UNITED STATES
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For the quarterly period ended:
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Commission File No.
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NEXTPLAY TECHNOLOGIES, INC.
FORM 10-Q
For the Quarter Ended November 30, 2022
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of NextPlay Technologies, Inc. (the “Company”), that are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements included in this Report. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under the section entitled “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K for the year ended February 28, 2022, as filed with the SEC on June 21, 2022 (under the heading “Risk Factors” and in other parts of that report) and in the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2022, as filed with the SEC on October 24, 2022 (under the heading “Risk Factors”). The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason, except as otherwise required by law.
The following discussion is based upon our unaudited Condensed Consolidated Financial Statements included elsewhere in this Report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, derivative liabilities and related disclosure of contingencies. Each of these decisions has some impact on the financial results for any given period. In making these decisions, we consider various factors including contractual obligations, customer satisfaction, competition, internal and external financial targets and expectations, and financial planning objectives. On an on-going basis, we evaluate our estimates, including those related to the fair value of investments, the carrying amounts of intangible assets, depreciation and amortization, deferred income taxes, purchase price allocation in connection with business combinations and allowance for credit losses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, including in our most recent Annual Report on Form 10-K. All references to years relate to the Company’s fiscal year ended February 28 or 29 (during leap years) of the particular year.
ii
Summary Risk Factors
We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:
| ● | 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 our 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; | |
| ● | The sale of our travel and media businesses is contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits; | |
| ● | 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; | |
| ● | A 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; | |
| ● | 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; | |
| ● | 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 and prospects could be harmed; | |
| ● | 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; | |
| ● | HotPlay’s go-to-market strategy and corresponding timeline are dependent on being able to successfully recruit substantial additional resources within FY23. Failure to do this could result in the revenues generated from HotPlay being delayed beyond FY23; |
iii
| ● | Although Longroot 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; | |
| ● | 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; | |
| ● | NextBank’s ability to originate loans is subject to risk associated with economic and market conditions; | |
| ● | NextBank uses correspondent banks and is subject to risk associated with termination of such relationships, which may negatively impact its operations; | |
| ● | Our success is subject to the development of new or upgraded products, services and features over time; | |
| ● | Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, and consumer protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business; | |
| ● | Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully respond to these regulations, our business could be negatively impacted; | |
| ● | NextBank is subject to various regulatory capital requirements. Regulatory changes or actions may alter the requirements for capital; | |
| ● | NextBank faces a risk of non-compliance and enforcement action related to the Bank Secrecy Act and other anti-money laundering, customer due diligence, and combating the financing of terrorism statutes and regulations; | |
| ● | We are subject to anti-bribery, anti-corruption and similar laws, and non-compliance with such laws could subject us to criminal penalties or significant fines and harm our business and reputation; | |
| ● | If we do not adequately protect our intellectual property, our ability to compete could be impaired; | |
| ● | Certain of our products are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent us from enforcing or defending our proprietary technologies; |
iv
| ● | 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. |
v
WHERE YOU CAN FIND OTHER INFORMATION
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, 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, with the SEC. 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.
vi
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
NextPlay Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short term investments | ||||||||
| Loans receivable, net | ||||||||
| Loans receivable - related parties, net | ||||||||
| Unbilled receivables | ||||||||
| Other receivables | ||||||||
| Other receivables, related parties | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Advances for investments | ||||||||
| Investments in unconsolidated affiliates: Short-term | ||||||||
| Assets held for sale - current | ||||||||
| Total current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Investments in unconsolidated affiliates: Long-term | ||||||||
| Convertible notes receivable, related party, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Security deposits | ||||||||
| Assets held for sale - non current | ||||||||
| Total non-current assets | $ | $ | ||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Line of credit and notes payable, net | $ | $ | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses - related parties | ||||||||
| Other current liabilities | ||||||||
| Current portion of operating lease liability | ||||||||
| Other current liabilities - customer demand deposits payable | ||||||||
| Notes payable - related party | ||||||||
| Liabilities held for sale - current | ||||||||
| Total current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Note payable long term, related parties | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other long-term liability | ||||||||
| Liabilities held for sale - non current | ||||||||
| Total non-current liabilities | $ | $ | ||||||
| Total liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Series A Preferred stock, $ | ||||||||
| Series B Preferred stock, $ | ||||||||
| Series C Preferred stock, $ | ||||||||
| Series D Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stockholders’ equity attributable to parent | $ | $ | ||||||
| Non-Controlling Interest in consolidated subsidiaries | ||||||||
| Non-Controlling Interest in held for sale | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Operations, Net and Comprehensive Loss
(Unaudited)
| For the nine months ended | For the three months ended | |||||||||||||||
| November 30, 2022 | November 30, 2021 | November 30, 2022 | November 30, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue | ||||||||||||||||
| Interest and financial services | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of Revenue | ||||||||||||||||
| Interest and financial services | ||||||||||||||||
| Total Cost of Revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Technology and development | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Selling and promotions expense | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income/ (Expense) | ||||||||||||||||
| Valuation loss, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Allowance for credit loss | ( | ) | ( | ) | ||||||||||||
| Interest income (expense) | ( | ) | ( | ) | ||||||||||||
| Realized loss on sale of marketable securities | ( | ) | ||||||||||||||
| Other income/(expense) | ( | ) | ( | ) | ||||||||||||
| Total other income/(expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before tax from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Estimated corporate taxes | ( | ) | ( | ) | ||||||||||||
| Net Loss after tax from continuing operations: | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Share of non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations attributable to parent | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss after tax from discontinued operation: | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Share of loss to non-controlling interest for discontinued operation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operation attributable to parent | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to parent | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Comprehensive (loss) income | ||||||||||||||||
| Foreign currency translation gain (loss) from continuing operations | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation loss from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Currency translation allocated to: | ||||||||||||||||
