Financial Technology

NEXTPLAY TECHNOLOGIES INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

General Information

This information should be read in conjunction with the interim unaudited
condensed consolidated financial statements and the notes thereto included in
this Quarterly Report on Form 10-Q (the “Report”), and Part II, Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K for the year ended
February 28, 2022, filed with the Securities and Exchange Commission on June 21,
2022
.

Certain capitalized terms used below and otherwise defined below, have the
meanings given to such terms in the footnotes to our consolidated financial
statements included above under “Part I – Financial Information – Item 1.
Financial Statements”.

Our logo and some of our trademarks and tradenames are used in this Report. This
Report also includes trademarks, tradenames and service marks that are the
property of others. Solely for convenience, trademarks, tradenames and service
marks referred to in this Report may appear without the ®, ™ and SM symbols.
References to our trademarks, tradenames and service marks are not intended to
indicate in any way that we will not assert to the fullest extent under
applicable law our rights or the rights of the applicable licensors if any, nor
that respective owners to other intellectual property rights will not assert, to
the fullest extent under applicable law, their rights thereto. We do not intend
the use or display of other companies’ trademarks and trade names to imply a
relationship with, or endorsement or sponsorship of us by, any other companies.

The market data and certain other statistical information used throughout this
Report are based on independent industry publications, reports by market
research firms or other independent sources that we believe to be reliable
sources. Industry publications and third-party research, surveys and studies
generally indicate that their information has been obtained from sources
believed to be reliable, although they do not guarantee the accuracy or
completeness of such information. We are responsible for all of the disclosures
contained in this Report, and we believe these industry publications and
third-party research, surveys and studies are reliable. While we are not aware
of any misstatements regarding any third-party information presented in this
Report, their estimates, in particular, as they relate to projections, involve
numerous assumptions, are subject to risks and uncertainties, and are subject to
change based on various factors, including those discussed under, and
incorporated by reference in, the section entitled “Item 1A. Risk Factors” of
this Report. These and other factors could cause our future performance to
differ materially from our assumptions and estimates. Some market and other data
included herein, as well as the data of competitors as they relate to NextPlay
Technologies, Inc.
, is also based on our good faith estimates.

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

In addition, unless the context otherwise requires and for the purposes of this
report only:



  ? "Exchange Act" refers to the Securities Exchange Act of 1934, as amended;




    ?   "SEC" or the "Commission" refers to the United States Securities and
        Exchange Commission; and




  ? "Securities Act" refers to the Securities Act of 1933, as amended.



Where You Can Find Other Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, 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 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.



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Summary of The Information Contained in Management’s Discussion and Analysis of
Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”) is provided in addition to the accompanying consolidated
financial statements and notes to assist readers in understanding our results of
operations, financial condition, and cash flows. MD&A is organized as follows:



    ?   Overview. Discussion of our business and overall analysis of financial and
        other highlights affecting us, to provide context for the remainder of
        MD&A.

    ?   Results of Operations. An analysis of our financial results comparing the
        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 November 30, 2022, NextPlay Technologies,
Inc.
, together with its consolidated subsidiaries, is building a technology
solutions company, offering games, in-game advertising, digital asset products
and services to consumers and corporations within a growing worldwide digital
ecosystem. NextPlay’s engaging products and services utilize innovative
advertising technology (“AdTech”), Artificial Intelligence (“AI”) and financial
technology (“FinTech”) solutions to leverage the strengths and channels of its
existing and acquired technologies.

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.



NextMedia Division



HotPlay


HotPlay Enterprise Limited (“HotPlay”), which is wholly-owned by NextPlay, is an
in-game advertising (“IGA”) platform that delivers advertisements into video
games without disrupting gameplay, enabling video games to monetize without
compromising on the integrity of the game. The platform enables advertisers and
merchants of all sizes to hyper-locally deliver promotional coupons to gamers,
offering them real world rewards from playing video games. Video games could
also deliver relevant virtual rewards through the platform in order to increase
retention rate.

Upon receiving the rewards, gamers are able to access them via the HotPlay
redemption mobile application (“Redemption App”). The redemption app also
features a list of games integrated with HotPlay IGA, giving video games
visibility among the HotPlay user base.

In order to increase HotPlay IGA adoption among third party video game
developers, HotPlay has established an in-house game development studio
dedicated to developing casual and hyper-casual games that help showcase the
capabilities of our technology.



