General Information
This information should be read in conjunction with the interim unaudited
condensed consolidated financial statements and the notes thereto included in
this Quarterly Report on Form 10-Q (the “Report”), and Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the year ended
2022
Certain capitalized terms used below and otherwise defined below, have the
meanings given to such terms in the footnotes to our consolidated financial
statements included above under “Part I – Financial Information – Item 1.
Financial Statements”.
Our logo and some of our trademarks and tradenames are used in this Report. This
Report also includes trademarks, tradenames and service marks that are the
property of others. Solely for convenience, trademarks, tradenames and service
marks referred to in this Report may appear without the ®, ™ and SM symbols.
References to our trademarks, tradenames and service marks are not intended to
indicate in any way that we will not assert to the fullest extent under
applicable law our rights or the rights of the applicable licensors if any, nor
that respective owners to other intellectual property rights will not assert, to
the fullest extent under applicable law, their rights thereto. We do not intend
the use or display of other companies’ trademarks and trade names to imply a
relationship with, or endorsement or sponsorship of us by, any other companies.
The market data and certain other statistical information used throughout this
Report are based on independent industry publications, reports by market
research firms or other independent sources that we believe to be reliable
sources. Industry publications and third-party research, surveys and studies
generally indicate that their information has been obtained from sources
believed to be reliable, although they do not guarantee the accuracy or
completeness of such information. We are responsible for all of the disclosures
contained in this Report, and we believe these industry publications and
third-party research, surveys and studies are reliable. While we are not aware
of any misstatements regarding any third-party information presented in this
Report, their estimates, in particular, as they relate to projections, involve
numerous assumptions, are subject to risks and uncertainties, and are subject to
change based on various factors, including those discussed under, and
incorporated by reference in, the section entitled “Item 1A. Risk Factors” of
this Report. These and other factors could cause our future performance to
differ materially from our assumptions and estimates. Some market and other data
included herein, as well as the data of competitors as they relate to
Technologies, Inc.
Unless the context requires otherwise, references to the “Company,” “we,” “us,”
“our,” and “NextPlay” refer specifically to
consolidated subsidiaries.
In addition, unless the context otherwise requires and for the purposes of this
report only:
? "Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
? "SEC" or the "Commission" refers to the United States Securities and
Exchange Commission ; and
? "Securities Act" refers to the Securities Act of 1933, as amended.
Where You Can Find Other Information
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, proxy and information statements and amendments to reports
filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act with
the
reports, proxy and information statements and other information regarding us and
other companies that file materials with the
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.
55
Summary of The Information Contained in Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”) is provided in addition to the accompanying consolidated
financial statements and notes to assist readers in understanding our results of
operations, financial condition, and cash flows. MD&A is organized as follows:
? Overview. Discussion of our business and overall analysis of financial and
other highlights affecting us, to provide context for the remainder of
MD&A.
? Results of Operations. An analysis of our financial results comparing the
nine months ended November 30, 2022 and 2021.
? Liquidity and Capital Resources. An analysis of changes in our
consolidated balance sheets and cash flows and discussion of our financial
condition.
? Critical Accounting Policies and Estimates. Accounting policies and
estimates that we believe are important to understanding the assumptions
and judgments incorporated in our reported financial results and forecasts.
OVERVIEW
During the nine month period ended
Inc.
solutions company, offering games, in-game advertising, digital asset products
and services to consumers and corporations within a growing worldwide digital
ecosystem.
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
NextFinTech, the Company’s Finance and Technology Division.
NextMedia Division HotPlay
in-game advertising (“IGA”) platform that delivers advertisements into video
games without disrupting gameplay, enabling video games to monetize without
compromising on the integrity of the game. The platform enables advertisers and
merchants of all sizes to hyper-locally deliver promotional coupons to gamers,
offering them real world rewards from playing video games. Video games could
also deliver relevant virtual rewards through the platform in order to increase
retention rate.
Upon receiving the rewards, gamers are able to access them via the HotPlay
redemption mobile application (“Redemption App”). The redemption app also
features a list of games integrated with HotPlay IGA, giving video games
visibility among the HotPlay user base.
In order to increase HotPlay IGA adoption among third party video game
developers, HotPlay has established an in-house game development studio
dedicated to developing casual and hyper-casual games that help showcase the
capabilities of our technology.
