EDGAR 10-K Filing

Company CIK: 1372183
Filing Year: 2021
Filename: 1372183_10-K_2021_0001580695-21-000154.json

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ITEM 1. BUSINESS
Item 1. Business.
Introduction
This information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplemental Data” of this Report.
Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section entitled “Item 1A. Risk Factors” in this Report. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to Monaker Group, Inc., is also based on our good faith estimates.
Our fiscal year ends on February 28th (or 29th during leap years). Interim results are presented on a quarterly basis for the quarters ended May 31, August 31, and November 30th, the first quarter, second quarter and third quarter, respectively, with the quarter ending February 28th/29th being referenced herein as our fourth quarter. Fiscal 2021 means the year ended February 28, 2021, whereas fiscal 2020 means the year ended February 29, 2020. Similarly, the year ended February 28, 2022 is our 2022 fiscal year.
Corporate, Organizational and Business Information
Organizational History
Our predecessor, Maximus Exploration Corporation, was incorporated in the State of Nevada on December 29, 2005, and was a reporting ‘shell company’ as defined in Rule 405 of the Securities Act (“Maximus”). Extraordinary Vacations Group, Inc. (“EXVG”) was incorporated in the State of Nevada in June 2004. Extraordinary Vacations USA Inc. (“EVUSA”), EXVG’s wholly-owned subsidiary, is a Delaware corporation, incorporated on June 24, 2002. On October 9, 2008, EXVG agreed to sell 100% of EVUSA to Maximus and consummated a reverse merger with Maximus. Maximus then changed its name to Next 1 Interactive, Inc. On June 24, 2015, we changed our name to Monaker Group, Inc.
Executive Offices and Telephone Number
Our principal executive offices are located at 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323 and our telephone number is (954) 888-9779. Additional information about us is available on our website at www.monakergroup.com. The information on our website is not incorporated herein by reference.
Overview
Summary
Monaker Group, Inc., is an innovative technology company that is building next generation solutions to power the travel, gaming, and cryptocurrency industries. We believe the most promising part of our business plan is our ability to achieve shareholder value through acquisition and organic growth that presents new opportunities in the leisure space and strengthens our existing technology platforms.
Through our subsidiaries NextTrip and Maupintour (soon to be rebranded as NextTrip Journeys), we provide travel technology solutions with a primary emphasis on alternative lodging rental (ALR) properties. Our proprietary Booking Engine, branded as NextTrip ConNextions, provides travel distributors access to a sizeable inventory of ALR properties allowing them to combine ALR with traditional components of travel (Air, Car, Cruise, etc.).
Our industry-leading platform assists property managers in booking, and broadening the market for, their homes. The Company serves three major constituents: (1) property managers, (2) travelers, and (3) other travel/lodging distributors. Property managers integrate their detailed property listings into the Monaker Booking Engine with the goal of reaching a broad audience of travelers seeking ALRs, through distribution channels they could not access otherwise.
All of Monaker’s ALRs, also commonly referred to as Vacation Rentals are:
i) Controlled by Property Management Companies. This is a key point of differentiation for Monaker, as the sole focus of Property Management Companies is to rent and service their properties, unlike an individual homeowner who often rents their property on a casual or part-time basis. We believe working with property managers results in four key benefits:
► All properties are Instantly Bookable (all Property Management Company inventory is integrated into Monaker’s Booking Engine allowing for instant confirmations);
► Higher levels of service for renters (property managers are full-time operators);
► Higher Quality Assurance (property managers generally have an incentive to eliminate trouble properties); and
► Certified Rentable (most property managers are licensed and bonded requiring them to ensure properties are “legal to rent” and are further responsible for paying required taxes on behalf of homeowners.
ii) Exclusively Individual Units. Our vacation homes and residential resort units are never shared, nor do we rent rooms in homes like other ALR companies. All ALR inventory is fully furnished, privately owned residential properties, including homes, condominiums, apartments, villas and cabins that property managers rent to the public on a nightly, weekly or monthly basis.
We believe that Monaker business-to-business (B2B) ALR offerings are timely in addressing traditional travel distributors’ needs to protect their client base by allowing them seamless access to ALR products. With the rapid growth of companies like Airbnb, we believe that traditional travel companies are realizing that not having access to this high demand vacation rental inventory means risking the loss of their consumers to other ALR sites. By connecting to Monaker’s Booking Engine, travel distributors can sell ALR inventory alongside their existing travel products (i.e., Air/Car/Hotel/Cruise/Tour bookings). This solves a key issue by allowing the customers of traditional travel distributors to complete their entire vacation package booking on their website versus forcing them to go to an ALR website and potentially lose the entire booking.
Monaker’s Direct to Consumer Websites
Monaker has established a direct-to-consumer presence though a number of websites.
These sites include NextTrip.com, our corporate travel management platform focused on small to medium-sized business, that provides companies the ability to book travel, manage travel expenses, and process employee expense reports. A differentiating feature of our NextTrip.com solution is the ability for corporate travelers to book ALR properties as part of their travel itinerary. Beyond access to our ALR inventory, Maupintour.com (soon to be rebranded as NextTrip Journeys), provides personalized concierge tours and activities at destinations around the world. Our online marketplaces are discussed in greater detail below.
Monaker identifies and sources ALR properties which it consolidates through its Monaker Booking Engine, allowing for instantly bookable properties being packaged alongside other travel products; this is its distinguishing niche. The ALRs are owned and leased by third parties and are available to rent through Monaker’s websites as well as through other distributors. Monaker’s services include critical elements such as technology, an extensive film library, trusted brands and established partnerships that enhance product offerings and reach. We believe that consumers are quickly adopting video for researching and educating themselves prior to purchases, and Monaker has carefully amassed video content, key industry relationships and a prestigious travel brand as cornerstones for the development and deployment of core-technology on both proprietary and partnership platforms.
Monaker sells travel services to leisure and corporate customers around the world. Our primary focus is to incorporate ALR options into our current offerings of scheduling, pricing and availability information for booking reservations for airlines, hotels, rental cars, as well as other travel products such as sightseeing tours, shows and event tickets, and theme park passes. The Company sells these travel services both individually and as components of dynamically-assembled packaged travel vacations and trips. In addition, the Company provides content that presents travelers with information about travel destinations, maps and other travel details. In December 2020, the Company introduced its new corporate travel platform under the NextTrip brand. This platform allows our users to search large travel suppliers of alternative lodging inventories and combine ALR with their air and car booking.
In March 2018, the Company introduced Travelmagazine.com, an online travel publication with the aim of giving travelers around the world inspiration for future travel destinations and trips. The publication offers written articles, videos, and podcasts. Moving forward, we hope that Travelmagazine.com will become a central hub of information for travelers who are looking to get detailed information on destinations all around the world. We also plan to move Travelmagazine.com from having content created by a team of staff writers, to a team of worldwide writers who will contribute content for publication in the future, funding permitting. The website is expected to be supported by advertising and allow for promotion of both ALR and Maupintour vacation products.
The Company sells its ALR travel inventory through various distribution channels. The primary distribution channel is through its business-to-business (B2B) channel partners which include sales via (i) other travel companies’ websites and (ii) networks of third-party travel agents. Secondary distribution is planned to occur through the Company’s own websites at Maupintour.com (soon to be rebranded as NextTrip Journeys) and NextTripbusiness.com. Additionally, we anticipate offering high end ALR products along with specialty travel products and services via NextTripjourneys.com, targeting high value inventory to customers with complex or high-end travel needs, upon its launch which is scheduled for August 2021.
Monaker’s core holdings are planned to be streamlined by this summer into four key platforms being; the Monaker Booking Engine (MBE) branded as NextTrip ConNextions, Nexttripbusiness.com, NextTrip.com, Maupintour.com, which will be rebranded as NextTripjourneys.com, and TravelMagazine.com.
Ø The Monaker Booking Engine (MBE), branded as NextTrip ConNextions is the Company’s proprietary technology and platform providing access to more than 3.2 million instantly bookable vacation rental homes, villas, chalets, apartments, condos, resort residences, and castles. This ALR product can be accessed by other travel distributors using the Company’s API.
Ø NextTripbusiness.com is targeted at small to midsized businesses offering them a customized travel solution for business travel to meetings, conferences, conventions or even vacation travel and gives the companies lower costs, better expense control and in the future the option for a “self-branded” website. The website is expected to be completed and operational in August 2021.
Ø Maupintour, soon to be rebranded as NextTrip Journeys (NextTripJourneys.com), is expected to be our primary consumer website where travel services and products are booked. The travel services and products currently include airlines, hotels, car rentals, and our worldwide ALR inventory. Additionally, NextTrip Journeys offers high-end personalized land tour packages, cruise vacations, and specialized ALRs that cannot be booked on a real-time basis. These ALRs tend to be sourced from owners and managers who have not invested in a reservation management system and/or the owner or manager prefers to personally vet the customer before accepting a booking; typically, because the ALR is a high value property.
Ø Travelmagazine.com, an online travel publication with the aim of giving travelers around the world inspiration for future travel destinations and trips. The publication offers written articles, videos, and podcasts. Moving forward, we plan for Travelmagazine.com to become a central hub of information for travelers who are looking to get detailed information on destinations all around the world.
Cryptocurrency Portal
As discussed in greater detail below under “Recent Material Events-Longroot Stock Purchase Agreement”, on November 16, 2020, the Company acquired 100% of Longroot, Inc., a Delaware corporation (“Longroot”), which in turn owned 57% of Longroot Limited, a Cayman Islands company (“Longroot Cayman”). Longroot Cayman owned 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 has since increased its ownership in Longroot Cayman and currently Longroot owns an approximate 36.75% indirect interest in Longroot Thailand, due to its ownership of 75% of Longroot Cayman, which in turn owns 49% of Longroot Thailand (75% x 49% = 36.75%)), provided that Longroot Cayman controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand.
Longroot Thailand provides blockchain technology solutions for the fast-growing cryptocurrency marketplace. Longroot Thailand is an Initial Coin Offering (ICO) portal operator authorized and regulated under the Thai Digital Asset Business Law and licensed by the Thai Securities and Exchange Commission. Longroot Thailand provides fully regulated and licensed digital assets financing, and investment services for digital assets. This innovative business model opens the door for new digital currency financing mechanisms, and new digital investment products. Monaker, with its indirect control over Longroot Thailand, is planning to use Longroot Thailand’s technology and digital asset capabilities to create regulated cryptocurrencies designed to allow consumers to invest in unique revenue streams in wholesale travel, real estate homes and hotels, gaming assets and digital advertising - as well as potential token and loyalty program opportunities complementary to Monaker’s planned gaming (with the acquisition of HotPlay) and current travel businesses.
Travel Products and Services
Monaker plans to focus on marketing ALR options directly to consumers and to other travel distributors. The Company’s concentration on ALRs is driven by contracts with vacation home (including timeshare) unit owners and managers that make their properties available to consumers and to other travel portals (Distributors) for nightly or extended stays. In addition, we offer travelers activities and tours through our subsidiary, Maupintour (soon to be rebranded as NextTrip Journeys). Therefore, not only can we assist a traveler with identifying a destination and the lodging at the destination, but we can provide options of activities while at the destination. We also provide the means for making arrangements for airline tickets, car rentals and lodging (i.e., hotels and ALRs in the near future). In summary, Monaker offers travelers the complete travel package made easy or... Travel Made EasyTM.
The average ALR search and booking takes a few hours while the average vacation planning process typically involves the consumer visiting up to seven travel websites and spending over 10 hours to book their vacation (according to Susan Ho, Founder of Journy). We believe the NextTrip.com website using the above features should reduce ALR/Vacation planning time from hours to minutes and with the convenience of one site (truly “Travel Made Easy”).
Products and Services for Property Owners and Managers
Listings. Property owners and managers are able to list a property, with no initial upfront fees, and provide those listings to us at a negotiated preferential rate for traveler bookings generated on our websites. Listings that are ‘real-time online bookable’ properties will be managed by the property owner or manager through an application program interface (API) which will provide real-time updates to each property and immediately notify the property owner or manager of all information regarding bookings, including modifications and cancellations. Information such as content, descriptions and images are provided to us through that API.
Listings that are “request-accept” properties will require communication and approval from the property owner or manager and will not be managed through an API (as discussed above). We will provide a set of tools for the property owner or manager that will enable them to manage an availability calendar, reservations, inquiries and the content of the listing. These tools will allow the property owner or manager to create the listing by uploading photographs, text descriptions or lists of amenities, a map showing the location of the property, and property availability, all of which can be updated throughout the term of the listing. Each listing will provide travelers the ability to use email or other methods to contact property owners and managers.
The listings include tools and services to help property owners and managers run their vacation rental businesses more efficiently: responding to and managing inquiries, preparing and sending rental quotes and payment invoices, allowing travelers to book online and, enter into rental agreements, and processing online payments. Property owners and managers who elect to process online payments will be subject to a transaction fee.
Redistribution of Listings. We make selected, online bookable properties available to online travel agencies as well as channel partners (jointly referred to as “Distributors”). We are compensated for these services by receiving a commission that is added to the negotiated net rate for each booking.
Products and Services for Travelers
Search Tools and Ability to Compare. Our online marketplace NextTripJourneys.com provide travelers with tools to search for and filter several travel products including air, car, accommodations (including ALRs) and activities based on various criteria, such as destination, travel dates, type of property, number of bedrooms, amenities, price, or keywords.
Traveler Login. Travelers are able to create accounts on our website(s) that give them access to their booking activity through the website.
Travel Blog. Travel guides, videos and pictures as well as travel articles can be accessed through Travelmagazine.com.
Security. We use a combination of technology and human review to evaluate the content of listings and to screen for inaccuracies or fraud with the goal of providing only accurate and trustworthy information to travelers. Our company is Payment Card Industry (PCI) compliant to ensure the safety and security of our customer credit card data.
Communication. Travelers who create an account on our website will receive regular communications, including notices about places of interest, special offers, new listings, and an email newsletter. The newsletter will be available to any traveler who agrees to receive it and offers introductions to new destinations and vacation rentals, as well as tips and useful information when staying in vacation rentals.
Mobile Websites and Applications. We provide versions of our websites formatted for web browsers, smart-phones and tablets so that property owners, managers and travelers can access our websites and tools from mobile devices.
