertising platforms that deliver native impression ads, typically in the form of in-game billboards

 

Given HotPlay’s ability to deliver fungible ads that do not disrupt gameplay and that requires a lower integration effort, management believes that the HotPlay Platform compares favorably with those direct competitors.

 

HotPlay also competes indirectly with other advertising platforms that deliver in-game advertisements in forms that disrupt gameplay, such as platforms delivering impression ads, click through ads, and rewarded video ads.

 

The market for platforms offering a game portfolio and tournament features is also highly competitive with the continuing rise of e-sports and need for platforms and service providers to increase engagement with their users. Several businesses including e-commerce and streaming businesses have recently included casual games to their portfolio. HotPlay competes directly with these businesses and service providers offering white-labeled solutions to such businesses. However, management believes that the integration of non-disruptive advertising and real-world rewards allows HotPlay to compete favorably with these direct competitors.

 

On this front, HotPlay also competes indirectly with e-sports platforms and game streaming platforms that offer different categories of games such as mid-core and hard-core games.

 

9

 

 

Reinhart Interactive TV competes directly with other end-to-end TV as a service (“TVaaS”) providers offering media content delivery solutions to telco companies as well as telecommunication companies that implement their own solutions. We also compete indirectly with other media content providers such as Over the Top (“OOT”) platforms and video streaming platforms.

 

FinTech Division

 

The market for fundraising via regulated ICOs in Thailand is still in an early stage. Under the Thai SEC’s Thai Royal Decree, any offering of digital assets must be made through an ICO Portal approved by the Thai SEC. The ICO Portal is responsible for carrying out due diligence on an issuer and conducting the actual offering. There are currently seven Thai SEC approved ICO Portals, and Longroot competes directly with them in Thailand. With the increased acceptance of cryptocurrencies and adoption of blockchain technology, our management believes that there will be more ICO Portals approved, increasing the number of direct competitors.

 

As Longroot does not limit its offerings to the Thai market, it also competes directly with financial institutions that facilitate financing through the sale of regulatory compliant digital assets globally.

 

The market for fundraising via the sale of digital assets backed by tangible assets is still at a nascent stage. However, as many regulators worldwide become increasingly accepting of token offerings, management believes that regulatory compliant token offerings will become more commonplace. While this could result in more business opportunities for Longroot, it is also likely to translate to an increase in competition. 

 

Longroot also competes indirectly with companies facilitating more traditional avenues of raising funds, such as investment banks that underwrite initial public offerings or bond issuances, and commercial banks offering direct loans to businesses. However, management believes that the advantages of digital assets offerings, such as the ability to securitize alternative assets, provide a high degree of flexibility on deal structure, and the reliability offered by blockchain technology could give Longroot a competitive advantage.

 

The banking industry is highly competitive and NextBank competes directly with other traditional banks and digital banks for deposits and origination of loans. Management believes that NextBank is able to compete effectively through the provision of concierge services for depositors, and the ability to originate loans and disburse funds, without compromising on the required due diligence, more quickly than its competitors.

 

The FinTech market is growing rapidly, with new entrants constantly entering the market. As NextFintech adopts a FinTech model, offers card services, and builds products to support the growing digital asset industry, NextBank expects to compete directly with crypto-focused, blockchained based financial services companies and digital payment companies. However, through the combination of traditional banking and financial technology, and the undertaking of new initiatives in a regulatory compliant manner, Management believes that NextBank is well-positioned to execute a growth strategy to achieve our mission of creating a diversified financial solution for the global economy.

 

10

 

 

Travel Division

 

The market to provide listing, searching, and marketing services whether they are for ALR, activities and tours, airline bookings, car rentals or hotel stays is highly competitive and fragmented with limited barriers to entry. Each of the ALR services that we provide to property owners, managers and travelers is currently offered by competitors. Furthermore, ALRs are not typically marketed exclusively through any single channel, and many of our listing agreements are not exclusive, potentially allowing our competitors to aggregate a set of listings like ours. We believe we will compete primarily based on the quantity, quality, and nature of the properties offered on our websites. The majority of ALRs that will be offered in our marketplace reflect a whole house or property rather than a room. In addition, we anticipate that we will benefit from the quality of the direct relationships we have with property owners and managers, the global diversity of the ALRs available on our websites, the quality of our websites, the tools provided to our property owners and managers, the strength of our brands, and the success of our marketing programs and price.

 

Our principal competitors in the travel space include:

 

Other vacation and short-term rental listing websites, such as TripAdvisor.com, HomeAway.com, VRBA.com, Booking.com and Airbnb.com;

 

Websites that list both rooms to rent as well as ALRs, such as Airbnb.com, Booking.com, HomeAway.com and VRBO.com;

 

Professional property managers who charge a percentage of booking revenue for their services, such as Wyndham Worldwide Corp. and InterHome, AG;

 

Hotels that offer large rooms and amenities common in ALRs, such as Hyatt Vacation Clubs and Four Seasons Resorts;

 

Websites that aggregate listings from property managers who advertise and take bookings on behalf of property managers, such as Perfect Places, Inc., Atraveo and E-Domizil;

 

Online travel websites, such as those operated by Expedia.com, Hotels.com, Kayak.com, Booking.com, Orbitz.com, Priceline.com and Travelocity.com, that have traditionally provided comprehensive travel services and may expand or are now expanding into the ALR category;

 

Timeshare exchange companies, such as Interval International, Inc. and RCI, LLC;

 

Large Internet companies, such as Craigslist, Inc., eBay Inc., Google Inc., MSN.com and Yahoo!, which provide vacation rental listing or search services in addition to a wide variety of other products or services; and

 

Offline publishers of classified vacation rental listings, including regional newspapers and travel-related magazines.

 

Research and Development

 

Media Division

 

We have developed proprietary systems based on patent pending technologies to create, maintain and operate our media based websites, services and platforms. These technologies comprise systems developed by internal and third-party designers, developers and engineers and software acquired, licensed or open-sourced from outside developers and companies. Our systems are designed to serve our internal game studio, other third-party game developers and advertisers at both the Business-to-Business (“B2B”) and Business-to-Consumer (“B2C”) level via a range of business models, including recurring license fees, Cost-per-mille (“CPM”), Cost-per-action (“CPA”) and revenue share advertising models.

 

FinTech Division

 

NextBank has focused on identifying and implementing technology solutions, such as updated core banking systems and transaction security, compliance and monitoring systems, and is moving rapidly to integrate with payment providers and exchanges. After launching the first release of its mobile banking app in April 2022, NextBank is working on fortifying security and scalability, adding features and capabilities, and expanding supported platforms to include all popular mobile and desktop devices.

 

Longroot has put considerable resources into researching technology solutions, such as suitable blockchain protocols and third-party security services, and has developed a proprietary system that serves its clients and internal operations, while complying with the rules of the Thai SEC. Its systems are designed to onboard investors on to the ICO Portal Platform in a compliant manner, offer access to information related to individual ICOs, such as their prospectus, and participate in ICOs.

 

Costs associated with our research and development were included as capitalized development costs or, included in several expenses including technology and development, salaries, and benefits and in general and administrative expenses.

 

11

 

 

Travel Division

 

We have developed proprietary systems to create, maintain and operate our websites. This technology consists of systems developed by internal and third-party designers, developers and engineers and software acquired or licensed from outside developers and companies. Our systems are designed to serve other property distributors, property owners, managers, and travelers in an automated and scalable fashion.

 

Technology and Infrastructure

 

Media Division

 

Our websites and platforms are hosted using cloud services distributed globally across multiple regions. Our systems have been designed to automatically scale on demand at both the B2B and B2C levels to maintain an extremely high level of availability, regardless of end user demand. Industry leading cloud based security system are in place to protect our platforms from unauthorized access and data breaches. Where possible, the services have been designed in a cloud agnostic manner to minimize the dependency on any single cloud provider and facilitate deployment across multiple cloud providers, as necessary.

 

FinTech Division

 

NextBank is transitioning to Datapro’s core banking system in order to enhance its capabilities and support its growth and scalability goals. Datapro develops and deploys advanced software solutions specifically designed to meet the changing needs of financial institutions worldwide. With a singular focus on the banking/financial services sector, Datapro uses cutting edge technologies and hands-on expertise to simplify all banking processes from data management and customer relationship functions to national/international regulatory compliance.

 

To further enhance compliance and transaction monitoring, NextBank is using Ocean Systems’ software. Ocean Systems, Inc. (“OSI”) is a software development company specializing in Compliance and Electronic Funds Transfer (“EFT”) applications for the financial and banking industry. They provide compliance solutions related to bank payment systems concerning Automated Clearing House (“ACH”), Wire Transfers, Automated Teller Machine (“ATM”), and Point of Sale (“POS”).

 

NextBank is committed to adhering to the highest level of security. Leveraging Amazon Web Services’ (“AWS”) infrastructure allows security configurations to be tightened. Strengthening NextBank’s network security enables stable scalability. Additionally, NextBank uses EnCirca, a registrar that provides supports domain name registrations and provides trademark protections services, as its registrar. They are one of only a small handful of registrars authorized to host .Bank domains. As the leading Internet Corporation for Assigned Names and Numbers (“ICANN”) registrar for the .Bank extension, EnCirca is well-equipped to offer state-of-the-art technology services for hosting secure websites and email.

 

Longroot Thailand’s proprietary ICO Portal Platform is built upon a number of innovations that allow it to serve investors, issuers, and the Longroot Thailand internal team in a secure and compliant manner. The platform leverages the Ethereum network, giving investors and issuers access to an ecosystem of services, such as secondary markets, exchanges, custodians, insurers, and decentralized finance services.

 

The platform also includes an integrated Securities Tokenization Offering technology. Not only does the technology allow Longroot Thailand to tokenize assets that are fully compliant with Thailand’s Royal Decree on Digital Assets Businesses, we believe that it will also allow Longroot Thailand to conduct similar offerings in other jurisdictions in the future, thereby enabling Longroot Thailand to expand its operations.

 

The infrastructure has a high level of reliability and is designed to allow Longroot Thailand to scale efficiently while maintaining the security levels required of a financial services operator. The platform is hosted using a combination of third-party data centers powered by Google Cloud Platform (“GCP”) and associated security services provided by other third parties. The high level of redundancy provided by GCP and designed into its infrastructure helps ensure that Longroot Thailand can reliably serve clients globally, 24x7. Longroot Thailand also uses security methods to ensure the integrity of its networks and protection of confidential data collected and stored on its servers. Longroot Thailand has developed internal policies and procedures to protect the information of investors and issuers that it collects and uses as part of its normal operations. Access to its networks, and the servers and databases, on which confidential data is stored, is protected by industry standard firewall technology.

 

12

 

 

Travel Division

 

Our websites are hosted using cloud services distributed globally across multiple regions. Our systems architecture has been designed to manage increases in traffic on our websites through additional computing power without making software changes. Our cloud services provide our online marketplace with scalable and redundant Internet connectivity and redundant power and cooling to our hosting environments. We use security methods to ensure the integrity of our networks and protection of confidential data collected and stored on our servers, and we have developed and use internal policies and procedures to protect the personal information of our property owners, managers and travelers using our websites that we collect and use as part of our normal operations. Access to our networks, and the servers and databases, on which confidential data is stored, is protected by industry standard firewall and encryption technology. Physical access to our servers and related equipment is secured by limiting access to the data center to operations personnel only. Costs associated with our web hosting operation are included in general and administrative costs.

 

Intellectual Property

 

The Company currently holds a wide range of intellectual property relating to software and products across its different divisions. This includes patent pending products, copyrights, registered and unregistered trademarks, trade secrets, industrial designs, registered domain names, and other forms of intellectual property rights.

 

Media Division

 

The Media Division intellectual property includes the HotPlay in-game advertising platform, which consists of the game developer portal, advertiser portal, redemption application, and Software Development Kit (“SDK”), artificial intelligence powered video game development technology, and proprietary casual games, as well as Zappware’s digital TV platform.

 

At the Media Division, the Company has filed patent protection for HotPlay’s in-game advertising technology and Make It Games’ Artificial Intelligence animation technology.

 

FinTech Division

 

The FinTech division intellectual property includes the NextBank mobile banking platform, Longroot’s ICO Portal, Token IQ’s securities token offering technology, and products and services designed to support the digital asset industry.

 

At the FinTech division, the Company has filed patent protection for Token IQ’s security token offering technology.

 

Travel Division

 

The Travel division intellectual property includes the travel management platform and property management solution for alternative lodging properties, the content of our websites, our registered domain names, our registered and unregistered trademarks, contracts with third party property managers and distributors.

 

The Company believes that its intellectual property is an essential asset of its business and gives us a competitive advantage. We rely on a combination of trademark, copyright and trade secret laws in the United States and internationally, as well as contractual provisions, to protect our proprietary technology and our brands. We also rely on copyright laws to protect the appearance and design of our sites and applications, although to date we have not registered for copyright protection on any particular content. We have registered numerous Internet domain names related to our business in order to protect our proprietary interests. We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality with third parties. The Company also files patent applications to protect innovations arising from our research and development.

 

These efforts we have taken to protect our intellectual property may not be sufficient or effective and we may not receive approval on our pending patents. It may be possible for other parties to copy or otherwise obtain and use content of its platform and brand names without authorization.

 

13

 

 

Employees

 

On average, we employed approximately 250 full-time employees throughout the reporting period. Additionally, we use independent contractors and temporary personnel to supplement our workforce, particularly in the software development and technology tasks. Our employees are not represented by a labor union, and we consider our employee relations to be very good. Competition for qualified personnel in our industry has historically been intense, particularly for software engineers, developers, and other technical staffs.

 

Employee Development, Attraction and Retention: The development, attraction and retention of employees is a critical success factor for the Company and its operating units for succession planning and sustaining our core value drivers. To support the advancement of our employees, we offer training and development programs encouraging advancement from within and strive to fill our team with strong and experienced management talent. We leverage both formal and informal programs to identify, foster, and retain top talent at both the corporate and operating unit level.

 

Diversity and Inclusion: The Company believes that its rich culture of inclusion and diversity enables it to create, develop and fully leverage the strengths of its workforce to exceed customer expectations and meet its growth objectives. The Company places a high value on inclusion, engaging employees in our programs staffed by employees with diverse backgrounds, experiences or characteristics who share a common interest in professional development, improving corporate culture and delivering sustained business results.

 

Sources and Availability of Raw Materials

 

Our products do not require the consumption of physical raw materials. Our products mainly involve cost of rendering of services, such as employees, contractors, amortization of intangible assets and etc.

 

Dependence on One or a Few Customers

 

In Fiscal year 2022, we did not depend on one or a few customers.

 

Government Regulation

 

Our operations are subject to, and affected by, various government regulations, as well as foreign and U.S. federal, state and local government authorities. Our providers, distributors, etc. are also subject to periodic renewal and ongoing regulatory requirements. The rules, regulations, policies and procedures affecting our businesses are constantly subject to change. The following descriptions are summaries in nature, and do not purport to describe all present and proposed laws and regulations affecting our businesses.

 

We operate several internet websites, which we use to distribute information about and supplement our programs. Internet services are now subject to regulation in the United States relating to the privacy and security of personally identifiable user information and acquisition of personal information from children under the age of 13, including the federal Child Online Protection Act (“COPA”) and the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM”), amongst other privacy related rules and regulations. In addition, a majority of states have enacted laws that impose data security and security breach obligations. Additional federal and state laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition, to the extent we offer products and services to online consumers outside the United States, the laws and regulations of foreign jurisdictions, including, without limitation, consumer protection, privacy, advertising, data retention, intellectual property, and content limitations, may impose additional compliance obligations on us.

 

Thailand is in the process of introducing a Personal Data Protection Act (“PDPA”), which all companies in Thailand that handle personal data will be required to adhere to, once implemented. This means that employers, businesses, and individuals that collect and process personal data would have to review and ensure that their data policies, particularly those pertaining to the rights of the data subjects and the obligations of data controllers, are in line with the PDPA’s provision once it comes to effect.

 

14

 

 

Longroot Thailand’s operations are subject to, and affected by, various government regulations. The rules, regulations, policies and procedures affecting its businesses are constantly subject to change. Longroot Thailand is regulated under the Thai SEC Royal Decree on Digital Assets Businesses that requires all ICOs in Thailand to be conducted by a Thai SEC approved ICO Portal. As an ICO Portal, Longroot Thailand is also responsible for carrying out due diligence on issuers. The decree was only recently introduced in 2018, and is subject to amendment. Longroot Thailand will need to constantly monitor the regulations as they evolve to remain in compliance.

 

Longroot Thailand is also regulated under the Thailand Anti-Money Laundering Office (“AMLO”), and is required to adhere to the Anti-Money Laundering Act and Counter-Terrorism and Proliferation of Weapon of Mass Destruction Financing Act of Thailand. As such, Longroot Thailand carries out Know Your Customer (“KYC”) checks on all issuers, investors and its internal team before onboarding them to help ensure compliance.

 

There are several business taxes levied by the Thai central government under the principal tax law, Revenue Code, such as Corporate Income Tax, Value Added Tax, Specific Business Tax, Customs Duties, Excise Tax and Stamp Duties. Hotplay Thailand and Longroot Thailand have a duty to assess their own income and ensure the right amount of taxes are paid to the government authorities and to correct to avoid additional tax penalty after the government inspection.

 

Blockchain technologies and digital currencies, are increasingly becoming subject to governmental regulation, both in the US and internationally. Blockchain technologies and cryptocurrency are under review with a number of US and foreign governmental agencies. Other governmental or quasi-governmental regulatory bodies have shown an interest in regulating or investigating companies engaged in digital currency related business. For instance, in early March 2021, the SEC chairperson nominee expressed an intent to focus on investor protection issues raised by cryptocurrencies. Presently, except as otherwise discussed in this Report, we do not believe any regulatory body in a foreign jurisdiction in which we operate, US or State regulatory body has taken any action or position adverse to our blockchain and digital currency related activities; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.

 

NextBank provides traditional banking services and the origination and sale of loans and receivables financing, among other types of lending services, as an International Financial Entity (“IFE”) under license by the Office of the Commissioner of Financial Institutions of Puerto Rico (“OCIF”). Pursuant to its authorization to operate as an IFE, the International Financial Center Regulatory Act of Puerto Rico, as amended (the “IFE Act”), it will be only allowed to perform banking transactions (accepting deposits, making loans, etc.) with any person or entity not considered domestic (in Puerto Rico) (with the exception of the investments in stocks, notes or bonds from the local government) including a range of transactions enumerated in its charter and other transactions for which prior approval is required from the OCIF. The minimum capitalization of the IFE will be $5 million. As provided in the IFE Act, at least $0.25 million must be fully paid-in at the time the license to operate as an international financial entity is issued by the Commissioner. The capital of the IFE must satisfy the adequacy criteria required in a safe and sound financial institution, in the manner provided by federal and state banking statutes and verification of which used by the Federal Deposit Insurance Corporation.