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NextFinTech Division



Next Fintech


NextPlay owns 100% of Next Fintech Holdings, Inc. (formerly Longroot, Inc.)
(“Next Fintech”), which in turn owns 75% of Longroot Limited, a Cayman Islands
company (“Longroot Cayman”). Longroot Cayman owns 49% of the outstanding
ordinary shares (with 51% of the preferred shares owned by two Thai citizen
nominee shareholders) of Longroot Holding (Thailand) Company Limited (“Longroot
Thailand”), provided that Longroot Cayman controls 90% of Longroot Thailand’s
voting shares and therefore effectively controls Longroot Thailand. Longroot
Thailand is an Initial Coin Offering (“ICO”) Portal that provides digital asset
financing and investment services that are fully regulated and licensed by the
Securities and Exchange Commission of Thailand (the “Thai SEC”). It is focused
on creating Thai regulated cryptocurrencies backed by high quality assets that
are designed to be more resistant to market declines. The initial class of
assets includes video games, insurance, precious metals, and real estate.

Longroot Thailand is a licensed ICO Portal under the Thai SEC and is regulated
under the Thai Digital Asset Law which stipulates that all offerings of digital
assets have to be conducted via a Thai SEC licensed ICO Portal.



NextBank International


NextBank International (“NextBank”) (previously International Financial
Enterprise Bank
), which is wholly-owned by NextPlay, is an International
Financial Entity (“IFE”) operating under the laws of the Commonwealth of Puerto
Rico
. Licensed under Act 273 by the Office of the Commissioner of Financial
Institutions
(“OCIF”), NextBank currently offers concierge services to high net
worth individuals and entrepreneurs, and loan products.

NextPlay plans to create a diversified FinTech solution company that offers
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 November 18, 2022, Kent Taepakdee resigned from his position as the Chief
Financial Officer of NextPlay Technologies, Inc., a Nevada corporation (the
“Company”). Mr. Taepakdee’s resignation is not a result of any disagreement with
the Company on any matter relating to the Company’s operations, policies or
practices, or any issues regarding the Company’s accounting policies or
practices.

On November 28, 2022, the board of directors of NextPlay Technologies, Inc., a
Nevada corporation (the “Company”) appointed Mr. Nutthaphol Rungsakhon to serve
as the Company’s interim Chief Financial Officer (the “Interim CFO”), effective
immediately. His appointment fills the vacant position resulting from Kent
Taepakdee’s resignation on November 18, 2022, as disclosed in that Current
Report on Form 8-K filed by the Company on November 25, 2022. Mr. Rungsakhon
will hold this interim position until his successor is duly elected and
qualified, subject to his earlier death, resignation, or removal.



Reverse Stock Split


Effective January 6, 2023, the Company implemented a reverse stock split of the
Company’s authorized, issued and outstanding shares of common stock, par value
$0.00001 per share (the “Common Stock”), at a ratio of 1-for-20 (the “Reverse
Split”). In order to implement the Reverse Split, the Company filed a
Certificate of Change with the Secretary of State of the State of Nevada (the
“Certificate of Change”) to effectuate the Reverse Split in accordance with
Nevada Revised Statutes (“NRS”) Section 78.209. The Company is effecting the
Reverse Split to satisfy the $1.00 minimum bid price requirement, as set forth
in Nasdaq Listing Rule 5550(a)(2), for continued listing on The Nasdaq Capital
Market.

In connection with the reverse stock split, the number of authorized shares of
common stock and the number of issued and outstanding shares of common stock are
proportionally reduced without change in par value per share of $0.00001. Also
on the Effective Date, all options, warrants and other convertible securities of
the Company that are outstanding immediately prior to the Reverse Split will be
adjusted by dividing the number of shares of Common Stock into which the
options, warrants and other convertible securities are exercisable or
convertible by 20, and multiplying the exercise or conversion price thereof by
20, all in accordance with the terms of the plans, agreements or arrangements
governing such options, warrants and other convertible securities and subject to
rounding to the nearest whole share. Accordingly, all historical per share data,
number of shares outstanding and other common stock equivalents for the periods
presented in the accompanying condensed consolidated financial statements and
notes thereto have been adjusted retroactively, where applicable, to reflect the
reverse stock split.

Strategic Sale of Reinhart Digital TV (Zappware) and NextTrip to TGS Esports,
Inc.

On June 28, 2022, the Company entered into a series of agreements, including a
securities exchange agreement, with William Kerby, the Company’s co-Chief
Executive Officer and director, Donald P. Monaco, a director of the Company, and
British Columbia-based TGS E-Sports Inc. (TSX-V: TGS, OTC: TGSEF) (“TGS”), a
public company whose securities are listed for trading on the Canadian TSX
Venture Exchange
, pursuant to which the Company has agreed to sell the Company’s
travel business, NextTrip Group, LLC (“NextTrip”), and its 51% ownership of
Reinhart Digital TV (the 100% owner of Zappware) to TGS in exchange for
securities of TGS (discussed in further detail below. TGS is a leading esports
tournament solutions provider.