| Equity holders of the Company | ( | ) | ( | ) | ( | ) | ||||||||||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||
| Total foreign currency translation | ( | ) | ( | ) | ( | ) | ||||||||||
| Total comprehensive loss attributable to: | ||||||||||||||||
| Equity holders of the Company | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic (1) | ||||||||||||||||
| Diluted (1) | ||||||||||||||||
| Basic net (loss) per share from continuing operations: (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic net (loss) per share from discontinued operations: (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total basic net (loss) per share | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Diluted net (loss) per share from continuing operations: (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Diluted net (loss) per share from discontinued operations: (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total diluted net (loss) per share | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
For the three months ended November 30, 2022
| Common Stock Shares(1) | Common
Stock Amount(1) | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total stockholders’ equity | Non-controlling interest | Stockholders’ equity | ||||||||||||||||||||||||||||
| Balances, August 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for compensation | ||||||||||||||||||||||||||||||||||||
| Shares issued for consulting services | ||||||||||||||||||||||||||||||||||||
| Shares issued for assets acquisition | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||||||
| Balances, November 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
For the nine months ended November 30, 2022
| Common Stock Share(1) | Common stock value(1) | Treasury Stock | Additional Paid in Capital | Accumulated deficit | Accumulated other comprehensive income | Total Shareholders’ equity | Minority interest | Total Shareholders’ equity | ||||||||||||||||||||||||||||
| Balances, February 28, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Fair value adjustment from valuation report | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Shares issued for compensation | ||||||||||||||||||||||||||||||||||||
| Shares issued for consulting services | ||||||||||||||||||||||||||||||||||||
| Shares issued for assets acquisition | ||||||||||||||||||||||||||||||||||||
| Increase in ownership of subsidiary - HotPlay | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balances, November 30, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
3
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C
Shares | Preferred C Amount | Common
Stock Shares(1) | Common
Stock Amount(1) | Treasury
Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total shareholders’ equity | Minority interest | Total
Shareholders’ equity | ||||||||||||||||||||||||||||||||||||||||
| Balances, August 31, 2021 | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for consulting and bonus | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Stock issued for direct offering | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Warrant Cancellation | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balances, November 30, 2021 | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
For the nine months ended November 30, 2021
| Preferred B Shares | Preferred B Amount | Preferred C
Shares | Preferred C Amount | Common
Stock Shares(1) | Common
Stock Amount(1) | Treasury
Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive income | Total shareholders’ equity | Minority interest | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||||
| Balances, February 28, 2021 | - | - | $ | | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||
| Reduction of share capital | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Reverse acquisition recapitalization | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Shares issued for consulting and bonus | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for debt payment | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for business combination | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for private placement | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Warrant Cancellation | - | - | - | - | - | - | - | ( | ) | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Share repurchase | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Changes in ownership interest from acquisition | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balances, November 30, 2021 | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| (1) | Reflects retrospectively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
NextPlay Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine months Ended | ||||||||
| November 30, | November 30, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from operations | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Valuation loss, net | ||||||||
| Stock based compensation | ||||||||
| Gain on Sale of assets | ( | ) | ||||||
| Share of non-controlling interest | ( | ) | ( | ) | ||||
| Gain on currency translation | ( | ) | ( | ) | ||||
| Allowance for credit loss | ||||||||
| Provision from employee benefits | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Amounts due from related parties | ||||||||
| Amounts due to related party | ( | ) | ||||||
| Accounts receivable | ||||||||
| Other Receivables | ( | ) | ||||||
| Unbilled receivable | ( | ) | ( | ) | ||||
| Loans receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Security deposits | ( | ) | ( | ) | ||||
| Operating lease liabilities | ||||||||
| Accounts payable & accrued expenses | ||||||||
| Deferred revenue - related party | - | ( | ) | |||||
| Other current liabilities | ( | ) | ||||||
| Other Liabilities - Customer Deposits | ||||||||
| Cash used in operating activities | $ | ( | ) | ( | ) | |||
| Cash flows from investing activities: | ||||||||
| Short term investment | ( | ) | ||||||
| Investment in unconsolidated affiliate | ||||||||
| Payment in advance for investment | ( | ) | ||||||
| Additions of intangible assets - related party | ( | ) | ( | ) | ||||
| Additions of intangible assets | ( | ) | ( | ) | ||||
| Purchase of computer, furniture, and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of computer, furniture, and equipment | ||||||||
| Effects of a business combination of NextBank | ||||||||
| Effects of a business combination of NextPlay (Monaker) | ||||||||
| Cash (used in) provided by investing activities | $ | ( | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable - related party | ||||||||
| Repayment of notes payable - related party | ( | ) | ( | ) | ||||
| Treasury stock transaction | ( | ) | ||||||
| Proceeds from promissory notes - related party | ||||||||
| Proceeds from promissory notes | ||||||||
| Proceeds from promissory notes - related party | ( | ) | ||||||
| Payments on promissory notes | ( | ) | ( | ) | ||||
| Proceeds from sale of stock | ||||||||
| Cash provided by (used in) financing activities | $ | |||||||
| Cash and Cash Equivalents | ||||||||
| Net change during the period | ( | ) | ||||||
| Balance, beginning of period – continuing operations | ||||||||
| Balance, beginning of period – discontinued operations | ||||||||
| Balance, beginning of period | ||||||||
| Balance, end of period from continued operations | $ | |||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | $ | |||||||
| NON-CASH TRANSACTIONS | ||||||||
| Addition of intangible assets through the advance investment | ||||||||
| Settle (a) Convertible note receivable and (b) note payable due to closing share exchange transaction | ||||||||
| Settle (a) Convertible note receivable and (b) share capital increase due to closing share exchange transaction | ||||||||
| Share issuances for asset acquisition – Fighter Base and Token IQ | ||||||||
| Share issuances for consulting and compensation | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
NextPlay Technologies, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Summary of Business Operations and Significant Accounting Policies
Nature of Operations and Business Organization
NextPlay Technologies, Inc., together with 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, and connected TV 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.
As of November 30, 2022, NextPlay is organized into two divisions: (i) NextMedia, the Company’s Interactive Digital Media Division and (ii) NextFinTech, the Company’s Finance and Technology Division.
| (i) | NextMedia, the Company’s Interactive Digital Media Division |
In the Interactive Digital Media Division, NextPlay closed its acquisition of HotPlay Enterprise Limited and its In-Game Advertising (“IGA”) platform on June 30, 2021.
| (ii) | NextFinTech, the Company’s Finance and Technology Division |
In the Finance and Technology Division, the Company’s acquisition of International Financial Enterprise Bank (“IFEB”), now called NextBank International, Inc. (“NextBank”), and the conditional approval from the Labuan Financial Services Authority (“Labuan FSA”) to operate a general insurance and reinsurance business, is expected to allow NextPlay to offer individuals and households asset management and banking services, and travel related services such as travel finance and travel insurance, subject to regulatory approval and licensing.