 

Other Regulations

 

We are also subject to various local, state, and federal regulations, including, without limitation, regulations promulgated by federal and state environmental, health and labor agencies.

 

Recent Material Events

 

Appointment and departure of Executive Officers and Directors of the Company

 

Effective upon the Closing of the HotPlay Share Exchange, resignations of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr. and Ms. Alexandra C. Zubko became effective and such persons were deemed to have resigned from the board of directors of the Company. In addition, Mr. Simon Orange, a then member of the board of directors, resigned as a director of the Company effective on June 30, 2021. Mr. William Kerby and Mr. Donald P. Monaco, remained as members of the board of directors following the closing.

 

In connection with the closing of the HotPlay Share Exchange, and pursuant to the terms thereof, the Company’s board of directors approved the increase in the number of directors from eight to nine and upon closing of the HotPlay Share Exchange, each of Mr. J. Todd Bonner, Ms. Nithinan Boonyawattanapisut (the spouse of Mr. Bonner), Mr. Komson Kaewkham, Mr. Athid Nanthawaroon, Mr. Yoshihiro Obata, Ms. Stacey Riddell, and Ms. Carmen L. Diges were appointed to serve as members of the board of directors of the Company, joining William Kerby and Donald Monaco who remained on the board of directors following the closing.

 

15

 

 

Mr. J. Todd Bonner and Mr. Donald Monaco were appointed as Co-Chairpersons of the board of directors following the closing. Certain of the new members of the board of directors were also appointed as members of the committee of the board of directors, as discussed in further detail elsewhere in this Report.

 

The board of Directors determined that Mr. Komson Kaewkham, Mr. Yoshihiro Obata, Ms. Stacey Riddell, and Ms. Carmen L. Diges, were “independent” pursuant to the rules of the Nasdaq Capital Market.

 

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.

 

On December 9, 2021, the Company’s board of directors appointed Edward Terrence Gardner, Jr. as an independent director of the Company, following the appointment, the board is now composed of 10 members.

 

Change in Principal Executive Officer (“PEO”)

 

On January 3, 2022, Nithinan “Jess” Boonyawattanapisut, Co-Chief Executive Officer of the Company, assumed the role of the Company’s PEO, thereby replacing William Kerby, the Company’s other Co-Chief Executive Officer, who stepped down from the PEO role.

 

Ms. Boonyawattanapisut’s assumption of the Company’s PEO role was based on various considerations, including her familiarity with the Company’s financial statements and operations post-acquisition of HotPlay.

 

Significant Business and Asset Acquisitions

 

Reinhart Interactive TV AG and Zappware N.V.

 

On January 15, 2021, we entered into a Founding Investment and Subscription Agreement with Reinhart Interactive TV AG, a company organized in Switzerland, and Jan C. Reinhart, the founder of Reinhart. The Investment Agreement contemplated the Company acquiring 51% of the ownership of Reinhart, in consideration for 10 million Swiss Francs (approximately $10.8 million US). Consideration was paid by cash and the transaction was closed on June 23, 2021.

 

More information regarding this transaction is disclosed in Note 4 - Acquisitions and Dispositions.

 

NextBank International (formerly IFEB)

 

On April 1, 2021, we entered into a Bill of Sale for Common Stock, effective March 22, 2021, with certain third parties, pursuant to which the Company agreed to purchase 2,191,489 shares, the IFEB Shares, of authorized and outstanding Class A Common Stock of IFEB, a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico, which IFEB Shares totaled approximately 57.16% of the outstanding Class A Common Stock of IFEB. The purchase price of the IFEB Shares was $6.4 million, which amount was paid to the sellers on April 1, 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 1,648,614 of the outstanding Class A Common Stock of IFEB, representing 42.94% of such outstanding Class A Common Stock of IFEB, in consideration for an aggregate of 1,926,750 restricted shares of the Company’s common stock (the “IFEB Common Shares”), with each one share of Class A Common Stock of IFEB being exchanged for 1.168 restricted shares of common stock of the Company, based on an agreed upon value of $2.50 per share for each share of Company common stock and $2.92 per share for each share of Class A Common Stock of IFEB.

 

As a result of the closing of both transactions, we acquired control of 100% of IFEB as of July 21, 2021.

 

More information regarding this transaction is disclosed in Note 4 - Acquisitions and Dispositions.

 

16

 

 

Go Game Asset Purchase

 

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 37% interest in the capital stock of Go Game Pte Ltd, a Singapore private limited company (“Go Game”), a mobile game publisher and technology company, representing an aggregate of 686,868 shares of Go Game’s Class B Preferred shares (the “Initial Go Game Shares”). The Go Game SPA also included an option whereby the Company could acquire additional shares of Go Game, as described in greater detail below. Pursuant to the Go Game SPA, the aggregate consideration to be paid for the Initial Go Game Shares was: (i) 6,100,000 shares of Series D Preferred Stock (representing $6.1 million of value, based on an aggregate liquidation preference of $6.1 million), and (ii) $5 million in cash, with $1.25 million paid on June 30, 2021, $1.25 million payable on or before July 31, 2021, and $2.5 million payable on or before September 30, 2021.

 

Pursuant to the Go Game SPA, the Company was also granted an option (the “Go Game Option”), to purchase up to an additional 259,895 shares of Go Game’s Class B Preferred shares from the Seller (the “Option Shares”) (representing 14% of Go Game’s outstanding Class B Preferred shares, or 51% with the Initial Go Game Shares). The Go Game Option was subject to the Seller’s acquisition of the Option Shares subsequent to the date of the Go Game SPA. The Go Game Option was to be exercisable from time to time after the date that the shareholders of the Company approved the issuance of shares of common stock upon conversion of the Series D Preferred Stock and in connection with the Go Game Option (the “Approval Date”), and prior to January 1, 2022. The per share consideration due in connection with an exercise of the Go Game Option was to be equal to $70 million, divided by the then number of outstanding shares of Go Game ($37.71 per share at the time the agreement was entered into) (the “Call Option Price”). The Call Option Price was to be satisfied by the issuance of shares of Company common stock valued based on the greater of (a) $2.35 per share and (b) 85% of the average of the closing prices of the Company’s common stock for the prior thirty days (the “30-Day Average”). The Seller agreed not to transfer the Option Shares from the date acquired through the exercise or expiration of the Go Game Option. Upon issuance of any shares of common stock upon exercise of the Go Game Option, the Seller agreed to enter into a lock-up agreement restricting any sales or transfers of any shares of common stock of the Company for a period of 18 months following the issuance date.

 

We agreed, pursuant to the Go Game SPA, that, upon our purchase of the Initial Go Game Shares, we would appoint the Seller to the board of directors of the Company, and that we would continue to nominate the Seller as a board nominee for appointment on the board of directors at each subsequent shareholder meeting of the Company, subject to certain exceptions, until the earlier of (i) Seller’s death; (ii) Seller’s resignation from the board of directors; (iii) the date that Seller is no longer qualified to serve as a member of the board of directors; (iv) the date the board of directors, acting in good faith, determines that the continued appointment of Seller to the board of directors would violate the fiduciary duties of such members of the board of directors; (v) the third anniversary of the acquisition of the Initial Go Game Shares; and (vi) the date that the Seller holds less than 2 million shares of Company common stock (including shares of common stock issuable upon conversion shares of Series D Preferred Stock held by Seller).

 

As of November 30, 2021, the second payment of $1.25 million, originally payable on or before July 31, 2021 and the third payment of $2.5 million originally payable on or before September 30, 2021 had not been paid and the shares of Series D Preferred Stock had not been issued, and such payments remained on hold subject to the completion of due diligence and further negotiation by the parties. Total payments made to the Seller as of November 30, 2021 were $1,250,000.

 

On March 30, 2022, the Company, Go Game and the Seller entered into an asset purchase agreement (the “Asset Purchase Agreement”), which amended and restated in its entirety the Go Game SPA, whereby Go Game agreed to sell and assign to the Company, and the Company agreed to purchase and assume from Go Game, substantially all the assets and certain liabilities related to the goPlay platform (the “Go Game Assets”), together with a perpetual license to the goPay payment gateway (the “goPay License”).

 

The consummation of the transactions contemplated by the Asset Purchase Agreement (the “Closing”) occurred on or about April 4, 2022, following the execution of the Asset Purchase Agreement on March 30, 2022.

 

As consideration for the Go Game Assets and the receipt of the goPay License, the Company agreed to pay $5,000,000 (the “Purchase Price”) as follows:

 

  (i) A cash payment of $1,250,000, which was paid previously by the Company to Go Game/Seller following the execution of the Go Game SPA;
     
  (ii) A cash payment of $1,500,000 at closing by wire transfer of immediately available funds; and
     
  (iii) A cash payment of $2,250,000, which shall be payable monthly by the Company to Go Game with simple interest thereon at the rate of 12.0% per annum until March 31, 2023.

 

No stock consideration of Go Game or the Company is being exchanged, as was previously contemplated under the Go Game SPA.

 

17

 

 

In the event the Company defaults on its monthly cash payment obligations under (iii) above, the Company agrees that the Seller shall be given the absolute right to demand for the return by way of assigning, transferring, and delivering to Seller all of the Company’s right, title, ownership and interest in certain games and source code for goPay (without taking away the perpetual licensing right).

 

For a period of six months following the closing, Go Game will provide transitional assistance to the Company to integrate the goPlay platform and associated game titles, together with the goPay payment gateway, at no additional charge.

 

The goPay License allows the Company to exploit the goPay payment gateway to enhance the products and service offerings of the Company. The goPay License does not allow the Company to exploit and sublicense the goPay technology as a stand-alone product.

 

Prior to the Closing, Go Game was engaged in discussions with potential customers of the goPlay platform. At the Closing, the Company and Go Game entered into a revenue share agreement (the “Revenue Share Agreement”), pursuant to which Go Game shall refer such potential customers and any other potential customers to the Company, in exchange for a right to receive 50% of net revenues attributable to such sales.

 

In addition, the Company and the Seller entered into a restrictive covenant agreement (the “Restrictive Covenant Agreement”) whereby Seller will agree to refrain from competing with the Company and soliciting the Company’s employees at the time of the closing and for a period of time thereafter in order to protect the Company’s legitimate business interests and goodwill in connection with the Asset Purchase Agreement.

 

Fighter Base Technologies Asset Purchase

 

On May 2, 2022, the Company completed the acquisition of certain of the assets of Fighter Base Publishing Inc. (“FBP”), an entity owned and controlled by Mark Vange, the Company Chief Technology Officer, pursuant to that Intellectual Property Purchase Agreement entered into by and between the Company and FBP on August 19, 2021. As consideration for the assets of FBP, the Company issued FBP 1,666,667 shares of Company common stock.

 

The assets purchased from FBP include the AI-powered video development platform of Make It Games (“MIG”), previously a wholly owned division of FBP. The platform includes proprietary technology that enables developers to create video games powered by AI. The technology supports the training of virtual characters to be more lifelike in appearance and behavior. Proprietary AI animation tools help program game or film characters to fully animate themselves, saving as much as 70% of the typical time and cost of animation.

 

Token IQ Asset Purchase

 

On May 2, 2022, the Company completed the acquisition of 100% of the assets of Token IQ Inc. (“Token IQ”), an entity owned and controlled by Mark Vange, the Company Chief Technology Officer, pursuant to that Intellectual Property Purchase Agreement entered into by and between the Company and Token IQ on August 19, 2021. As consideration for the assets of Token IQ, the Company issued Token IQ 1,250,000 shares of Company common stock.

 

The assets purchased from Token IQ focus on the digital assets industry, allowing the Company to provide its customers with KYC related services, as well as a solution to replace their digital assets should they lose access to, or control of, their digital assets, amongst other things. The foundational intellectual property purchased from Token IQ is designed to reconcile legal and regulatory requirements around digital assets, including KYC, Anti-money laundering and shareholder rights enforcement, all common pain points within the crypto markets today.

 

Financings

 

May 2021 Underwritten Offering

 

On May 13, 2021, the Company entered into an underwriting agreement (the “May 2021 Underwriting Agreement”) with Kingswood, as representatives of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “May 2021 Offering”) an aggregate of 3,230,000 shares of the Company’s common stock at a public offering price of $2.50 per share. The Company also granted the underwriters a 45-day option to purchase up to an additional 484,500 shares of common stock to cover over-allotments, if any, which over-allotment option was exercised in full. The May 2021 Offering (including the sale of the over-allotment shares) closed on May 18, 2021. The net proceeds to the Company from the May 2021 Offering, after deducting the underwriting discounts and commissions and offering expenses, were approximately $8.5 million.

 

Kingswood acted as sole book-running managers for the May 2021 Offering. The Company paid the Underwriters a cash fee equal to 6% of the aggregate gross proceeds received by the Company in connection with the May 2021 Offering, paid the Underwriters a non-accountable expense allowance equal to 1% of the aggregate gross proceeds received by the Company in connection with the May 2021 Offering, and reimbursed certain expenses of the Underwriters.

 

18

 

 

November Registered Direct Offering

 

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, an aggregate of 18,987,342 shares (the “Shares”) of the Company’s common stock, together with warrants to purchase an aggregate of 14,240,508 shares of Common Stock (the “Warrants”), at a combined price of $1.58 per Share and accompanying three quarters of a Warrant. The net proceeds to the Company from the offering, after deducting placement agent fees and expenses and estimated offering expenses (excluding proceeds to the Company, if any, from the future exercise of the Warrants) were approximately $27.85 million.

 

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), which was initially filed with the SEC on June 25, 2021, was amended on September 24, 2021 and October 27, 2021, and was declared effective on October 29, 2021.

 

Each whole Warrant sold in the offering will be exercisable for one share of common stock at an initial exercise price of $1.97 per share (the “Initial Exercise Price”), the closing sales price of the Company’s common stock on October 29, 2021 (the last trading day prior to the date that the Purchase Agreement was entered into). The Warrants may be exercised commencing six months after the issuance date (the “Initial Exercise Date”) and terminating on the fifth anniversary of the Initial Exercise Date. The Warrants are exercisable for cash; provided, however that they may be exercised on a cashless exercise basis if, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the shares of common stock issuable upon exercise of the Warrants. The exercise of the Warrants will be subject to a beneficial ownership limitation, which will prohibit the exercise thereof, if upon such exercise the holder of the Warrants, its affiliates and any other persons or entities acting as a group together with the holder or any of the holder’s affiliates would hold 4.99% (or, upon election of a purchaser prior to the issuance of any shares, 9.99%) of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of the Warrant held by the applicable holder, provided that the holders may increase or decrease the beneficial ownership limitation (up to a maximum of 9.99%) upon 61 days advance notice to the Company, which 61 day period cannot be waived.

 

The Warrants also include certain anti-dilution rights, which provide that if at any time the Warrants are outstanding, the Company issues or enters into any agreement to issue, or is deemed to have issued or entered into an agreement to issue (which includes the issuance of securities convertible or exercisable for shares of common stock), securities for consideration less than the then current exercise price of the Warrants, the exercise price of such Warrants will be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities; provided, however, that unless and until the Company has received stockholder approval to reduce the exercise price of the Warrants below $1.97 per share (the “Floor Price”), no such adjustment to the exercise price may be made. Pursuant to the Purchase Agreement, the Company agreed to use its reasonable best efforts to obtain stockholder approval within 90 days from the date of the prospectus supplement to remove the Floor Price of the Warrants. Until such shareholder approval is obtained, the Company has agreed to hold a special meeting of its stockholders every three months thereafter, for so long as the Warrants remain outstanding, to obtain such stockholder approval.

 

If the Company fails for any reason to deliver shares of common stock upon the valid exercise of the Warrants, subject to its receipt of a valid exercise notice and the aggregate exercise price, by the time period set forth in the Warrants, the Company will be required to pay the applicable holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares subject to such exercise (as calculated in the Warrant), $10 per trading day (increasing to $20 per trading day on the third trading day after such liquidated damages begin to accrue) for each trading day that such shares are not delivered. The Warrants also include customary buy-in rights in the event the Company fails to deliver shares of common stock upon exercise thereof within the time periods set forth in the Warrant.

 

EF Hutton, division of Benchmark Investments, LLC (“EFH”), agreed to act as placement agent for the offering on a “reasonable best efforts” basis. Pursuant to the placement agency agreement entered into with EFG, the Company paid EFH an aggregate cash fee equal to 6.0% of the aggregate gross proceeds of the offering, a non-accountable expense reimbursement of 1.0% of the aggregate gross proceeds in the offering, and $50,000 for the reimbursement of certain of the EFH’s expenses.

 

19

 

 

At The Market Offering Agreement Facility

 

On March 4, 2022, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Agent”), to create an at-the-market equity program under which the Company may, from time to time, offer and sell shares of its common stock having an aggregate gross offering price of up to $20 million (the “Shares”) to or through the Agent (the “ATM Offering”).

 

Any Shares sold to or through the Agent will be issued pursuant to a prospectus dated October 29, 2021 and a prospectus supplement dated March 4, 2022 filed with the SEC (the “Prospectus Supplement”), in connection with one or more offerings of the Shares pursuant to the Prospectus Supplement. Subject to the terms and conditions of the ATM Agreement, the Agent will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations to sell the Shares from time to time, based upon the Company’s instructions. Sales of the Shares, if any, under the ATM Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made by means of ordinary brokers’ transactions (including directly on the Nasdaq Capital Market), at market prices or as otherwise agreed between the Company and the Agent. The Agent is not under any obligation to purchase any of the Shares on a principal basis pursuant to the ATM Agreement, except as otherwise agreed by the Agent and the Company in writing pursuant to a separate terms agreement. The Company has no obligation to sell any of the Shares and may at any time suspend offers under the ATM Agreement or terminate the ATM Agreement. As compensation for services provided, if any, the Agent will be entitled to a commission at a fixed commission rate equal to 3.0% of the gross sales price of any Shares sold in the ATM Offering.

 

Note Purchase Agreements: Streeterville Capital, LLC

 

November 2020 Note Purchase Agreement

 

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 $5,520,000 (the “November 2020 Streeterville Note”). Streeterville paid consideration of an initial cash purchase price of $3,500,000 for the note and issued the Company a promissory note in the amount of $1,500,000 (the “November 2020 Investor Note”). The associated debt issuance costs of the note were $370,000 for total amount due $3,870,000. In addition to the $370,000 of debt issuance costs, the Company paid $245,000 for advisory fees, resulting in net proceeds to the Company of $3,255,000.