To date, we have focused on developing our booking engine and establishing relationships with suppliers to increase the size of our instantly bookable inventory. The booking engine has produced little revenue to date because, among other reasons, of the limited number of widely-used distribution partners with which we have been able to establish relationships. We have recently begun contracting with established, widely-used distribution partners to make our inventory available through their distribution channels. The success of the booking engine will depend on users of those distribution partners booking properties supplied by our booking engine, and on our ability to expand the number of such distribution partners that utilize our booking engine.
The Company has completed integrating several distributors for the booking of our ALR products and the Company continues to integrate suppliers of ALR products. We now have more than 3.2 million properties listed on our booking engine.
Products and Services for Cryptocurrency Investors
ICO Portal. Through our indirect control of Longroot Thailand, we, through Longroot Thailand, offer an ICO Portal located at Longroot.com, that provides investors a new digital investment product and gives suppliers a new digital currency financing mechanism. Monaker, through its indirect control of Longroot Thailand, is planning to use the technology and digital asset capabilities to create regulated cryptocurrencies designed to allow consumers to invest in unique revenue streams in wholesale travel, real estate homes and hotels, gaming assets and digital advertising - as well as potential token and loyalty program opportunities complementary to Monaker’s gaming (planned through the acquisition of HotPlay) and travel businesses.
The Company is a Nevada corporation headquartered in Weston, Florida.
Planned Future Operations
As described in greater detail below under “Recent Material Events-HotPlay and Axion Share Exchanges”, “Recent Material Events-Reinhart Interactive TV AG and Zappware N.V. Acquisition”, and “Recent Material Events-IFEB Bank Transaction”, the Company is in the process of completing the acquisition of HotPlay, which has developed a next generation in-game advertising (IGA) solution that harmonizes engagement between businesses and video gamers, has acquired 51% of Reinhart TV AG, which is in the business of providing a software-based TV and video distribution platform to telecom operators and digital content owners and providing services to telecom operators and digital content owners for user interaction design, as well as software development, deployment and support, and is in the process of completing the acquisition of control of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico (IFEB).
Moving forward, assuming the completion of the acquisition of HotPlay and IFEB bank, the Company anticipates the majority of its operations will transition to those of HotPlay, provided that the Company plans to continue to pursue cryptocurrency and banking operations through Longroot and IFEB. The Company is also excited about the prospects of the Reinhart TV AG acquisition.
Competition
The market to provide listing, searching, and marketing services whether they are ALR, activities and tours, airline bookings, car rentals or hotel stays is highly competitive and fragmented with limited barriers to entry. Each of the ALR services that we will provide to property owners, managers and travelers is currently offered by competitors. Furthermore, ALRs are not typically marketed exclusively through any single channel, and many of our listing agreements are not exclusive, potentially allowing our competitors to aggregate a set of listings like ours. We believe we will compete primarily based on the quantity, quality, and nature of the properties offered on our websites. The majority of ALRs that will be offered in our marketplace reflect a whole house or property rather than a room. In addition, we anticipate that we will benefit from the quality of the direct relationships we have with property owners and managers, the global diversity of the ALRs available on our websites, the quality of our websites, the tools provided to our property owners and managers, the strength of our brands, and the success of our marketing programs and price.
Our principal competitors include:
● other vacation and short-term rental listing websites, such as TripAdvisor.com, HomeAway.com, VRBA.com, Booking.com and Airbnb.com;
● websites that list both rooms to rent as well as ALRs, such as Airbnb.com, Booking.com, HomeAway.com and VRBO.com;
● professional property managers who charge a percentage of booking revenue for their services, such as Wyndham Worldwide Corp. and InterHome, AG;
● hotels that offer large rooms and amenities common in ALRs, such as Hyatt Vacation Clubs and Four Seasons Resorts;
● websites that aggregate listings from property managers who advertise and take bookings on behalf of property managers, such as Perfect Places, Inc., Atraveo and E-Domizil;
● online travel websites, such as those operated by Expedia.com, Hotels.com, Kayak.com, Booking.com, Orbitz.com, Priceline.com and Travelocity.com, that have traditionally provided comprehensive travel services and may expand or are now expanding into the ALR category;
● timeshare exchange companies, such as Interval International, Inc. and RCI, LLC;
● large Internet companies, such as Craigslist, Inc., eBay Inc., Google Inc., MSN.com and Yahoo!, which provide vacation rental listing or search services in addition to a wide variety of other products or services; and
● offline publishers of classified vacation rental listings, including regional newspapers and travel-related magazines.
The market for fundraising via regulated Initial Coin Offerings (“ICO”) in Thailand is still at the nascent stage. Under Thailand’s Securities and Exchange Commission’s (“Thai SEC”) Thai Royal Decree, any offering of digital assets must be made through an ICO Portal approved by the Thai SEC. The ICO Portal is responsible for carrying out due diligence on an issuer and conducting the actual offering.
At present, only four ICO Portals, including Longroot Thailand, have been approved by the Thai SEC and Longroot Thailand competes directly with them. With the increased acceptance of cryptocurrencies and adoption of blockchain technology, HotPlay management believes that there will be more ICO Portals approved, increasing the number of direct competitors.
Longroot Thailand also competes indirectly with companies facilitating more traditional avenues of raising funds, including investment banks that underwrite initial public offerings or bond issues, commercial banks offering direct loans to businesses, and others. However, HotPlay management believes that advantages of digital assets offerings, such as the ability to securitize alternative assets, provide a high degree of flexibility on deal structure, and that the reliability offered by blockchain technology could give Longroot Thailand a competitive advantage. Furthermore, the Thai SEC ICO Portal is allowed to offer digital assets to both retail and institutional investors, giving issuers access to a wider investor market.
Seasonality
Property owners and managers tend to list their properties when travelers are most likely to make vacation plans. The timing primarily depends on whether travelers are taking a winter or summer vacation and tends to vary by country. The highest level of listings is expected in the first quarter of a year, which is typically when travelers are making plans for summer vacations in the United States and Europe. The lowest level of listings is expected in the third quarter. By the fourth quarter, property owners and managers of winter vacation destinations will be listing their properties in time to meet the needs of travelers planning those trips. Other vacation areas outside of the United States and Europe also have seasonality, which may not be reflected in the same quarters (for example, winter and summer months are reversed in the southern hemisphere).
As the listings grow, the seasonality of those transactions may result in higher revenues in the summer and winter vacation months. We also expect seasonality in the number of visitors to our websites, with the first quarter having the highest number of visitors.
Notwithstanding the above, adverse economic conditions, or pandemics, including COVID-19, could result in future seasonal patterns that are different from historical trends.
Research and Development
We have developed proprietary systems to create, maintain and operate our websites. This technology consists of systems developed by internal and third-party designers, developers and engineers and software acquired or licensed from outside developers and companies. Our systems are designed to serve other property distributors, property owners, managers, and travelers in an automated and scalable fashion.
Longroot Thailand has put considerable resources into researching technology solutions, such as suitable blockchain protocols and third-party security services, and has developed a proprietary system that serves its clients and internal operations while complying with the Thai SEC. Its systems are designed to onboard investors on to the ICO Portal Platform in a compliant manner, offer access to information related to individual ICOs, such as their prospectus, and participate in ICOs.
Costs associated with our research and development were included as capitalized development costs or, included in several expenses including technology and development, salaries, and benefits and in general and administrative expenses.
Technology and Infrastructure
Our websites are hosted using cloud services distributed globally across multiple regions. Our systems architecture has been designed to manage increases in traffic on our websites through additional computing power without making software changes. Our cloud services provide our online marketplace with scalable and redundant Internet connectivity and redundant power and cooling to our hosting environments. We use security methods to ensure the integrity of our networks and protection of confidential data collected and stored on our servers, and we have developed and use internal policies and procedures to protect the personal information of our property owners, managers and travelers using our websites that we collect and use as part of our normal operations. Access to our networks, and the servers and databases, on which confidential data is stored, is protected by industry standard firewall and encryption technology(s). Physical access to our servers and related equipment is secured by limiting access to the data center to operations personnel only. Costs associated with our web hosting operation are included in general and administrative costs.
Longroot Thailand’s proprietary ICO Portal Platform is built upon a number of innovations that allow it to serve investors, issuers, and the Longroot Thailand internal team in a secure and compliant manner. The platform leverages the Ethereum network, giving investors and issuers access to an ecosystem of services such as secondary markets, exchanges, custodians, insurers, and decentralized finance services.
The platform also includes an integrated Securities Tokenization Offering technology. Not only does the technology allow Longroot Thailand to tokenize assets that are fully compliant with Thailand's Royal Decree on Digital Assets Businesses, it will also allow Longroot Thailand to conduct similar offerings in other jurisdictions in the future, thereby enabling Longroot Thailand to expand its operations.
The infrastructure has a high level of reliability and is designed to allow Longroot Thailand to scale efficiently while maintaining the security levels required of a financial services operator. The platform is hosted using a combination of third-party data centers powered by Google Cloud Platform (GCP) and associated security services provided by other third parties. The high level of redundancy provided by GCP and designed into its infrastructure helps ensure that Longroot Thailand can reliably serve clients globally, 24x7. Longroot Thailand also uses security methods to ensure the integrity of its networks and protection of confidential data collected and stored on its servers. Longroot Thailand has developed internal policies and procedures to protect the information of investors and issuers which it collects and uses as part of its normal operations. Access to its networks, and the servers and databases, on which confidential data is stored, is protected by industry standard firewall technology.
Intellectual Property
Our intellectual property includes the content of our websites, our registered domain names, our registered and unregistered trademarks, contracts with third party property managers and distributors. We believe that our intellectual property is an essential asset of our business and that our registered domain names and our technology infrastructure will give us a competitive advantage in the online market for ALR listings and arrangements with attractions and tour operators. We rely on a combination of trademark, copyright and trade secret laws in the United States as well as contractual provisions, to protect our proprietary technology and our brands. We also rely on copyright laws to protect the appearance and design of our sites and applications, although to date we have not registered for copyright protection on any particular content. We have registered numerous Internet domain names related to our business in order to protect our proprietary interests. We also enter into confidentiality and invention assignment agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites or our brand names without authorization.
The primary web properties are:
● monakergroup.com
● nexttrip.com (and nextrip.com)
● nexttripvacations.com
● nexttrip.biz
● maupintour.com
● exvg.com (and extraordinaryvacations.com)
● travelmagazine.com
Longroot Thailand’s intellectual property includes the ICO Portal Platform, its registered domain, its registered and unregistered trademarks, and its status as a Thai SEC’s approved ICO Portal that was obtained after going through a rigorous process that included approval of its business plan and audits of its internal processes and technology, which took close to two years to complete.
We believe that Longroot Thailand’s intellectual property is an essential asset of its business and that its ICO Portal status, registered domain names and technology infrastructure will give it a competitive advantage. Longroot Thailand relies on a combination of trademark, copyright and trade secret laws as well as contractual provisions, to protect its proprietary technology and brands. It also relies on copyright laws to protect the appearance and design of its sites and applications, although to date it has not registered for copyright protection on any particular content. Longroot Thailand has registered numerous Internet domain names related to its business in order to protect its proprietary interests. Longroot Thailand also enters into confidentiality and invention assignment agreements with its employees and consultants and seeks to control access to and distribution of its proprietary information in a commercially prudent manner. The efforts Longroot Thailand has taken to protect its intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of its Platform or our brand names without authorization.
Longroot Thailand’s primary web properties are:
● www.Longroot.com
● portal.Longroot.co.th
● sign-up.Longroot.co.th
Employees
We employed 18 full-time employees as of the date of this Report. Additionally, we use independent contractors and temporary personnel to supplement our workforce, particularly in the software development and technology tasks. Our employees are not represented by a labor union and we consider our employee relations to be very good. Competition for qualified personnel in our industry has historically been intense, particularly for software engineers, developers, and other technical staffs.
Longroot Thailand employs three full-time employees as of the date of Report. Additionally, Longroot Thailand uses independent contractors and temporary personnel to supplement its workforce, particularly in the software development and technology tasks. Its employees are not represented by a labor union and it considers its employee relations to be very good. Competition for qualified personnel has historically been intense, particularly for software engineers, developers, and other technical staff.
Employee Development, Attraction and Retention: The development, attraction and retention of employees is a critical success factor for the Company and its operating units for succession planning and sustaining our core value drivers. To support the advancement of our employees, we offer training and development programs encouraging advancement from within and strive to fill our team with strong and experienced management talent. We leverage both formal and informal programs to identify, foster, and retain top talent at both the corporate and operating unit level.
Diversity and Inclusion: The Company believes that its rich culture of inclusion and diversity enables it to create, develop and fully leverage the strengths of its workforce to exceed customer expectations and meet its growth objectives. The Company places a high value on inclusion, engaging employees in our programs staffed by employees with diverse backgrounds, experiences or characteristics who share a common interest in professional development, improving corporate culture and delivering sustained business results.
Segments
We operate as one operating segment consisting of products and services related to our online travel services and cryptocurrency marketplaces. Our travel services are composed of the following services:
● The Monaker Booking Engine (MBE), branded as NextTrip ConNextions, is the Company’s proprietary technology and platform providing access to more than 3.2 million instantly bookable vacation rental homes, villas, chalets, apartments, condos, resort residences, and castles. MBE offers travel distributors and agencies an industry first: a customizable, instant-booking platform for alternative lodging rental. MBE is also becoming a driving force and differentiator for the Company’s in-house brands Maupintour and NextTrip.com.
● Maupintour is a historic 70-year-old tour company tracing its roots back to the late 1940s as a well-known and respected name in the travel industry. Maupintour is widely recognized by its customers and established travel agencies for creating outstanding & unique itineraries. Historically, Maupintour experienced admirable repeat customer rates and continues to have strong brand recognition in the tour packaging community. Maupintour will be rebranded to NextTrip Journeys (NextTripJourneys.com) in summer 2021 to reflect a re-energized brand with increased offerings including land tour packages, cruise vacations, airlines, hotels, car rentals, and specialized ALRs that cannot be booked on a real-time basis.
● NextTripbusiness.com launched in December 2020, is a corporate booking and expense management solution for small to midsized businesses, enabling them to sign up, create accounts for employees, control expenditures and reduce overall business travel expenses though its access to wholesale travel inventories.