Our Company, in accordance with Thailand foreign ownership laws, holds an indirect control of Longroot (Thailand) Company Limited (“Longroot”), which operates in financial advisory service and owns an Initial Coin Offering (“ICO”) Portal which is approved and regulated by the Thai Securities and Exchange Commission (“Thai SEC”). The Portal enables us to crypto-securitize an array of high-quality alternative assets, such as video games, insurance contracts, and real estate. These digital assets serve as a new asset class, which the Company’s management believes will create significant opportunities to accelerate products and services within the FinTech division’s asset management business.
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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 $
On October 14, 2021, “Longroot Inc.” (a subsidiary of the Company) changed its name to “Next Fintech Holdings, Inc.” The Company plans to use Next Fintech Holdings, Inc. as the holding company for its FinTech division.
Reverse Stock Split
In connection with the
reverse stock split, the number of authorized shares of common stock and the number of issued and outstanding shares of common stock are
proportionally reduced without change in par value per share of $
Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc.
On June 28, 2022, the Company entered into a series
of agreements, including a securities exchange agreement, with William Kerby, the Company’s co-Chief Executive Officer and director,
Donald P. Monaco, a director of the Company, and British Columbia-based TGS E-Sports Inc. (TSX-V: TGS, OTC: TGSEF) (“TGS”),
a public company whose securities are listed for trading on the Canadian TSX Venture Exchange, pursuant to which the Company has agreed
to sell the Company’s travel business, NextTrip Group, LLC (“NextTrip”), and its
Prior to the execution of the securities exchange
agreement, NextTrip issued an aggregate of
In addition to the securities exchange agreement, the Company, NextTrip, Reinhart and TGS also entered into a separation agreement on June 28, 2022, to further document the separation of NextTrip and Reinhart from the Company and to assign, transfer and convey certain assets and liabilities held in NextTrip or the Company’s name, respectively, to NextTrip or the Company, respectively, to allow for the separation of the businesses in accordance with the securities exchange agreement at closing of the transaction. The separation agreement also provides for the termination of certain intercompany agreements and accounts by and between the parties at closing of the transaction, sets rights related to confidentiality, non-disclosure and maintenance of attorney-client privilege matters, and also provides for a mutual release by and among the Company, NextTrip and Reinhart for all pre-closing claims between themselves and their officers, directors, affiliates, successors and assigns.
In addition, the separation agreement provides
for the contribution of (i) $
7
Closing of the transaction remains subject to various conditions, including (without limitation) regulatory approvals, approval of certain related matters by TGS’ shareholders and consummation of a financing by TGS, and is expected to occur in Q4 2022. No assurances can be provided that the closing conditions will be satisfied, or that the transaction will be consummated on the anticipated timeline, or at all.
The transaction, once consummated, is expected to streamline the Company’s business operations and management, improve capital allocation, and is expected to unlock shareholder value by offering investors a pure-play investment in the Digital Media and Financial Technology sectors.
As a result of the foregoing, as of November 30, 2022, Reinhart/Zappware and NextTrip were no longer treated as a division of the Company; accordingly, for the nine-month and three-month periods ended November 30, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia. Assets and liabilities of Reinhart TV AG/Zappware and NextTrip were classified as held for sale according to Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc.
Reverse Acquisition of HotPlay Enterprise Ltd.
On July 23, 2020, the Company (then known as Monaker
Group, Inc. (“Monaker”)) entered into a Share Exchange Agreement (as amended from time to time, the “Share Exchange
Agreement”) with HotPlay Enterprise Limited (“HotPlay”) and the stockholders of HotPlay (the “HotPlay Stockholders”).
Pursuant to the Share Exchange Agreement, Monaker exchanged
During the nine-month period ended November 30, 2022, the Company completed the fair value assessment (Purchase Price Allocation) of the net identifiable assets and liabilities assumed by an independent appraiser. In order to reflect the adjustment to the provisional fair value of the identifiable assets and liabilities of the reverse acquisition of HotPlay Enterprise Ltd. at the acquisition date, the adjustments were made as follows:
The following table summarizes the fair value of consideration transferred:
| Number of Monaker common shares outstanding as of 6/30/2021(1) | ||||
| Monaker share price as of 6/30/2021(1) | $ | |||
| Fair value of common shares | $ |
| (1) | Reflects retroactively the 1-for-20 reverse stock split for number of shares and share prices that became effective January 6, 2023. Refer to Note 1 - Nature of Operations and Business Organization. |
8
| As of June 30, 2021 | ||||||||||||
| Provisional fair value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | |||||||||||
| Current assets | ( | ) | ||||||||||
| Intangible assets | ||||||||||||
| Goodwill | ( | ) | ||||||||||
| Non-current assets | ||||||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | ( | ) | ( | ) | ||||||||
| Non-current liabilities | ( | ) | ( | ) | ||||||||
| Total fair value of net assets from reverse acquisition | ||||||||||||
| Fair value of non-controlling interests of the subsidiaries | $ | |||||||||||
Fair value adjustments were from the increase
in fair value of intangible assets which are developed software and goodwill upon the completion of fair value assessment (Purchase Price
Allocation) of the subsidiaries subsequent to the closing date of reverse acquisition. As a result, non-controlling interests of the subsidiaries
amounting to $
Interim Financial Statements
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended February 28, 2022 and notes thereto and other pertinent information contained in the Company’s Annual Report on Form 10-K, which the Company filed with the Securities and Exchange Commission (the “SEC”) on June 21, 2022.
The results of operations for the three and nine months ended November 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2023.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include the fair value of investments, the carrying amounts of intangible assets, depreciation and amortization, deferred income taxes, purchase price allocation in connection with the business combination and allowance for credit losses.
9
Cash and Cash Equivalents
For purposes of balance sheet presentation and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company had no cash equivalents on November 30, 2022, and February 28, 2022.