 

The November 2020 Investor Note, in the principal amount of $1,500,000, evidenced the amount payable by Streeterville to the Company as partial consideration for the acquisition by the Company of the November 2020 Streeterville Note. The November 2020 Investor Note accrued interest at the rate of 10% per annum, payable in full on November 23, 2021, subject to a 30-day extension exercisable at the option of Streeterville and could be prepaid at any time. The amount of the Investor Note has been offset against the amount of the November 2020 Streeterville Note in the balance sheet as of February 28, 2021, as both notes have substantially similar terms, and the Investor Note was provided in consideration for the acquisition of a portion of the November 2020 Streeterville Note. The November 2020 Investor Note was subsequently funded in full in January 2021.

 

On November 4, 2021, upon completion of the November 2021 registered direct offering (discussed above), the Company completely paid off the November 2020 Streeterville Note in the amount of $3,100,807.

 

20

 

 

March 2021 Note Purchase Agreement

 

On March 22, 2021, the Company 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 $9,370,000 (the “March 2021 Streeterville Note”). Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company a promissory note in the amount of $1,500,000 (the “March 2021 Investor Note”), in consideration for the March 2021 Streeterville Note, which included an original issue discount of $850,000 (the “OID”) and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID was fully earned upon issuance and the remaining $150,000 was not fully earned until the March 2021 Investor Note was fully-funded by Streeterville, which occurred on May 26, 2021. Also on May 26, 2021, Streeterville funded the March 2021 Investor Note (in the amount of $1.5 million) in full.

 

The March 2021 Streeterville Note bore interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on March 23, 2022). From time to time, beginning six months after issuance, Streeterville had the right to redeem a portion of the March 2021 Streeterville Note, not to exceed $2.125 million. In the event we did not pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount was to be added to the outstanding balance of the March 2021 Streeterville Note. Under certain circumstances, the Company had the right to defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the March 2021 Streeterville Note would increase by 2%. Subject to the terms and conditions set forth in the March 2021 Streeterville Note, the Company could prepay all or any portion of the outstanding balance of the March 2021 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the March 2021 Streeterville Note remained outstanding, the Company agreed to pay to Streeterville 20% of the gross proceeds that the Company received from the sale of any of its common stock or preferred stock, which payments were applied towards and reduced the outstanding balance of the March 2021 Streeterville Note, which percentage would increase to 30% upon the occurrence of, and continuance of, an event of default under the March 2021 Streeterville Note (each an “Equity Payment”). The outstanding balance of the March 2021 Streeterville Note would have automatically increased by 10% each time that we failed to pay an Equity Payment. Additionally, in the event we failed to timely pay any such Equity Payment, Streeterville had the right to seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment.

 

The March 2021 Note Purchase Agreement required that we complete the purchase of the Reinhart Interactive TV AG equity interests discussed below (the “Reinhart Interest”), within ten 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. 

 

The Company made a required equity payment of $1,857,250 to Streeterville under the March 2021 Streeterville Note on May 26, 2021, with funds raised through a May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering. On November 4, 2021, the Company paid down the outstanding balance of the March 2021 Streeterville Note, with funds raised through the November 2021 registered direct offering (discussed above).

 

October 2021 Note Purchase Agreement

 

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 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.

 

The October 2021 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.

 

21

 

 

Pursuant to the October 2021 Streeterville Note, the Company provided Streeterville a right of first refusal to purchase any promissory note, debenture, or other debt instruments which the Company proposes to sell, other than sales to officers or directors of the Company and/or sales to the government. Each time, if ever, that the Company provides Streeterville such right, and Streeterville does not exercise such right to provide such funding, the outstanding balance of the October 2021 Streeterville Note increases by 3%, unless the proceeds from such sale(s) are used to repay the October 2021 Streeterville Note in full. Each time, if ever, that the Company fails to comply with the terms of the right of first refusal, the outstanding balance of the October 2021 Streeterville Note increases by 10%. Additionally, upon each major default described in the October 2021 Streeterville Note (i.e., the failure to pay amounts under the October 2021 Streeterville Note when due or to observe any covenant under the Note Purchase Agreement (other than the requirement to make Equity Payments)), the outstanding balance of the October 2021 Streeterville Note may be increased, at Streeterville’s option, by 15%, and for each other default, the outstanding balance of the October 2021 Streeterville Note may be increased, at Streeterville’s option, by 5%, provided such increase can only occur three times each as to major defaults and minor defaults, and that such aggregate increase cannot exceed 30% of the balance of the October 2021 Streeterville Note immediately prior to the first event of default.

 

The October 2021 Note Purchase Agreement and the October 2021 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the October 2021 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the October 2021 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the October 2021 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the October 2021 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The October 2021 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the October 2021 Streeterville Note.

 

As of February 28, 2022, the remaining principal balance of Streeterville Notes was $4,053,737, plus accrued interest of $653,587.

 

On May 5, 2022, the Company and Streeterville entered into a Standstill Agreement, pursuant to which Streeterville agreed that it will not seek to redeem any portion of the October 2021 Streeterville Note before September 18, 2022. As consideration for such agreement, the outstanding balance of the October 2021 Streeterville Note was increased by approximately $87,639, resulting in an updated outstanding balance of approximately $1,840,913 as of such date. Pursuant to Standstill Agreement, in the event of a default by the Company under the October 2021 Streeterville Note, the Standstill Agreement shall terminate immediately. Except as provided herein, the Standstill Agreement does not impact or alter the terms of the October 2021 Streeterville Note or the October 2021 Purchase Agreement, both of which remain in full force and effect.

 

More information regarding this transaction is disclosed in Note 9 – Notes Payable.

 

May 2022 Streeterville Note Purchase

 

On May 5, 2022 (the “Effective Date”), the Company entered into a new Note Purchase Agreement (the “May 2022 Note Purchase Agreement”) with Streeterville, pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $2,765,000 (the “May 2022 Streeterville Note”). Streeterville paid consideration of $2,500,000, which amount represents the original principal amount less a $250,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses incurred in connection with the transaction.

 

22

 

 

The May 2022 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on May 5, 2023). From time to time, beginning six months after issuance, Streeterville may redeem any portion of the May 2022 Note, up to a maximum amount of $625,000 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 May 2022 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 May 2022 Note is increased by 2%.

 

Subject to the terms and conditions set forth in the May 2022 Note, the Company may prepay all or any portion of the outstanding balance of the May 2022 Note at any time subject to a prepayment penalty equal to (i) 5% of the amount of the outstanding balance to be prepaid if such prepayment is made on or before six months from the Effective Date and (ii) 10% of the amount of the outstanding balance to be prepaid if such prepayment is made after six months from the Effective Date. For so long as the May 2022 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 May 2022 Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the May 2022 Note (each an “Equity Payment”). Each time that the Company fails to pay an Equity Payment, the outstanding balance of the May 2022 Note automatically increases by 10%. Additionally, in the event the Company fails to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent the Company from issuing common or preferred stock until or unless the Company paid all past-due Equity Payments.

 

Additionally, upon each major default described in the May 2022 Note (including, without limitation, the failure to pay amounts under the May 2022 Note when due or to observe any covenant under the May 2022 Purchase Agreement (other than the requirement to make Equity Payments)), the outstanding balance of the May 2022 Note may be increased, at Streeterville’s option, by 15%, and for each other default, the outstanding balance of the May 2022 Note may be increased, at Streeterville’s option, by 5%, provided such increase can only occur three times each as to major defaults and minor defaults, and that such aggregate increase cannot exceed 30% of the balance of the May 2022 Note immediately prior to the first event of default.

 

The May 2022 Purchase Agreement and the May 2022 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. Pursuant to the May 2022 Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the May 2022 Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the May 2022 Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the May 2022 Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The May 2022 Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the May 2022 Note.

 

The May 2022 Purchase Agreement also provides for cross-indemnification by the parties in the event that they incur loss or damage related to, among other things, a breach of applicable representations, warranties, or covenants under the May 2022 Purchase Agreement.

 

In connection with the May 2022 Purchase Agreement and the May 2022 Note, the Company entered into a Security Agreement with Streeterville, pursuant to which the obligations of the Company are secured by substantially all of the assets of the Company.

 

IDS Settlement

 

On August 15, 2019, the Company entered into an Intellectual Property Purchase Agreement (“and the “IP Purchase Agreement”) with IDS Inc. (“IDS”). Pursuant to the IP Purchase 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 shares of restricted common stock (the “IDS Shares”) valued at $2.50 per share, or $4.9 million in aggregate.

 

23

 

 

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 (“Daniels”), which parties are affiliated with IDS, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. CACE-20-007088). Pursuant to the complaint, the Company alleged causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and sought a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 IDS Shares issued pursuant to the terms of the IP Purchase Agreement and preventing such persons from selling or transferring any IDS Shares, sought damages from the defendants, rescission of the IP Purchase Agreement, attorneys fees and other amounts. The defendants subsequently filed various counterclaims against the Company.

 

The complaint was filed because of IDS’ failure to deliver the IP Assets, certain other actions of IDS and the other of the defendants which the Company alleged constituted fraud. The Company sought to unwind the IP Purchase Agreement and sought damages for the Company due to IDS’ and the other defendants’ breaches thereunder. IDS, through its counsel, sent a letter threatening to bring a shareholders’ derivative action and/or direct suit against the Company. In response to such letter, the Company’s board of directors empowered the governance committee to conduct an internal investigation into the claims. The results of the investigation, conducted by several law firms, were presented to the Company’s board and the board concluded that no fraudulent activities occurred. The investigation concluded in October 2020.

 

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 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 pursuant to a court ordered mediation in February 2021.

 

Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (the “IP Purchase Amendment”). Pursuant to the IP Purchase Amendment, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2.85 million (the “Payment”), payable by way of an initial payment of $0.5 million, and twelve monthly payments of approximately $0.2 million (collectively, the “Required Payments”), with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of the Company or a third-party) (a “Paying Party”), for the benefit of the Company, which shall be treated for all purposes as a payment by the Company. As consideration for such Paying Party making such payment on behalf of the Company, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.6888 as to the first $0.5 million payment, and 0.691 as to the monthly payments (as applicable, the “Applicable Portion” of the IDS Shares). Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment, as discussed above, by the Company (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company.

 

Pursuant to the IP Purchase Amendment, on May 19, 2021, the Company made the initial payment of $0.5 million. Thereafter, the first 344,400 shares of common stock repurchased by the Company were returned to treasury and cancelled.

 

On September 27, 2021, the Court entered the Agreed Order. The Court ordered that:

 

(i)the Company resume the monthly payment on or before September 28, 2021 (which payment has not been made due to failure of IDS to provide required documents);

 

(ii)$24,583.33 shall be paid monthly to one of IDS’ counsel and the balance of each payment shall be paid to the IDS Defendants; and

 

(iii)$20,000 of the 12th monthly payments shall be withheld pending further order of the court; and

 

(iv)NextPlay (formerly Monaker) was awarded its fees and costs associated with the filing of the Motion.

 

As of February 28, 2022 and through the filing date of this Report, IDS still has not provided any of the necessary documents in order for the stock transfers.

 

24

 

 

Item 1A. Risk Factors

 

In addition to the other information in this Annual Report, readers should carefully consider the following important factors. These factors, among others, in some cases have affected, and/or in the future could affect, our financial condition and results of operations and could cause our future results to differ materially from those expressed or implied in any forward-looking statements that appear in this Annual Report or that we have made or will make elsewhere.

 

Risks Related to Our Business Generally

 

We need additional capital which may not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.

 

As of February 28, 2022, we had an accumulated deficit of $39.2 million. Net loss for the year ended February 28, 2022, amounted to $40.4 million. Our NextMedia division generated gross profits of $4.8 million, our NextFinTech division generated gross profits of $1.1 million and our NextTrip division generated gross profits of $0.02 million for the year ended February 28, 2022, and as of February 28, 2022, we had working capital of $6.3 million.

 

We are subject to all the substantial risks inherent in the development of a new business enterprise within extremely competitive industries. 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. Our future operating results depend on many factors, including, without limitation, 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 markets 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 cryptocurrency, gaming, banking and global travel industries in general, such as COVID-19, contractions in the cryptocurrency, gaming, banking and global travel industries, or regulatory changes, as compared to larger competitors.

 

We currently have a monthly cash requirement of approximately $1,500,000. 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 February 28, 2022, we had $27.5  million of current liabilities.

 

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 our 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 obtain additional funding to support the operations and to 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 financial statements included elsewhere in this Report 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, such 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 elsewhere in this Report 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.

 

25

 

 

Global pandemics, such as COVID-19 have had, and could in the future have, a material adverse impact our business, operating results, and liquidity.

 

Our business and operations have been, and could in the future be, adversely affected by health epidemics, such as the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including in the regions in which the Company and our clients and partners operate, and are significantly impacting economic activity and financial markets. Many marketers have decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity, and other COVID-related impacts, which have negatively impacted, and may continue to negatively impact, our revenue and results of operations. The COVID-19 pandemic, and governmental responses thereto, have also had an unprecedented effect on the global travel industry. The ability to travel has been curtailed through border closures, mandated testing, mandated travel restrictions and limited operations of hotels and airlines, which has resulted in unprecedented levels of cancellations and limited new travel bookings in our NextTrip division and may be further limited through additional voluntary or mandated closures of travel-related businesses. In addition, our clients’, advertisers’ and partners’ businesses or cash flows have been and may continue to be negatively impacted by COVID-19, which has and may continue to lead them to seek adjustments to payment terms or delay making payments or default on their payables, any of which may impact the timely receipt and/or collectability of our receivables.

 

The duration and severity of the COVID-19 pandemic are still uncertain and difficult to predict. The pandemic could continue to impede global economic activity for an extended period, even as restrictions have been lifted in many jurisdictions and vaccines are now widely available in the United States and in many other jurisdictions. 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 industries in which we operate. Moreover, any additional COVID-related measures, restrictions or changes in laws or regulations, whether in the United States or other countries, may exacerbate the negative impact of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows and liquidity position.

 

We currently anticipate an increase in year-over-year revenue for our fiscal 2023 year as compared to fiscal year 2022 (ended February 28, 2022). However, the ultimate extent of the COVID-19 pandemic and its impact on the industries in which we operate and overall economic activity is constantly changing and impossible to predict currently. Furthermore, we do not currently anticipate future revenues will be sufficient to support or operating expenses in the near term.

 

Economic downturns and market conditions beyond our control could adversely affect our business, financial condition and results of operations.

 

Our business depends on the overall demand for advertising, video games, financial services, travel and other technology offerings. Economic downturns or unstable market conditions may cause advertisers to decrease or pause their advertising budgets, which could reduce spend though our IGA and real-time rewards platform. Similarly, economic downturns could also decrease the amount of disposable income gamers have available for the purchase of our video game offerings, customers have to invest in cryptocurrencies, and/or that our customers have to travel. Additionally, as described above, public health crises may disrupt the operations of our customers and partners for an unknown period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact their business and results of operations, including cash flows. Economic downturns and less than optimal market conditions could adversely affect our business, financial condition and results of operations.

 

We have a limited operating history in certain of the industries that we currently operate in and have incurred significant operating losses since inception. We may never become profitable or, if achieved, be able to sustain profitability.

 

There is no significant operating history upon which to base any assumption as to the likelihood that certain of our business endeavors will prove successful, and we may never achieve profitable operations. We currently expect to incur net losses for the foreseeable future. Even if we do achieve profitability, there can be no guarantee that we will be able to sustain profitability. As a result of the acquisition of HotPlay in 2021 (and subsequent acquisitions), our business model has changed significantly in the last year, and we have limited experience in certain of the industries that we now operate in. If we are unsuccessful in infiltrating and selling our products and services in the industries that we operate in, it will have a material adverse impact on our business, financial condition and results of operations.

 

26

 

 

We have significant indebtedness, which could adversely affect our business and financial condition.

 

We currently have significant indebtedness. As of February 28, 2022, we had total current liabilities of $27.5  million. Risks relating to our indebtedness include, without limitation:

 

  increasing our vulnerability to general adverse economic and industry conditions;
     
  requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
     
  making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
     
  limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;
     
  possibly placing us at a competitive disadvantage compared to our competitors that have less debt; and
     
  limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable.

 

Our obligations under the October 2021 and May 2022 Streeterville Notes are secured by a first priority security interest in substantially all of our assets.

 

On October 22, 2021 and May 5, 2022, we entered into Note Purchase Agreements with Streeterville, pursuant to which we sold Streeterville the October 2021 and May 2022 Streeterville Notes, in the aggregate principal amount of $2,765,000. The October 2021 and May 2022 Streeterville Notes all bear interest at a rate of 10% per annum and mature 12 months from their date of issuance. For so long as any of the notes remain outstanding, we have agreed to pay to Streeterville 20% of the gross proceeds that we receive from the sale of our 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 notes, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the Streeterville Note.

 

In connection with issuance of the October 2021 and May 2022 Streeterville Notes, we entered into Security Agreements with Streeterville, pursuant to which our obligations to Streeterville under the notes are secured by substantially all of our assets. As such, Streeterville may enforce its security interests over our assets and/or our subsidiaries that secure the repayment of such obligations, take control of our assets and operations, force us to seek bankruptcy protection or force us to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company could become worthless.

 

Our ability to service our indebtedness will depend on our ability to generate cash and/or raise additional capital in the future.

 

Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future and/or raise additional capital. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. We may continue to not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, and we may not be able to obtain additional financing on terms favorable to us (if at all), either of which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs, and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.

 

27

 

 

We have agreed to hold meetings of our stockholders every 90 days for purposes of removing the Floor Price of certain Warrants, which may be time consuming and expensive.

 

On November 3, 2021, we sold Warrants (the “2021 Warrants”) to purchase an aggregate of 14,240,508 shares of common stock, together with 18,987,342 shares of our common stock, to certain accredited investors in a registered direct offering. Each 2021 Warrant has an initial exercise price of $1.97 per share (the Floor Price), and may be exercised commencing six months after the issuance date and terminating on the fifth anniversary thereof. The 2021 Warrants provide that if at any time the 2021 Warrants are outstanding, we issue or enter into any agreement to issue, or are deemed to have issued or entered into an agreement to issue, certain securities for consideration less than the then current exercise price of the 2021 Warrants, the exercise price of such 2021 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 we have received stockholder approval to reduce the exercise price of the 2021 Warrants below the Floor Price, no such adjustment to the exercise price may be made.

 

We have agreed to hold a special meeting of our stockholders every 90 days for the life of the 2021 Warrants to obtain stockholder approval of the removal of the Floor Price, which stockholder approval may never be obtained. Holding stockholder meetings is expensive and requires significant time and efforts of our management. If stockholder approval is not obtained during the life of the 2021 Warrants, such expenses and diversion of management’s time and efforts could have a material adverse effect on our financial condition, business, and operations.

 

Our long-term success depends, in part, on our ability to continue to expand our operations outside of the United States and, as a result, our business is susceptible to risks associated with international operations.