● Travelmagazine.com is an online travel publication with the aim of giving travelers around the world inspiration for where to go next. The publication includes a library of travel footage as part of its offerings of written articles, videos, and podcasts.
Longroot Thailand operates as one operating segment consisting of the ICO Portal Platform where applicable investors are able to sign up and invest in available ICOs, and issuers can issue tokens and list information related to their offerings. The Platform has been approved by the Thai SEC and is built in a manner that enables the Longroot Thailand internal team to conduct the necessary checks to ensure compliance with applicable regulations.
Other Investments
As part of prior business transactions, and in many cases, in lieu of requiring counterparties to pay us cash consideration for certain dispositions, we have accepted and/or retained securities in various entities (including former subsidiary companies). As described below, we are currently in the process of liquidating those securities in an effort to increase liquidity and we do not intend to hold such securities.
We assess the potential impairment of our equity method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value.
Verus International, Inc and NestBuilder.com Corp (OTCMKTS:VRUS)
We have recognized an impairment loss on investment in unconsolidated affiliate. As of February 28, 2021, and February 29, 2020, Monaker owned 3,845,101 and 61,247,139 shares of Verus International, Inc. (formerly known as RealBiz Media Group, Inc. (“Verus”)) Series A Convertible Preferred Stock, respectively. This interest was written down to zero ($0) as of February 28, 2015. On January 13, 2021, Verus completed a 1-for-500 reverse stock split which has been retroactively reflected in the discussion below.
On April 10, 2019 and effective on February 8, 2019, we entered into an Inducement Agreement with Verus. Pursuant to the Inducement Agreement, we agreed to amend the designation of the Series A Convertible Preferred Stock of Verus (the “Series A Preferred Stock”)(of which we held 44,470,101 shares of Series A Preferred Stock at the time of the entry into the Inducement Agreement, which converts into common stock of Verus, and votes on all stockholder matters, on a one-for-500 basis, subject to the Ownership Blocker (discussed below)), to remove certain anti-dilution rights described therein; and Verus agreed to issue us 304,060 shares of its common stock, following Verus’ then planned increase in authorized shares of common stock, pursuant to the anti-dilution rights of that certain Settlement Agreement by and among the Company, Verus, AST and NestBuilder discussed above. The designation of the Series A Preferred Stock, as amended, includes a 9.99% beneficial ownership limitation, preventing the Company from converting such Series A Preferred Stock into common stock of Verus (and reducing the voting rights of such preferred stock proportionally), if upon such conversion, the Company, its affiliates and/or any group which it is a part of, would own greater than 9.99% of Verus’ common stock (the “Ownership Blocker”).
On April 16, 2019, Verus filed a Certificate of Amendment (the “Amendment”) to its Amended and Restated Certificate of Incorporation, as amended, to increase its authorized common stock from 1,500,000,000 shares to 7,500,000,000 shares and to decrease the par value of its common stock and preferred stock from $0.001 per share to $0.000001 per share. On April 23, 2019, Verus issued us the 304,060 shares of common stock.
On October 29, 2019, the Company entered into Stock Purchase Agreements with (a) Monaco Investment Partners, LP, of which Donald Monaco is the managing partner and a member of the board of directors of the Company; (b) Simon Orange, a member of the board of directors of the Company; and (c) William Kerby, the Chief Executive Officer and director of the Company. Pursuant to the Stock Purchase Agreements, the Company sold the purchasers 51,125 shares (3,125 shares to Mr. Kerby and 25,000 shares to each of Monaco Investment Partners, LP and Mr. Orange) of Series A Preferred Stock of Verus. The purchase price for the Verus shares was determined by the board of directors of the Company, based on among other things, the recent trading prices of Verus’ common stock on the OTCQB Market, as publicly reported. The Company received net proceeds of $425,000 from the Stock Purchase Agreements.
On January 22, 2020, the Company entered into a Stock Purchase Agreement with William Kerby, the Chief Executive Officer and Director of the Company. Pursuant to the agreement, the Company sold Mr. Kerby 3,125 shares of restricted Series A Preferred Stock of Verus for a total of $25,000 or $8.00 per shares.
As of February 29, 2020, the Company owned 122,495 shares of Verus’s common stock which had a fair value of $8.00 per share or $979,954 in aggregate.
Since the issuance date of such common stock, the Company has sold 61,247,139 shares of common stock of Verus and therefore, as of February 28, 2021, the Company owned 0 shares of common stock of Verus. The change in fair value of $649,020 is recognized in net loss as other expense, realized loss, net.
Bettwork Industries Inc. (OTC Pink: BETW)
On July 2, 2018, three Secured Convertible Promissory Notes aggregating $5,250,000 (as described in greater detail in the notes to the audited financial statements below under “Item 8. Financial Statements and Supplementary Data-Note 3 - Notes Receivable”), which were entered into with Bettwork Industries Inc. (“Bettwork”), were exchanged for 7,000,000 shares of Bettwork’s common stock at $0.75 per share for a fair value of $5,250,000 as of July 2, 2018. Bettwork’s common stock has a readily determinable fair value as it is quoted on the OTC Pink market under the symbol “BETW”.
On November 29, 2018 and December 6, 2018, the Company sold 428,572 shares of Bettwork common stock to each of (a) the Donald P. Monaco Insurance Trust, of which Donald Monaco is the trustee and the Chairman of the board of directors of the Company; and (b) Charcoal Investment Ltd, which entity is owned by Simon Orange, a member of the board of directors of the Company for an aggregate of $300,000 ($600,000 in total), or $0.70 per share.
On February 29, 2020, the shares of Bettwork’s common stock were trading at $0.25 per share which decreased the fair value of the 6,142,856 remaining shares of Bettwork common stock held by the Company to $1,535,714 and caused an accumulated fair value loss of $6,081,427 to be realized. The change in fair value of $6,081,427 is recognized in net income (loss) on the statement of operations, as other income, valuation loss, net, as a valuation loss as of February 29, 2020.
On February 28, 2021, the shares of Bettwork’s common stock were trading at $0.09 per share which decreased the fair value of the 6,142,856 remaining shares of Bettwork common stock held by the Company to $55,286 and caused an accumulated fair value loss of $1,480,428 to be realized. The change in fair value of $1,480,428 is recognized in net income (loss) on the statement of operations, as other income, valuation loss, net, as a valuation loss as of February 28, 2021.
Recruiter.com Group, Inc., formerly Truli Technologies Inc (OTCQB:RCRT)
On August 31, 2016, we entered into a Marketing and Stock Exchange Agreement with Recruiter.com (“Recruiter”). The Agreement required Monaker to issue to Recruiter 75,000 shares of Monaker common stock in exchange for 2,200 shares of Recruiter common stock. Also, Monaker issued to Recruiter an additional 75,000 shares of Monaker common stock for marketing initiatives within the Recruiter platform. In essence, Monaker issued 75,000 shares of its common stock to purchase 2,200 shares of Recruiter, and Monaker issued an additional 75,000 shares of its common stock as a prepayment for marketing and advertising within the Recruiter platform. Recruiter was at that time a private company with a platform that companies and individuals use for employment placements.
On January 15, 2019, pursuant to an Agreement and Plan of Merger / Merger Consideration, Truli Technologies Inc which subsequently changed its name to Recruiter.com Group, Inc. (OTCQB: RCRT) (“Recruiter.com”), acquired Recruiter and Monaker exchanged its 2,200 shares in Recruiter for 139,273 shares of Recruiter.com common stock.
As of February 29, 2020, each share of Recruiter.com’s common stock was valued at $2.25 per share which decreased the fair value of the 139,273 shares of Recruiter.com common stock to $313,363 and caused an accumulated fair value loss of $160,164 to be realized. The change in fair value of $160,164 is recognized in net income (loss) as other income, valuation loss, net, on the statement of operations, as a valuation loss as of February 29, 2020.
As of February 28, 2021, each share of Recruiter.com’s common stock was valued at $3.39 per share which decreased the fair value of the 78,137 shares of Recruiter.com common stock to $264,884 and caused an accumulated fair value loss of $48,479 to be realized. The change in fair value of $48,479 is recognized in net income (loss) as other income, valuation loss, net, on the statement of operations, as a valuation loss as of February 28, 2021.
Longroot Thailand
As discussed in greater detail above under “Recent Material Events-Longroot Stock Purchase Agreement”, on November 16, 2020, the Company acquired 100% of Longroot, which in turn owned 57% of 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.
In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, the Company has accounted for this business combination utilizing the following values in connection with the purchase of Longroot, Inc.: total consideration to selling shareholder of $2,528,000 (and $2,250,636, net of cash acquired) and the purchase price has been provisionally allocated as follows. The fair value of net assets acquired were $219,940 and an intangible asset (license) of $2,212,702 with the liabilities assumed of $142,983 and minority interest of $39,023. The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date.
Sources and Availability of Raw Materials and the Names of Principal Suppliers
Our products do not require the consumption of raw materials.
Longroot Thailand outsources the development of the ICO Portal Platform to Atato Company Limited (“Atato”), a company incorporated in Thailand, and has signed an agreement for their services from November 16, 2020 to November 15, 2021.
Dependence on One or a Few Customers
We do not depend on one or a few customers. As we expand our business, we do not anticipate that we will depend on one or a few customers.
Government Regulation
Our operations are subject to and affected by various government regulations, U.S. federal, state and local government authorities. These providers, distributors, etc. are also subject to periodic renewal and ongoing regulatory requirements. The rules, regulations, policies and procedures affecting our businesses are constantly subject to change. The following descriptions are summary in nature and do not purport to describe all present and proposed laws and regulations affecting our businesses.
Regulation of the Internet
We operate several internet websites which we use to distribute information about and supplement our programs. Internet services are now subject to regulation in the United States relating to the privacy and security of personally identifiable user information and acquisition of personal information from children under the age of 13, including the federal Child Online Protection Act (COPA) and the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM). In addition, a majority of states have enacted laws that impose data security and security breach obligations. Additional federal and state laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. In addition, to the extent we offer products and services to online consumers outside the United States, the laws and regulations of foreign jurisdictions, including, without limitation, consumer protection, privacy, advertising, data retention, intellectual property, and content limitations, may impose additional compliance obligations on us.
Longroot Thailand’s operations are subject to, and affected by, various government regulations. The rules, regulations, policies and procedures affecting its businesses are constantly subject to change. The following descriptions are summary in nature and do not purport to describe all present and proposed laws and regulations affecting its businesses.
Longroot Thailand is regulated under the Thai SEC Royal Decree on Digital Assets Businesses that requires all ICOs in Thailand to be conducted by a Thai SEC approved ICO Portal. As an ICO Portal, Longroot Thailand is also responsible for carrying out due diligence on issuers. The decree was only recently introduced in 2018, and is subject to amendment. Longroot Thailand will need to constantly monitor the regulations as they evolve and stay compliant.
Longroot Thailand is also regulated under the Thailand Anti-Money Laundering Office (AMLO) and is required to adhere to the Anti-Money Laundering Act and Counter-Terrorism and Proliferation of Weapon of Mass Destruction Financing Act of Thailand. As such, Longroot Thailand carries out Know Your Customer (KYC) checks on all issuers, investors and its internal team before on boarding them to help ensure compliance.
Thailand is in the process of introducing a Personal Data Protection Act (PDPA), which all companies in Thailand that handle personal data would be required to adhere to. This means that employers, businesses, and individuals that collect and process personal data would have to review and ensure that their data policies, particularly those pertaining to the rights of the data subjects and the obligations of data controllers, are in line with the PDPA’s provision once it comes to effect.
There are several business taxes levied by the Thai central government under the principal tax law, Revenue Code such as Corporate Income Tax, Value Added Tax, Specific Business Tax, Customs Duties, Excise Tax and Stamp Duties. Longroot Thailand has a duty to assess its own income and ensure the right amount of taxes are paid to the government authorities and to correct to avoid additional tax penalty after the government inspection.
Other Regulations
We are also subject to various local, state, and federal regulations, including, without limitation, regulations promulgated by federal and state environmental, health and labor agencies.
Recent Material Events
Amended Revolving Monaco Trust Note
On December 9, 2019, the Company entered into an Amended and Restated Promissory Note with the Donald P. Monaco Insurance Trust, of which Donald P. Monaco is the trustee and the Chairman of the board of directors of the Company (the “Monaco Trust”), in the amount of up to $2,700,000 (the “Revolving Monaco Trust Note”).
The amount owed pursuant to the Revolving Monaco Trust Note accrues interest at the rate of 12% per annum (18% upon the occurrence of an event of default). The Revolving Monaco Trust Note contains standard and customary events of default.
On January 29, 2020, the Company entered into a first amendment to the Revolving Trust Note with the Monaco Trust, to extend the maturity date of such note from February 1, 2020 to April 1, 2020. No other changes were made to such note as a result of such amendment.
On March 27, 2020, Company entered into a second amendment to the Revolving Trust Note with the Monaco Trust, to extend the maturity date of such Revolving Monaco Trust Note to December 1, 2020. No other changes were made to such note as a result of such amendment.
On November 6, 2020, the Company entered into a third amendment to the Revolving Trust Note with the Monaco Trust, to extend the maturity date of such Revolving Monaco Trust Note to February 28, 2021. No other changes were made to such note as a result of such amendment.
On November 16, 2020, the Company entered into a fourth amendment to the Revolving Trust Note with the Monaco Trust, to increase the amount available under such Revolving Monaco Trust Note to $2,800,000. No other changes were made to such note as a result of such amendment.
The Revolving Monaco Trust Note was fully repaid on January 4, 2021, with funds raised through the December 2020 underwritten offering discussed below.