56
NextFinTech Division
Next Fintech
(“Next Fintech”), which in turn owns 75% of
company (“Longroot Cayman”). Longroot Cayman owns 49% of the outstanding
ordinary shares (with 51% of the preferred shares owned by two Thai citizen
nominee shareholders) of
Thailand”), provided that Longroot Cayman controls 90% of Longroot Thailand’s
voting shares and therefore effectively controls Longroot Thailand. Longroot
financing and investment services that are fully regulated and licensed by the
on creating Thai regulated cryptocurrencies backed by high quality assets that
are designed to be more resistant to market declines. The initial class of
assets includes video games, insurance, precious metals, and real estate.
Longroot
under the Thai Digital Asset Law which stipulates that all offerings of digital
assets have to be conducted via a Thai SEC licensed ICO Portal.
NextBank International
Enterprise Bank
Financial Entity (“IFE”) operating under the laws of the
Rico
Institutions
worth individuals and entrepreneurs, and loan products.
asset banking, asset management and mobile payment and banking services.
Departure of Directors or Certain Officers; Election of Directors; Appointment
of Certain Officers; Compensatory Arrangements of Certain Officers.
On
Financial Officer of
“Company”). Mr. Taepakdee’s resignation is not a result of any disagreement with
the Company on any matter relating to the Company’s operations, policies or
practices, or any issues regarding the Company’s accounting policies or
practices.
On
as the Company’s interim Chief Financial Officer (the “Interim CFO”), effective
immediately. His appointment fills the vacant position resulting from Kent
Taepakdee’s resignation on
Report on Form 8-K filed by the Company on
will hold this interim position until his successor is duly elected and
qualified, subject to his earlier death, resignation, or removal.
Reverse Stock Split
Effective
Company’s authorized, issued and outstanding shares of common stock, par value
Split”). In order to implement the Reverse Split, the Company filed a
Certificate of Change with the Secretary of State of the
“Certificate of Change”) to effectuate the Reverse Split in accordance with
Nevada Revised Statutes (“NRS”) Section 78.209. The Company is effecting the
Reverse Split to satisfy the
in Nasdaq Listing Rule 5550(a)(2), for continued listing on The Nasdaq Capital
Market.
In connection with the reverse stock split, the number of authorized shares of
common stock and the number of issued and outstanding shares of common stock are
proportionally reduced without change in par value per share of
on the Effective Date, all options, warrants and other convertible securities of
the Company that are outstanding immediately prior to the Reverse Split will be
adjusted by dividing the number of shares of Common Stock into which the
options, warrants and other convertible securities are exercisable or
convertible by 20, and multiplying the exercise or conversion price thereof by
20, all in accordance with the terms of the plans, agreements or arrangements
governing such options, warrants and other convertible securities and subject to
rounding to the nearest whole share. Accordingly, all historical per share data,
number of shares outstanding and other common stock equivalents for the periods
presented in the accompanying condensed consolidated financial statements and
notes thereto have been adjusted retroactively, where applicable, to reflect the
reverse stock split.
Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports,
Inc.
On
securities exchange agreement, with
Executive Officer and director,
public company whose securities are listed for trading on the
Venture Exchange
travel business,
Reinhart Digital TV (the 100% owner of Zappware) to TGS in exchange for
securities of TGS (discussed in further detail below. TGS is a leading esports
tournament solutions provider.
Prior to the execution of the securities exchange agreement, NextTrip issued an
aggregate of 915,000 units in NextTrip to Messrs. Kerby and Monaco to resolve
certain management unit issuances provided for in NextTrip’s Operating Agreement
as consideration for services rendered.
As consideration for the sale of Reinhart and NextTrip, upon closing of the
transaction, (i) the Company will receive 232,380,952 shares of newly created
nonvoting convertible preferred stock of TGS (the “TGS Preferred”), valued at
equity interests in NextTrip (discussed above), will receive an aggregate of
69,714,286 shares of TGS common shares, valued at
11,619,048 TGS common shares will be held in escrow for a period of time. The
TGS Preferred shares will be redeemable in certain situations, can be sold
subject to certain transfer restrictions (including a right of first refusal in
favor of TGS), and may be converted into shares of TGS common shares in certain
limited circumstances, including mandatory conversion upon the occurrence of
certain events. In the event that the TGS Preferred shares are converted into
TGS common shares by the Company at any time, the Company is obligated to
distributed all such TGS common shares in a stock dividend to its shareholders.
Concurrently with a determination to convert the TGS Preferred shares into
shares of TGS common stock, if ever, the Company will set a shareholder record
date for a special dividend to distribute all of the common shares of TGS held
by the Company to the Company’s shareholders, on a pro-rata basis.