 

We currently conduct business throughout the world and expect that international sales (including in emerging markets in Asia and elsewhere) will account for a significant portion of our total revenues and profits in the near term. We are making significant investments to continue to build our international operations and to expand globally, which may include acquiring international businesses and conducting business in jurisdictions where we do not currently operate. Managing a global organization is difficult, time consuming and expensive, and any international expansion efforts that we undertake may not be profitable in the near or long term or otherwise be successful. In addition, conducting international operations subjects us to risks that include, amongst other things:

 

  the cost and resources required to localize our services, which requires the translation of our websites and their adaptation for local practices and legal and regulatory requirements;
     
  adjusting the products and services we provide in foreign jurisdictions, as needed, to better address the needs of local owners, managers, distributors and travelers, and the threats of local competitors;
     
  being subject to foreign laws and regulations, including those laws governing Internet activities, email messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices, which may be less developed, less predictable, more restrictive, and less familiar, and which may adversely affect financial results in certain regions;
     
  competition with companies that understand the local market better than we do or who have pre-existing relationships with property owners, managers, distributors and travelers in those markets;
     
  legal uncertainty regarding our liability for the transactions and content on our websites, including uncertainty resulting from unique local laws or a lack of clear precedent of applicable law;
     
  lack of familiarity with, and the burden of complying with, a wide variety of other foreign laws, legal standards and foreign regulatory requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject to unexpected changes;
     
  laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;
     
  adapting to variations in foreign payment forms;
     
  difficulties in managing and staffing international operations and establishing or maintaining operational efficiencies;
     
  difficulties in establishing and maintaining adequate internal controls and security over our data and systems;
     
  currency exchange restrictions and fluctuations in currency exchange rates;
     
  potentially adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;

 

28

 

 

  increased financial accounting and reporting burdens and complexities and difficulties in implementing and maintaining adequate internal controls;

 

  political, social and economic instability abroad, war, terrorist attacks and security concerns in general;

 

  the potential failure of financial institutions internationally;
     
  varying effects of global pandemics and epidemics, including COVID-19 on different countries;
     
  reduced or varied protection for intellectual property rights in some countries; and
     
  higher telecommunications and Internet service provider costs.

 

Operating in international markets also requires significant management attention and financial resources. We cannot guarantee that our international expansion efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs.

 

We are exposed to fluctuations in currency exchange rates.

 

Because we conduct a significant portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. In addition, fluctuation in our mix of U.S. and foreign currency denominated transactions may contribute to this effect as exchange rates vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other operating results may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation. For example, if the U.S. dollar strengthens relative to foreign currencies our non-U.S. revenue would be adversely affected when translated into U.S. dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue when translated into U.S. dollars. We may enter into hedging arrangements in order to manage foreign currency exposure but such activity may not completely eliminate fluctuations in our operating results. 

 

We may be adversely affected by the effects of inflation.

 

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

 

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

 

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.

 

Additionally, the recent military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

 

Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Report.

 

29

 

 

We currently rely on a small number of third-party service providers to host and deliver a significant portion of our products and services, and any interruptions or delays in services from these third parties could impair the delivery of our products and services and harm our business.

 

We rely on third-party service providers for numerous products and services, including payment processing services, data center services, web hosting services, online gaming platforms, insurance products for customers and travelers and some customer service functions. We rely on these companies to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.

 

We use a combination of third-party data centers to host our websites and core services. We do not control the operation of any of the third-party data center facilities we use. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place. As a result, the occurrence of any of these events, a decision by our third-party service providers to close their data center facilities or to terminate their contracts with us without adequate notice or other unanticipated problems could result in loss of data as well as a significant interruption in our products and services and harm to our reputation and brand.

 

Furthermore, we depend on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason, or if their services are disrupted, we could experience disruption in our products and services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business and reputation.

  

If these companies experience difficulties and are not able to provide services in a reliable and secure manner, if they do not operate in compliance with applicable laws, rules and regulations and, with respect to payment and card processing companies, if they are unable to effectively combat the use of fraudulent payments on our websites or games, our results of operations and financial positions could be materially and adversely affected. In addition, if such third-party service providers were to cease operations or face other business disruption either temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs and delays until we find or develop an equivalent replacement, any of which could have an adverse impact on our business and financial performance.

 

Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

 

From time to time, we are involved in lawsuits, regulatory inquiries, and may be involved in governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our results of operations and liquidity.

 

Changes in our effective tax rate could harm our future operating results.

 

We are subject to federal and state income taxes in the United States and in various foreign jurisdictions. Our provision for income taxes and our effective tax rate are subject to volatility and could be adversely affected by several circumstances, including:

 

  earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
     
  effects of certain non-tax-deductible expenses;
     
  changes in the valuation of our deferred tax assets and liabilities;
     
  transfer pricing adjustments, including the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;
     
  adverse outcomes resulting from any tax audit;
     
  our ability to utilize our net operating losses and other deferred tax assets; and
     
  changes in accounting principles or changes in tax laws and regulations, or the application of the tax laws and regulations, including possible U.S. changes to the deductibility of expenses attributable to foreign income, or the foreign tax credit rules.

 

Significant judgment is required in the application of accounting guidance relating to uncertainty in income taxes. If tax authorities challenge our tax positions and any such challenges are settled unfavorably, it could adversely impact our provision for income taxes.

 

30

 

 

The industries in which we participate are highly competitive, and we may be unable to compete successfully with our current or future competitors.

 

The advertising, gaming, communications, FinTech, digital assets, and travel industries are all highly competitive. Our NextMedia business competes with companies that sell advertising, as well as with companies that provide social, media, and communication products and services that are designed to engage users on mobile devices and online. We face significant competition in every aspect of our NextMedia business, including from companies that facilitate communication and the sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other forms of media content, and companies that provide development platforms for applications developers. Additionally, we have seen, and expect to continue to see, new competitors enter the market for mobile games and existing competitors to allocate more resources to developing and marketing competing mobile games and applications.

 

The digital assets industry is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. Our NextFinTech business competes with other FinTech companies, including a number of companies operating both within the United States and abroad, and both those that focus on traditional financial services and those that focus on digital assets-based services. We expect competition in this sector to further intensify in the future as existing and new competitors introduce new products or enhance existing products.

 

Our NextTrip division is also subject to intense competition. The market to provide listing, search and marketing services for the ALR industry is very competitive and highly fragmented. In addition, the barriers to entry are low and new competitors may enter. There are thousands of vacation rental listing websites that compete directly with us for listings, travelers, or both, such as Booking.com, HomeAway.com, Airbnb, and TripAdvisor. Many of these competitors offer free or heavily discounted listings or focus on a particular geographic location or a specific type of rental property. Some of them also aggregate property listings obtained through various sources, including the websites of property managers some of whom will also market their properties on our websites. Competitors also operate websites directed at the wider fragmented travel lodging market, such as Airbnb and HomeAway, by listing either rooms or the owner’s primary home. We also compete with online travel agency websites, such as Expedia, Hotels.com, Kayak, Priceline, Booking.com, Orbitz and Travelocity, which have traditionally provided comprehensive travel services and some of whom are now expanding into the vacation rental category.

 

In addition, many of our current or potential competitors are larger, have longer operating histories, and have greater financial, technical, marketing, research and development, and other resources than we do. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. Many of our competitors offer products and services directed at more specific markets than those we target, enabling these competitors to focus a greater proportion of their efforts and resources on these markets. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities and technologies. Furthermore, because of these advantages, existing and potential partners, customers, clients, and distributors might accept our competitors’ offerings, even if they may be inferior to ours. For all of these reasons, we may not be able to compete successfully against our current and future competitors. Any material decrease in demand for our products or services may have a material adverse effect on our business, financial condition, and results of operations.

 

Our failure to be current in our filings with the SEC could pose significant risks to our business, which could, individually or in the aggregate, materially and adversely affect our financial condition and results of operations.

 

Despite our efforts, we were unable to file this Report with the SEC on or before the applicable filing deadline. We may face various consequences as a result, as further discussed below, which could, individually or in the aggregate have a material adverse affect on our financial condition and results of operations.

 

Under the Exchange Act, the Company (as a reporting company) is required to file certain periodic and current reports with the SEC in order to provide investors important financial and business information related to the Company. Examples of these reports include the annually filed Form 10-K and the quarterly filed Form 10-Q. Periodic reports help investors to make informed investment decisions about the purchase or sale of a reporting company’s securities. The timely and complete submission of periodic reports provides investors with information to help them make informed investment decisions. The SEC’s Divisions of Enforcement and Corporation Finance jointly established the Delinquent Filings Program in 2004 to encourage reporting companies that are delinquent in filing their periodic reports to submit their periodic reports or rectify deficient periodic reports. If a reporting company identified as a delinquent filer fails to submit its periodic reports, Section 12(k) of the Exchange Act gives the SEC the authority to suspend trading in a security for up to 10 trading days if the SEC believes that a suspension is required to protect investors and the public interest. A trading suspension by the SEC halts the trading in a security on all trading platforms. In addition, Section 12(j) gives the SEC the authority to revoke, or suspend for up to twelve months, an issuer’s securities registration if, after an administrative hearing, the SEC finds that an issuer violated the Exchange Act by failing to file its periodic reports.

 

Additionally, issuers who have not timely filed their periodic reports lose their eligibility to offer and sell their securities under a Form S-3 Registration statement, which can make it more difficult for companies to raise funds in a timely and cost effective manner, or at all. Pursuant to Form S-3, unless relief is provided by the SEC, the loss of eligibility to use Form S-3 extends for a period of 12 months from the delinquent filing. As a result, unless we are able to obtain relief from the SEC, we will not be able to register any new securities on certain registration statements under the Securities Act, such as Forms S-3, until we have filed all reports required under the Exchange Act for a continuous period of 12 months. Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.

 

Our failure to timely file this Report SEC could have additional adverse impacts on our ability to, among other things, (i) access our ATM Offering facility; (ii) continue to have our common stock listed for quotation on the Nasdaq Capital Market; (iii) consummate certain strategic transactions; (iv) attract and retain key employees, or (v) raise funds in the public markets, and any of these events could materially and adversely affect our financial condition and results of operations.

 

Our common stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements.

 

On January 26, 2022, the Company received a notification letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock was below $1.00 per share for 30 consecutive trading days, the Company is not currently in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The notification has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market, and, therefore, the Company’s listing remains fully effective.

 

31

 

 

In accordance with Nasdaq Marketplace Rule 58I0(c)(3)(A), the Company has a period of 180 calendar days from January 26, 2022, or until July 25, 2022, to regain compliance with the Minimum Bid Price Requirement. If at any time before July 25, 2022, the closing bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending on July 25, 2022, then Nasdaq may grant the Company a second 180 calendar day grace period to regain compliance, provided the Company (i) meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for the Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) the Company notifies Nasdaq of its intent to cure the deficiency.

 

The Company intends to continue actively monitoring the closing bid price for the Company’s common stock between now and July 25, 2022 and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance within the allotted compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the Minimum Bid Price Requirement during the 180 days compliance period, secure a second period of 180 calendar days to regain compliance, or maintain compliance with the other Nasdaq listing requirements.

 

If our common stock is delisted from Nasdaq, it could come within the definition of “penny stock” as defined in the Exchange Act and would then be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

 

If we do not successfully implement our acquisition strategies, the businesses and/or assets that we have acquired or invested in do not perform as expected, or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed.

 

We face competition within our industry for acquisitions of businesses, technologies and assets, and, in the future, such competition may become more intense. As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms, or at all, because of such competition. Furthermore, if we enter into negotiations that are not ultimately consummated, those negotiations could result in the diversion of management time and significant out-of-pocket costs. Even if we are able to complete such acquisitions, we may additionally expend significant amounts of cash or incur substantial debt to finance them, which indebtedness could result in restrictions on our business and use of available cash. In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in dilution of our existing stockholders. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize their benefits.

 

Any businesses that we acquire or invested in, or those that we have already acquired or invested in, may not perform as well as we expect. If the companies we have invested in do not perform well, our investments could become impaired and our financial results could be negatively impacted. Failure to manage and successfully integrate acquired businesses and technologies could materially harm our business, financial condition or operating results. Additionally, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies and assets, including as they relate to creation, ownership and rights in intellectual property, existence of open-source software and compliance with laws and contractual requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual time limitations and limitations of liability.

 

32

 

 

Some members of our senior management team have limited experience in the day-to-day operations of the industries in which our businesses operate.

 

Some members of our senior management team have limited experience with respect to certain of the industries in which we operate, including commercial banking (NextBank) and ICOs (Longroot), and may have limited experience in other industries and markets which we may choose to enter. Our management team relies on the knowledge and talent of the employees in our operating subsidiaries to successfully operate these businesses on a day-to-day basis. We may not be able to retain, hire or train personnel as quickly or efficiently as we need or on terms that are acceptable to us. An inability to efficiently operate our businesses would have a material adverse effect on our business, financial conditions, results of operations, and prospects.

 

Our future success depends on the continuing efforts of our key employees and our ability to attract, hire, retain and motivate highly skilled employees in the future.

 

Our future success depends on the continuing efforts of certain of our key employees including, without limitation, Nithinan Boonyawattanapisut (our Co-Chief Executive Officer and a director), William Kerby (our Co-Chief Executive Officer and a director), Sirapop “Kent” Taepakdee (our Chief Financial Officer), Timothy Sikora (our Chief Information Officer), Andrew Greaves (our Chief Operating Officer), and Mark Vange (our Chief Technology Officer). We rely on the leadership, knowledge and experience that our executive officers provide. We also rely in large part on our ability to attract and retain high-quality operating personnel, as well as skilled technical and marketing personnel. The market for talent in our areas of operation is intensely competitive. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards.

 

Employee turnover, including changes in our management team, could disrupt our business. All of our employees may terminate his or her employment with us at any time for any reason. The loss of one or more of our executive officers, or our inability to attract and retain highly skilled employees, could have an adverse effect on our business, financial condition and results of operations.

 

Risks Related to Our NextMedia Business

 

We rely on relationships with developers to provide an extensive game portfolio and sufficient advertising spaces.

 

Our ability to sell advertising depends on establishing developers’ interest in integrating their mobile games with our platform. To provide sufficient inventory of advertising space, we need to maintain good relationships with developers and ensure our software does not impact any performance or weaken the security of the games that it integrates with. If our relationship with developers terminates for any reason, or if the commercial terms of our relationships are changed or do not continue to be renewed on favorable terms, we would need to qualify new developers, which could adversely impact our revenue and its business. Furthermore, in the event that game engines or other software frameworks that are used commonly by developers offer built-in features for advertising and rewards similar to the way we do, this could result in increased competition as developers may choose those options over ours.

 

We depend on servers and networks to operate our games and advertising. If we were to lose functionality in any of these areas for any reason, our businesses may be negatively impacted.

 

We rely on the continuous operation of servers, some of which are owned and operated by third parties. Although we strive to maintain more than sufficient server capacity, and provide for active redundancy in the event of limited hardware failure, any broad-based catastrophic server malfunction, a significant service-disrupting attack or intrusion by hackers that circumvents security measures, a failure of disaster recovery service or the failure of a company on which we are relying for server capacity to provide that capacity for whatever reason would likely degrade or interrupt the functionality of our software and products with online features, and could prevent the operation of such software and products altogether, any of which could result in the loss of sales.

 

We also rely on platforms and networks operated by third parties, such as the Apple Appstore and Google Play store, for the sale and digital delivery of downloadable games. An extended interruption to any of these services could adversely affect our ability to operate our NextMedia business, which could result in a loss of revenue and otherwise negatively impact our business.

 

33

 

 

Our 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 our business.

 

Our products and internal systems rely on software and hardware that is highly technical and complex. Additionally, our products and internal systems depend on the ability of such software and hardware to store, retrieve, process, and manage immense amounts of data. The software and hardware on which we rely may contain errors, bugs, or vulnerabilities, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives. Some errors, bugs, or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use. Errors, bugs, vulnerabilities, design defects, or technical limitations within the software and hardware on which we rely have in the past led to, and may in the future lead to, outcomes including a negative experience for users and marketers who use such products; compromised ability of such products to perform in a manner consistent with our terms, contracts, or policies; delayed product introductions or enhancements; targeting, measurement, or billing errors; compromised ability to protect user data and/or our intellectual property; or reductions in our ability to provide some or all of our related services. In addition, any errors, bugs, vulnerabilities, or defects in our systems or the software and hardware on which we rely, failures to properly address or mitigate the technical limitations in our systems, or associated degradations or interruptions of service or failures to fulfill commitments to our users, have in the past led to, and may in the future lead to, outcomes including damage to our reputation, loss of users, loss of marketers, loss of revenue, regulatory inquiries, litigation, or liability for fines, damages, or other remedies, any of which could adversely affect our business and financial results.

 

The products or services we release may contain defects, bugs or errors.

 

Our products and services are extremely complex software programs and are difficult to develop and distribute. We have quality controls in place to detect defects, bugs or other errors in their products and services before they are released. Nonetheless, these quality controls are subject to human error, overriding, and resource or technical constraints. Our quality controls and preventative measures may not be effective in detecting all defects, bugs or errors in our products and services before they have been released into the marketplace. In such an event, the technological reliability and stability of our products and services could be below our standards and the standards of our players, and our reputation, brand and sales could be adversely affected. In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability or sale of the product or service or expend significant resources to cure the defect, bug or error, each of which could significantly harm our business and operating results.

 

Our business partners may be unable to honor their obligations to us, or their actions may put us at risk.

 

We rely on various business partners, including third-party service providers, vendors, licensing partners, development partners, and licensees in many areas of our business. Their actions may put our business, reputation and brand at risk. In many cases, our business partners may be given access to sensitive and proprietary information in order to provide services and support to their teams, and they may misappropriate such information and engage in unauthorized use of it. In addition, the failure of these third parties to provide adequate services and technologies, or their failure to adequately maintain or update their services and technologies, could result in a disruption to our business operations. Further, disruptions in the financial markets, economic downturns including related to the COVID-19 pandemic, poor business decisions, or reputational harm may adversely affect our partners and they may not be able to continue honoring their obligations to us or could cease their arrangements with us. Alternative arrangements and services may not be available to us on commercially reasonable terms, if it all, or we may experience business interruptions upon a transition to an alternative partner or vendor. If we lose one or more significant business partners, our business could be harmed and our financial results could be materially affected.

 

We derive a significant portion of our revenues from advertisements, and if any events occur that negatively impact our relationships with advertisers, our advertising revenues and operating results would be negatively impacted.