HotPlay and Axion Share Exchanges
As disclosed in greater detail in the Current Report on Form 8-K filed by the Company with the SEC on July 23, 2020, on July 23, 2020, the Company entered into a Share Exchange Agreement (as amended by the first amendment thereto dated October 28, 2020, as disclosed in the Current Report on Form 8-K filed with the SEC on October 29, 2020, the second amendment thereto dated November 12, 2020, as disclosed in the Current Report on Form 8-K filed with the SEC on November 18, 2020, the third amendment thereto dated January 6, 2021, as disclosed in the Current Report on Form 8-K filed with the SEC on January 11, 2021, and the fourth amendment thereto dated February 22, 2021, as disclosed in the Current Report on Form 8-K filed with the SEC on February 26, 2021, the “HotPlay Exchange Agreement” and the transactions contemplated therein, the “HotPlay Share Exchange”) with HotPlay Enterprise Limited (“HotPlay”) and the stockholders of HotPlay (the “HotPlay Stockholders”). The transactions contemplated by the HotPlay Exchange Agreement are subject to certain closing conditions, including, the approval of the listing of the combined company’s common stock on the NASDAQ Capital Market following the closing.
Additionally, as disclosed in the Current Report on Form 8-K filed with the SEC on November 18, 2020, on November 12, 2020, the Company entered into an Amended and Restated Share Exchange Agreement (as amended by the first amendment thereto dated January 6, 2021, as disclosed in the Current Report on Form 8-K filed with the SEC on January 11, 2021, the “Axion Exchange Agreement”) with certain stockholders holding shares of Axion Ventures, Inc. (“Axion” and the “Axion Stockholders”) and certain debt holders holding debt of Axion (the “Axion Creditors”)(the “Axion Share Exchange”, and collectively with the HotPlay Exchange Agreement, the “Exchange Agreements” and the transactions contemplated therein, the “Share Exchanges”). The transactions contemplated by the Axion Exchange Agreement closed on November 16, 2020.
Pursuant to the HotPlay Exchange Agreement, the HotPlay Stockholders agreed to exchange 100% of the outstanding capital shares of HotPlay (making HotPlay a wholly-owned subsidiary of the Company following the closing of the transactions contemplated therein) for 52 million shares of the Company’s common stock (the “HotPlay Shares”).
Pursuant to the Axion Exchange Agreement, (a) the Axion Stockholders (including Cern One Limited (“Cern One”)), exchanged ordinary shares of Axion equal to approximately 33.85% of the then outstanding common shares of Axion, in consideration for 10,000,000 shares of newly designated shares of Series B Convertible Preferred Stock of the Company (the “Series B Preferred Stock”), which are automatically convertible into common shares of the Company upon the occurrence of certain events, including the closing of the HotPlay Share Exchange, into an aggregate of 7,417,700 shares of Monaker common stock; and (b) the Axion Creditors exchanged debt of Axion in the aggregate amount of $7,657,024 (the “Axion Debt”), for (i) 3,828,500 shares of newly designated shares of Series C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”), which are automatically convertible into common shares of the Company upon the occurrence of certain events, including the closing of the HotPlay Share Exchange, on a one-for-one basis; and (ii) a warrant, granted to Cern One, to purchase 1,914,250 shares of the Company’s common stock (the “Creditor Warrants”), which is only exercisable upon the occurrence of certain events (described below). Although the Axion Share Exchange closed on November 16, 2020, the Company has yet to formally complete the transfer of the ownership of the Axion shares into its name, due to a Cease Trade Order issued by the British Columbia Securities Commission, which impacts Axion.
The Creditor Warrants, have cashless exercise rights, an exercise price of $2.00 per share and have a term of two years, beginning on the Vesting Date (defined below). The Creditor Warrants vest on the later of (a) the date that the Series B Preferred Stock and Series C Preferred Stock convert into common stock, and the earlier of (i) the date the Axion Debt is fully repaid by Axion or (ii) the date that Monaker obtains 51% or more of the voting control of, and economic rights to, Axion, provided that such vesting date must occur before November 16, 2021, or the Creditor Warrants will terminate (as applicable, the “Vesting Date”). All of the Creditor Warrants were granted to Cern One.
The HotPlay Exchange Agreement can be terminated by the parties thereto under various circumstances, including if the transactions contemplated thereby have not both been completed by April 30, 2021, provided that such termination date is extended automatically, until up to May 31, 2021, in the event that Monaker has, prior to such date, filed a definitive proxy statement with the SEC, has called a special meeting to approve the issuance of the shares to the HotPlay Stockholders, among other things, and is continuing to work in good faith to complete the closing of the HotPlay Share Exchange, which termination date has been extended automatically to May 31, 2021 (the “Outside Date”).
At a special meeting of stockholders held on April 7, 2021, the stockholders of the Company approved the issuance of shares of common stock in connection with the HotPlay Share Exchange and the terms thereof and the shares of common stock in connection with the conversion of the Series B Preferred Stock and Series C Preferred Stock, among other matters. The Company is currently working with the NASDAQ Capital Market to obtain approval for the continued listing of the Company’s common stock following the closing of the HotPlay Share Exchange, which approval the Company hopes to receive in or around June 2021 and which HotPlay Share Exchange the Company hopes to close in or around June 2021. The parties are fully committed to closing the HotPlay Share Exchange and the Company expects to extend the Outside Date, or otherwise continue to work together with HotPlay and the HotPlay Stockholders to close the HotPlay Share Exchange, following the date of this Report.
Following the closing of the HotPlay Share Exchange, the current HotPlay Stockholders are expected to own approximately 60.0% of the outstanding common stock of Monaker, and the Axion Stockholders and Axion Creditors are expected to own, upon the automatic conversion of the outstanding Series B Preferred Stock shares and Series C Preferred Stock shares into common stock of the Company upon the closing of the HotPlay Share Exchange, approximately 13.0% of the aggregate outstanding common stock of Monaker, without taking into account the shares of common stock issuable upon exercise of the Creditor Warrants, with the Monaker stockholders prior to the effective date of the closing holding approximately 27.1% of the aggregate outstanding common stock of the combined company, in each case based on the current outstanding shares of common stock of Monaker.
We previously operated solely in the travel industry. With the recent acquisition of Longroot, as previously discussed, we are now venturing into the cryptocurrency industry. Upon the completion of the HotPlay Exchange Agreement, the Company plans to transition its operations to those of a travel, cryptocurrency, and an in-game advertising company. During the period until the closing of the HotPlay Exchange Agreement, and in the event the HotPlay Exchange Agreement is not consummated, the Company intends to continue to actively operate in the travel and cryptocurrency industries.
To date, HotPlay has loaned the Company $15 million pursuant to the terms of the HotPlay Exchange Agreement (collectively, the “HotPlay Loans”), pursuant to which HotPlay was required to have at least $15 million in cash on hand as of the closing of such HotPlay Exchange Agreement, less amounts loaned to the Company. The HotPlay Loans are evidenced by Convertible Promissory Notes (collectively, the “HotPlay Notes”), which have an interest rate of 1% per annum.
The HotPlay Notes are automatically forgiven by HotPlay in the event the HotPlay Exchange Agreement is terminated in certain situations and automatically convert into fully paid and nonassessable shares of the Company’s common stock at a conversion price of $2.00 per share, subject to the NASDAQ Limitation, described below, in the event the HotPlay Exchange Agreement is terminated in certain other situations.
In the event the transactions contemplated by the HotPlay Share Exchange close, it is anticipated that the HotPlay Notes will be forgiven as intracompany loans.
The maximum number of shares of common stock to be issued in connection with the conversion of the HotPlay Convertible Notes, cannot (i) exceed 19.9% of the outstanding shares of common stock on the date of the applicable note, (ii) exceed 19.9% of the combined voting power of the then outstanding voting securities of the Company on the date of the applicable note, in each of subsections (i) and (ii) before the issuance of the common stock under such notes, or (iii) otherwise exceed such number of shares of common stock that would violate applicable listing rules of The NASDAQ Capital Market in the event the Company’s stockholders do not approve the issuance of the common stock (as applicable, the “NASDAQ Limitation”).
December 2020 Underwritten Offering
On December 28, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood Capital Markets, division of Benchmark Investments, Inc. (“Kingswood”) and Aegis Capital Corp. (“Aegis”), as representatives of the underwriters name therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 3,080,000 shares of the Company’s common stock, at a public offering price of $2.50 per share. The Company also granted the underwriters a 45-day option to purchase up to an additional 462,000 shares of common stock to cover over-allotments, if any, which over-allotment option was fully exercised on January 13, 2021. The Offering closed on December 31, 2020.
Kingswood and Aegis acted as the book-running managers for the Offering. The shares of common stock sold in the Offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3. The Company paid the Underwriters a cash fee equal to 6% of the aggregate gross proceeds received by the Company in connection with the Offering, paid the Underwriters a non-accountable expense allowance equal to 1% of the aggregate gross proceeds received by the Company in connection with the Offering, and reimbursed certain expenses of the Underwriters.
The net proceeds to the Company from the Offering, after deducting the underwriting discounts and commissions and Offering expenses, were approximately $7.1 million. The Company intends to use the net proceeds from the Offering to accelerate Longroot Thailand’s internet coin offering platform and our NextTrip platform and call center, to repay outstanding debt obligations (certain of which have already been paid, as discussed above), to pay outstanding obligations owed pursuant to prior acquisition agreements, for the potential acquisition of additional ownership interests in Axion and/or Longroot Cayman (of which additional interests have been purchased as described above), for general corporate purposes and working capital.
Pursuant to the Underwriting Agreement, the Company agreed, subject to certain exceptions, not to offer, issue or sell any shares of common stock or securities convertible into or exercisable or exchangeable for shares of common stock for a period of thirty days following the Offering without the prior written consent of Kingswood and Aegis.
In connection with the Offering, each of our officers, directors, and certain holders of our outstanding securities agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of thirty days after the Offering is completed, without the prior written consent of Kingswood and Aegis.
Letter of Intent to Acquire Axion shares
On October 28, 2020, the Company entered into a non-binding Letter of Intent (as amended by the first amendment thereto dated March 10, 2021, the “Letter of Intent”) with Radiant Ventures Limited, which manages Radiant VC1 Limited and Radiant PV 1 Limited, two stockholders of Axion, which entity the Company acquired approximately 33.85% of (provided that such ownership of Axion has not been formally transferred to the Company to date) on November 16, 2020, as discussed above.
Pursuant to the Letter of Intent, the Company agreed, subject to certain condition precedents, including regulatory approvals and the entry into material agreements with the sellers, to acquire approximately 12 million shares of Axion, equal to 5.7% of Axion’s outstanding shares, from the stockholders for approximately $2 million, payable in a combination of stock and cash. In connection with our entry into the Letter of Intent, we paid the sellers a $500,000 non-refundable deposit towards the cash purchase price of the shares in or around October 2020 (representing 25% of such purchase price). We also issued the sellers 235,000 shares of common stock in March 2021, representing an additional 25% of the purchase price. Both payments are non-refundable. A final payment of 50% of the purchase price is due 10 days after the British Columbia Securities Commission (BCSC) lifts a cease trade order on Axion’s shares and is payable at the option of the sellers in cash or shares of the Company’s common stock, based on a 20% discount to the Company’s stock price at the time the election to take such final payment in shares is made, provided that such stock price valuation will not be less than $2.00 per share and not more than $3.00 per share. The Letter of Intent terminates if the final payment has not been made by the earlier of June 30, 2021 and 15 days after the BCSC lifts the Axion no trade order. The purchase is also contingent on the sellers granting the Company a proxy to vote the shares to be purchased of Axion through closing. The purchase remains subject to the negotiation of, and entry into, a definitive purchase agreement with the sellers, as well as other closing conditions, which have not been entered into and/or which have not been completed, to date.
Longroot Stock Purchase Agreement
As discussed above under “Cryptocurrency Portal”, on November 16, 2020, Monaker acquired 100% of Longroot, which in turn owned 57% of 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 Thailand, provided that Longroot Cayman controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand.
The acquisition was made pursuant to the November 2, 2020 Stock Purchase Agreement (the “SPA”) entered into between the Company and Dr. Jason Morton (“Morton”), and for certain limited purposes set forth therein, Longroot. Pursuant to the SPA, the Company purchased, 100% of Longroot, in consideration for (a) $1,650,000 in cash; (b) 200,000 shares of restricted common stock valued at $2.14 per share for a total value of $428,000, as well as 150,000 shares of restricted common stock valued at $3.00 per share, for a total value of $450,000. A total of $100,000 was paid as a non-refundable deposit towards the purchase of Longroot on October 15, 2020, and a total of $700,000 was paid at the closing on November 16, 2020, along with the issuance of the 200,000 shares. Additionally, prior to the closing, the Company advanced a separate $400,000 to Longroot which was used for working capital prior to closing which brought the purchase price to a total of $2.1 million of cash (without taking into account the value of the shares). The remaining $900,000 owed to Morton pursuant to the terms of the SPA (the “Remaining Cash Payments”) was payable in three installments of $300,000 each, due on or prior to (i) December 16, 2020 (30 days after the closing), which amount has been paid in full; (ii) March 16, 2021 (120 days after the closing); and (iii) April 15, 2021 (150 days after the closing). Pursuant to the SPA, Morton had the option to elect to receive any or all of the Remaining Cash Payments in shares of common stock of the Company, with such number of shares issuable based on a Company stock price of $3.00 per share.
The Company provided Morton demand registration rights in connection with shares of restricted common stock of the Company held by Morton, provided that Morton is not authorized to request more than one demand registration in any 12-month period. In the event such demand registration right is exercised, the Company has 60 days to file a registration statement to register the shares demanded to be registered and is required to use commercially reasonable best efforts thereafter to gain effectiveness of such registration statement, with all fees being paid for by the Company. The demand registration right has no expiration date.
Effective on December 11, 2020, the Company entered into a letter agreement with Morton, which revised the terms of the SPA. Pursuant to the letter agreement, we agreed to accelerate the payment of an aggregate of $150,000 of the $300,000 which was payable pursuant to the terms of the SPA on or prior to April 15, 2021 (which amount was promptly paid), in consideration for Morton agreeing to withdraw a prior demand he had made for the Company to file a registration statement to register the 200,000 shares of common stock previously issue to Morton pursuant to the terms of the SPA. We also agreed to file a registration statement to register the initial 200,000 shares issued no later than January 31, 2021, which Registration Statement on Form S-3 was timely filed on January 29, 2021 and has been declared effective by the SEC to date.
On January 5, 2021, the Company, through Longroot, subscribed to purchase an additional 100 shares of Longroot Cayman, in consideration for $1 million. The subscription was made pursuant to certain pre-emptive rights set forth in a shareholders’ agreement entered into between the shareholders of Longroot Cayman, and increased Longroot’s ownership of Longroot Cayman up to 75%.