Prior to the execution of the securities exchange agreement, NextTrip issued an
aggregate of 915,000 units in NextTrip to Messrs. Kerby and Monaco to resolve
certain management unit issuances provided for in NextTrip’s Operating Agreement
as consideration for services rendered.

As consideration for the sale of Reinhart and NextTrip, upon closing of the
transaction, (i) the Company will receive 232,380,952 shares of newly created
nonvoting convertible preferred stock of TGS (the “TGS Preferred”), valued at
$12.2 million, and (ii) Messrs. Kerby and Monaco, both of whom hold certain
equity interests in NextTrip (discussed above), will receive an aggregate of
69,714,286 shares of TGS common shares, valued at $3.66 million, of which
11,619,048 TGS common shares will be held in escrow for a period of time. The
TGS Preferred shares will be redeemable in certain situations, can be sold
subject to certain transfer restrictions (including a right of first refusal in
favor of TGS), and may be converted into shares of TGS common shares in certain
limited circumstances, including mandatory conversion upon the occurrence of
certain events. In the event that the TGS Preferred shares are converted into
TGS common shares by the Company at any time, the Company is obligated to
distributed all such TGS common shares in a stock dividend to its 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 June 28, 2022, to
further document the separation of NextTrip and Reinhart from the Company and to
assign, transfer and convey certain assets and liabilities held in NextTrip or
the Company’s name, respectively, to NextTrip or the Company, respectively, to
allow for the separation of the businesses in accordance with the securities
exchange agreement at closing of the transaction. The separation agreement also
provides for the termination of certain intercompany agreements and accounts by
and between the parties at closing of the transaction, sets rights related to
confidentiality, non-disclosure and maintenance of attorney-client privilege
matters, and also provides for a mutual release by and among the Company,
NextTrip and Reinhart for all pre-closing claims between themselves and their
officers, directors, affiliates, successors and assigns.

In addition, the separation agreement provides for the contribution of (i) $1.5
million
to NextTrip and (ii) an additional $1.5 million in ten (10) equal
monthly installments beginning July 1, 2022, in exchange for NextTrip, as of May
1, 2022
, agreeing to assume the ongoing operating expenses of NextTrip and
Reinhart. NextTrip has also agreed to assume payments under that certain payment
obligation of the Company pursuant an Amendment to Intellectual Property
Purchase Agreement effective May 18, 2021, by and between the Company, IDS Inc.,
TD Assets Holding LLC, and Ari Daniels in the approximate amount of $2,500,000,
provided, however, that, if the Company fails to make any of the above
installment payments within five (5) business days of being due, that such IDS
payment obligation reverts back to the Company.

Closing of the transaction remains subject to various conditions, including
(without limitation) regulatory approvals, approval of certain related matters
by TGS’ shareholders and consummation of a financing by TGS, and is expected to
occur in the second half of 2022. No assurances can be provided that the closing
conditions will be satisfied, or that the transaction will be consummated on the
anticipated timeline, or at all.

The transaction, once consummated, is expected to streamline the Company’s
business operations and management, improve capital allocation, and is expected
to unlock shareholder value by offering investors a pure-play investment in the
Digital Media and Financial Technology sectors.

As a result of the foregoing, since June 28, 2022, Reinhart/Zappware and
NextTrip were no longer treated as a division of the Company; accordingly, for
the nine-month period ended November 30, 2022, the Company had two remaining
reportable business segments: NextFinTech and NextMedia.

Novel Coronavirus (COVID-19)

In December 2019, a novel strain of coronavirus, which causes the infectious
disease known as COVID-19, was reported in Wuhan, China. The World Health
Organization
declared COVID-19 a “Public Health Emergency of International
Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March
and April 2020, many U.S. states and local jurisdictions began issuing
‘stay-at-home’ orders. For example, the state of Florida, where the Company’s
principal business operations are, issued a ‘stay-at-home’ order effective on
April 1, 2020, which remained in place, subject to certain exceptions, through
June 2020, when the order was gradually lifted. Since then, many states have
implemented various restrictions in order to minimize the spread of COVID-19,
many of which have been fully lifted as of the date of this filing. There can be
no assurances that additional restrictions will not be implemented again in the
future.