 

We derive a significant portion of our revenues though advertisements and in-game offers. We must maintain good relationships with advertisers to ensure a sufficient inventory of advertisements and offers. Online advertising, including through mobile games and other mobile applications, is an intensely competitive industry. Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers. If our relationship with any advertising partners terminates for any reason, or if the commercial terms of our relationships are changed or do not continue to be renewed on favorable terms, we would need to qualify new advertising partners, which could negatively impact our revenues, at least in the short term.

 

In addition, Internet-connected devices and operating systems controlled by third parties increasingly contain features that allow device users to disable functionality that allows for the delivery of advertising on their devices. Device and browser manufacturers may include or expand these features as part of their standard device specifications.

 

34

 

 

Failure to launch a product for a major client, may adversely affect our growth.

 

We have an agreement in place with one of Southeast Asia’s largest retailers to develop a gamified virtual store for their e-commerce business. The virtual store is planned to be integrated with a casual game owned by us, and we intend to deliver native ads and coupons to both the virtual store and the integrated casual game. We believe that the launch of this product is critical, and such launch is expected to lead to significant growth of the Company, given the retailer’s reputation and existing large customer base. However, the virtual store may fail to launch due to our failure to deliver or the retailer prematurely terminating the agreement. We believe that any such failure to launch could have an adverse impact on our near-term growth prospects.

 

HotPlay’s Go-to-market (“GTM”) strategy and timeline dependent on ability to recruit key development roles in FY23.

 

The current timeline for commercial launch of the HotPlay IGA product is dependent on us filling several open senior positions within the HotPlay development team by the end of FY23, within the budget allocated to do so. Given the current global competitive climate for software developers and the rising costs associated with hiring these resources, amongst other things, there is a risk that we may not be able to recruit the necessary resources in the required timeframe to be able to deliver on the HotPlay revenue forecasts for FY23. If we are unable to do so, our operating results may suffer.

 

Zappware’s TVaaS service dependency on encoding hardware availability

 

Zappware’s TvaaS media platform is dependent on our ability to source the necessary encoding hardware for each new Telco Operator onboarded. The current global shortage of microchips is impacting the manufacturing, and as a result, the availability of this type of hardware for both PaaS and TVaaS providers globally. This could result in delays to the commercial launch of the TVaaS platform for each new client included in our revenue forecast, which in turn could negatively impact the revenues returned for the Zappware portion of the NextMedia business unit in FY23.

 

Risks Related to Our NextFinTech Business

 

Although Longroot is a licensed ICO Portal in Thailand, it has not yet closed any offerings, and there can be no assurances that it will.

 

Longroot recently received its license to serve as an ICO Portal in Thailand, and has not yet closed any offerings. There can be no assurances that Longroot will close any offerings in the near future, if ever, or if it does, that any such offerings will be profitable. If Longroot is engaged to provide any such services, it could face claims from any dissatisfied clients and could incur liabilities in rendering any such services, which could damage our reputation and adversely affect other parts of our business. This risk is exacerbated by the fact that our management has limited ICO, and may not successfully or efficiently manage Longroot, which is subject to significant regulatory oversight and reporting obligations under Thai securities laws.

 

Acceptance and/or widespread use of digital assets is uncertain.

 

Currently, there is a relatively small use of digital assets in the retail and commercial marketplace for goods or services. In comparison, there is a relatively large use by speculators contributing to price volatility. Furthermore, although security tokens are increasingly being adopted by institutions, these are still at a nascent stage. There is no guarantee that digital assets will gain widespread adoption and a lack of acceptance or decline in acceptances could have a material adverse effect on our NextFinTech business, prospects or operations.

 

Digital Asset exchanges and other trading venues are relatively new.

 

Digital asset market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, commodities or currencies. When digital asset exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, such events could result in a reduction in digital asset prices, impact the success of our NextFinTech business, and have a material adverse effect on our business, prospects and operations.

 

35

 

 

There are cyber security risks related to digital asset trading.

 

Trading platforms and third-party service providers may be vulnerable to hacking or other malicious activity. As with any computer code generally, flaws in digital asset codes may be exposed to such negative activities. Several errors and defects have been found previously, including those that disabled some functionality for users of digital asset trading platforms and exposed such users’ personal information. Flaws in and exploitations of the source code allowing malicious actors to take or create money have previously occurred. Any of the above events affecting us may adversely affect our operations and results of operations.

 

We depend on third party cryptographic and algorithmic protocols governing the issuance of and transactions in digital assets.

 

Digital assets issued by us depend on the infrastructure of third party cryptographic and algorithmic protocols. The growth of this industry in general, and the use of digital assets in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur and is unpredictable. Furthermore, the occurrence of security or cryptography issues might adversely affect our ability to operate in the industry.

 

Our tokens might be used for illegal or improper purposes, which could expose us to additional liability and harm our business.

 

Our tokens remain susceptible to potentially illegal or improper uses, as criminals are using increasingly sophisticated methods to engage in illegal activities involving internet services, such as money laundering, terrorist financing, drug trafficking, human trafficking, illegal online gaming, romance and other online scams, prohibited sales of pharmaceuticals, fraudulent sale of goods or services, piracy of software, movies, music and other copyrighted or trademarked goods, unauthorized uses of credit and debit cards or bank accounts and similar misconduct. Tokenholders may also encourage, promote, facilitate or instruct others to engage in illegal activities. If the measures we have taken are too restrictive and inadvertently screen proper transactions, this could diminish customer experience which could harm our business.

 

The performance of digital assets is dependent on the performance of the issuer and underlying asset, which is inherently unpredictable and may result in reputational damage should they underperform.

 

Longroot helps raise capital for issuers primarily via the sale of digital assets backed by an underlying business or asset. Prior to conducting the actual fund raise, Longroot conducts extensive due diligence on the issuer and underlying business or asset to determine the feasibility of the project. However, there can be no assurances that the digital asset will perform well, regardless of the amount of due diligence and other actions taken by Longroot. The performance of the digital asset after issuance depends on various factors, such as market conditions, management and performance of the business or asset, and market acceptance. Many of these factors are beyond our control, and may result in the digital asset underperforming, leading to reputational damage, which may negatively impact our ability to gain clients.

 

Developing NextBank into a comprehensive FinTech solution provider involves a high risk of complexity, may require substantial resources and costs, and is subject to obtaining regulatory approval.

 

NextBank is in the process of developing a range of products and technologies to support the digital asset industry, and aims to become a comprehensive FinTech solution provider. The development of such technologies involves a high level of complexity, requires sophisticated security implementations, and integration with third-party tools. Furthermore, the implementation and launch of certain products may be subject to regulatory approvals from the Office of the Commission of Financial Institutions (“OCIF”) or regulators in other jurisdictions. We may not be able to successfully develop and/or implement the products, which may negatively affect our ability to generate revenue and could have a material adverse effect on our results of operations.

 

36

 

 

The NextBank mobile application development has, to date, been partially developed by Ukrainian developers, which has been impacted by the ongoing conflict between Ukraine and Russia.

 

The NextBank mobile application development has, to date, been partially developed by Ukrainian developers. Since the beginning of the ongoing conflict between Ukraine and Russia, the rate of development by the affected developers has slowed down. We have since increased our development capacity by hiring developers in other countries in order to mitigate this concern. However, no assurances can be provided that we will be able to hire enough developers elsewhere to complete the development of our mobile application in accordance with our timeline, and given the uncertainty surrounding the ongoing conflict, there is still a risk that our development capacity may continue to be negatively affected while the conflict is ongoing.

 

NextBank’s ability to originate loans in subject to risk associated with economic and market conditions.

 

NextBank currently generates most of its revenue through the origination and subsequent sale of loans issued to real estate developers in the United States. Poor economic and market conditions, including a potential recession, may negatively impact market sentiment, decreasing the demand for housing development and purchases, which would adversely affect our operating income and results of operations. Although NextBank is currently planning to expand the profile of the loan recipients to mitigate this risk, such actions may not fully mitigate the risk in times of economic downturn.

 

NextBank uses correspondent banks and is subject to risk associated with termination of such relationships, which may negatively impact its operations.

 

NextBank currently relies on correspondent relationships with banks in the U.S. to clear transactions directly through the Federal Reserve System and provide services to a portion of our clients. We intend to further expand the network of banks we have correspondent relationships with to provide a range of services such as multi-currency accounts. In such a relationship, the correspondent banks are liable for regulatory compliance of NextBank. There is a risk that current and future correspondent banks may terminate the relationship due to regulatory concerns or simply for convenience. This may limit our ability to provide services to certain clients and could negatively impact our operating income.

 

Risks Related to Our NextTrip Business

 

If we are unable to introduce new or upgraded products, services or features that distributors, travelers or property owners and managers recognize as valuable, we may fail to drive additional travelers to the websites of our distributors, drive additional travelers to our websites, retain existing property owners and managers, attract new property owners and managers, retain existing distributors, and/or attract new distributors. Our efforts to develop new and upgraded services and products could require us to incur significant costs.

 

In order to attract travelers to our distributors, as well as our own online marketplace, while retaining, and attracting new, distributors, property owners and managers, we will need to continue to invest in the development of new products, services and features that both add value for travelers, distributors, property owners and managers and differentiate us from our competitors. The success of new products, services and features depends on several factors, including the timely completion, introduction and market acceptance of the product, service or feature. If travelers, distributors, property owners or managers do not recognize the value of our new services or features, they may choose not to utilize our products or list on our online marketplace.

 

37

 

 

The development and delivery of new or upgraded products, services or features involves inherent hazards and difficulties, and is costly. Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks, and we may not be able to manage these product developments and enhancements successfully. We may not succeed in developing new or upgraded products, services or features or new or upgraded products, services or features may not work as intended or provide value. In addition, some new or upgraded products, services or features may be difficult for us to market and may also involve unfavorable pricing. Even if we succeed, we cannot guarantee that our property owners and managers will respond favorably.

 

In addition to developing our own improvements, we may choose to license or otherwise integrate applications, content and data from third parties. The introduction of these improvements imposes costs on us and creates a risk that we may be unable to continue to access these technologies and content on commercially reasonable terms, or at all. In the event we fail to develop new or upgraded products, services or features, the demand for our services and ultimately our results of operations may be adversely affected.

 

If we are unable to attract and maintain a critical mass of ALR listings and travelers, whether due to competition or other factors, our marketplace will become less valuable to property owners and managers and to travelers, and it could decrease our ability to generate revenue and net income in the future.

 

We anticipate that moving forward, most of our NextTrip division revenue will be generated when ALRs are booked by either customers to our website or by customers to distributors we provide ALRs to. Our revenue will be the difference between the funds received from our customers and distributors versus the net amount owed to the property owner/manager at the time of booking. Accordingly, our success primarily depends on our ability to attract owners, managers and travelers to NextTrip.com, NextTripVacations.com, Maupintour.com and to distributors. If property owners and managers choose not to market their ALRs through our websites, or instead list them with a competitor, we may be unable to offer a sufficient supply and variety of ALRs to attract travelers to our websites. Similarly, our volume of new and renewal listings may suffer if we are unable to attract travelers to our websites or, to the distributors. As a result of any of these events, the perceived usefulness of our online marketplace and the relationships with distributors may decline, and, consequently, it could significantly decrease our ability to generate revenue and net income in the future.

 

Our revenues and results of operations are subject to the ability of our distributors and partners to integrate our ALRs with their websites, and the timing of such integrations.

 

The integration of our ALRs with our distributors’ and partners’ websites is complicated and may involve various software components and application program interfaces (“APIs”). The timing of the integration of our distributors’ ability to access our ALR offerings stored in our Booking Engine is significantly dependent on the ability of such distributors to implement processes, procedures and in some cases, software or systems to integrate with our API, which will enable them to list our ALRs on their websites. We have little to no control over those processes, or the timing of such integrations.

 

Our NextTrip division’s future revenues and results of operations are substantially dependent on the timing of those integrations and in some cases the willingness of our distributors and partners to undertake additional steps and processes in order to provide us what we need, and in the form that we need, to implement such integrations. The failure of our partners and/or distributors to undertake the actions required so that we can successfully integrate our offerings, and/or any delay in such integrations, may have a negative effect on our revenues and results of operations. The actions of our partners and distributors, and/or their ability to undertake such actions, may further be limited by the effects of COVID-19.

 

If we are not able to maintain and enhance our NextTrip brand and the brands associated with our websites, our reputation and business may suffer.

 

It is important for us to maintain and enhance our brand identity in order to attract and retain property owners, managers, distributors and travelers. The successful promotion of our brands will depend largely on our marketing and public relations efforts. We expect that the promotion of our brands will require us to make substantial investments, and, as our market becomes more competitive, these branding initiatives may become increasingly difficult and expensive. In addition, we may not be able to successfully build our NextTrip brand identity without losing value associated with, or decreasing the effectiveness of, our other brand identities. If we do not successfully maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause property owners and managers to terminate or elect not to renew their listings with us. In addition, our brand promotion activities may not be successful or may not yield revenue sufficient to offset their cost, which could adversely affect our reputation and business.

 

38

 

 

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 may receive complaints related to certain activities on our websites, including disputes over the authenticity of an ALR listing. We may be subject to claims of liability for unauthorized use of credit card and/or bank account information, identity theft, phishing attacks, potential breaches of system security, libel, and infringement of third-party copyrights, trademarks or other intellectual property rights. Fraud may be purported by owners or managers listing properties which either do not exist or are significantly not as described in the listing. The methods used by perpetrators of fraud constantly evolve and are complex. Moreover, our trust and security measures may not detect all fraudulent activity. Consequently, we expect to receive complaints from travelers and requests for reimbursement of their rental fees, as well as actual or threatened related legal action against us in the usual course of business.

 

We may also be subject to claims of liability based on events that occur during travelers’ stays at ALRs, including those related to robbery, injury, death, and other similar incidents. These types of claims could increase our operating costs and adversely affect our business and results of operations, even if these claims do not result in liability, as we incur costs related to investigation and defense. The available terms and conditions of our websites specifically state that we are exempt from any liability to travelers relating to these matters. However, the enforceability of these terms varies from jurisdiction to jurisdiction, and the laws in this area are consistently evolving. If we are subject to liability or claims of liability relating to the acts of our property owners or managers, or due to fraudulent listings, we may be subject to negative publicity, incur additional expenses and be subject to liability, any of which could harm our business and our operating results.

 

Regulatory Risks Relating to Our Operations

 

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, and consumer protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

 

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, electronic contracts and other communications, competition, consumer protection, product liability, telecommunications, e-commerce, taxation, economic or other trade prohibitions or sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

 

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industries in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. Proposed or new legislation and regulations could also significantly affect our business. These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions, may in the future lead to unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity and reputational harm, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices.

 

Compliance with the E.U. General Data Protection Regulation (“GDPR”), Thailand’s Personal Data Protection Act (“PDPA”), the California Consumer Privacy Act (“CCPA”), and other regulatory and legislative privacy requirements will require significant operational resources and modifications to our business practices, and any compliance failures may have a material adverse effect on our business, reputation, and financial results.

 

We are engaged in ongoing privacy compliance and oversight efforts, including efforts to comply with the GDPR, the PDPA and other regulatory and legislative requirements around the world, including the CCPA. These compliance and oversight efforts will increase demand on our systems and resources, and will require significant investments, including investments in compliance processes, personnel, and technical infrastructure. Our privacy compliance and oversight efforts will require significant time and attention from management and our board of directors. In addition, regulatory and legislative privacy requirements are constantly evolving and can be subject to significant change and uncertain interpretation. If we are unable to successfully implement and comply with the mandates of the GDPR, the PDPA, CCPA, or other applicable regulatory or legislative requirements, or if we are found to be in violation of such requirements, we may be subject to regulatory or governmental investigations or lawsuits, which may result in significant monetary fines, judgments, or other penalties, and we may also be required to make additional changes to our business practices. Any of these events could have a material adverse effect on our business, reputation, and financial results.

 

39

 

 

Our processing, storage, use and disclosure of personal data will expose us to risks of internal or external security breaches and could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

 

We collect and use personally identifiable information in certain sectors of our business. The security of data when engaging in electronic commerce is essential in maintaining consumer and supplier confidence in our services. Substantial or ongoing security breaches whether instigated internally or externally on our systems or other internet-based systems could significantly harm our future business. It is possible that advances in computer circumvention capabilities, new discoveries or other developments, including our own acts or omissions, could result in a compromise or breach of customer transaction data.

 

There are risks of security breaches both on our own systems and on third party systems which store our information as we increase the types of technology that we use to operate our marketplace, such as mobile applications. We cannot guarantee that our, or our partners’, security measures will prevent security breaches or attacks. A party that is able to circumvent our security systems could misappropriate confidential or proprietary information, cause an interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches, and reductions in website availability and response time could cause loss of substantial business volumes during the occurrence of any such incident. Security breaches could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. Security breaches could also cause customers and potential customers to lose confidence in our security, which would have a negative effect on the value of our brand.

 

In our processing transactions, we expect to receive a large volume of personally identifiable data. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, results of operations and financial condition.

 

Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully respond to these regulations, our business could be negatively impacted.

 

The video game industry continues to evolve, and new and innovative business opportunities are often subject to new attempts at regulation. As such, legislation is continually being introduced, and litigation and regulatory enforcement actions are taking place, which may affect the way in which we, and other industry participants, may offer our content and features, and distribute and advertise products. These laws, regulations, and investigations are related to protection of minors, gambling, consumer privacy, accessibility, advertising, taxation, payments, intellectual property, distribution, and antitrust, among others.

 

For example, many foreign countries have laws that permit governmental entities to restrict or prohibit marketing or distribution of interactive entertainment software products because of the content therein (and similar legislation has been introduced from time to time at the federal and state levels in the United States, including legislation that attempts to impose additional taxes based on content). In addition, certain jurisdictions have laws that restrict or prohibit marketing or distribution of interactive entertainment software products with random digital item mechanics, or subject such products to additional regulation and oversight, such as reporting to regulators. Also, our games could in the future become subject to gambling-related rules and regulations and expose us to civil and criminal penalties. Further, the growth and development of electronic commerce and virtual items and currency may prompt calls for more stringent consumer protection laws that may impose additional burdens or limitations on operations of companies conducting business through the Internet and mobile devices. Also, existing laws or new laws regarding the marketing of in-app purchases, regulation of currency, banking institutions, unclaimed property, and money laundering may be interpreted to cover virtual currency or goods.

 

The adoption and enforcement of legislation that restricts the marketing, content, business model, or sales of our products in countries in which we do business may harm our sales, as the products they we offer to customers and the size of the potential audience for such products may be limited. We may be required to modify certain product development processes or products or alter marketing strategies to comply with regulations, which could be costly or delay the release of products. In addition, the laws and regulations affecting our products vary by territory and may be inconsistent with one another, imposing conflicting or uncertain restrictions. Failure to comply with any applicable legislation may also result in government-imposed fines or other penalties, as well as harm to our reputation.