On March 19, 2021, Morton exercised his option to receive the remaining consideration due to him in shares of common stock, and the Company issued Morton 150,000 shares of restricted common stock in full satisfaction of the final amounts due.
A total of 22.9% of Longroot Cayman is owned by Axion Interactive Inc. (BVI), of which Axion, holds a 100% interest. Monaker currently owns approximately 33.85% of Axion’s shares.
Currently Longroot owns an approximate 36.75% indirect interest in Longroot Thailand, due to its ownership of 75% of Longroot Cayman, which in turn owns 49% of Longroot Thailand (75% x 49% = 36.75%)), 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 operator authorized and regulated under Thai Digital Asset Business Law and licensed by the Thai Securities and Exchange Commission. Longroot Thailand provides fully regulated and licensed digital assets financing, and investment services for digital assets. The Company believes that this innovative new business model opens the door to new financing mechanisms, and new investment products. Monaker, as a majority stakeholder in Longroot Thailand, is planning to use the technology and digital asset capabilities to create cryptocurrencies regulated under Thai law, designed to allow consumers to invest in unique revenue streams in wholesale travel, real estate homes and hotels, gaming assets and digital advertising - as well as potential token and loyalty program opportunities complementary to Monaker’s gaming and travel businesses.
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 Interactive TV AG, a company organized in Switzerland (“Reinhart”), and Jan C. Reinhart, the founder of Reinhart (“Founder”).
The Investment Agreement contemplated the Company acquiring 51% of the ownership of Reinhart, in consideration for 10,000,000 Swiss Francs (approximately $10.8 million US). The closing of the transactions contemplated by the Investment Agreement was to take place on April 1, 2021, or earlier if the conditions to closing were earlier satisfied. Conditions to closing included the Company paying the required capital contribution, approval of the transaction by the board of directors of the Company and Reinhart, and certain requirements and confirmations required by Swiss law. The Investment Agreement included customary representations and warranties of the parties. We also agreed to reimburse the Founder’s legal fees of up to 30,000 Swiss Francs (approximately $33,670) in connection with the transaction. Additionally, in the event we failed to close the transactions contemplated by the Investment Agreement by April 1, 2021, we agreed to pay the Founder 500,000 Swiss Francs (approximately $560,000), as a break-up fee.
We closed the transactions contemplated by the Investment Agreement on March 31, 2021, by paying the Founder $10.8 million in cash. The consideration paid to the Founder came largely from funds advanced by HotPlay pursuant to HotPlay Notes.
Reinhart is in the business of providing a software-based TV and video distribution platform to telecom operators and digital content owners and providing services to telecom operators and digital content owners for user interaction design, as well as software development, deployment and support.
In connection with our entry into the Investment Agreement, we entered into a Founding Shareholders’ Agreement with the Founder (the “Shareholders’ Agreement”). The Shareholders’ Agreement set forth certain rules for the governance and control of Reinhart. The Shareholders’ Agreement provides that the board of directors of Reinhart will consist of five members, three of which will be appointed by the Founder and other shareholders of Reinhart, and two of which will be appointed by the Company which include William Kerby, the Company’s Chief Executive Officer, and Mark Vange, the Chief Technology Officer of HotPlay; that any material shareholder matters are required to be approved by shareholders holding at least 66 2/3% of the total outstanding vote of Reinhart; that in the event Reinhart issues, within five years after the closing date, any equity or convertible equity, with a price less than the most recent valuation of Reinhart’s shares, the shares held by each director who is appointed by the Founder are subject to weighted average anti-dilution protection; provides for various restrictions on transfers of shares of Reinhart, including right of first refusal rights, tag-along rights, and drag-along rights, as well as certain rights which would trigger the right of the other parties to the Shareholders’ Agreement to acquire the shares held by an applicable shareholder, for the higher of the fair market value and the nominal value of the shares (except in the case of (c) where the purchase price is the lower of such amounts), if such shareholder (a) commits a criminal act against the interests of another party, Reinhart or its affiliates; (b) breaches the Shareholders’ Agreement, and fails to cure such breach 20 days after notice thereof is provided; or (c) the employment of any employed shareholder is terminated for certain reasons.
The Shareholders' Agreement also provides a right for the Founder and any other persons appointed as directors by the Founder to put their shares to the Company, at which time the Company will be required to purchase such shares (the “Founder’s Shares”), based on the following schedule:
Date right is triggered
Percent of Founder’s Shares eligible to be sold
Required Purchase Price
January 1, 2024 33% times EBITDA based on audited 2023 Reinhart financials
January 1, 2025 66% times EBITDA based on audited 2024 Reinhart financials
December 20, 2025, if the board of directors of Reinhart, together with a majority of the directors appointed by the Company, agree to sell Reinhart to a third party, but the Company and the Founder can’t agree on such sale, by such date 100% Higher of (a) 15 times EBITDA based on audited 2025 Reinhart financials; and (b) the value of a fully-funded acquisition proposal based on audited 2025 Reinhart financials
January 1, 2026 100% Lower of (a) 15 times EBITDA based on audited 2025 Reinhart financials; and (b) the value of a fully-funded acquisition proposal based on audited 2025 Reinhart financials
The Shareholders’ Agreement also allows the parties to file for an initial public offering on a Swiss trading exchange. The Shareholders’ Agreement has a term of 10 years, extendable thereafter for successive five-year periods, unless terminated by either party with 12 months prior written notice (provided that any such termination shall only be applicable to the terminating shareholder), subject to earlier termination in connection with certain initial public offerings.
Warrant Grants
On or around March 19, 2021 and March 22, 2021, the Company issued warrants to purchase an aggregate of 160,000 shares of common stock to seven warrant holders (all unrelated third parties) in consideration for the immediate exercise of newly granted warrants. The warrants replaced prior warrants which had expired in 2020 (which had exercise prices from between $3.75 and $5.00 per share) and had an exercise price of $2.00 per share and an expiration date on March 31, 2021 (the “New Warrants”). Those warrants were subsequently exercised for cash on or around March 31, 2021, and the Company received cash of $320,000 in connection with such exercises. The 160,000 shares of common stock issuable upon exercise thereof were issued on or around April 1, 2021. The Company has agreed to register the shares of common stock issuable upon exercise of the warrants in the future.
Warrant Exchanges
On or around March 19, 2021 and March 22, 2021, the Company exchanged warrants to purchase an aggregate of 51,900 shares of common stock held by two of the same warrant holders who were granted New Warrants, which had an exercise price of $5.13 per share and an expiration date of July 30, 2022, for new warrants had an exercise price of $2.00 per share and an expiration date on March 31, 2021 (the “Exchanged Warrants”). Those warrants were subsequently exercised for cash on or around March 31, 2021, and the Company received cash of $103,800 in connection with such exercises. The 51,900 shares of common stock issuable upon exercise thereof were issued on or around April 1, 2021. The Company has agreed to register the shares of common stock issuable upon exercise of the warrants in the future.
Streeterville Note Purchases
On March 22, 2021, we entered into a Note Purchase Agreement dated March 23, 2021 (the “March 2021 Note Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”), an accredited investor, pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $9,370,000 (the “March 2021 Streeterville Note”). Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company a promissory note in the amount of $1,500,000 (the “March 2021 Investor Note”), in consideration for the March 2021 Streeterville Note, which included an original issue discount of $850,000 (the “OID”) and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID is fully earned and the remaining $150,000 is not fully earned until the March 2021 Investor Note is fully-funded by Streeterville, which March 2021 Investor Note was fully funded on May 26, 2021.
The March 2021 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on March 23, 2022). From time to time, beginning six months after issuance, Streeterville may redeem a portion of the March 2021 Streeterville Note, not to exceed $2.125 million. In the event we don’t pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the March 2021 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the March 2021 Streeterville Note is increased by 2%. Subject to the terms and conditions set forth in the March 2021 Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the March 2021 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the March 2021 Streeterville Note remains outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock, which payments will be applied towards and will reduce the outstanding balance of the March 2021 Streeterville Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the March 2021 Streeterville Note (each an “Equity Payment”). Each time that we fail to pay an Equity Payment, the outstanding balance of the March 2021 Streeterville Note automatically increases by 10%. Additionally, in the event we fail to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment.
The March 2021 Streeterville Note provides that if any of the following events have not occurred on or before June 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof: (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) during the period beginning on July 21, 2020, and ending on the date that the HotPlay Share Exchange is consummated, HotPlay must have raised at least $15,000,000 in cash or debt through equity investments (which has been completed); (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; and (d) HotPlay must have become a co-borrower on the March 2021 Streeterville Note (collectively, the “March 2021 Note Transaction Conditions”).
The March 2021 Note Purchase Agreement required that we complete the purchase of the Reinhart Interactive TV AG equity interests discussed below (the “Reinhart Interest”), within ten days of the date of the sale of the March 2021 Streeterville Note, and that the Company pledge the Reinhart Interest to Streeterville pursuant to a pledge agreement thereafter, both of which were timely completed.
In addition to the March 2021 Streeterville Note, the Company previously sold Streeterville a Secured Promissory Note in the original principal amount of $5,520,000 on November 23, 2020 (the “November 2020 Streeterville Note”). Streeterville paid consideration of (a) $3,500,000 in cash; and (b) issued the Company a promissory note in the amount of $1,500,000 (the “November 2020 Investor Note”), in consideration for the November 2020 Streeterville Note, which included an original issue discount of $500,000 and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $350,000 of the OID was fully earned and the remaining $150,000 was not fully earned until or unless the November 2020 Investor Note was fully-funded by Streeterville, which November 2020 Investor Note was fully funded on January 6, 2021. The November 2020 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on November 23, 2021). From time to time, beginning six months after issuance, Streeterville may redeem a portion of the November 2020 Streeterville Note, not to exceed an amount of $1.25 million. The November 2020 Streeterville Note and purchase agreement has substantially similar terms as the March 2021 Streeterville Note and purchase agreement, in regard to required redemptions, penalties, required equity payments and events of default. The November 2020 Streeterville Note has a current balance of approximately $2.39 million. We made a required monthly redemption payment of $1,250,000 to Streeterville under the November 2020 Streeterville Note on May 26, 2021, with funds obtained pursuant to the May 2021 Underwritten Offering discussed below. At the same time, Streeterville waived the requirement that we use 20% of the funds obtained pursuant to the May 2021 Underwritten Offering to pay down amounts owed under the November 2020 Streeterville Note, contingent upon our payment of 20% of the proceeds from our May 2021 underwritten offering towards the balance of the March 2021 Streeterville Note, which amount was subsequently paid as discussed below.
The November 2020 Streeterville Note provided that if any of the following events had not occurred on or before April 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof (the “April 2021 Note Increase”): (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) during the period beginning on July 21, 2020, and ending on the date the HotPlay Share Exchange is consummated, HotPlay must have raised at least $15,000,000 in cash through equity investments; (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; (d) HotPlay must have become a co-borrower on the November 2020 Streeterville Note; and (e) the Company must have paid off all outstanding debt obligations to the Donald P. Monaco Insurance Trust and National Bank of Commerce, in full (collectively, the “November 2020 Note Transaction Conditions”). To date, the Company has not yet completed the acquisition of HotPlay, and as such, the November 2020 Note Transaction Conditions have not been met.
On June 1, 2021, Streeterville agreed to defer 50% of the April 2021 Note Increase which was otherwise to occur due to the Company’s failure to timely meet all of the November 2020 Note Transaction Conditions. As such, a total of $506,085 has been capitalized into the outstanding balance of the November 2020 Streeterville Note effective as of April 30, 2021, and the remaining $506,085 of the April 2021 Note Increase will only be added to the balance of the November 2020 Streeterville Note if the Company fails to meet the November 2020 Transaction Conditions by June 30, 2021. Separately, if the Company does not meet the March 2021 Note Transaction Conditions by June 30, 2021, the March 2021 Streeterville Note will be subject to the June 2021 Note Increase.
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 the May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering.
IFEB Bank Transaction
On April 1, 2021, we entered into a Bill of Sale for Common Stock, effective March 22, 2021 (the “Bill of Sale”), with certain third parties pursuant to which the Company agreed to purchase 2,191,489 shares (the “IFEB Shares”) of authorized and outstanding Class A Common Stock of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico (“IFEB”), which IFEB Shares total approximately 57.1% of the outstanding Class A Common Stock of IFEB. The purchase price of the IFEB Shares was $6,400,000, which amount was paid to the sellers on April 1, 2021.
IFEB was incorporated in 2017 as a corporation under the laws of the Commonwealth of Puerto Rico and received its international financial entity license on June 18, 2017 from the Office of the Commissioner of Financial Institutions of Puerto Rico, in Spanish, “Oficina del Comisionado de Instituciones Financieras” or “OCIF”, as license #51. As a result, IFEB is regulated by OCIF, and intends to update its application to establish a Fedwire account with the Federal Reserve Bank, New York (“FRB”). IFEB conducts its business activities out of its head office in Puerto Rico at 268 Ponce de Leon Ave., in San Juan.
Notwithstanding the terms of the Bill of the Sale, and the payment by the Company of the aggregate purchase price pursuant thereto, the transfer of the IFEB Shares to the Company and the Company’s acquisition of control of IFEB is subject to review of the Company’s financial viability, as well as other matters, by OCIF. The Company anticipates completing acquisition of the IFEB Shares in or around June 2021.
On May 6, 2021, in anticipation of the acquisition of the IFEB Shares, and control of IFEB, the Company and IFEB entered into a Preferred Stock Exchange Agreement, which was amended by a First Amendment to Preferred Stock Exchange Agreement entered into May 10, 2021 and effective May 6, 2021 (as amended by the first amendment, the “Preferred Exchange Agreement”), pursuant to which the Company agreed to exchange 1,950,000 shares of the Company’s restricted common stock (the “Monaker Shares”) for 5,850 shares of cumulative, non-compounding, non-voting, non-convertible, perpetual Series A preferred shares of IFEB (the “IFEB Preferred Shares”).