Short Term Investments
The short term investments are a short-term certificate of deposit with a maturity date more than three months, as required by the Office of the Commissioner of Financial Institutions (“OCIF”) for business purpose of one of the Company’s subsidiaries.
Other Receivable, Unbilled Receivables
A receivable is recognized when the Company has an unconditional right to receive consideration. If revenue has been recognized before the Company has an unconditional right to receive consideration, the amount is presented as an unbilled receivable. A receivable is measured at transaction price less credit loss, and unbilled receivables are measured at the amount of consideration that the Company is entitled to, less credit loss. The Company calculates its allowance for current expected credit losses (“CECL”) based on lifetime expected credit losses at each reporting date. CECLs are calculated based on its historical credit loss experience and adjusted for forward-looking factors specific to the debtors and the economic environment. A receivable is written off when there is no reasonable expectation of recovering the contractual cash flows.
Loans Receivable and Allowance for Loan Losses
Loans Receivable
Loans that the Company has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are stated at their outstanding principal amount adjusted for charge-offs and the allowance for loan losses. Interest is accrued as earned based upon the daily outstanding principal balance.
The accrual of interest is generally discontinued at the time a loan is 90 days past due, unless the credit is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans placed on nonaccrual or charged-off is reversed against interest income. Interest on these loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is evaluated on a regular basis by management and is based upon collectability of loans, based on historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This represents management’s estimate of CECL in the Company’s loan portfolio over its expected life, which is the contract term being the reasonable and supportable period that we can reasonably and supportably forecast future economic conditions to estimate expected credit losses. The historical loss experience is to be adjusted for asset-specific risk characteristics and economic conditions, including both current conditions and reasonable and supportable forecasts of future conditions.
10
This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. Due to potential changes in conditions, it is possible that changes in estimates will occur and that such changes could be material to the amounts reported in the Company’s financial statements.
Prepaid Expenses and Other Current Assets
The Company records cash paid in advance for goods and/or services to be received in the future as prepaid expenses. Prepaid expenses are expensed over time according to the period indicated on the respective contract. Other current assets are recognized when it is probable that the future economic benefits will flow to the Company and the asset has a cost or value that can be measured reliably. It is then charged to expense over the expected number of periods during which economic benefits will be realized.
Advances for Investments
Advances for investments represent cash deposits transferred to the potential seller as a deposit payment, as stipulated in the relevant investment purchase agreement, mainly for potential acquisitions of assets or businesses.
Investment in Unconsolidated Affiliates
Investment in unconsolidated affiliates is recognized at cost less valuation loss.
Computer, Furniture and Equipment
The Company purchases computers, laptops, furniture
and fixtures. These are originally recorded at cost and stated at cost less accumulated depreciation and impairment, if any. The computers
and laptops are depreciated over a useful life of
11
Intangible Assets
Software Development Costs
The Company capitalizes internal software development costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established by “ASC 985-20-25” Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Amortization of the capitalized software development costs begins when the product is available for general release to customers. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.
Website Development Costs
The Company accounts for website development costs in accordance with Accounting Standards Codification (“ASC”) 350-50 “Website Development Costs”. Accordingly, all costs incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development stage that meet specific criteria are capitalized and costs incurred in the day-to-day operation of the website are expensed as incurred. All costs associated with the websites are subject to straight-line amortization over a three-year period.
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that is not individually identified and separately recognized as an asset. Adjustments made to the acquisition accounting during the measurement period may affect the recognition and measurement of assets acquired and liabilities assumed, any non-controlling interest (“NCI”), consideration transferred and goodwill or any bargain purchase gain, as well as the remeasurement of any pre-existing interest in the acquiree.
In our assessment, goodwill arisen from reverse acquisition is allocated systematically and reasonably to reporting segments which are regularly reviewed by the Company’s Chief Operating Decision Maker (“CODM”). The CODM allocates resources and assess performance of the business and other activities at the single operating segment level. The reporting units for impairment testing purpose are determined as the lowest level of cash generating unit below the operating segments since the components constitute a business for which discrete financial information is available, and the CODM regularly reviews the operating results of the components. Certain components share similar economic characteristic and are deemed to be a single reporting unit.
The Company assigned assets and liabilities to each reporting unit based on either specific identification or by using judgment for the remaining assets and liabilities that are not specific to a reporting unit. Goodwill was assigned to the reporting units based on a combination of specific identification and relative fair values. Goodwill associated with reporting units being sold are included in the carrying amount of assets held for sale at the reporting date.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:
| 1. | Significant underperformance compared to historical or projected future operating results; |
| 2. | Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and |
| 3. | Significant negative industry or economic trends. |
12
In impairment testing, goodwill acquired in a business combination is allocated to each of the Company’s reporting units that are expected to benefit from the synergies of the combination. The Company estimates the recoverable amount of each reporting unit to which the goodwill and intangible assets relates. Where the recoverable amount of the reporting unit is less than the carrying amount, an impairment loss is recognized in profit or loss. Impairment losses cannot be reversed in future periods. During the fourth quarter of each fiscal year, the Company carries out annual impairment reviews at the reporting unit level in respect of goodwill and intangible assets by performing qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If those impairment indicators exist, the quantitative assessment is required to assess the recoverable amount of the reporting unit by performing step 1 of the two-step goodwill impairment test. If we perform step 1 and the carrying amount of the reporting unit exceeds its fair value, we would perform step 2 to measure such impairment. In determining value in use, the estimated future cash flows are discounted to their present value to reflect current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.
In determining allowance for impairment of goodwill and intangible assets, the management is required to exercise judgements regarding determination of the recoverable amount of the asset, which is the higher of its fair value less costs of disposal and its value in use.
Accounts Payable, Notes Payable and Accrued Expenses
Accounts payable are recognized when the Company receives invoices, and accrued expenses are recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably.
Notes payable are recognized at cost, net transaction costs. Transaction costs are amortized over the terms of notes payable using effective interest rate method.
Customer Demand Deposits Payable
Customer deposit represents cash demand deposits payable received from customers at NextBank.
Business Combination
The Company uses the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). ASC 805 requires, among other things, that assets acquired, and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, Fair Value Measurements, as of the closing date. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.
Non-Controlling Interests
Non-controlling interests represent the equity in a subsidiary that is not attributable directly or indirectly to the parent. At the acquisition date, the Company measures any non-controlling interest at fair value.