 

40

 

 

Change in government regulations relating to the Internet could negatively impact our business.

 

We rely on consumers’ access to significant levels of Internet bandwidth for the digital delivery of our content and the functionality of our games with online features. Changes in laws or regulations that adversely affect the growth, popularity or use of the Internet, including laws impacting net neutrality, could impair our consumers’ online experiences, decrease the demand for our products and services or increase their cost of doing business. Given uncertainty around these rules relating to the Internet, including changing interpretations, amendments, or repeal of those rules, coupled with the potentially significant political and economic power of local Internet service providers and the level of Internet bandwidth access our products and services require, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expenses, or otherwise negatively impact our business.

 

Regulatory changes or actions may restrict the use of digital assets in a manner that adversely affects our business, prospects or operations.

 

As digital assets have grown in both popularity and market size, governments around the world have reacted differently, with certain governments deeming them illegal while others have allowed their use and trade. Thailand, where our subsidiary Longroot Thailand is regulated, is the first country to approve a legal ICO portal for issuers. Under Thai SEC regulation, all digital asset issuance in Thailand must be approved by the Thai SEC and carried out via an approved ICO Portal such as ours. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade digital assets or to exchange digital assets for fiat currency. Similar actions by governments or regulatory bodies could impact our ability to continue to operate in the digital asset space and such actions could affect Longroot Thailand’s ability to continue as a going concern, which could have a material adverse effect on our business, prospects or operations.

 

In addition, the Thai SEC is authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of digital assets both inside and outside Thailand is a rapidly changing area of law and is subject to modification by government and judicial action. Digital assets also currently face an uncertain regulatory landscape in various jurisdictions. Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect digital assets and its users, particularly digital asset operators and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations or directives may conflict with those of Thailand and may negatively impact the acceptance of digital assets by users, merchants and service providers outside of Thailand. The effect of any future domestic or foreign regulatory change on our digital assets related activities is unable to be predicted.

 

Furthermore, a large proportion of the digital assets we plan to issue are likely to be classified as securities. This will subject our digital asset activities to securities regulations in different jurisdictions, which could limit our business activities, such as restricting issuances to non-retail investors only. This may negatively impact our profitability. Furthermore, compliance with existing laws and regulations will involve significant amounts of time, including that of our management and dedicated compliance personnel, all of which might negatively impact our results of operations.

  

Regulatory changes or actions may alter the nature of the Company’s ownership of Longroot Thailand or restrict the use of cryptocurrencies in a manner that adversely affects Longroot Thailand’s business, prospects or operations.

 

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies, with certain governments deeming them illegal while others have allowed their use and trade. Thailand, where Longroot Thailand is regulated, is the first country to approve a legal ICO portal for issuers. Under Thai SEC regulation, all crypto token issuances in Thailand must be approved by the Thai SEC and carried out via an approved ICO Portal such as Longroot Thailand. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. Similar actions by governments or regulatory bodies could impact the ability of Longroot Thailand to continue to operate and such actions could affect the ability of Longroot Thailand to continue as a going concern, which could have a material adverse effect on the business, prospects or operations of the Company.

 

41

 

 

Furthermore, tokens issued by Longroot Thailand may be classified as securities depending on the nature of the token and the regulatory frameworks of the respective jurisdictions. Longroot Thailand’s activities may be subject to securities regulations in different jurisdictions, which could limit its business activity, such as limits on the personnel it can issue tokens to, and this may negatively impact Longroot Thailand’s profitability. In addition, compliance with existing laws and regulations, will involve significant amounts of time, including that of Longroot Thailand’s senior leaders and that of dedicated compliance personnel, all of which might negatively impact Longroot Thailand’s results of operations.

 

Next Bank is subject to various regulatory capital requirements. Regulatory changes or actions may alter the requirement of the capital.

 

Under capital adequacy guidelines, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of common equity; (i) Tier 1 capital to risk-weighted assets, and (ii) Tier 1 capital to average assets.

 

NextBank faces risk of non-compliance and enforcement actions related to Bank Secrecy Act and other anti-money laundering, customer due diligence, and combating the financing of terrorism statues and regulations.

 

NextBank is regulated by OCIF and has to comply with strict regulations including Bank Secrecy Act, and anti-money laundering (“AML”), customer due diligence (“CDD”), and combating the financing of terrorism (“CTF”). Although NextBank uses its best efforts to keep up to date with regulatory requirements and implements strict internal policies to maintain compliance, there is a risk of non-compliance. If NextBank fails to comply with such regulations, it may face enforcement actions from one or more of the regulators that enforce such regulations, which may result in fines, penalties, or even the revocation of our license, and could have a material negative impact on our results of operations.

 

Unfavorable changes in, or interpretations of, government regulations or taxation of the evolving alternative ALRs, Internet and e-commerce industries could harm our operating results.

 

We have contracted for ALRs in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our operations or regulate the rental activity of property owners and managers. Compliance with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region has different regulations with respect to licensing and other requirements for ALRs. Our online marketplaces are accessible by property owners, managers and travelers in many states and foreign jurisdictions. Our efficiencies and economies of scale depend on generally uniform treatment of property owners, managers and travelers across all jurisdictions. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose added costs and increased liabilities for compliance deficiencies. In addition, laws or regulations that may harm our business could be adopted, or interpreted in a manner that affects our activities, including but not limited to the regulation of personal and consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage our reputation and business.

 

In addition, regulatory developments may affect the ALR industry and the ability of companies like us to list those vacation rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners and managers to rent certain properties for fewer than 30 consecutive days and other cities may introduce similar regulations. Some cities also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to ALR. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were established before the growth of the Internet and e-commerce, which creates a risk of these laws being used in ways not originally intended, that could burden property owners and managers or otherwise harm our business. These and other similar new and newly interpreted regulations could increase costs for, or otherwise discourage, owners and managers from listing their property with us, which could harm our business and operating results.

 

42

 

 

We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws could subject us to criminal penalties or significant fines and harm our business and reputation.

 

We are subject to anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the USA PATRIOT Act, U.S. Travel Act, the U.K. Bribery Act 2010 and Proceeds of Crime Act 2002, and possibly other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct business. Anti-corruption laws have been enforced with great rigor in recent years and are interpreted broadly. Such laws prohibit companies and their employees and their agents from making or offering improper payments or other benefits to government officials and others in the private sector. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with specified persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. Any investigations, actions and/or sanctions could have a material negative impact on our business, financial condition and results of operations.

 

Risks Related to Our Intellectual Property

 

If we do not adequately protect our intellectual property, our ability to compete could be impaired.

  

Our success is heavily dependent upon our intellectual property and other proprietary rights. To protect our intellectual property and other proprietary rights, we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action we deem appropriate to protect our rights. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites and products without authorization. We may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive, distracting and result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete.

 

Effective trademark, copyright and trade secret protection may not be available in every country in which our products and services are offered, either in person or over the Internet. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, including in certain of the countries that we operate in, we may be unable to protect their proprietary technology adequately against unauthorized third-party copying, infringement or use, which could adversely affect our competitive position. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving.

 

Certain of our products, and particularly those offered by our NextMedia division, are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent us from enforcing or defending our proprietary technologies. Further, the use of unauthorized “cheat” programs or the use of other unauthorized software modifications by users could impact multiplayer gameplay or lead to reductions in microtransactions in our games.

 

Piracy is a persistent problem for us, and policing the unauthorized sale, distribution and use of products is difficult, expensive, and time-consuming. Further, the laws of some countries in which our products are, or may be, distributed either do not protect products and intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. In addition, although we take steps to make the unauthorized sale, distribution and use of our products more difficult and to enforce and police our rights, as do the operators of other platforms on which many of their games are played, these efforts may not be successful in controlling the piracy of products in all instances.

 

In addition, “cheating” programs or other unauthorized software tools and modifications that enable consumers to cheat in games could negatively impact the volume of microtransactions or purchases of downloadable content. In addition, vulnerabilities in the design of our products or the platforms upon which they run could be discovered after their release, which may result in lost revenues from paying consumers or increased cost of developing technological measures to respond to these, either of which could negatively impact our business.

 

43

 

 

We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.

 

Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or business methods. Any intellectual property claims against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, content, branding or business methods found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and be inferior. Any of these results could harm our operating results.

 

Our ability to acquire and maintain licenses to intellectual property may affect our revenue and profitability.

 

While most of the intellectual property we use in our games is created by us, we also acquire rights to third-party intellectual property. Proprietary licenses typically limit our use of intellectual property to specific uses and for specific time periods, and include other contractual obligations with which we must comply. Competition for these licenses is intense. If we were unable to obtain and remain in compliance with the terms of these licenses or obtain additional licenses on reasonable economic terms, our revenue and profitability may be adversely impacted. In addition, use of these intellectual properties generally requires that we pay a royalty to the licensor, which decreases our profitability.

 

We use open-source software in connection with certain of our games and services, which may pose particular risks to our proprietary software, products, and services, and which could have a negative impact on our business.

 

We use open-source software in connection with some of the games and services we offer. Some open-source software licenses require users who distribute open-source software as part of their software to publicly disclose all or part of the source code to such software or make available any derivative works of the open-source code on unfavorable terms or at no cost. The terms of various open-source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our use of the open-source software. Were it to be determined that our use was not in compliance with a particular license, we may be required to release proprietary source code, pay damages for breach of contract, re-engineer games or products, discontinue distribution in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from their game or technology development efforts, any of which could negatively impact our business.

 

44

 

 

Risks Related to Our Securities

 

The price of our common stock may fluctuate significantly, and investors could lose all or part of their investments.

 

The market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described herein and other factors beyond our control. Factors affecting the trading price of our common stock could include, without limitation:

 

  variations in our operating results and/or those of similar companies and our competitors;
     
  changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;
     
  announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors;
     
  marketing and advertising initiatives by us or our competitors;
     
  threatened or actual litigation;
     
  changes in our management;
     
  market conditions in the industries in which we operate and the economy as a whole;
     
  the overall performance of the equity markets;
     
  sales of shares of our common stock by us or by existing stockholders;
     
  global pandemics and epidemics, such as COVID-19; and
     
  adoption or modification of regulations, policies, procedures or programs applicable to our business.

 

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could harm the value of our common stock.

 

In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation; and we have previously been the target of this type of litigation. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert our management’s attention from other business concerns, which could materially harm our business.

 

Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock or securities convertible into, or exercisable for, shares of our common stock.

 

Our board of directors has authority, without action or vote of our stockholders, to issue all or part of our authorized but unissued shares of common stock. In the past we have, and in the future we may, raise additional capital by selling shares of our common stock or securities convertible into, or exercisable for, shares of our common stock, possibly at a discount to the market price of such securities. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.

 

45

 

 

The ownership of our capital stock is highly concentrated, which may prevent other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.

 

As of May 30, 2022, Nithinan Boonyawattanapisut (our Co-Chief Executive Officer and a director) and her spouse, J. Todd Bonner (Chairman of our board of directors) beneficially own, together with entities controlled by them, approximately 26% of our issued and outstanding shares of common stock. In addition, Tree Roots Entertainment Group Co Ltd. (“Tree Roots”), and entity controlled by Jwanwat Ahriyavraromp and Pornsinee Chalermrattawongz, beneficially owns approximately 25% of our outstanding common stock as of May 30, 2022. Accordingly, Ms. Boonyawattanapisut and Mr. Bonner (together), and Mr. Ahriyavraromp and Mrs. Chalermrattawongz (through their control of Tree Roots), exert substantial influence over the Company and the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company’s assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the Company, even if such a change of control would benefit other stockholders of the Company. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

 

Nevada law and our Articles of Incorporation authorize us to issue shares of stock, which shares may cause substantial dilution to our existing stockholders.

 

We have authorized capital stock consisting of 500,000,000 shares of common stock, par value $0.00001 per share; 3,000,000 shares of Series A Preferred stock, par value $0.01 per share; 10,000,000 shares of Series B Preferred Stock, par value $0.00001 per share; 3,828,500 shares of Series C Preferred Stock, par value $0.00001 per share; and 6,100,000 shares of Series D Preferred Stock, par value $0.00001 per share. As of February 28, 2022, we had 108,360,020 shares of common stock issued and outstanding, and no preferred stock issued and outstanding. As a result, our board of directors can issue a large number of additional shares of common stock without stockholder approval, and if additional shares are issued, it could cause substantial dilution to our then stockholders.

 

Additionally, shares of preferred stock may be issued by our board of directors without stockholder approval with voting powers, and such preferences and relative, participating, optional or other special rights and powers as determined by our board of directors, which may be greater than the shares of common stock currently outstanding. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to shares thereof, could reduce the voting rights and powers of our common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our outstanding common stock. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of our current stockholders.

 

If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price.

 

We are subject to reporting and other obligations under the Exchange Act, including the requirements of the Sarbanes-Oxley Act. These provisions require annual management assessments of the effectiveness of our internal controls over financial reporting. We also operate in a complex environment and expect these obligations, together with our rapid growth and expansion through acquisitions, to place significant demands on our management and administrative resources, including accounting and tax resources. If we are unable to conclude that our internal control over financial reporting is effective, our investors could lose confidence in the accuracy and completeness of our financial reports.

 

If securities analysts and other industry experts do not publish research or publish negative research about our business, our stock price and trading volume could decline.

 

The trading market for our common stock depends in part on the research, reports and other media that securities analysts and other industry experts publish about us or our business. If security analysts do not cover our stock, downgrade our stock or publish negative research about our business, our stock price could decline. If analysts do not cover us in the future or fail to publish reports on us regularly, we could lose visibility in the stock market and demand for our stock could decrease, which could cause our stock price or trading volume to decline. If one or more industry analysts publish negative statements about our business, our stock price could decline.

 

46

 

 

Provisions in our amended and restated articles of incorporation limiting the liability of management to stockholders.

 

We have adopted provisions, and will maintain provisions, to our amended and restated articles of incorporation that limit the liability of our directors, and provide for indemnification by us of our directors and officers to the fullest extent permitted by Nevada law. Our amended and restated articles of incorporation and Nevada law provide that directors have no personal liability to third parties for monetary damages for actions taken as a director, except for breach of duty of loyalty, acts or omissions not in good faith involving intentional misconduct or knowing violation of law, unlawful payment of dividends or unlawful stock repurchases, or transactions from which the director derived improper personal benefit. Such provisions limit the stockholders’ ability to hold directors liable for breaches of fiduciary duty and reduce the likelihood of derivative litigation against directors and officers.

  

Certain of our outstanding warrants include anti-dilutive rights.

 

Certain of our outstanding warrants include anti-dilution rights, which provide that if at any time while such warrants are outstanding, we issue or enter into an agreement to issue, or are deemed to have issued or entered into an agreement to issue (which includes the issuance of securities convertible or exercisable for shares of our common stock), securities for consideration less than the then current exercise price of such warrants, the exercise price of such warrants shall be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities. As of May 31, 2022, there were warrants to purchase an aggregate of 14,430,908 shares of our common stock that include the foregoing anti-dilution provisions outstanding, consisting of (i) 2021 Warrants to purchase 14,240,508 shares of common stock, which 2021 Warrants currently have an exercise price of $1.97 per share (the “Floor Price”), and (ii) warrants to purchase 190,400 shares of common stock that we issued to certain institutional investors on October 2, 2018 (the “2018 Warrants”), which 2018 Warrants currently have an exercise price of $2.00 per share. Unless and until we received shareholder approval to reduce the exercise price of the 2021 Warrants below the Floor Price, no such adjustment to the exercise price of the 2021 Warrants may be made. Although we have not received stockholder approval to remove the Floor Price of the 2021 Warrants to date, we have agreed to hold special meetings of our stockholders every three months, for so long as the 2021 Warrants remain outstanding, to obtain such stockholder approval. Pursuant to the terms of the 2018 Warrants, the exercise price thereof may not be reduced below $0.57 per share. Adjustments to the exercise price of the 2018 Warrants are not subject to approval by our stockholders.

 

In the event that shareholder approval of removal of the Floor Price is obtained during the term of the 2021 Warrants, the subsequent sale of any shares in this offering at a price below $1.97 per share will result in an automatic reduction of the exercise price of the 2021 Warrants to a price equal to the lowest price at which such shares are sold. In the event that any such sale occurs prior to shareholder approval of removal of the Floor Price, the exercise price of the 2021 Warrants will be reduced to the lowest price of any such prior sales effective immediately upon receipt of shareholder approval. Additionally, the sale of any shares in this offering at a price below $2.00 per share will result in an automatic reduction of the exercise price of the 2018 Warrants to a price equal to the lowest price at which such shares are sold, subject to a floor of $0.57 per share.

 

You will experience further dilution if we issue additional equity securities in the future.

 

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exercisable or exchangeable for our common stock. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. To the extent that outstanding warrants are exercised, investors purchasing our common stock in this offering will experience further dilution.

 

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

 

Future sales of substantial amounts of our common stock (including in this offering), or securities convertible or exchangeable into shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options and warrants, or the perception that those sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital in the future. Additionally, the market price of our common stock could decline as a result of sales by, or the perceived possibility of sales by, our existing stockholders of shares of our common stock in the market after this offering. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.

 

47

 

 

We do not intend to pay dividends on our common stock for the foreseeable future.

 

We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future. Investors should not rely on an investment in us if they require income generated from dividends paid on our capital stock. Because we do not intend to pay dividends on our common stock, any income derived from our common stock would only come from a rise in the market price of our common stock, which is uncertain and unpredictable.

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

The Company leases its office space and certain office equipment under non-cancellable operating leases are located as follows.

 

Location  Commencement date  Expiration date  Lease term (Year)   Total payment for FYE2022
(in million $)
   Right-of-use assets value as of Feb 28, 2022
(in million $)
 
Sawgrass, Florida  March 2021  July 2028   7   0.14   1.0 
San Juan, Puerto Rico  September 2021  September 2026   5   0.04   0.3 
Thailand  September 2021  October 2024   3   0.06   0.4 
Switzerland  April 2021  March 2026   5   0.07   0.3 
Belgium  May 2022  April 2029   9   0.18   1.2 

 

Item 3. Legal Proceedings

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

 

Such current litigation or other legal proceedings, if any, are described in, and incorporated by reference in, this “Item 3. Legal Proceedings” of this Annual Report on Form 10-K from, “Part II—Item 8. Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in “Note 12 – Commitments and Contingencies”, under the heading “Legal Matters”. However, assessment of the current litigation, if any, 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. The Company settled certain matters subsequent to the year ended February 28, 2022, that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results except as disclosed in this Report.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

48

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock trades on the Nasdaq Capital Market under the ticker symbol “NXTP”.