57
In addition to the securities exchange agreement, the Company, NextTrip,
Reinhart and TGS also entered into a separation agreement on
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)
million
monthly installments beginning
1, 2022
Reinhart. NextTrip has also agreed to assume payments under that certain payment
obligation of the Company pursuant an Amendment to Intellectual Property
Purchase Agreement effective
provided, however, that, if the Company fails to make any of the above
installment payments within five (5) business days of being due, that such IDS
payment obligation reverts back to the Company.
Closing of the transaction remains subject to various conditions, including
(without limitation) regulatory approvals, approval of certain related matters
by TGS’ shareholders and consummation of a financing by TGS, and is expected to
occur in the second half of 2022. No assurances can be provided that the closing
conditions will be satisfied, or that the transaction will be consummated on the
anticipated timeline, or at all.
The transaction, once consummated, is expected to streamline the Company’s
business operations and management, improve capital allocation, and is expected
to unlock shareholder value by offering investors a pure-play investment in the
Digital Media and Financial Technology sectors.
As a result of the foregoing, since
NextTrip were no longer treated as a division of the Company; accordingly, for
the nine-month period ended
reportable business segments: NextFinTech and
Novel Coronavirus (COVID-19)
In
disease known as COVID-19, was reported in
Organization
Concern” on
and
‘stay-at-home’ orders. For example, the state of
principal business operations are, issued a ‘stay-at-home’ order effective on
implemented various restrictions in order to minimize the spread of COVID-19,
many of which have been fully lifted as of the date of this filing. There can be
no assurances that additional restrictions will not be implemented again in the
future.
58
The COVID-19 pandemic, and governmental responses thereto, including travel
restrictions, ‘stay-at-home’ orders and required social distancing orders,
severely restricted the level of economic activity around the world, and had an
unprecedented effect on the global travel industry. Additionally, the ability to
travel has been curtailed through border closures, mandated travel restrictions
and limited operations of hotels, airlines, and may be further limited through
additional voluntary or mandated closures of travel-related businesses, the
majority of which have now been lifted.
The measures implemented to contain the COVID-19 pandemic have had, and may in
the future have continue to have, a significant negative effect on our business,
financial condition, results of operations, cash flows and liquidity position.
The duration and severity of the COVID-19 pandemic are still uncertain and
difficult to predict at this time. The pandemic could continue to negatively
affect global economic activity for an extended period of time, even as
restrictions have been lifted in most jurisdictions and vaccines are widely
available in
predict the long-term effects of the COVID-19 pandemic on our partners and their
business and operations or the ways that the pandemic may fundamentally alter
the travel industry. The aforementioned circumstances could result in a material
adverse impact on our business, financial condition, results of operations and
cash flows, potentially for a prolonged period.
The Company’s liquidity could also be adversely impacted by delays in payments
of outstanding accounts receivable amounts beyond normal payment terms and
insolvencies.
It is difficult to estimate COVID-19’s impact on future revenues, results of
operations, cash flows, liquidity or financial condition, but such impacts have
been, and likely will continue to be, significant and could continue to have a
material adverse effect on our business, financial condition, results of
operations, cash flows and liquidity position for the foreseeable future. In the
near term, we do expect that the COVID-19 pandemic will continue to negatively
affect our operating results and year-over-year results.
As a result of the above, we may be forced to scale back our operations, adjust
our plan of operations, borrow or raise additional funding, which may not be
available on favorable terms if at all. In the event we require and are unable
to raise additional funding in the future, we may be forced to seek bankruptcy
protection.
RESULTS OF OPERATIONS
As discussed elsewhere in this report, as a result of the proposed sale of
NextTrip and Reinhart/Zappware to TGS, Reinhart/Zappware and NextTrip were no
longer treated as a division of the Company, and instead have been classified as
assets held for sale; accordingly, unless otherwise stated, the results of
continuing operations included herein for the nine-month period ended November,
2022 exclude the results of NextTrip and Reinhart/Zappware.
For the Nine months Ended
Revenues
Our total revenues increased to
30, 2022
2021
increase in financial services of NextBank.
59
Cost of Revenues
Our total cost of revenues increased to
30, 2021
30, 2022
Cost of revenues and gross profit increased in line with revenue of NextBank.