13
Foreign Currency Translation
The Company prepares the consolidated financial statements using U.S. dollars as the functional currency. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at the rates of exchange at the balance sheet date with the resulting translation adjustments included as a separate component of stockholders’ equity through other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss.
Income and expenses are translated at the average monthly rates of exchange. The Company includes realized gains and losses from foreign currency transactions in other income (expense), net in the consolidated statements of net and comprehensive loss.
The effect of foreign currency translation on cash and cash equivalents is reflected in cash flows from operating activities on the consolidated statements of cash flows.
Earnings per Share
Basic earnings per share are computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. For the nine months ended November 31, 2022 and 2021, warrants were excluded from the computation of diluted net loss per share, as the result of the computation was anti-dilutive. The Company presents earnings per share from continuing operation and discontinued operation separately.
Assets and liabilities held for sale
In accordance with ASC 306, the potential sale of Reinhart/Zappware and NextTrip qualified as assets and liabilities held for sale as: (i) the Company has committed to a plan to sell, (ii) the disposal entities are available for immediate sale, (iii) the buyer has been identified and has committed to purchase, subject to satisfaction of certain closing conditions, and (iv) it is probable to occur within 1 year from the date of the classification. Assets and liabilities held for sale are measured at the lower of carrying amount and the fair value less cost to sell. Computer and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
Where the fair value less cost to sell of assets held for sale exceed the asset’s carrying amounts, a gain shall be recognized for which not exceeding the cumulative loss previously recognized.
Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position as well as for prior period. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of comprehensive loss.
14
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, which involves identifying the contracts with customers, identifying performance obligations in the contracts, determining transactions price, allocating transaction price to the performance obligation, and recognizing revenue when the performance obligation is satisfied. Types of revenue consist of:
Interest and Financial services
NextBank provides traditional banking services in niche-focused businesses, including commercial and residential real estate and the origination and sale of loans, among other types of lending services. Revenues are categorized as interest income and financial services. NextBank is primarily responsible for fulfilling the services to clients, bears risks on its loan products, has discretion in establishing the price, hence it acts as principal, and recognizes revenues at the gross amount received for the services.
Interest is accrued as earned based upon the daily outstanding principal balance. The accrual of interest is generally discontinued at the time a loan is 90 days past due, unless the credit is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged- off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans placed on nonaccrual or charged-off is reversed against interest income. Interest on these loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Financial services are categorized as follows:
| - | Origination fee is recognized at point of time when the loan contract is mutually originated between a customer and the Company. |
| - | Deposit account fees and other administrative fees are generally recognized upon completion of services (wire in/out processing, certain deposit condition met, etc.). |
Cost of Revenue
Cost of revenue from finance and technology mainly consists of interest expense, loan related commissions, amortization of core banking software and technology facilities and infrastructures.
Selling and Promotions Expense
Selling and promotion expenses consist primarily of advertising and promotional expenses, expenses related to our participation in industry conferences, and public relations expenses; the expense is recognized when incurred.
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company recognizes compensation on a straight-line basis over the requisite service period for each award and recognizes forfeitures as when they occur.
15
Warrants
The Company accounts for the warrants in accordance with the guidance contained in ASC 815, under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. Most of warrant agreements contain fixed strike prices and a fixed number of shares that may be issued upon exercise of the warrants at the fixed strike price, with certain provisions that may result in changes to the strike price in certain circumstances, subject to stockholder approval. All such warrant agreements are exercisable at the option of the holder and settled in shares of the Company. The warrants are qualified as equity-linked instrument embedded in a host instrument, whereby they do not meet definition of derivative; therefore, it is not required to separate the embedded component from its host.
The Company treats a modification of the terms or conditions of an equity award in accordance with ASC Topic 718-20-35-3, by treating the modification as an exchange of the original award for a new award. In substance, the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation cost for any incremental value. Incremental compensation cost is measured as the excess, if any, of the fair value of the modified award determined in accordance with the provisions of ASC Topic 718-20-35-3 over the fair value of the original award immediately before its terms are modified, measured based on the share price and other pertinent factors at that date.
Fair Value of Financial Instruments
The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but it does provide guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).
The hierarchy consists of three levels:
| ● | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities, if any.
Financial instruments consist principally of cash, investments in unconsolidated affiliates, other receivables, net, accounts payable, accrued liabilities, notes payable, related parties, line of credit and certain other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
16
Leases
The Company utilizes operating leases for its offices. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s contractual obligation to make lease payments under the lease. Operating leases are included in operating lease right-to-use assets, non-current, and operating lease liabilities current and non-current captions in the consolidated balance sheets.
Operating lease right-to-use assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term. Lease agreements may contain periods of free rent or reduced rent, predetermined fixed increases in the minimum rent and renewal or termination options, all impacting the determination of the lease term and lease payments to be used in calculating the lease liability. Lease cost is recognized on a straight-line basis over the lease term. The Company uses the implicit rate in the lease when determinable. As most of the Company’s leases do not have a determinable implicit rate, the Company uses a derived incremental borrowing rate based on borrowing options under its credit agreement. The Company applies a spread over treasury rates for the indicated term of the lease based on the information available on the commencement date of the lease.
Segment Reporting
Accounting Standards Codification 280-10 “Segment Reporting” established standards for reporting information about operating segments in annual consolidated financial statements and required selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
An operating segment component has the following characteristics:
| a. | It engages in business activities from which it may recognize revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). |
| b. | Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. |
| c. | Its discrete financial information is available. |
As of November 30, 2022, the Company had two operating segments consisting of
| (i) | NextMedia segment, consisting of: |
| - | HotPlay Enterprise Ltd. and HotPlay (Thailand) Co., Ltd., |
| (ii) | NextFinTech segment, consisting of: |
| - | Next Fintech Holdings, Inc. (formerly Longroot Inc.) |
17
| - | Longroot Limited |
| - | Longroot Holding (Thailand) Co., Ltd. |
| - | Longroot (Thailand) Co., Ltd. |
| - | NextBank International, Inc. |
The Company’s chief operating decision makers are considered to be the Co-Chief Executive Officers. The chief operating decision makers allocate resources and assesses performance of the business and other activities at the single operating segment level.