The IFEB Preferred Shares will have a coupon of 2% per annum, payable in quarterly installments in arrears. The IFEB Preferred Shares will be redeemable by the Company; however, IFEB may, by the vote of the holders of a majority of its outstanding common stock, call and redeem the IFEB Preferred Shares in exchange for the Monaker Shares, plus accrued interest on the IFEB Preferred Shares at the time of any such redemption; and upon a Change of Control (defined below), the Company may cause IFEB to repurchase the IFEB Preferred Shares in exchange for the Monaker Shares, plus accrued interest at the time of any such Change of Control. “Change of Control” means the sale of all or substantially all the assets of IFEB; any merger, consolidation or acquisition of IFEB with, by or into another corporation, entity or person; or any change in the ownership of more than fifty percent (50%) of IFEB’s voting securities or the economic rights of such IFEB’s securities.
The closing of the transactions contemplated by the Preferred Exchange Agreement, including the issuance of the Monaker Shares and IFEB Preferred Shares, are subject to various closing conditions, including, but not limited to IFEB receiving approval from OCIF to issue preferred stock (including the Series A preferred shares), and the filing of a formal designation of the Series A preferred stock by IFEB with the Secretary of State of Puerto Rico. As such, the transactions contemplated by the Preferred Exchange Agreement may not close on a timely basis, if at all. If not closed by June 30, 2021, the Preferred Exchange Agreement can be terminated by either party with written notice to the other.
Convertible Promissory Notes
On April 8, 2021, the Company entered into an Exchange Agreement with William Kerby, its Chief Executive Officer and director and Monaco Investment Partners II, LP (“MI Partners”), of which Donald P. Monaco is the managing general partner and the Chairman of the board of directors of the Company (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the terms of which were approved by the board of directors of the Company, Mr. Kerby and MI Partners exchanged their right to an aggregate of $1,016,314 in accrued dividends (the “Accrued Dividends”) which had accrued on the Company’s outstanding Series A Preferred Stock, which had been held by Mr. Kerby and MI Partners prior to the conversion of such Series A Preferred Stock into common stock of the Company in August 2017, for Convertible Promissory Notes. Specifically, Mr. Kerby exchanged rights to $430,889 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $430,889 and MI Partners exchanged rights to $585,425 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $585,425 (the “Convertible Promissory Notes”).
The Convertible Promissory Notes accrue interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Notes is convertible, at the option of the holders thereof, into shares of the Company’s common stock, at any time beginning seven days after the date the HotPlay Exchange Agreement closes and prior to the payment in full of such Convertible Promissory Notes by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default.
May 2021 Underwritten Offering
On May 13, 2021, the Company entered into an underwriting agreement (the “May 2021 Underwriting Agreement”) with Kingswood, as representatives of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “May 2021 Offering”) an aggregate of 3,230,000 shares of the Company’s common stock at a public offering price of $2.50 per share. The Company also granted the underwriters a 45-day option to purchase up to an additional 484,500 shares of common stock to cover over-allotments, if any, which over-allotment option was exercised in full. The May 2021 Offering (including the sale of the over-allotment shares) closed on May 18, 2021.
Kingswood acted as sole book-running managers for the May 2021 Offering. The Company paid the Underwriters a cash fee equal to 6% of the aggregate gross proceeds received by the Company in connection with the May 2021 Offering, paid the Underwriters a non-accountable expense allowance equal to 1% of the aggregate gross proceeds received by the Company in connection with the May 2021 Offering, and reimbursed certain expenses of the Underwriters.
The net proceeds to the Company from the May 2021 Offering, after deducting the underwriting discounts and commissions and offering expenses, were approximately $8.5 million. The Company intends to use the net proceeds from the May 2021 Offering to repay approximately $4.2 million owed to Streeterville, provide capital to IFEB in advance of the closing of the acquisition of control of IFEB (which acquisition is pending, subject to closing conditions, and may not be completely timely, if at all), for general corporate purposes and working capital or for other purposes that the board of directors, in their good faith, deems to be in the best interest of the Company. We may also use all or a portion of the remaining net proceeds from this offering (after the payments described above) to fund possible investments in, or acquisitions of, complementary businesses, technologies or products; however, we currently have no definitive agreements or commitments with respect to any investment or acquisition.
Pursuant to the May 2021 Underwriting Agreement, the Company agreed, subject to certain exceptions, not to offer, issue or sell any shares of common stock or securities convertible into or exercisable or exchangeable for shares of common stock for a period of 45 days following the May 2021 Offering, without the prior written consent of Kingswood.
In connection with the May 2021 Offering, each of our officers and directors agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our common stock or other securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 45 days after the May 2021 Offering is completed, without the prior written consent of Kingswood.
IDS Settlement
On August 15, 2019, the Company entered into an Intellectual Property Purchase Agreement with IDS Inc. (“IDS” and the “IP Purchase Agreement”). Pursuant to the agreement, the Company purchased certain proprietary technology from IDS for the reservation and booking of air travel, hotel accommodations, car rentals, and ancillary products, services, and amenities, integration of the same with the providers of such products and services, associated functions, including website addresses, patents, trademarks, copyrights and trade secrets relating thereto, and all goodwill associated therewith (collectively, the “IP Assets”). In consideration for the purchase, the Company issued IDS 1,968,000 shares of restricted common stock (the “IDS Shares”) valued at $2.50 per share, or $4,920,000 in aggregate.
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS and TD Assets Holding, LLC (“TD Asset”), Navarro McKown, Aaron McKown and Ari Daniels (“Daniels”), which parties are affiliated with IDS, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. CACE-20-007088). Pursuant to the complaint, the Company alleged causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and sought a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 IDS Shares issued pursuant to the terms of the IP Purchase Agreement and preventing such persons from selling or transferring any IDS Shares, sought damages from the defendants, rescission of the IP Purchase Agreement, attorneys fees and other amounts. The defendants subsequently filed various counterclaims against the Company.
The complaint was filed because of IDS’s failure to deliver the IP Assets, certain other actions of IDS and the other of the defendants which the Company alleged constituted fraud. The Company sought to unwind the IP Purchase Agreement and sought damages for the Company due to IDS’s and the other defendants’ breaches thereunder. IDS, through its counsel, sent a letter threatening to bring a shareholders’ derivative action and/or direct suit against the Company. In response to such letter, the board of directors empowered the governance committee to conduct an internal investigation into the claims. The results of the investigation, conducted by several law firms, were presented to the Board and the Board concluded that no fraudulent activities occurred. The investigation concluded in October 2020.
On April 29, 2020, the Company filed a Verified Motion for Temporary Injunction (the “Injunction Motion”). Defendants IDS, TD Assets, and Ari Daniels filed an answer, affirmative defenses, and counterclaims (the “Answer and Counterclaim”). The Answer and Counterclaim included alleged breach of contract and tort claims against the Company. On September 17, 2020, the Company moved to strike the affirmative defenses and dismiss the counterclaims. On October 15, 2020, defendants IDS, TD Assets, and Ari Daniels filed an amended Answer and Counterclaim, including alleged breach of contract, tort, and federal securities claims against the Company, Mr. William Kerby, our Chief Executive Officer and an employee of the Company.
On July 27, 2020, the Company entered into a confidential settlement agreement with certain of the defendants in the IDS matter, Navarro Hernandez, P.L., Aaron M. McKown, and Jeffery S. Bailey. The settlement provided for mutual releases of the parties and amounts payable from such parties to the Company in four tranches, in consideration for such settlement, of which all such payments have been timely paid pursuant to the terms of the settlement.
The remaining parties to the litigation subsequently attempted to mediate their pursuant to a court ordered mediation in February 2021.
Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (the “IP Purchase Amendment”). Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000 (the “Payment”), payable by way of an initial payment of $500,000, and twelve monthly payments of approximately $195,833 (collectively, the “Required Payments”), with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment, and has been paid to date. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of Monaker or a third-party) (a “Paying Party”), for the benefit of Monaker, which shall be treated for all purposes as a payment by Monaker. As consideration for such Paying Party making such payment on behalf of Monaker, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.6888 as to the first $500,000 payment (which payment has been made, but which shares have not been transferred to the Company to date), and 0.691 as to the monthly payments (as applicable, the “Applicable Portion” of the IDS Shares).
In the event the Company fails to make any payment timely, and the Company does not cure such default within seven days of written notice of default being provided by IDS, IDS is entitled to entry of a default judgment against the Company in the amount of the differential, if any, between the realized value of the IDS Shares upon the future sale thereof in the open market by IDS, and the unpaid amount of any payment due. In the event of any such default, IDS will be entitled to attorneys’ fees incurred to obtain said judgment.
Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment as discussed above by Monaker (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company.
Until such time as the IDS Shares are no longer held by IDS, IDS agreed not to transfer or encumber any of such shares, except pursuant to the terms of the IP Purchase Amendment.
IDS also agreed to transfer certain unbranded travel videos back to the Company which were previously purchased by IDS from Monaker, pursuant to the IP Purchase Agreement.
A further requirement of the IP Purchase Amendment was that IDS enter into a Shareholder Voting Representation Agreement with William Kerby, our Chief Executive Officer and director (the “Shareholder Voting Agreement”), which was entered into effective on May 18, 2021. Pursuant to the Shareholder Voting Agreement, IDS provided Mr. Kerby the right to, and an irrevocable proxy to, vote all of the IDS Shares held by IDS at any meeting of stockholders of the Company and/or via any written consent of stockholders of the Company. The Shareholder Voting Agreement remains in place until the earlier of the fifth anniversary of the Shareholder Voting Agreement; the disposition of the IDS Shares pursuant to the IP Purchase Amendment; a change of control of Monaker resulting in persons prior to such transaction obtaining more than 50% voting control of the Company following such transaction; the sale of all or substantially all of the assets of the Company; or termination of the agreement by Mr. Kerby. Mr. Kerby may also assign his rights under the agreement to another party and/or the Company may assign Mr. Kerby’s rights under the agreement if Mr. Kerby is unable to make such assignment due to his death or disability. Mr. Kerby was provided the voting rights as the shareholder representative of, and for the benefit of, the Company.
Also effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, entered into a Confidential Settlement Agreement and Mutual Release, whereby (a) we provided a general release to IDS, TD Asset and Mr. Daniels, and (b) IDS, TD Asset and Mr. Daniel provided a general release to us; the parties agreed to file a Joint Notice of Voluntary Dismissal to dismiss the pending lawsuit discussed above; and the parties agreed that a prior Web Based Booking Engine Development Agreement dated October 24, 2017, was terminated.
We expect the parties to the litigation above to file a joint notice for voluntary dismissal of the lawsuit shortly after the date of this Report.
Recent Issues Surrounding the COVID-19 Pandemic
In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April, many U.S. states and local jurisdictions began issuing ‘stay-at-home’ orders. For example, the state of Florida, where the Company’s principal business operations are, issued a ‘stay-at-home’ order effective on April 1, 2020, which remained in place, subject to certain exceptions, through June 2020, when the order was gradually lifted. Since that time the U.S., and Florida in particular, have seen rapid increases in the spread of COVID-19. It is currently unclear whether the state of Florida, or the other states, countries or other jurisdictions in which we provide travel services, will issue new or expanded ‘stay-at-home’ orders, or how those orders, or others, may affect our operations and/or results of operations, notwithstanding the current roll-out of COVID-19 vaccines. It is also too early to determine how effective the available vaccines will be to curb the spread or effects of COVID-19, or how many persons will choose to receive the vaccine.
The COVID-19 pandemic, and governmental responses thereto, including travel restrictions, ‘stay-at-home’ orders and required social distancing orders, have severely restricted the level of economic activity around the world, and is having an unprecedented effect on the global travel industry. Additionally, the ability to travel has been curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines, and may be further limited through additional voluntary or mandated closures of travel-related businesses.
The measures implemented to contain the COVID-19 pandemic have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position. In particular, such measures have led to unprecedented levels of cancellations and limited new travel bookings. Moreover, any additional measures or changes in laws or regulations, whether in the United States or other countries, that further impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring the closure of hotels or other travel-related businesses (such as restaurants) or otherwise restricting travel due to the risk of the spreading of COVID-19, may exacerbate the negative impact of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows and liquidity position.
The duration and severity of the COVID-19 pandemic are uncertain and difficult to predict at this time. The pandemic could continue to impede global economic activity for an extended period of time, even as restrictions are being lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which could significantly reduce discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2022 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2021 ended February 28, 2021. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently.
Separately, our capital requirements may increase in the near term and long-term due to the impact of the COVID-19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
As a result of the above, in the event the HotPlay Share Exchange described above does not close timely, if at all, and/or if the HotPlay Share Exchange is terminated, 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.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
In addition to the other information in this Annual Report, readers should carefully consider the following important factors. These factors, among others, in some cases have affected, and in the future could affect, our financial condition and results of operations and could cause our future results to differ materially from those expressed or implied in any forward-looking statements that appear in this Annual Report or that we have made or will make elsewhere.
Risks Related to Our Operations, Business and Industry
We need additional capital which may not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.
As of February 28, 2021, we had $26.0 million in total assets, $6.8 million in total liabilities, working capital of $6.0 million and a total accumulated deficit of $132.3 million. We had net loss of $16,508,654 for the FYE February 28, 2021, compared to net loss of $9,454,686 for the FYE February 29, 2020, an increase in net loss of $7,053,968 from the prior period. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven. We may never ever achieve profitable operations or generate significant revenues. Our future operating results depend on many factors, including demand for our products, the level of competition, and the ability of our officers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively impact the ability of the Company to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, achieve, or sustain profitability, or continue as a going concern. Furthermore, due to our relatively small size and market footprint, we may be more susceptible to issues affecting the global travel, cryptocurrency and banking (assuming the IFEB acquisition is successfully completed) industries in general, such as COVID-19, contractions in the global travel industry, cryptocurrency and banking (assuming the IFEB acquisition is successfully completed) regulatory changes, as compared to larger competitors.
We currently have a monthly cash requirement of approximately $600,000. We believe that in the aggregate, we could require several millions of dollars to support and expand the marketing and development of our products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from all products are fully implemented and begin to offset our operating costs. We require additional funding in the future and if we are unable to obtain additional funding on acceptable terms, or at all, it will negatively impact our business, financial condition, and liquidity. As of February 28, 2021, and February 29, 2020, we had $6,825,072 and $4,078,849, respectively, of current liabilities.