Operating Expenses
Our operating expenses include general and administrative, salaries and
benefits, technology and development, stock-based compensation, selling and
promotion and depreciation and amortization. Our operating expenses increased to
This increase was mainly related to:
(i) General and administrative expenses, which increased to $1.53 million for
the nine months ended November 30, 2022 , as compared to $5.78 million for
the nine months ended November 30, 2021 . The increase is mainly due to
professional and consultant fees;
(ii) $0.60 million increase in salaries and benefits, due to having an
increased number of employees 2022 compared to 2021;
(iii) $0.50 million increase in technology and development, due to
professional fees and software license expenses;
(iv) $0.14 million increase in stock-based compensation given to consultants
and business vendors;
(v) $0.016 million increase in selling and promotion expenses, due to the
operation for the prior period from NextTrip; and
(vi) $0.33 million decrease in depreciation and amortization from a write-off
some assets of the Company.
Other Income and Expenses
Our other income and expenses include valuation gain or loss on investments,
impairment loss, interest income or expense, and other income or expense. Our
total other expenses amounted to
months ended
attributable to the valuation loss on investments of
Non-Controlling Interest
We had an increase in loss in non-controlling interest of
nine months ended
interest of
due to a loss from operation for the period from Reinhart/Zappware in the 2022
period.
Net Loss after tax from continuing operation
We had a net loss attributable to the Company of
months ended
Company of
due to the decrease in other expenses of
60
Net Loss after tax from discontinued operation
Loss from discontinued operations
below:
(i) Reinhart/Zappware: net loss from operation of$4.71 million and (ii) NextTrip: net loss from operation of$0.98 million , as the global travel demand slowly recovered.
The discontinued operations classified as held for sale were considered for its
impairment since
fixed assets per accounting standard, this primarily resulted in net profit for
Reinhart/Zappware.
LIQUIDITY AND CAPITAL RESOURCES
On
was decreased from
out flow from investing activities of
acquisition.
As of
million
- Line of credit and notes payable of $5.33 million , mainly consisting of
notes payable to Streeterville;
- Accounts payable and accrued expense of $9.74 million ;
- Customer deposits of $27.28 million from NextBank; and
- Liabilities classified as held for sale of $13.76 million , mainly
consisting of liabilities of Reinhart/Zappware and NextTrip.
As of
million
Cash used in operating activities was
activities during the nine months ended
mainly due to operating expense and other related activities.
Net cash used in investing activities was
investing activities are mainly attributable to the intangible asset acquisition
of GoGame and travel platform in 2022 while 2021 represented HotPlay’s cashflow
for reverse takeover activities.
Net cash generated in financing activities was
ended
used in previous year came from the proceeds from the sale of common stock and
warrants in a registered public offering. In 2022, the decrease was primarily
due to proceed from notes payable – related party of
represented HotPlay’s cashflow received from shareholders in conjunction with
the reverse takeover activities.
Additional information regarding our acquisitions and dispositions, notes
receivable, investments in equity instruments, notes payable can be found under
“Part I. Financial Statements-Item 1. Financial Statements”, “Note 4 –
Acquisitions and Dispositions”, “Note 5 – Related party transactions”, “Note 6 –
Investment in Unconsolidated Affiliates”, “Note 7 – Notes Receivable”, and “Note
9 – Notes Payable”, and “Note 14 – Subsequent Events”.
We have limited financial resources. As of
capital of
million
We will need to raise additional capital or borrow loans to support the on-going
operation, increase market penetration of our products, expand the marketing and
development of our 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 on 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.
To date, we have funded our operations with the proceeds from equity and debt
financings and we anticipate we will need to meet our funding requirements
through the sale of additional equity or debt financing, which funds may not be
available on favorable terms, if at all. We anticipate that we would need
several millions of dollars to properly market our services and fund the
operations for the next 12 months.
61
Known Trends or Uncertainties
Although we have not seen any significant reduction in revenues to date, we have
seen some consolidation in our industry during economic downturns. These
consolidations have not had a negative effect on our total sales; however,
should consolidations and downsizing in the industry continue to occur, those
events could adversely impact our revenues and earnings going forward.
As discussed in the Risk Factors section of this Report, the world has been
affected due to the COVID-19 pandemic. Until the pandemic has passed, there
remains uncertainty as to the effect of COVID-19 on our business in both the
short and long-term.
The potential for growth in new markets is uncertain. We will continue to
explore these opportunities until such time as we either generate sales or
determine that resources would be more efficiently used elsewhere.