                                       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 the United States and certain other countries. We also cannot
predict the long-term effects of the COVID-19 pandemic on our partners and their
business and operations or the ways that the pandemic may fundamentally alter
the travel industry. The aforementioned circumstances could result in a material
adverse impact on our business, financial condition, results of operations and
cash flows, potentially for a prolonged period.

The Company’s liquidity could also be adversely impacted by delays in payments
of outstanding accounts receivable amounts beyond normal payment terms and
insolvencies.

It is difficult to estimate COVID-19’s impact on future revenues, results of
operations, cash flows, liquidity or financial condition, but such impacts have
been, and likely will continue to be, significant and could continue to have a
material adverse effect on our business, financial condition, results of
operations, cash flows and liquidity position for the foreseeable future. In the
near term, we do expect that the COVID-19 pandemic will continue to negatively
affect our operating results and year-over-year results.

As a result of the above, we may be forced to scale back our operations, adjust
our plan of operations, borrow or raise additional funding, which may not be
available on favorable terms if at all. In the event we require and are unable
to raise additional funding in the future, we may be forced to seek bankruptcy
protection.




RESULTS OF OPERATIONS



As discussed elsewhere in this report, as a result of the proposed sale of
NextTrip and Reinhart/Zappware to TGS, Reinhart/Zappware and NextTrip were no
longer treated as a division of the Company, and instead have been classified as
assets held for sale; accordingly, unless otherwise stated, the results of
continuing operations included herein for the nine-month period ended November,
2022 exclude the results of NextTrip and Reinhart/Zappware.

For the Nine months Ended November 30, 2022 Compared to Nine months Ended
November 30, 2021



Revenues


Our total revenues increased to $1.55 million for the nine months ended November
30, 2022
, as compared to $0.71 million for the nine months ended November 30,
2021
. The increase is derived from the loan portfolio organic growth and
increase in financial services of NextBank.



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Cost of Revenues


Our total cost of revenues increased to $1.11 million for the nine months ended
November 30, 2022, compared to $0.30 million for the nine months ended November
30, 2021
. Our gross profit was $0.44 million for the nine months ended November
30, 2022
, compared to $0.42 million for the nine months ended November 30, 2021.
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
$2.46 million for the nine months ended November 30, 2022, as compared to the
$11.87 million for the nine months ended November 30, 2021.

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 $0.96 million for the nine months ended
November 30, 2022, compared to other expenses of $5.42 million for the nine
months ended November 30, 2021. The period over period change is mainly
attributable to the valuation loss on investments of $2.34 million.



Non-Controlling Interest


We had an increase in loss in non-controlling interest of $1.16 million for the
nine months ended November 30, 2022, compared to a loss in non-controlling
interest of $1.39 million for the nine months ended November 30, 2021, mainly
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 $14.62 million for the nine
months ended November 30, 2022, compared to a net loss attributable to the
Company of $16.12 million for the nine months ended November 30, 2021, primarily
due to the decrease in other expenses of $4.46 million.



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Net Loss after tax from discontinued operation

Loss from discontinued operations $5.69 million represents 2 reporting entities
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 March 1, 2022 and did not continue to depreciate/amortize their
fixed assets per accounting standard, this primarily resulted in net profit for
Reinhart/Zappware.

LIQUIDITY AND CAPITAL RESOURCES

On November 30, 2022, we had $2.56 million of cash and cash equivalents, which
was decreased from $1.72 million as of February 28, 2022 due primarily to cash
out flow from investing activities of $4.82 million for intangible asset
acquisition.

As of November 30, 2022, the Company had total current liabilities of $57.90
million
, which represented:



    -   Line of credit and notes payable of $5.33 million, mainly consisting of
        notes payable to Streeterville;




  - Accounts payable and accrued expense of $9.74 million;




  - Customer deposits of $27.28 million from NextBank; and




    -   Liabilities classified as held for sale of $13.76 million, mainly
        consisting of liabilities of Reinhart/Zappware and NextTrip.



As of November 30, 2022, we had approximately $103.985 million in total assets,
$57.90 million in total liabilities and a total accumulated deficit of $57.17
million
.

Cash used in operating activities was $0.33 million for the nine months ended
November 30, 2022, compared to $12.57 million of cash used in operating
activities during the nine months ended November 30, 2021. The decrease was
mainly due to operating expense and other related activities.

Net cash used in investing activities was $4.82 million for the quarter ended
November 30, 2022, as compared to net cash generated in investing activities of
$11.57 million for nine months ended November 30, 2021. The cash used in
investing activities are mainly attributable to the intangible asset acquisition
of GoGame and travel platform in 2022 while 2021 represented HotPlay’s cashflow
for reverse takeover activities.