As a result of the proposed strategic sale of Reinhart/Zappware and NextTrip, as of November 30, 2022, those entities were no longer treated as a division of the Company; accordingly, for the nine-month period ended November 30, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia.
See Note 12 Business Segment Reporting for details on each segment unit.
Comparative figures
Certain comparative figures have been reclassified to conform with the current period presentation.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB is issuing this Update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.
Stakeholders asserted that the language in the illustrative example resulted in diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring that equity security’s fair value. Some stakeholders apply a discount to the price of an equity security subject to a contractual sale restriction, whereas other stakeholders consider the application of a discount to be inappropriate under the principles of Topic 820.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance.
The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.
18
Note 2 - Going Concern
As of November 30, 2022, and February 28, 2022,
the Company had an accumulated deficit of $
We have limited financial resources. As of November
30, 2022, we have working capital of $
We will need to raise additional capital or borrow loans to support the on-going operations, increase market penetration of our products, expand the marketing and development of our technology driven products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, and systems for managing the business including covering other operating costs until our planned revenue streams from all businesses and products are fully implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all, would negatively impact our business, financial condition, and liquidity. We currently have limited resources to satisfy these obligations, and our inability to do so could have a material adverse effect on our business and ability to continue as a going concern.
Management’s plans with regard to this going concern are as follows:
| (i) | the Company plans to continue to raise funds with third parties by way of public or private offerings, | |
| (ii) | the Company is working aggressively to increase the viewership of its 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 finance and technology division; | |
| (iv) | the Company is seeking an additional funding with lower cost to refinance the existing loans; and | |
| (v) | the Company is tightening its spending on expenses, which is expected to help in the cost reduction of the operations. |
The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan and generate greater revenues. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.
Note 3 – Notable Financial Information
Short term investment
As of November 30, 2022 and February 28, 2022,
NextBank had short-term certificate of deposit of $
19
Loans Receivable
Loans receivable related to the provision of traditional
banking services in niche-focused businesses, including commercial and residential real estate and the origination and sale of loans and
receivables financing, among other types of lending services of NextBank. As of November 30, 2022 and February 28, 2022, the Company had
loans receivable of $
As of November 30, 2022, most of the loans were performing, and a general allowance was established at appropriate rate on the principal amount outstanding at year end. Due to limited outstanding loans, they are analyzed one by one to determine if the general reserve covers the related risk of such loans. As of November 30, 2022, the Company’s management deemed the reserve as sufficient when compared to the risk assessment.
As of November 30, 2022, there were loans placed
on a non-accrual basis of $
Unbilled Receivables
As of November 30, 2022 and February 28, 2022,
the Company had unbilled receivables of $
Prepaid Expenses and Other Current Assets
As of November 30, 2022 and February 28, 2022,
the Company had prepaid expenses of $
Convertible Notes Receivable, Related Party, net
As of November 30, 2022 and February 28, 2022,
the Company had Convertible Notes Receivable, related party, net allowance for expected credit loss of $
Goodwill
The Company had total goodwill as allocated to units as follows:
| Reporting unit | November 30, 2022 | February 28, 2022 | ||||||
| HotPlay | $ | $ | ||||||
| Longroot | ||||||||
| NextBank | ||||||||
| Total | $ | $ | ||||||
As a result of completion of fair value assessment of certain acquisitions during this period, the Company has reassigned the goodwill to the reporting units to reflect the change in fair value of net assets acquired.
20
Computers, Furniture and Equipment
As of November 30, 2022 and February 28, 2022,
the Company had net computers, furniture and equipment of $
Operating Lease Right-to-Use asset and Operating Lease Liability
The Company’s lease agreements are for office space used in its operation. The following schedule represents outstanding balance of operating lease Right-to-Use asset and operating lease liability of the Company as of November 30, and February 28, 2022, respectively:
| Operating lease Right-to-Use asset | November 30, 2022 | February 28, 2022 | ||||||
| Net Carrying Value | $ | $ | ||||||
| Operating lease liability | November 30, 2022 | February 28, 2022 | ||||||
| Current portion | $ | $ | ||||||
| Noncurrent portion | ||||||||
| Totals | $ | $ | ||||||
Accounts Payable and Accrued Expenses
As of November 30, 2022 and February 28, 2022,
the Company had accounts payable of $
Other Liabilities – Customer Demand Deposits Payable
As of November 30, 2022 and February 28, 2022,
the Company had other current liabilities – customer demand deposits payable of $
As of November 30, 2022, the Company had interest
and non-interest- bearing deposits received from customers with interest rates ranging from
Line of credit and notes payable
As of November 30, 2022, and February 28, 2022, the Company had a Line
of credit and notes payable of $
Short Term Note Payable – Related Parties
As of November 30, 2022, and February 28, 2022,
the Company had a short term note payable – related party of $
21
Long Term Note Payable – Related Parties
As of November 30, 2022 and February 28, 2022,
the Company had a long term note payable – related party of $
The note payable had an interest rate of
Revenue
Disaggregation of revenue information was as follows:
| November 30, 2022 | November 30, 2021 | |||||||
| NextFinTech | ||||||||
| Interest income | $ | |||||||
| Financial services | ||||||||
| Total revenue | $ | |||||||
Note 4 – Acquisitions and Dispositions
Reinhart Interactive TV AG and Zappware N.V. Acquisition
On January 15, 2021, we entered into a Founding
Investment and Subscription Agreement (the “Investment Agreement”) with Reinhart, and Jan C. Reinhart, the founder of Reinhart
(“Founder”). The Investment Agreement contemplated the Company acquiring
During the nine-month period ended November 30, 2022, the Company completed the fair value assessment (Purchase Price Allocation) of the net identifiable assets and liabilities assumed by an independent appraiser. The fair value assessment was taken into account the entirety of the valuation of the acquired company and therefore resulted in the increase in fair value of intangible assets which is developed software and non-controlling interests.