 

Holders

 

As of May 31, 2022, there were approximately 510 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number of record stockholders is not indicative of the total number of stockholders of the Company when including securities beneficially owned.

 

Dividends

 

To date, we have not declared or paid any dividends on our outstanding shares of common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings to finance our operations and future growth, our board of directors will have discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements and other factors, which our board of directors may deem relevant.

 

There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

 

1.We would not be able to pay our debts as they become due in the usual course of business, or;

 

2.Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.

 

Transfer Agent

 

Our stock transfer agent is Colonial Stock Transfer Co, Inc. (“Colonial”), 66 Exchange Place, 1st floor, Salt Lake City, UT 84111. Colonial’s telephone number in the U.S. is (801) 355-5740 and their internet address is www.colonialstock.com.

 

Recent Issuances of Unregistered Securities

 

There have been no sales of unregistered securities during and from the period from March 1, 2021 to the filing date of this Report, which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

 

Issuer Purchases of Equity Securities

 

Pursuant to the IP Purchase Amendment, on May 19, 2021, the Company made initial payment of $500,000. Thereafter, the first 344,400 shares of common stock repurchased by the Company amounted to $771,456, which shares were returned to treasury and cancelled.

 

During the year ended February 28, 2022, the Company purchased 5,070,000 shares for investment in subsidiaries valued at $10,140,000 pursuant to the Preferred Exchange Agreement (see 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 as a repurchase of shares and have been eliminated in the consolidated financial reporting.

 

49

 

 

Description of Common Stock

 

We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.00001 par value per share.

 

The following summary of certain provisions of our common stock does not purport to be complete. You should refer to our Articles of Incorporation (as amended) and our Bylaws (as amended), both of which have been filed with the SEC, and have been incorporated by reference as exhibits to this Report. The summary below is also qualified by provisions of applicable law.

 

Each share of our common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by our board of directors. No holder of any shares of our common stock has a pre-emptive right to subscribe for any of our securities, nor are any shares of our common stock subject to redemption or convertible into other securities. Upon liquidation, dissolution or winding-up of the Company, and after payment to our creditors and preferred stockholders, if any, our assets will be divided pro rata on a share-for-share basis among the holders of our common stock. Each share of our common stock is entitled to one vote on all stockholder matters.

 

The presence of the persons entitled to vote of 33 1/3% of the outstanding voting shares on a matter before the stockholders constitutes the quorum necessary for the consideration of the matter at a stockholders’ meeting.

 

Except as otherwise required by law, the Articles of Incorporation, or any certificate of designations, (i) at all meetings of stockholders for the election of directors, a plurality of votes cast are sufficient to elect such directors; (ii) any other action taken by stockholders are be valid and binding upon the Company if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, at a meeting at which a quorum is present, except that adoption, amendment or repeal of the Bylaws by stockholders requires the vote of a majority of the shares entitled to vote; and (iii) broker non-votes and abstentions are considered for purposes of establishing a quorum but not considered as votes cast for or against a proposal or director nominee. Each stockholder has one vote for every share of stock having voting rights registered in his or her name, except as otherwise provided in any preferred stock designation setting forth the right of preferred stock stockholders.

 

The common stock does not have cumulative voting rights, which means that the holders of 51% of the common stock voting for election of directors can elect 100% of our directors if they choose to do so.

 

Item 6. [Reserved]

  

50

 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this filing. In addition to historical consolidated financial information, the following discussion contains forward- looking statements that reflect our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those discussed below. See “Cautionary Note Regarding Forward-Looking Statements” above for a discussion of the uncertainties, risks and assumptions associated with these statements. See also the disclosures under “Item 1A. Risk Factors”, above for additional discussion of such risks.

 

Recent Significant Funding Transactions

 

During the 2022 fiscal year, the Company received funding from;

 

Cash injection from HotPlay through the reverse acquisition amounted to $12 million (2021 fiscal year: amounted to $3 million).

 

Public Offering of $36.4 million net of placement agent fees and related offering expenses.

 

Loans from Streeterville amounted to $9.3 million net of finance cost and bank fees.

 

Key Financial Highlights

 

Key financial highlights for the fiscal year ended (“FYE”) February 28, 2022 include the following:

 

 

Achieved record annually revenue of $8.2 million, compares very favorably to $0 revenue in the last year.

 

Consolidated gross profit totaled $5.9 million or 71% of total revenue compared to none in the last year.

 

 

As of February 28, 2022 and 2021, we have total assets of $99.8 million and $11.5 million, respectively, according to the reverse merger and additional acquisitions in Reinhart Interactive TV AG and Zappware N.V. and NextBank International.

 

  Cash and cash equivalents as of 28 February 2022 and 2021, $6.6 million and $0.4 million, respectively, increased mainly for ongoing operating expenses and roll out new Fintech and Media activities.

 

The balance as of February 28, 2021, represents Hotplay Enterprise Limited as it was before the reverse acquisition transaction.

 

Key Operational Highlights and subsequent period

 

Key operational highlights for the FYE February 28, 2022 include the following:

 

Completed merger with HotPlay Enterprises and rebranded the company as NextPlay Technologies.

 

Reinhart Interactive TV, a NextPlay-funded strategic partnership, acquired award-winning Interactive TV provider, Zappware, founded in 2001 by former employees of Philips Media.

 

Acquired controlling interest in International Financial Enterprise Bank (IFEB), a global financial institution.

 

Company’s licensed Longroot digital token offering platform engaged to serve as the financial advisor and underwriter for Ample’s proposed security token offering (STO).

 

Entered into an agreement to acquire from Fighter Base Publishing the assets and AI-powered video game development platform of its wholly owned division, Make It Games™, which was closed subsequent to the fiscal yearend.

 

  Entered into an agreement with Token IQ to acquire 100% of its assets,  including intellectual property designed to reconcile legal and regulatory requirements around digital assets, including Know Your Customer, Anti-money laundering and shareholder rights enforcement, all common pain points within the crypto markets today, which was closed subsequent to the fiscal year end.

 

In November 2021, the Company received conditional approvals for insurance and reinsurance licenses. The licensing enables NextPlay’s NextShield LTD business unit to establish digital primary insurance and reinsurance operations and to offer blockchain-delivered products like parametric comprehensive travel insurance and bank deposit insurance.

 

51

 

 

  Announced the signing of a Memorandum of Understanding with Alphabit Consulting Pte Ltd to provide deposit accounts and payment cards for their cryptocurrency exchange users.

 

  Announced the signing of a Memorandum of Understanding with TruCash Group of Companies Inc, a leading global payments provider. Through the proposed partnership, NextBank plans to offer payment services including Payment Cards, such as Debit and Credit cards, Mobile Wallets, and Mobile Payments.

 

Announced the signing of a preliminary agreement with Decentralised Investment Group (“DIG”), a leading global blockchain technology company, to develop and operate an exclusive fiat payment platform for DIG customers, enabling them to purchase and monetize DIG assets.

 

Acquired goPlay assets including a new-gen game publishing platform featuring a tournament system, chat, payment, and 37 casual games ranging from arcade to strategy. NextPlay plans to complete the integration of its HotPlay in-game advertising (IGA) technology into the 37 goPlay games by year-end. The Asset purchase also included a perpetual license to goPay, a payment aggregator that offers game developers multiple ways to more easily collect and process user payments through carrier billing, over the counter, e-voucher, bank transfer and e-wallet transfers.

 

Launched NextPlay X Soma Labs, an innovation and design platform bringing together non-fungible tokens (NFTs), social games, and Metaverse virtual worlds for major brands, creators, and agencies.

 

Announced the MedTrek Fund, a blockchain securitized closed-end fund focused on building medical facilities designed to lower the likelihood of infection for four medical asset classes including primary care, tertiary care, long term care and resort convalescent facilities.

 

  Appointed Mark Vange, an industry leader in video game development and in-game advertising and former chief technology officer of Electronic Arts Interactive,  as chief technology officer of the Company.

 

  Appointed Andrew Greaves, a senior level executive with experience leading gaming eSports and digital media companies, as Chief Operating Officer of the Company.

 

Results of Operations

 

Result of operations for the FYE February 28, 2022 compared to 2021 (of HotPlay) are as follows:

 

Revenue

 

 

Total revenue amounted to $8.2 million, compares very favorably to $0 revenue in the last year of HotPlay. Zappware N.V. achieved $4.5 million revenue from subscription services and $2.0 million revenue from product development as a result from high demand in digital media content, NextBank International generated $1.6 million revenue from interest and bank services as a result from increase in real estate and other commercial loans and NextTrip generated $0.16 million as a result of global pandemic recovery and travel restriction relief.

 

Cost of revenue

 

 

Cost of revenue amounted to $2.3 million in line with the revenue, compared to $0 cost in the last year of HotPlay. Cost of media subscription and services amounted to $1.3 million, product development cost amounted to $0.4 million, interest and bank service cost amounted to $0.5 million and cost related to travel service amounted to $0.1 million.

 

Gross profit margin

 

 

Gross profit totaled $5.9 million (71%) compared to $0 of HotPlay in the last year. For the year ended 28 February 2022, NextMedia segment generated gross profits of $4.8 million and NextFinTech segment generated gross profits of $1.1 million.

 

Net operating loss

 

  Net operating loss totaled $20.7 million compared to $1.6 million last year of HotPlay as some businesses were in pre-operating stage last year, which amount consisted mainly of employee expenses $5.2 million, depreciation and amortization $5.7 million, legal, consulting and professional fee $6 million.

 

Net loss

 

  Net loss totaled $40.4 million compared to $1.6 million last year of HotPlay, which consistent mainly of certain non-recurring and non-cash such as impairment loss of asset $11.6 million, allowance for note receivables $3.1 million and loss from valuation $2.4 million.

 

In FYE2022 and the subsequent period, the Company completed the reverse acquisition of Monaker Group in June 2021 and four major acquisitions as of the filing date of this Report. Management believes that the acquisition of GoPlay game portfolio and tournament platform, and subsequent integration with HotPlay will accelerate the launch of a comprehensive gaming solution that could help operators and platforms meaningfully increase user engagement while realizing an alternative revenue stream. In the FinTech division, NextBank has been steadily growing deposits and access to credit lines, generating revenue via the origination and selling of loans. As we transition NextBank to a digital bank, management is determined to develop an integrated FinTech platform that offers digital banking, investments into alternative assets, and insurance products.

 

52

 

 

Liquidity and Capital Resources

 

On February 28, 2022, we had $6.6 million of cash and cash equivalent, which was an increase of $6.2 million from $0.4 million at February 28, 2021. The increase in cash and cash equivalent was mainly attributed to net proceeds received from financing activities of $20.4 million, and cash providing by investing activities of $7.9 million, offset by cash used in operating activities of $22.0 million.

 

As of February 28, 2022, the Company had total current liabilities of $27.5 million, consisting mainly of accounts payable and accrued expense of $8.6 million as well as other liabilities - customer deposits of $7.6 million. We anticipate that we will satisfy these amounts from proceeds derived from equity sales, sales of marketable securities, financing, cash and cash equivalent and revenue generated from sales.

 

As of February 28, 2022, we had $99.8 million in total assets, $31.9 million in total liabilities, working capital of $6.3 million and a total accumulated deficit of $39.2 million.

 

Net cash used in operating activities increased to $22.0 million for the FYE February 28, 2022, compared to $1.0 million of the FYE February 28, 2021. The increase was mainly the result of the Company’s net loss from operations, payments relating to prepaid expenses for software, licenses and games along with increases in assets.

 

Net cash provided by investing activities increased to $7.9 million for the FYE February 28, 2022, as compared to net cash used for investing activities of $5.6 million for FYE February 28, 2021. The increase was mainly from the effects of business combinations of NextPlay and NextBank during FY22.

 

Net cash provided by financing activities increased to $20.4 million for the FYE February 28, 2022, compared to $7.0 million for the FYE February 28, 2021. The increase was primarily due to (i) funds received from the sale of common stock, amounting to $27.9 million; (ii) loans from Streeterville amounted to $2.1 million; and (iii) the repayment of notes to Streeterville, amounting to $9.7 million.

 

Additional information regarding our notes payable, notes receivable, investments in equity instruments, acquisitions and dispositions and line of credit can be found under “Item 8. Financial Statements and Supplementary Data” – “Note 4 – Acquisitions and Dispositions”, “Note 5 – Related Party Transactions”, “Note 7 – Notes Receivable” and “Note 16 – Subsequent Events”.

 

We have limited financial resources. As of February 28, 2022, we have working capital of $6.3 million. Our monthly cash requirement is approximately $1.5 million for over twelve months.

 

We will need to raise additional capital or borrow loans to support our on-going operations, increase market penetration of our products, expand the marketing and development of our travel and technology driven products, repay debt obligations, provide capital expenditures for additional equipment and development costs, satisfy payment obligations, and to implement 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 February 28, 2022, $2.1 million, we expect to see an increase in revenue in next year.

 

Management’s plans with regard to this going concern are as follows:

 

  (i) the Company plans to continue to raise funds by way of public or private offerings;

 

  (ii) the Company is working aggressively to increase the viewership of its FinTech 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 FinTech division;

 

  (iv) the Company plans to issue tokens under its Longroot entity during the year 2023, which is expected to result in generating revenues;

 

  (v)

the Company is tightening its spending on expenses, which is expected to help in the cost reduction of the operations; and

 

  (vi) In March 2022, the Company created an at-the-market equity program under which the Company may, from time to time, and so long as there is an effective registration statement covering the shares issuable thereunder in place, offer and sell shares of its common stock in an aggregate gross offering price of up to $20 million to or through the agent pursuant to the ATM Offering.

 

The Company’s registration statement on Form S-3 (SEC File No. 333-257457), including the accompanying prospectus and any related prospectus supplement, is subject to the provisions of General Instruction I.B.6 of Form S-3, which provides that the Company may not sell securities in a public primary offering with a value exceeding one-third of its public float in any twelve-month period unless its public float is at least $75 million. As of August 31, 2021, the Company’s public float (i.e., the aggregate market value of its outstanding equity securities held by non-affiliates) was approximately $55 million, based on the closing price per share of the Company’s common stock, as reported on the Nasdaq Capital Market on August 31, 2021, as calculated in accordance with General Instruction I.B.6 of Form S-3. If the Company’s public float meets or exceeds $75 million at any time, the Company will no longer be subject to the restrictions set forth in General Instruction I.B.6 of Form S-3, at least until the filing of its next Section 10(a)(3) update as required under the Securities Act.

 

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.

 

53

 

 

Known Trends or Uncertainties

 

Although we have not seen any significant reduction in revenues to date, we have seen some consolidation in our industry during economic downturns. These consolidations have not had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.

 

As discussed in the Risk Factors section of this Report, the world has been affected due to the COVID-19 pandemic. Until the pandemic has passed, there remains uncertainty as to the effect of COVID-19 on our business in both the short and long-term.

 

The potential for growth in new markets is uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would be more efficiently used elsewhere.

 

Inflation

 

Inflation has increased during the periods covered by this Report, and is expected to continue to increase for the near future. Inflationary factors, such as increases in interest rates, overhead costs and transportation costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, employee availability and wage increases.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements.

 

Contractual Obligations and Commitments

 

Note Purchase Agreements: Streeterville Capital, LLC

 

November 2020 Note Purchase Agreement

 

On November 23, 2020, the Company entered into the November 2020 Note Purchase Agreement with Streeterville, pursuant to which the Company sold Streeterville the November 2020 Streeterville Note in the original principal amount of $5,520,000. Streeterville paid consideration of an initial cash purchase price of $3,500,000 for the note and issued the Company the November 2020 Investor Note in the amount of $1,500,000. The associated debt issuance costs of the note were $370,000 for total amount due $3,870,000. In addition to the $370,000 of debt issuance costs, the Company paid $245,000 for advisory fees, resulting in net proceeds to the Company of $3,255,000.

 

The November 2020 Investor Note, in the principal amount of $1,500,000, evidenced the amount payable by Streeterville to the Company as partial consideration for the acquisition by the Company of the November 2020 Streeterville Note. The November 2020 Investor Note accrued interest at the rate of 10% per annum, payable in full on November 23, 2021, subject to a 30-day extension exercisable at the option of Streeterville and could be prepaid at any time. The amount of the Investor Note has been offset against the amount of the November 2020 Streeterville Note in the balance sheet as of February 28, 2021, as both notes have substantially similar terms, and the Investor Note was provided in consideration for the acquisition of a portion of the November 2020 Streeterville Note. The November 2020 Investor Note was subsequently funded in full in January 2021.

 

On November 4, 2021, the Company completely paid off the November 2020 Streeterville Note in the amount of $3,100,807.

 

March 2021 Note Purchase Agreement

 

On March 22, 2021, we entered into the March 2021 Note Purchase Agreement dated March 23, 2021 with Streeterville, pursuant to which the Company sold Streeterville the March 2021 Streeterville Note in the original principal amount of $9,370,000. Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company the March 2021 Investor Note in the amount of $1,500,000, in consideration for the March 2021 Streeterville Note, which included an OID of $850,000 and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID was fully earned upon issuance and the remaining $150,000 was not fully earned until the March 2021 Investor Note was fully-funded by Streeterville, which occurred on May 26, 2021. Also on May 26, 2021, Streeterville funded the March 2021 Investor Note (in the amount of $1.5 million) in full.

 

We made a required equity payment of $1,857,250 to Streeterville under the March 2021 Streeterville Note on May 26, 2021, with funds raised through a May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering. On November 4, 2021, the Company paid down the outstanding balance of the March 2021 Streeterville Note in the amount of $6,000,000 with funds raised through the November 2021 registered direct offering.

 

October 2021 Note Purchase Agreement

 

On October 22, 2021, the Company entered into the October 2021 Note Purchase Agreement with Streeterville, pursuant to which the Company sold Streeterville the October 2021 Streeterville Note in the original principal amount of $1,665,000. Streeterville paid consideration of $1,500,000, which represents the original principal amount less a $150,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.

 

54

 

 

The October 2021 Note Purchase Agreement and the October 2021 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the October 2021 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the October 2021 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the October 2021 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the October 2021 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The October 2021 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the October 2021 Streeterville Note.

 

As of February 28, 2022, the remaining aggregate principal balance of the March 2021 and October 2021 Streeterville Notes was $4,053,737, plus accrued interest of $653,587.

 

May 2022 Note Purchase Agreement

 

On May 5, 2022, the Company entered into the May 2022 Note Purchase Agreement with Streeterville, pursuant to which the Company sold Streeterville the May 2022 Streeterville Note in the original principal amount of $2,765,000. Streeterville paid consideration of $2,500,000, which represents the original principal amount less a $250,000 OID, which was fully earned upon issuance, and a total of $15,000 to cover Streeterville’s professional fees and transaction expenses.