We have derived our funding of operations with equity transactions and with the proceeds from debt offerings. Currently, revenues provide less than 1% of our cash requirements due to the COVID-19 pandemic.
We have experienced liquidity issues due to, among other reasons, our limited ability to raise adequate capital on acceptable terms. We have historically relied upon the sale of common stock and the issuance of promissory notes to fund our operations and have devoted significant efforts to reduce that exposure. We anticipate that we will need to issue equity to fund our operations and continue to repay our outstanding debt for the foreseeable future. If we are unable to achieve operational profitability or are not successful in securing other forms of financing, we will have to evaluate alternative actions to reduce our operating expenses and conserve cash.
These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The financial statements included herein also include a going concern footnote from our auditors.
In the event we are unable to raise adequate funding in the future for our operations and to pay our outstanding debt obligations, we may be forced to scale back our business plan and/or liquidate some or all of our assets or may be forced to seek bankruptcy protection, which could result in the value of our outstanding securities declining in value or becoming worthless.
The COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on the travel industry and our business, operating results, and liquidity.
The COVID-19 pandemic, and governmental responses thereto, including travel restrictions, ‘stay-at-home’ orders and required social distancing orders, have severely restricted the level of economic activity around the world, and is having an unprecedented effect on the global travel industry. Additionally, the ability to travel has been curtailed through border closures, mandated travel restrictions and limited operations of hotels and airlines and may be further limited through additional voluntary or mandated closures of travel-related businesses.
The measures implemented to contain the COVID-19 pandemic have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position. In particular, such measures have led to unprecedented levels of cancellations and limited new travel bookings in our travel division. Moreover, any additional measures or changes in laws or regulations, whether in the United States or other countries, that further impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring the closure of hotels or other travel-related businesses (such as restaurants) or otherwise restricting travel due to the risk of the spreading of COVID-19, may exacerbate the negative impact of the COVID-19 pandemic 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. The pandemic could continue to impede global economic activity for an extended period, even as restrictions have been lifted in many jurisdictions and vaccines are now widely available in the United States and in many other jurisdictions, leading to decreased per capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which could significantly reduce discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
The Company’s liquidity could also be adversely impacted by delays in payments of outstanding accounts receivable amounts beyond normal payment terms and insolvencies.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2022 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2021 ended February 28, 2021. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently.
Separately, our capital requirements associated with our travel division may increase in the near term and long-term due to the impact of the COVID-19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
As a result of the above, in the event the HotPlay Share Exchange described above under “Item 1. Business-Recent Material Events-HotPlay and Axion Share Exchanges”, does not close timely, if at all, 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.
The $190,000 owed to us under Secured Convertible Promissory Note due from Bettwork Industries Inc., may not be repaid timely, if at all.
Bettwork Industries Inc. (“Bettwork”), a related party owes us $190,000 pursuant to a promissory note (the “Bettwork Note”). The Bettwork Note bears interest at 12% per year and was due on February 29, 2020. All interest and the principal balance were due and payable on the maturity date. The Bettwork Note includes a “Default Rate” of eighteen percent (18.0%) per annum and is secured by all of the outstanding preferred stock shares held by the Chairman of the board of directors of Bettwork (which provide for super-majority voting rights) and Bettwork is precluded from issuing additional shares of common stock or preferred stock without consent from Monaker. Additionally, we have the right to convert the principal and accrued interest owed under the Bettwork Note into common stock of Bettwork at a conversion price of $0.75 per share (as equitably adjusted for stock splits and recapitalizations). The Bettwork Note is in default, Bettwork may never pay the Bettwork Note and we may never collect on amounts owed thereunder.
Our ability to service our indebtedness will depend on our ability to generate cash in the future.
Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future and raise needed capital. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business may continue to not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.
We are required to make monthly redemption payments, at the request of Streeterville under the Streeterville Capital, LLC Promissory Notes, and our obligations under the Streeterville Capital, LLC Promissory Notes are secured by a first priority security interest in substantially all of our assets.
As described in greater detail above under “Item 1. Business-Recent Material Events-Streeterville Note Purchases”, we currently have outstanding secured promissory notes due to Streeterville totaling approximately $2.3 million as of February 28, 2021 and approximately $7.2 million as of the date of this Report. From time to time, beginning six months after issuance (i.e., in May 2021), Streeterville may redeem a portion of the November 2020 Streeterville Note, not to exceed $1.25 million. In the event we don’t pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the November 2020 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the November 2020 Streeterville Note is increased by 2%. From time to time, beginning six months after issuance (i.e., in August 2021), Streeterville may redeem a portion of the March 2021 Streeterville Note, not to exceed $2.125 million. In the event we don’t pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the March 2021 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the March 2021 Streeterville Note is increased by 2%. We may not have the required funds to pay the required note redemptions and such redemptions, or penalties in connection therewith, may have an adverse effect on our cash flows, results of operations, and ability to pay our other debts as they come due. Our failure to pay the redemptions, when due, may result in defaults under our agreements with Streeterville.
In connection with the Streeterville Secured Promissory Notes, the Company entered into a Security Agreement with Streeterville (the “Security Agreement”), pursuant to which the obligations of the Company are secured by substantially all of the assets of the Company. As such, Streeterville may enforce its security interests over our assets and/or our subsidiaries which secure the repayment of such obligations, take control of our assets and operations, force us to seek bankruptcy protection or force us to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company could become worthless.
We are subject to requirements, penalties and damages under our agreements with Streeterville.
As described in greater detail above under “Item 1. Business-Recent Material Events-Streeterville Note Purchases”, we have entered into various agreements and promissory notes with Streeterville. In addition to the required redemptions discussed above, we may prepay all or any portion of the outstanding balance of the Streeterville notes at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the Streeterville notes remain outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock, towards each outstanding note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under each Streeterville note. Each time that we fail to pay an Equity Payment, the outstanding balance of the applicable Streeterville note automatically increases by 10%. Additionally, in the event we fail to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment. The November 2020 Streeterville Note provided that if any of the following events had not occurred on or before April 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof: (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) HotPlay must have raised at least $15,000,000 in cash through equity investments; (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; (d) HotPlay must have become a co-borrower on the Streeterville note; and (e) the Company must have paid off certain liabilities which have been paid in full. As a result of the HotPlay Share Exchange not closing by April 30, 2021, Streeterville has advised us that we owe approximately an additional $1 million on the November 2020 Streeterville Note (representing 25% of the amount due thereunder as of April 30, 2021), pursuant to the stated terms of such note.
The March 2021 Streeterville Note has similar terms as the above as to Equity Payments and requires that if any of the following events have not occurred on or before June 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof: (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) HotPlay must have raised at least $15,000,000 in cash or debt through equity investments; (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; and (d) HotPlay must have become a co-borrower on the March 2021 Streeterville Note.
On June 1, 2021, Streeterville agreed to defer 50% of the April 2021 Note Increase which was otherwise to occur due to the Company’s failure to timely meet all of the November 2020 Note Transaction Conditions. As such, a total of $506,085 has been capitalized into the outstanding balance of the November 2020 Streeterville Note effective as of April 30, 2021, and the remaining $506,085 of the April 2021 Note Increase will only be added to the balance of the November 2020 Streeterville Note if the Company fails to meet the November 2020 Transaction Conditions by June 30, 2021. Separately, if the Company does not meet the March 2021 Note Transaction Conditions by June 30, 2021, the March 2021 Streeterville Note will be subject to the June 2021 Note Increase.
Both Streeterville notes also include various other penalties, liquidated damages and triggers which increase the amount due, or the amounts of the notes. Our failure to comply with the terms of the Streeterville notes or penalties thereunder, may have a material adverse effect on our results of operations, cash flow, and could result in us having to pay significantly more funds to Streeterville and/or seeking bankruptcy protection.
Axion owes us a substantial amount of money, the payment of which is in default, and which may not be timely repaid, if at all.
Pursuant to the Axion Share Exchange, which closed on November 16, 2020, the Company acquired $7,657,024 of debt owed by Axion. As of June 30, 2019, the last date that publicly available information for Axion is available, Axion had $2.5 million more liabilities than assets. The Axion debt acquired by the Company pursuant to the November 16, 2020 closing of the Axion Share Exchange is currently past due and has not been paid to date. We may have to take legal action to enforce the repayment of such debt. Furthermore, Axion may not have sufficient cash to repay such debt. The debt is unsecured and as such, secured creditors of Axion may have priority rights to Axion’s assets in connection with any liquidation or bankruptcy. In the event the Axion debt is not paid and/or not paid in full, it could have a material adverse effect on our cash flows and our ability to pay our debts as they become due. Any continued failure by Axion to timely repay their debt obligations under the Axion debt acquired pursuant to the Axion Share Exchange could cause the value of our securities to decline in value or become worthless.
If we are not able to complete software interfaces with our property owners, managers and distributors, in a timely manner, our business is susceptible to shortfalls in revenues due to delays in remitting our ALRs to distributors and/or ALRs not being available for bookings or distribution.
The Company contracts with property owners and managers to list their ALRs on the Company’s system. Those ALRs are being populated into the system through an application programming interface (API) from the property owner and/or manager to the Company. If the technology of the API is inadequate, erroneous or corrupted, the Company may incur delays in populating the ALRs into the Company’s system until the issues related to their API are corrected. These delays could cause delays in realizing revenues from bookings from those additional ALRs.
Also, the Company plans to provide its ALRs to distributors who will allow its customers to book those ALRs. The Company plans to make those ALRs available to distributors through its own API. If the technology of the distributor cannot write the correct program to request the ALRs from the Company’s operating system, the Company may incur delays in making the ALRs available to the distributor until the issues are resolved and the correct program is written by the distributor. These delays could cause delays in realizing revenues from bookings from those ALRs.
Our Shareholders Agreement with the founder of Reinhart provides for certain put rights, which if exercised by such founder, could require us to pay significant amounts of money.
On January 15, 2021, we entered into a Shareholders’ Agreement with Jan C. Reinhart, the founder of Reinhart. Such Shareholders’ Agreement allows Mr. Reinhart to put his 49% ownership of Reinhart to us on certain dates from January 2024 to January 2026, as described above under “Item 1. Business-Recent Material Events-Reinhart Interactive TV AG Acquisition”. There is no cap on the required purchase price which would be payable to Mr. Reinhart, and such purchase price may be as high as 15 times EBITDA of Reinhart for the applicable periods. We may need to raise additional funding in the future to pay the put amount, and as such may need to seek additional debt or equity financing. Such additional financing may not be available on favorable terms, if at all. If debt financing is available and obtained, our interest expense may increase and we may be subject to the risk of default, depending on the terms of such financing. If equity financing is available and obtained it may result in our shareholders experiencing significant dilution. If such financing is unavailable, we may be in breach of the terms of the put requirement, which could subject us to litigation, damages and penalties. The existence of the put right could make it harder for us to sell our interest in Reinhart, devalue such interest, or cause complex accounting issues which have a material adverse effect on our financial statements and results of operations.
If we are unable to attract and maintain a critical mass of ALR listings and travelers, whether due to competition or other factors, our travel marketplace will become less valuable to property owners and managers and to travelers, and it could significantly decrease our ability to generate revenue and net income from such travel division in the future.
We anticipate that moving forward, most of our travel division revenue will be generated when ALRs are booked by either customers to our website or by customers to distributors we provide ALRs to (“Distributors”). Our travel revenue will be the difference between the funds received from our customers and distributors versus the net amount owed to the property owner/manager at the time of booking. Accordingly, the success of our travel division primarily depends on our ability to attract owners, managers and travelers to NextTrip.com, NextTripVacations.com, Maupintour.com (soon to be rebranded as NextTrip Journeys) and to Distributors. If property owners and managers choose not to market their ALRs through our websites or instead list them with a competitor, we may be unable to offer a sufficient supply and variety of ALRs to attract travelers to our websites. Similarly, our volume of new and renewal listings may suffer if we are unable to attract travelers to our websites or, to the Distributors. As a result of any of these events, the perceived usefulness of our online marketplace and the relationships with Distributors may decline, and, consequently, it could significantly decrease our ability to generate travel revenue and net income in the future. As a result, the value of our securities may decline in value or become worthless.
We agreed to pay significant amounts to IDS, Inc. pursuant to the Property Purchase Agreement and related agreements.
Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (IP Purchase Amendment). Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000, payable by way of an initial payment of $500,000, and twelve monthly payments of approximately $195,833, with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment, and has been paid to date. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of Monaker or a third-party), for the benefit of Monaker, which shall be treated for all purposes as a payment by Monaker. As consideration for such Paying Party making such payment on behalf of Monaker, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.6888 as to the first $500,000 payment (which payment has been made, but which shares have not been transferred to the Company to date), and 0.691 as to the monthly payments (as applicable, the “Applicable Portion” of the IDS Shares).
In the event the Company fails to make any payment timely, and the Company does not cure such default within seven days of written notice of default being provided by IDS, IDS is entitled to entry of a default judgment against the Company in the amount of the differential, if any, between the realized value of the IDS Shares upon the future sale thereof in the open market by IDS, and the unpaid amount of any payment due. In the event of any such default, IDS will be entitled to attorneys’ fees incurred to obtain said judgment.
Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment as discussed above by Monaker (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company.
We may not have sufficient funds to pay the amounts due to IDS pursuant to the IP Agreement Amendment.
Our travel revenues and results of travel operations are subject to the ability of our distributors and partners to integrate our ALRs with their websites, and the timing of such integrations.
The integration of our ALRs with our distributors and partners’ websites is complicated and may involve various software components and application program interfaces (APIs). The ALR listings of our distributors and partners may be formatted differently or stored differently and may require modifications in order to receive and display our ALR properties correctly.
The timing of the integration of our distributors’ ability to access our ALR offerings stored in the Monaker Booking Engine is significantly dependent on the ability of such distributors to implement processes, procedures and in some cases, software or systems to integrate with our API, which will enable them to list our ALRs on their websites. We have little to no control over those processes, or the timing of such integrations.