In order to reflect the adjustment to the provisional value of the identifiable assets and liabilities of Reinhart Interactive TV AG and Zappware N.V. at the acquisition date, the adjustments were made as follows:
| As of June 23, 2021 | ||||||||||||
| Provisional value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | |||||||||||
| Current assets | ||||||||||||
| Right-of-use assets | ||||||||||||
| Non-current assets | ||||||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | ( | ) | ( | ) | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||||||
| Non-current liabilities | ( | ) | ( | ) | ||||||||
| Total identifiable net assets | ||||||||||||
| Add: Goodwill | ||||||||||||
| Fair value of non-controlling interests | ( | ) | ( | ) | ||||||||
| Total fair value of purchase consideration | ||||||||||||
22
As of November 30, 2022, with regards to the strategic decision sale of Reinhart/Zappware in 2022, assets and liabilities including goodwill of Zappware and Reinhart, were presented in assets and liabilities held for sale at the balance sheet date.
NextBank International (formerly IFEB) Acquisition
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, pursuant to which the
Company agreed to purchase
On May 6, 2021, 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, pursuant to which the Company agreed to exchange
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
As a result of the closing of both transactions,
we acquired control of
The following table summarizes the fair value of consideration transferred:
| Cash | $ | |||
| Common stock ( | $ | |||
| Fair value of consideration paid | $ |
| (1) | Reflects retroactively the 1-for-20 reverse stock split that became effective January 6, 2023. Refer to Note 1, “Summary of Business Operations and Significant Accounting Policies.” |
During the nine-month period ended November 30,
2022, the Company completed the fair value assessment of the net identifiable assets and liabilities assumed by an independent appraiser
which primarily resulted in a decrease in goodwill due to the change in fair value of purchase consideration. During the year ended February
28, 2022, the purchase consideration of common stock was calculated based on $
23
In order to reflect the adjustment to the provisional value of the identifiable assets and liabilities of NextBank International (formerly IFEB) at the acquisition date, the adjustments were made as follows:
| As of July 21, 2021 | ||||||||||||
| Provisional value | Increase (Decrease) | Adjusted fair value | ||||||||||
| Assets acquired | ||||||||||||
| Cash and cash equivalents | $ | |||||||||||
| Current assets | ( | ) | ||||||||||
| Non-current assets | ||||||||||||
| Liabilities assumed | ||||||||||||
| Current liabilities | ( | ) | ( | ) | ||||||||
| Non-current liabilities | ||||||||||||
| Total identifiable net assets | ||||||||||||
| Adjustment: Goodwill | ( | ) | ||||||||||
| Total fair value of purchase consideration | $ | ( | ) | |||||||||
Sales plan - Reinhart Digital TV (Zappware) and NextTrip to TGS Esports, Inc
In connection with the potential sale plan, the Company has reclassified assets and liabilities to present as held for sale. As of November 30, 2022, the Company has classified goodwill and intangible assets as held for sale in current assets as follows:
| As of November 30, 2022 | ||||||||||||
| Reinhart/ Zappware | NextTrip | Total | ||||||||||
| Goodwill | ||||||||||||
| Carrying amount | $ | $ | ||||||||||
| Accumulated translation adjustment | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ( | ) | ( | ) | ||||||
| Goodwill, net | $ | $ | $ | |||||||||
| Intangible assets | ||||||||||||
| Net book value | $ | $ | ||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||
| Valuation adjustment of held-for-sale assets | ( | ) | ( | ) | ||||||||
| Intangible assets, net | $ | $ | $ | |||||||||
The fair value completion of the acquisition of
Reinhart/Zappware and Reverse Acquisition disclosed in Note 1 and 4 resulted in an increase in goodwill of $
During the nine-month period ended November 30,
2022, the Company performed the impairment assessment and recognized the impairment loss in operation loss from discontinued operations
to reflect the expected recoverable amount upon the classification to held-for-sale assets, comprised of impairment loss on intangible
assets of NextTrip amounting to $
As of February 28, 2022, the Company has reclassified goodwill and intangible assets as held for sale in non-current assets as follows:
| As of February 28, 2022 | ||||||||||||
| Reinhart/ Zappware | NextTrip | Total | ||||||||||
| Goodwill | ||||||||||||
| Carrying amount | $ | $ | $ | |||||||||
| Accumulated translation adjustment | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ( | ) | ( | ) | ||||||
| Goodwill, net | $ | $ | $ | |||||||||
| Intangible assets | ||||||||||||
| Net book value | $ | $ | ||||||||||
| Impairment loss | ( | ) | ( | ) | ||||||||
| Intangible assets, net | $ | $ | $ | |||||||||
24
During the year ended February 28, 2022, the Company
performed the impairment assessment and recognized the impairment loss for goodwill and intangible assets of Reinhart/Zappware and NextTrip
units, as we assessed that the fair value from expected recoverable selling price was lower than the book value, therefore recorded impairment
on goodwill amounted to $
The business of NextTrip represented the entirety of the NextTrip operating segment and Reinhart Digital TV was a part of NextMedia operating segment until February 28, 2022. Comparative figures included in the accompanying condensed consolidated financial statements have been reclassified as held for sale related to Reinhart/Zappware and NextTrip to conform with current period presentation.