Inflation
Inflation has increased during the periods covered by this Report, and is
expected to continue to increase for the near future. Inflationary factors, such
as increases in interest rates, overhead costs and transportation costs may
adversely affect our operating results. Although we do not believe that
inflation has had a material impact on our financial position or results of
operations to date, we may experience some effect in the near future (especially
if inflation rates continue to rise) due to supply chain constraints,
consequences associated with COVID-19 and the ongoing conflict between
and
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations and Commitments
Note Purchase Agreements:
On
Streeterville the
of
(b) issued the Company the
in consideration for the
total of
fully-funded by Streeterville, which occurred on
2021
million
We made a required Equity Payment of
2021
underwritten offering, which represented approximately 20% of the funds raised
in such offering. On
balance of the
funds raised through the
As of
2021
62
On
Agreement with Streeterville, pursuant to which the Company sold Streeterville
the
original principal amount less a
issuance, and a total of
transaction expenses.
The
contain customary events of default, including if the Company undertakes a
fundamental transaction (including consolidations, mergers, and certain changes
in control of the Company), without Streeterville’s prior written consent. As
described in the
events of default (mainly our entry into bankruptcy), the outstanding balance of
the
Upon the occurrence of other events of default, Streeterville may declare the
outstanding balance of the
payable at such time or at any time thereafter. After the occurrence of an event
of default (and upon written notice from Streeterville), interest on the
2021
the maximum rate permitted under applicable law. The
Agreement prohibits Streeterville from shorting our stock through the period
that Streeterville holds the
On
Streeterville, pursuant to which, Streeterville agreed not to seek to redeem any
portion of the
of
the outstanding balance of the
(the “Standstill Fee”); as a result, the outstanding balance of the
Note as of
Subsequently on
option which added
outstanding principal balance to
As of
On
with Streeterville, pursuant to which the Company sold Streeterville the
2022
Streeterville paid consideration of
principal amount less a
a total of
expenses.
The
customary events of default, including if the Company undertakes a fundamental
transaction (including consolidations, mergers, and certain changes in control
of the Company), without Streeterville’s prior written consent. As described in
the
default (mainly our entry into bankruptcy), the outstanding balance of the
2022
occurrence of other events of default, Streeterville may declare the outstanding
balance of the
time or at any time thereafter. After the occurrence of an event of default (and
upon written notice from Streeterville), interest on the
Note will accrue at a rate of 22% per annum, or if lesser, the maximum rate
permitted under applicable law. The
Streeterville from shorting our stock through the period that Streeterville
holds the
63
As of
2022
On
requirement that HotPlay become a co-borrower on the
Note and the
the obligations and duties of the Company under those notes. As a result, all
references to “Borrower” or the “Company” in such notes now jointly refer to
HotPlay and
increase in the balance of the
Company’s failure to add HotPlay as a co-borrower on the
Streeterville Note within the prescribed period of time to do so. The Global
Amendment does not alter any other terms of the notes.
June 2022 Promissory Notes
On
principal amount of approximately CAD
legal counsel, which notes were issued, along with a CAD
lieu of immediate payment of outstanding amounts payable to such counsel for
legal services previously rendered to the Company. The first note matured on
however, that if the Company fails to repay the first note in full on or before
its maturity date, then the second note will automatically become immediately
due and payable. Both notes are unsecured and accrue interest at a rate of 18%
per annum. The Company is in the process of re-negotiating the payment
schedules.
Operating Leases Obligation
The Company entered into an office lease in
approximately 5,279 square feet of office space at
Parkway
office space lease agreement, the Company will be renting the commercial office
space, for a term of almost eight years from
2028
duration of the lease. As per the Separation Agreement by and between the
Company, Reinhart/Zappware and NextTrip, however, the Company has transferred
the office lease contract to NextTrip from
presented under assets and liabilities held for sale. On
Company entered into an office lease in
months from
rents office space located in
from five to nine years, with rental costs for all such properties amounting to
an aggregate of approximately
64
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of the Company’s financial condition and results of
operations are based upon its consolidated unaudited financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent liabilities. On an on-going basis, management evaluates
past judgments and estimates, including those related to bad debts, accrued
liabilities, convertible promissory notes and contingencies. Management bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The accounting
policies and related risks described in the Company’s Annual Report on Form 10-K
for the fiscal year ended
estimates. As of
the critical accounting policies contained therein.
Recently Issued Accounting Standards
For more information on recently issued accounting standards, see in “Note 1 –
Summary of Business Operations and Significant Accounting Policies”, to the
Notes to Consolidated Financial Statements included herein under “Part I –
Financial Information – Item 1. Financial Statements”.
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