Net cash generated in financing activities was $1.09 million for the nine months
ended November 30, 2022, compared to net cash used in by financing activities of
$21.97 million for the nine months ended November 30, 2021, the significant cash
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 $1.36 million while 2021
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 November 30, 2022, we have working
capital of $3.53 million. Our monthly cash requirement is approximately $1.4
million
.

We will need to raise additional capital or borrow loans to support the on-going
operation, increase market penetration of our products, expand the marketing and
development of our 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 Russia
and Ukraine, employee availability and wage increases.

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commitments

Note Purchase Agreements: Streeterville Capital, LLC

March 2021 Note Purchase Agreement

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

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

As of November 30, 2022, the remaining aggregate principal balance of the March
2021
Streeterville Notes was $0.



                                       62




October 2021 Note Purchase Agreement

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

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

On April 29, 2022, the Company entered into the Standstill Agreement with
Streeterville, pursuant to which, Streeterville agreed not to seek to redeem any
portion of the October 2021 Streeterville Note (in the original principal amount
of $1,665,000) until September 18, 2022. As consideration for such agreement,
the outstanding balance of the October 2021 Note was increased by $87,639.33
(the “Standstill Fee”); as a result, the outstanding balance of the October 2021
Note as of April 29, 2022 was $1,840,912.84 (including outstanding interest).
Subsequently on September 22, 2022, the Company elected the redemption deferral
option which added $38,331.27 to the principal in which increased the
outstanding principal balance to $1,790,971 as of the same date.

As of November 30, 2022, the remaining aggregate principal balance of the
October 2021 Streeterville Notes was $1,752,639, plus accrued interest of
$152,778.

May 2022 Note Purchase Agreement

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

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



                                       63




As of November 30, 2022, the remaining aggregate principal balance of the May
2022
Streeterville Notes was $2,765,000, plus accrued interest of $92,119.

On June 2, 2022, the Company entered into a Global Amendment to satisfy the
requirement that HotPlay become a co-borrower on the October 2021 Streeterville
Note and the May 2022 Streeterville Note and jointly and severally assume all of
the obligations and duties of the Company under those notes. As a result, all
references to “Borrower” or the “Company” in such notes now jointly refer to
HotPlay and NextPlay. Streeterville also agreed to waive its right to enforce an
increase in the balance of the October 2021 Streeterville Note due to the
Company’s failure to add HotPlay as a co-borrower on the October 2021
Streeterville Note within the prescribed period of time to do so. The Global
Amendment does not alter any other terms of the notes.



June 2022 Promissory Notes


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




Operating Leases Obligation



The Company entered into an office lease in Sunrise, Florida where we leased
approximately 5,279 square feet of office space at 1560 Sawgrass Corporate
Parkway
, Suite 130, Sunrise, Florida 33323. In accordance with the terms of the
office space lease agreement, the Company will be renting the commercial office
space, for a term of almost eight years from March 1, 2021, through July 31,
2028
, with rental costs amounting to approximately $17,380 per month for the
duration of the lease. As per the Separation Agreement by and between the
Company, Reinhart/Zappware and NextTrip, however, the Company has transferred
the office lease contract to NextTrip from May 1, 2022 onwards and therefore
presented under assets and liabilities held for sale. On August 25, 2022, the
Company entered into an office lease in Sunrise, Florida for a term of six
months from September 1, 2022, through January 30, 2023. Additionally, the Group
rents office space located in Puerto Rico, Thailand with lease terms ranging
from five to nine years, with rental costs for all such properties amounting to
an aggregate of approximately $19,546.14 per month.



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of the Company’s financial condition and results of
operations are based upon its consolidated unaudited financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these unaudited financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent liabilities. On an on-going basis, management evaluates
past judgments and estimates, including those related to bad debts, accrued
liabilities, convertible promissory notes and contingencies. Management bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The accounting
policies and related risks described in the Company’s Annual Report on Form 10-K
for the fiscal year ended February 28, 2022, which was filed with the SEC on
June 21, 2022, are those that depend most heavily on these judgments and
estimates. As of November 30, 2022, there had been no material changes to any of
the critical accounting policies contained therein.

Recently Issued Accounting Standards

For more information on recently issued accounting standards, see in “Note 1 –
Summary of Business Operations and Significant Accounting Policies”, to the
Notes to Consolidated Financial Statements included herein under “Part I –
Financial Information – Item 1. Financial Statements”.

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