The detail of assets and liabilities classified as held for sale as of November 30, 2022 and February 28, 2022 were as follows:
| Reinhart/Zappware | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | $ | |||||||
| Accounts receivable, net | ||||||||
| Unbilled receivables | ||||||||
| Other receivable | ||||||||
| Work in progress | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Security deposits | ||||||||
| Total current assets held for sale | ||||||||
| Intangible assets, net | ||||||||
| Goodwill, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Security deposits | ||||||||
| Total non current assets held for sale | ||||||||
| Total assets | $ | |||||||
| Liabilities | ||||||||
| Line of credit and notes payable, net | $ | |||||||
| Accounts payable and accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Current portion of operating lease liability | ||||||||
| Total current liabilities held for sale | ||||||||
| Line of Credit and Notes Payable Long Term, net | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other long term liability | ||||||||
| Total non current liabilities held for sale | ||||||||
| Total liabilities | $ | |||||||
| Net asset | $ | |||||||
25
| NextTrip | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | $ | |||||||
| Accounts receivables, net | ||||||||
| Other receivables | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Advance for investments | ||||||||
| Intangible assets, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Security deposits | ||||||||
| Total current assets held for sale | ||||||||
| Intangible assets, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Security deposits | ||||||||
| Total non current assets held for sale | ||||||||
| Total assets | $ | |||||||
| Liabilities | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses – related parties | ||||||||
| Deferred revenue | ||||||||
| Current portion of operating lease liability | ||||||||
| Total current liabilities held for sale | ||||||||
| Total liabilities | $ | |||||||
| Net asset | ||||||||
26
| Total assets and liabilities held for sale | ||||||||
| November 30, 2022 | February 28, 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalent | ||||||||
| Accounts receivables, net | ||||||||
| Unbilled receivables | ||||||||
| Other receivables | ||||||||
| Work in progress | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Advance for investments | ||||||||
| Intangible assets, net | ||||||||
| Goodwill, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Security deposits | ||||||||
| Total current assets held for sale | ||||||||
| Intangible assets, net | ||||||||
| Goodwill, net | ||||||||
| Computers, furniture and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Security deposits | ||||||||
| Total non current assets held for sale | ||||||||
| Total assets | ||||||||
| Liabilities | ||||||||
| Line of credit and notes payable, net | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses – related parties | ||||||||
| Other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Operating lease liability | ||||||||
| Total current liabilities held for sale | ||||||||
| Line of Credit and Notes Payable Long Term, net | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other long term liability | ||||||||
| Total non current liabilities held for sale | ||||||||
| Total liabilities | ||||||||
| Net asset | ||||||||
The Consideration expected to be received by the Company upon closing of the transaction – Nonvoting convertible preferred shares of TGS compared with net book value of selling assets as of November 30, 2022 were as follows:
| Net asset of Reinhart/Zappware as of November 30, 2022 | ||||
| Net asset of NextTrip as of November 30, 2022 | ||||
| Total net asset | ||||
| Additional cash contribution to TGS per agreement | ||||
| Cash transferred to NextTrip in May 2022 | ( | ) | ||
| Less: Fair value of Reinhart/Zappware – non-controlling interest | ( | ) | ||
| Consideration expected to be received - Nonvoting convertible preferred shares of TGS |
27
The operating results of held-for-sale entities included in the Company’s Statement of Comprehensive Income for the nine-month and three-month period ended November 30, 2022 were as follows:
| For the nine-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of Revenue | ||||||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Valuation adjustment of held-for-sale assets | ( | ) | ||||||||||
| Impairment loss | ||||||||||||
| Other Expense/(income) | ||||||||||||
| Net profit (loss) before tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Estimated corporate taxes | $ | $ | $ | |||||||||
| Net profit (loss) after tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Share loss of non-controlling interest | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operation attributable to parent | ( | ) | ( | ) | ( | ) | ||||||
| Other Comprehensive (loss) income: | ||||||||||||
| Currency Translation from discontinued operation | $ | ( | ) | $ | $ | ( | ) | |||||
| Comprehensive (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | $ | ( | ) | |||||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | $ | ( | ) | ||||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| For the three-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of Revenue | ||||||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Valuation adjustment of held-for-sale assets | ( | ) | ( | ) | ||||||||
| Other Expense | ||||||||||||
| Net profit (loss) before tax for the period from discontinued operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Estimated corporate taxes | $ | $ | $ | |||||||||
| Net profit (loss) after tax for the period from discontinued operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Share loss of non-controlling interest | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operation attributable to parent | ( | ) | ( | ) | ||||||||
| Other Comprehensive income: | ||||||||||||
| Currency Translation from discontinued operation | $ | $ | $ | |||||||||
| Comprehensive income | $ | $ | $ | |||||||||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | $ | $ | |||||||||
| Non-controlling interests of the subsidiaries | ||||||||||||
| $ | $ | $ | ||||||||||
| Total comprehensive income attributable to: | ||||||||||||
| Equity holders of the Company | $ | $ | $ | |||||||||
| Non-controlling interests of the subsidiaries | ||||||||||||
| $ | $ | $ | ||||||||||
28
| For the nine-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of Revenue | ||||||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Other Expense | ( | ) | ||||||||||
| Net loss before tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Estimated corporate taxes | $ | $ | $ | |||||||||
| Net loss after tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Share profit of non-controlling interest | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operation attributable to parent | ( | ) | ( | ) | ( | ) | ||||||
| Other Comprehensive loss: | ||||||||||||
| Currency Translation from discontinued operation | $ | ( | ) | $ | $ | ( | ) | |||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | $ | ( | ) | |||||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | $ | ( | ) | ||||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| For the three-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of Revenue | ||||||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Other Expense | ( | ) | ||||||||||
| Net loss before tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Estimated corporate taxes | $ | $ | $ | |||||||||
| Net loss after tax for the period from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Share profit of non-controlling interest | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operation attributable to parent | ( | ) | ( | ) | ( | ) | ||||||
| Other Comprehensive loss: | ||||||||||||
| Currency Translation from discontinued operation | $ | ( | ) | $ | $ | ( | ) | |||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Currency translation allocated to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | $ | ( | ) | |||||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | $ | ( | ) | ||||||
| Total comprehensive (loss) income attributable to: | ||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Non-controlling interests of the subsidiaries | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The net cashflow of held-for-sale entities are included in the Company’s cash flow statement for the nine-month period ended November 30, 2022 and 2021 were as follows:
| For the nine-month ended November 30, 2022 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Net cash flows from (used in) operating activities | ( | ) | ||||||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash flows from (used in) financing activities | ( | ) | ||||||||||
| Net decrease in cash and cash equivalent | $ | $ | ( | ) | $ | |||||||
| For the nine-month ended November 30, 2021 | Reinhart/ Zappware | NextTrip | Total | |||||||||
| Net cash flows from operating activities | $ | |||||||||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash flows from financing activities | ||||||||||||
| Net increase (decrease) in cash and cash equivalent | $ | ( | ) | ( | ) | |||||||
29
Note 5 – Related Party Transactions
Parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control or joint control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa.
| Name of related parties | Relationship with the Company | |
| Red Anchor Trading Corporation (“RATC”) | ||
| Tree Roots Entertainment Group Company Limited (“TREG”) | ||
| Axion Ventures Inc. (“Axion”) | ||
| Axion Interactive Inc. (“AI”) | ||
| HotNow (Thailand) Company Limited (“HotNow”) | ||
| True Axion Interactive Company Limited (“TAI”) | ||
| Magnolia Quality Development Corporation Limited (“MQDC”) |