 

The May 2022 Note Purchase Agreement and the May 2022 Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. As described in the May 2022 Streeterville Note, upon the occurrence of certain events of default (mainly our entry into bankruptcy), the outstanding balance of the May 2022 Streeterville Note will become automatically due and payable. Upon the occurrence of other events of default, Streeterville may declare the outstanding balance of the May 2022 Streeterville Note immediately due and payable at such time or at any time thereafter. After the occurrence of an event of default (and upon written notice from Streeterville), interest on the May 2022 Streeterville Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate permitted under applicable law. The May 2022 Note Purchase Agreement prohibits Streeterville from shorting our stock through the period that Streeterville holds the May 2022 Streeterville Note.

 

Operating Leases Obligation

 

The Company entered into an office lease in Sunrise, Florida where we leased approximately 5,279 square feet of office space at 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323. In accordance with the terms of the office space lease agreement, the Company will be renting the commercial office space, for a term of almost eight years from March 1, 2021, through July 31, 2028, with rental costs amounting to approximately $17,380 per month for the duration of the lease. Additionally, the Company (in some cases indirectly through its subsidiaries) rents office space located in Puerto Rico, Thailand, Belgium, and Switzerland with lease terms ranging from five to nine years, with rental costs for all such properties amounting to an aggregate of approximately $21,228 per month.

 

A subsidiary of the Company entered into several car operating leases for employees with a term of 24 to 62 months from April, 2022, through July, 2025. The Company recorded operating lease Right-to-Use asset amount of $3,962,596 along with operating lease liability amounting to $4,009,242 as of February 28, 2022.

 

June 2022 Promissory Notes

 

On June 13, 2022, the Company entered into two promissory notes, each in the principal amount of approximately CAD $231,121 (USD $178,234), with its former legal counsel, which notes were issued, along with a CAD $10,000 (USD $7,712) in lieu of immediate payment of outstanding amounts payable to such counsel for legal services previously rendered to the Company. The first note will mature on July 31, 2022, and the second note will mature on September 1, 2022; provided, however, that if the Company fails to repay the first note in full on or before its maturity date, then the second note will automatically become immediately due and payable. Both notes are unsecured and accrue interest at a rate of 18% per annum.

 

Critical Accounting Policies and Estimates

 

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. To the extent there are material differences between these estimates and our actual results, our consolidated financial statements will be affected.

 

Our significant accounting policies, methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. We believe that the policies involve the greatest degree of complexity and judgment by our management and are critical for understanding and evaluating our financial condition and results of operations. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.

 

Significant accounting policies, methods, estimates and judgments are described in “Item 8. Financial Statements and Supplementary Data” – “Note 1 – Description of Business and Summary of Significant Accounting Policies” to the accompanying consolidated financial statements.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

55

 

 

Item 8. Financial Statements and Supplementary Data.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Description   Page
     
Report of Independent Registered Public Accounting Firm (PCAOB ID No. is 6706.)   F-2
Consolidated Balance Sheets   F-5
Consolidated Statements of Operations and Comprehensive Loss   F-6
Consolidated Statement of Cash Flows   F-7
Consolidated Statements of Stockholders’ Equity   F-8
Notes to Consolidated Financial Statements  F-9

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors

NextPlay Technologies, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of NextPlay Technologies, Inc. (“the Company”), as of February 28, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended February 28, 2022 and for the period March 6, 2020 (inception) to February 28, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of February 28, 2022 and 2021, and the consolidated results of its operations and its cash flows for the year ended February 28, 2022 and for the period March 6, 2020 (inception) to February 28, 2021, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements and going concern assessment of critical audit matter below, the Company has suffered recurring losses from operations and has stockholders’ deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

  

F-2

 

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgement. The communication of a critical audit matter does not alter in anyway our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

 

Initial Purchase Price Allocated to Assets acquired and Liabilities assumed in connection with the Reverse acquisition (refer to Note 1 to the financial statements) and Business combinations (refer to Note 4 to the financial statements)

 

Critical Audit Matter Description

 

As discussed in Note 1 to the consolidated financial statements, the Company (then known as Monaker Group, Inc. (“Monaker”)) entered into a “Share Exchange Agreement” with HotPlay Enterprise Limited (“HotPlay”) in July 2020, which was completed in June 2021, for fair value of total estimated consideration transferred of $53.43 million. The transaction resulted in a reverse acquisition, pursuant to which, the Company recognized total assets acquired of $56.48 million, including cash, and total liabilities assumed of $37.90 million.

 

As discussed in Note 4 to the consolidated financial statements, the Company acquired Reinhart Interactive TV AG and Zappware N.V. in June 2021, for total consideration of $10.71 million. As a result of the acquisition, the Company recognized total assets of $20.39 million, including cash and total liabilities assumed of $12.8 million. 

 

Further, As discussed in Note 4 to the consolidated financial statements, the Company acquired NextBank International (formerly IFEB) in July 2021, for total consideration of $11.21 million. As a result of the acquisition, the Company recognized total assets of $14.77 million, including cash and total liabilities assumed of $11.48 million. 

 

We identified the purchase price allocation as a critical audit matter. There was a high degree of subjectivity involved in evaluating the estimated fair value of the assets acquired and liabilities assumed. Specifically, assessing the estimated fair value of non-current assets and liabilities was challenging as it involved subjective judgment based on nature of those assets and liabilities and current economic condition. Changes to those assumptions could have had a significant effect on the determination of the fair value measurements.

 

How the Critical Audit Matter Was Addressed in the Audit

 

The following are the primary procedures we performed, among others (for each of the acquisition) to address this critical audit matter:

 

We obtained understanding of business and business environment.
   
Performed inquiries with applicable individuals in the Company’s and Acquiree’s finance and operations department.
   
Tested accuracy and completeness of the provisional opening balances at the date of acquisition, obtained and reviewed copies of significant contracts.
   
Obtained provisional purchase price allocation worksheets, tested the mathematical accuracy of the worksheet, and tied the balances with applicable acquiree trial balance.
   
Evaluated the reasonableness of estimated provisional fair value of each asset acquired and liability assumed.
   
Considered the existence of contradictory evidence based on reading of internal communication to management, Board minutes, Company press releases, publicly available information as well as our observations and inquires as to the changes within the business.

 

F-3

 

 

Allowance for Credit Losses (“ACL”) with respect to Axion Ventures Inc’s Convertible notes (refer to Note 7 to the financial statements

 

Critical Audit Matter Description

 

As discussed in Note 7 of the consolidated financial statements, the Company as of the year ended February 28, 2022 has an outstanding convertible note receivable of $7.7 million and relevant accrued interest receivable of $0.2 million with Axion Ventures Inc. The Company initiated the process to recover the outstanding amount. Accordingly, the Company engaged external counsel, sent a demand letter to Axion Ventures Inc, filed a claim in the Supreme Court of British Columbia, and based the filed claim, noted the court was receptive to loans related evidence and determined that it will be further resolved together with other Axion Ventures Inc. issues in the next trial. As of the year ended February 28, 2022, the Company has recorded an ACL for the principal amount of $3.1 million and for the accrued interest receivable amount of $0.2 million.

 

We identified ACL specific to Axion Ventures Inc’s convertible note as a critical audit matter. There was a high degree of subjectivity involved in assessing the sufficiency of the ACL amount as the assumptions used in measuring the ACL amount are judgmental and subjective and based on the ongoing legal matter. Changes to those assumptions could have had a significant effect on the determination of the ACL amount.

 

How the Critical Audit Matter Was Addressed in the Audit

 

The following are the primary procedures, among others, we performed to address this critical audit matter:

 

We obtained an understanding of the convertible note receivable.
   
Performed inquiries with relevant individuals of the Company
   
Obtained and reviewed a response from the Company’s respective attorney, as well as reviewed applicable attorney’s communication regarding the matter.
   
Obtained and reviewed a copy of the filed lawsuit.
   
Reviewed the publicly available Axion Ventures Inc’s audited financial statements, noting the matter as one of the outstanding legal matters.
   
Assessed the reasonableness of key assumptions used in estimating the ACL.
   
Considered the existence of contradictory evidence based on reading of internal communication to management, Board minutes, Company press releases, publicly available information as well as our observations and inquires as to the changes within the business.

 

Going Concern Assessment (refer to Note 2 to the financial statements)

 

Critical Audit Matter Description

 

As described in Note 2 to the financial statements, the Company prepared its financial statements on a going concern basis, and management has concluded that the Company has not generated sufficient income to sustain the operations. For the year ended February 28, 2022 and for the period March 6, 2020 (inception) to February 28, 2021, the Company incurred net losses of $40.41 million and $1.63 million respectively, and used net cash in operating activities of $22.03 million and $1.0 million, respectively. As of February 28, 2022 and for the period March 6, 2020 (inception) to February 28, 2021, the accumulated deficit amounted to $39.17 million and $1.20 million, respectively.

 

The principal consideration for our determination that performing procedures relating to the Company’s going concern assessment is a critical audit matter is the significant judgment by management related to the Company’s ability to raise funds and generate revenue sufficient to continue its operations.

 

How the Critical Audit Matter Was Addressed in the Audit

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included reviewing new note payable agreements, reviewing certain debt restructuring agreements and reviewing the at-the market equity program entered into by the Company subsequent to year end.

 

/S/ TPS Thayer, LLC

 

TPS Thayer, LLC

We have served as the Company’s auditor since 2020

Sugar Land, Texas

June 17, 2022

 

F-4

 

 

NextPlay Technologies, Inc.
Consolidated Balance Sheets

 

   February 28,   February 28, 
    2022       2021 
Assets        
Current assets        
Cash and cash equivalent  $6,618,951   $444,920 
Short term investment   304,509    
 
Accounts receivable, net   766,793    
 
Loans receivable, net   17,355,163    
 
Unbilled receivables   3,277,408    
 
Other receivable   343,681    
 
Other receivable, related parties   155,425    
 
Work in progress   691,863    
 
Prepaid expenses and other current assets   1,010,364    235,746 
Advance for investments   3,227,117    
 
Investment in unconsolidated affiliate: Short-term   8,722    
 
Convertible notes receivable, related party   
    3,000,000 
Total current assets  $33,759,996   $3,680,666 
           
Non-current assets          
Investment in unconsolidated affiliates: Long-term  $6,258   $
 
Convertible notes receivable, related party - net   4,594,214    
 
Intangible assets, net   17,661,676    7,759,603 
Goodwill   38,946,419    
 
Computers, furniture and equipment, net   557,961    25,793 
Operating lease right-of-use asset   3,962,596     
Security deposits   264,373    
 
Total non-current assets  $65,993,497   $7,785,396 
           
Total assets  $99,753,493   $11,466,062 
           
Liabilities and stockholders’ equity          
Current liabilities          
Line of credit and notes payable, net  $7,341,745   $
 
Accounts payable and accrued expenses   8,595,064    343,941 
Other current liabilities   392,684    11,163 
Deferred revenue   2,087,763    
 
Current portion of operating lease liability   711,803    
 
Other current liabilities - customer demand deposits payable   7,608,279    
 
Other liabilities affiliate   
    38,260 
Notes payable - related party   765,040    1,053,082 
Total current liabilities  $27,502,378   $1,446,446 
           
Non-current liabilities          
Line of credit and notes payable long-term, net  $270,809   $
 
Note payable long term, related parties   966,314    
 
Operating lease liability, noncurrent portion   3,117,947    
 
Other long-term liability   34,847    
 
Total non-current liabilities  $4,389,917   $
 
           
Total liabilities  $31,892,295   $1,446,446 
           
Commitments and Contingencies   
 
    
 
 
           
Stockholders’ equity          
Series A Preferred stock, $0.01 par value; 3,000,000 authorized; 0 and 0 shares issued and outstanding at February 28, 2022 and 2021, respectively   
    
 
Series B Preferred stock, $0.00001 par value; 10,000,000 authorized; 0 and 10,000,000 shares issued and outstanding at February 28, 2022 and 2021, respectively   
    
 
Series C Preferred stock, $0.00001 par value; 3,828,500 authorized; 0 and 3,828,500 shares issued and outstanding at February 28, 2022 and 2021, respectively   
    
 
Series D Preferred stock, $0.00001 par value; 6,100,000 authorized; 0 and 0 shares issued and outstanding at February 28, 2022 and 2021, respectively   
    
 
Common stock, $0.00001 par value; 500,000,000 shares authorized; 108,360,020 and 62,400,000 shares outstanding at February 28, 2022 and 2021, respectively   1,084    624 
Treasury stock   (771,453)   
 
Additional paid-in-capital   104,393,361    11,599,357 
Accumulated other comprehensive (loss)/income   (218,703)   10,221 
Accumulated deficit   (39,173,079)   (1,200,309)
Stockholders’ equity attributable to parent  $64,231,210   $10,409,893 
Non-controlling interest   3,629,988    (390,277)
           
Total stockholders’ equity   67,861,198    10,019,616 
Total liabilities and stockholders’ equity  $99,753,493   $11,466,062 

 

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

 

F-5 

 

 

NextPlay Technologies, Inc.

Consolidated Statements of Operations and Comprehensive Loss

 

  

For the year ended

February 28,

   For the period
from
March 6,
2020 to
February 28,
 
   2022   2021 
         
Revenue        
Media subscription and services  $4,463,051    
 
Product development revenue   2,003,447      
Interest and financial services   1,581,421    
 
Travel services   155,407    
 
           
Total revenue  $8,203,326    
 
           
Cost of Revenue          
Media subscription and services   1,273,959    
 
Cost of product development   444,327      
Interest and financial services   490,911    
 
Travel services   137,170    
 
           
Total Cost of Revenue  $2,346,367    
 
           
Gross Profit  $5,856,959    
 
           
Operating Expenses          
General and administrative   12,463,578    784,945 
Salaries and benefits   5,722,609    325,473 
Technology and development   1,023,504    3,180 
Stock-based compensation   546,978    
 
Selling and promotions expense   1,126,231    4,702 
Depreciation and amortization   5,658,299    461,596 
           
Total operating expenses   26,541,199    1,579,896 
           
Operating Loss   (20,684,240)   (1,579,896)
           
Other Income/ (Expense)          
Valuation loss, net   (2,380,157)   
 
Impairment loss   (11,583,852)   
 
Allowance for credit loss   (3,136,685)   
 
Interest expense   (2,505,522)   (51,827)
Realized loss on sale of marketable securities   (59,586)   
 
Foreign Exchange loss   
    (2,110)
Other income (expense)   (47,556)   425 
Total other income (expenses)   (19,713,358)   (53,512)
Net loss before tax  $(40,397,598)   (1,633,408)
Estimated corporate taxes   (16,876)   
 
Net loss   (40,414,474)   (1,633,408)
           
Share of non-controlling interest      (2,441,704)   (433,099)
Net loss attributable to parent  $(37,972,770)   (1,200,309)
           
Other Comprehensive income (loss):          
Foreign currency translation gain (loss)   (489,746)   20,859 
Total other comprehensive income (loss)     (489,746)   20,859 
           
Comprehensive loss   (40,904,220)   (1,612,549)
           
Total foreign currency translation allocated to:          
Equity holders of the Company   (228,924)   10,221 
Non-controlling interests of the subsidiaries   (260,822)   10,638 
Total foreign currency translation   (489,746)   20,859 
           
Total comprehensive loss attributable to:          
Equity holders of the Company   (38,346,555)   (1,190,088)
Non-controlling interests of the subsidiaries   (2,557,665)   (422,461)
Total comprehensive loss   (40,904,220)   (1,612,549)
           
Weighted average number of common shares outstanding          
Basic   94,513,747    62,400,000 
Diluted   94,513,747    62,400,000 
Basic net loss per share  $(0.40)   (0.02)
Diluted net loss per share  $(0.40)   (0.02)

  

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

 

F-6 

 

 

NextPlay Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

For the year ended February 28, 2022 and for the period from March 6, 2020 to February 28, 2021

 

   Preferred B
Shares
   Preferred B
Amount
   Preferred C
Shares
   Preferred C
Amount
   Common Stock
Shares
   Common
Stock
Amount
   Treasury
Stock
   Additional
Paid-in
Capital
   Accumulated
Deficit
   Accumulated
Other
Comprehensive
income
   Total
shareholders’
equity
   Non-controlling
interest
   Shareholders’
equity
 
Balances, March 6, 2020 (inception date)   
    
    
    
     —
    
    
    
    
    
    
    
    
    
 
Share contribution:                                                                 
cash       
        
    23,400,000    234    
    5,196,353        
    5,196,587    32,184    5,228,771 
Intangible assets       
        
    39,000,000    390    
    6,403,004    
    
    6,403,394    
    6,403,394 
Net loss for the period       
        
        
    
    
    (1,200,309)   
    (1,200,309)   (433,099)   (1,633,408)
Foreign currency translation adjustment       
        
        
    
    
    
    10,221    10,221    10,638    20,859 
Balances, February 28, 2021   
    
    
    
    62,400,000   $624    
   $11,599,357   $(1,200,309)  $10,221   $10,409,893   $(390,277)  $10,019,616 
Reduction of share capital       
        
    (10,400,000)   (104)   
    (2,999,896)   
    
    (3,000,000)       (3,000,000)
Reverse acquisition recapitalization   10,000,000    100    3,828,500    38    23,854,203    239    
    62,813,297    
    
    62,813,536    6,577,930    69,391,466 
Conversion of preferred shares   (10,000,000)   (100)   (3,828,500)   (38)   11,246,200    112    
    (112)       
    
    
    
 
Shares issued for compensation       
        
    258,594    3    
    419,225        
    419,228        419,228 
Shares issued for consulting services       
        
    97,500    1    
    127,749        
    127,750        127,750 
Shares issued for debt payment   
    
    
    
    335,000    3    
    669,997        
    670,000        670,000 
Shares issued for business combination   
    
    
    
    1,925,581    19    
    4,813,933        
    4,813,952        4,813,952 
Shares issued for private placement       
        
    18,987,342    190    
    27,849,811        
    27,850,001        27,850,001 
Warrant cancellation       
        
        
    
    (900,000)       
    (900,000)       (900,000)
Share repurchase   
    
    
    
    (344,400)   (3)   (771,453)   
            (771,456)       (771,456)
Foreign currency translation adjustment       
        
        
    
    
    
    (228,924)   (228,924)   (260,822)   (489,746)
Net loss for the year       
        
        
    
    
    (37,972,770)   
    (37,972,770)   (2,296,843)   (40,269,613)
Balances, February 28, 2022   
    
    
    
    108,360,020   $1,084    (771,453)  $104,393,361   $(39,173,079)  $(218,703)  $64,231,210   $3,629,988   $67,861,198 

 

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

 

F-7 

 

 

NextPlay Technologies, Inc.

Consolidated Statements of Cash Flows

 

   For the year ended
February 28, 2022
   For the period from