Our future travel revenues and results of travel operations are substantially dependent on the timing of those integrations and in some cases the willingness of our distributors and partners to undertake additional steps and processes in order to provide us what we need, and in the form that we need, to implement such integrations. The failure of our partners and/or distributors to undertake the actions required so that we can successfully integrate our offerings, and/or any delay in such integrations, may have a negative effect on our travel revenues and results of travel operations and cause the value of our common stock to decline in value. The actions of our partners and distributors, and/or their ability to undertake such actions, may further be limited by the effects of COVID-19.
Our travel business will depend substantially on property owners and managers renewing their listings.
Our travel business will depend substantially on property owners and managers renewing their listings. Significant declines in our listing renewals could harm our expected travel operating results. Property owners and managers will generally market their vacation rentals on our websites with no obligation to renew. We may be unable to predict future listing renewal rates accurately, and our renewal rates may decline materially or fluctuate as a result of a number of factors. These factors include property owners’ decisions to sell or to cease renting their properties, their decisions to use the services of our competitors, or their dissatisfaction with our pricing, products, services or websites. Property owners and managers may not establish or renew listings if we cannot generate a large number of travelers who book vacation rentals through our marketplace and/or through our distributors. As a result, our revenue may decline and our results of operations may be negatively affected. In addition to the above, property owners may be unable (due to governmental restrictions) or unwilling (due to fear of contagion and other risks) to renew their listings due to COVID-19 and the governmental responses thereto.
If Distributors are unable to drive customers to their websites and/or we are unable to drive visitors to our websites, from search engines or otherwise, this could negatively impact transactions on the websites of our Distributor websites as well as our websites and consequently cause our travel revenue to decrease.
Many visitors find the Distributors and our websites by searching for vacation rental information through Internet search engines. A critical factor in attracting visitors to our websites, and those of our Distributors, is how prominently our Distributors and we are displayed in response to search queries. Accordingly, we utilize search engine marketing, or SEM, as a means to provide a significant portion of our visitor acquisition. SEM includes both paid visitor acquisition (on a cost-per-click basis) and unpaid visitor acquisition, which is often referred to as organic search.
We plan to employ search engine optimization, or SEO to acquire visitors. SEO involves developing our websites in order to rank highly in relevant search queries. In addition to SEM and SEO, we may also utilize other forms of marketing to drive visitors to our websites, including branded search, display advertising and email marketing.
The various search engine providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites are displayed for a given search query and how highly websites rank. Search engine providers may change these methods in a way that may negatively affect the number of visitors to our Distributors’ websites as well as our own websites and may do so without public announcement or detailed explanation. Therefore, the success of our SEO and SEM strategy depends, in part, on our ability to anticipate and respond to such changes in a timely and effective manner.
In addition, websites must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at any time. If we or our Distributors fail to follow such guidelines and policies properly, the search engine may cause our content to rank lower in search results or could remove the content altogether. If we or our Distributors fail to understand and comply with these guidelines and policies and ensure our websites’ compliance, our SEO and SEM strategy may not be successful.
If our Distributors or we are listed less prominently or fail to appear in search result listings for any reason, including as a result of our failure to successfully execute our SEO and SEM strategy, it is likely that we will acquire fewer visitors to our websites. Fewer visitors to our websites could lead to property owners and managers becoming dissatisfied with our websites, as well as fewer travelers inquiring and booking through our websites, either or both of which could adversely impact our revenue. We may not be able to replace this traffic in a cost-effective manner from other channels, such as cost-per-click SEM or display or other advertising, or even at all. Any attempt to replace this traffic through other channels may increase our sales and marketing expenditures, which could adversely affect our operating results relating to our travel division.
Unfavorable changes in, or interpretations of, government regulations or taxation of the evolving alternative lodging rental (ALR), Internet and e-commerce industries could harm our travel division operating results.
We have contracted for ALRs in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our travel division operations or regulate the rental activity of property owners and managers.
Compliance with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region has different regulations with respect to licensing and other requirements for ALRs. Our online marketplaces are accessible by property owners, managers and travelers in many states and foreign jurisdictions. Our efficiencies and economies of scale depend on generally uniform treatment of property owners, managers and travelers across all jurisdictions. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose added costs and increased liabilities for compliance deficiencies. In addition, laws or regulations that may harm our business could be adopted, or interpreted in a manner that affects our activities, including but not limited to the regulation of personal and consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage our reputation and business.
In addition, regulatory developments may affect the ALR industry and the ability of companies like us to list those vacation rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners and managers to rent certain properties for fewer than 30 consecutive days and other cities may introduce similar regulations. Some cities also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to ALR. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were established before the growth of the Internet and e-commerce, which creates a risk of these laws being used, in ways not originally intended, that could burden property owners and managers or otherwise harm our business. These and other similar new and newly interpreted regulations could increase costs for, or otherwise discourage, owners and managers from listing their property with us, which could harm our business and operating results.
From time to time, we may become involved in challenges to, or disputes with government agencies regarding, these regulations. We may not be successful in defending against the application of these laws and regulations. Further, if we were required to comply with regulations and government requests that negatively impact our relations with property owners, managers and travelers, our business, travel division operations and financial results could be adversely impacted.
Additionally, new, changed, or newly interpreted or applied tax laws, statutes, rules, regulations or ordinances could increase our property owners’ and managers’ and our compliance, operating and other costs. This, in turn, could deter property owners and managers from renting their ALR properties, negatively affect our new listings and renewals, or increase costs of doing business. Any or all of these events could adversely impact our business and financial performance.
Furthermore, as we expand or change the products and services that we offer or the methods by which we offer them, we may become subject to additional legal regulations, tax requirements or other risks. Regulators may seek to impose regulations and requirements on us even if we utilize third parties to offer the products or services. These regulations and requirements may apply to payment processing, insurance products or the various other products and services we may now or in the future offer or facilitate through our marketplace. Whether we comply with or challenge these additional regulations, our costs may increase and our business may otherwise be harmed.
If we are not able to maintain and enhance our NextTrip brand and the brands associated with each of our websites, our reputation and business may suffer.
It is important for us to maintain and enhance our brand identity in order to attract and retain property owners, managers, distributors and travelers. The successful promotion of our brands will depend largely on our marketing and public relations efforts. We expect that the promotion of our brands will require us to make substantial investments, and, as our market becomes more competitive, these branding initiatives may become increasingly difficult and expensive. In addition, we may not be able to successfully build our NextTrip brand identity without losing value associated with, or decreasing the effectiveness of, our other brand identities. If we do not successfully maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause property owners and managers to terminate or elect not to renew their listings with us. In addition, our brand promotion activities may not be successful or may not yield revenue sufficient to offset their cost, which could adversely affect our reputation and business.
Our long-term success depends, in part, on our ability to expand our property owner, manager and traveler bases outside of the United States and, as a result, our business is susceptible to risks associated with international operations.
We have limited operating and e-commerce experience in many foreign jurisdictions and are making significant investments to build our international operations. We plan to continue our efforts to expand globally, including acquiring international businesses and conducting business in jurisdictions where we do not currently operate. Managing a global organization is difficult, time consuming and expensive and any international expansion efforts that we undertake may not be profitable in the near or long term or otherwise be successful. In addition, conducting international operations subjects us to risks that include:
● the cost and resources required to localize our services, which requires the translation of our websites and their adaptation for local practices and legal and regulatory requirements;
● adjusting the products and services we provide in foreign jurisdictions, as needed, to better address the needs of local owners, managers, distributors and travelers, and the threats of local competitors;
● being subject to foreign laws and regulations, including those laws governing Internet activities, email messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices, which may be less developed, less predictable, more restrictive, and less familiar, and which may adversely affect financial results in certain regions;
● competition with companies that understand the local market better than we do or who have pre-existing relationships with property owners, managers, distributors and travelers in those markets;
● legal uncertainty regarding our liability for the transactions and content on our websites, including online bookings, property listings and other content provided by property owners and managers, including uncertainty resulting from unique local laws or a lack of clear precedent of applicable law;
● lack of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject to unexpected changes;
● laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;
● challenges associated with joint venture relationships and minority investments;
● adapting to variations in foreign payment forms;
● difficulties in managing and staffing international operations and establishing or maintaining operational efficiencies;
● difficulties in establishing and maintaining adequate internal controls and security over our data and systems;
● currency exchange restrictions and fluctuations in currency exchange rates;
● potentially adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;
● increased financial accounting and reporting burdens and complexities and difficulties in implementing and maintaining adequate internal controls;
● political, social and economic instability abroad, war, terrorist attacks and security concerns in general;
● the potential failure of financial institutions internationally;
● varying effects of global pandemics and epidemics, including COVID-19 on different countries;
● reduced or varied protection for intellectual property rights in some countries; and
● higher telecommunications and Internet service provider costs.
Operating in international markets also requires significant management attention and financial resources. We cannot guarantee that our international expansion efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs.
The market in which we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors.
The market to provide listing, search and marketing services for the ALR industry is very competitive and highly fragmented. In addition, the barriers to entry are low and new competitors may enter. All of the services that we plan to provide to property owners, managers and travelers, including listing and search, are provided separately or in combination by current or potential competitors. Our competitors may adopt aspects of our business model, which could reduce our ability to differentiate our services. Additionally, current or new competitors may introduce new business models or services that we may need to adopt or otherwise adapt to in order to compete, which could reduce our ability to differentiate our business or services from those of our competitors. Furthermore, properties in the ALR industry are not typically marketed exclusively through any single channel, and our listing agreements are not typically exclusive. Accordingly, our competitors could aggregate a set of listings similar to ours. Increased competition could result in a reduction in revenue, rate of new listing acquisition, existing listings or market share.
There are thousands of vacation rental listing websites that compete directly with us for listings, travelers, or both, such as Booking.com, HomeAway.com, Airbnb, and TripAdvisor. Many of these competitors offer free or heavily discounted listings or focus on a particular geographic location or a specific type of rental property. Some of them also aggregate property listings obtained through various sources, including the websites of property managers some of whom will also market their properties on our websites.
Competitors also operate websites directed at the wider fragmented travel lodging market, such as Airbnb and HomeAway by listing either rooms or the owner’s primary home. These properties increase both the number of rental opportunities available to travelers and the competition for the attention of the traveler. Some vacation rental property owners and managers also list on these websites, and consequently, these companies currently compete with us to some extent.
We will also compete with online travel agency websites, such as Expedia, Hotels.com, Kayak, Priceline, Booking.com, Orbitz and Travelocity, which have traditionally provided comprehensive travel services and some of whom are now expanding into the vacation rental category. We also compete with large Internet search companies, such as craigslist, eBay, Google, MSN.com and Yahoo!, which provide listing or advertising services in addition to a wide variety of other products or services. In addition, some competitors, such as Perfect Places, Inc., Atraveo and eDomizil, predominately serve the professional property manager marketplace, and therefore have the ability to create more products and features targeted to property managers. Hotels, corporate travel providers, travel metasearch engines, travel content aggregators, mobile platform travel applications, social media websites, and even mobile computing hardware providers all also have the potential to increase their competitive presence in the areas of our business as well.
We believe we will compete primarily on the basis of the quantity and quality of our listings, the quality of the direct relationships we have with distributors, property owners and managers, the volume of expected travelers who will visit our websites, the global diversity of the vacation rentals available on our websites, the quality of our websites, the tools provided to our distributors, property owners and managers to assist them with their business, customer service, brand identity, the success of our marketing programs, and price. If current or potential property owners, managers, distributors or travelers choose to use any of these competitive offerings in lieu of ours, our revenue could decrease and we could be required to make additional expenditures to compete more effectively. Any of these events or results could harm our travel division business, operating results and financial condition.
In addition, most of our current or potential competitors are larger and have more resources than we do. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, our current or potential competitors may have access to larger property owner, manager or traveler bases. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or owner, manager or traveler requirements, including, but not limited to those associated with the COVID-19 pandemic. Furthermore, because of these advantages, existing and potential owners, managers, distributors and travelers might accept our competitors’ offerings, even if they may be inferior to ours. For all of these reasons, we may not be able to compete successfully against our current and future competitors.
If the businesses and/or assets that we have acquired or invested in do not perform as expected or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed.
We have four platforms, a library of travel footage, equity investments in Verus International, Inc, NestBuilder.com, Bettwork Industries Inc, Recruiter.com Group, Inc., Longroot Thailand, Reinhart, and our acquisition of control of IFEB and HotPlay, which are pending, subject to required approvals and closing conditions. The businesses we have acquired, or invested in, may not perform as well as we expect. Failure to manage and successfully integrate acquired businesses and technologies could harm our operating results and our prospects. If the companies we have invested in do not perform well, our investments could become impaired and our financial results could be negatively impacted.
Our future mergers and acquisitions, if any, will involve numerous risks, including the following:
● difficulties in integrating and managing the combined operations, technologies, technology platforms and products of the acquired companies and realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems;
● legal or regulatory challenges or post-acquisition litigation, which could result in significant costs or require changes to the businesses or unwinding of the transaction;
● failure of the acquired company or assets to achieve anticipated revenue, earnings or cash flow;
● diversion of management’s attention or other resources from our existing business;
● our inability to maintain key distributors and business relationships, and the reputations of acquired businesses;
● uncertainty resulting from entering markets in which we have limited or no prior experience or in which competitors have stronger market positions;
● our dependence on unfamiliar affiliates and partners of acquired businesses;
● unanticipated costs associated with pursuing acquisitions;
● liabilities of acquired businesses, which may not be disclosed to us or which may exceed our estimates, including liabilities relating to non-compliance with applicable laws and regulations, such as data protection and privacy controls;
● difficulties in assigning or transferring to us or our subsidiaries intellectual property licensed to companies we acquired;
● difficulties in maintaining our internal standards, controls, procedures and policies including financial reporting requirements of the Sarbanes-Oxley Act of 2002 and extending these controls to acquired companies;
● potential loss of key employees of the acquired companies;
● difficulties in complying with antitrust and other government regulations;
● challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with U.S. generally accepted accounting principles; and
● potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, customer relationships or intellectual property, are later determined to be impaired and written down in value.
Moreover, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies and assets, including as they relate to creation, ownership and rights in intellectual property, existence of open-source software and compliance with laws and contractual requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual time limitations and limitations of liability.
If we are unable to introduce new or upgraded products, services or features that distributors, travelers or property owners and managers recognize as valuable, we may fail to (i) drive additional travelers to the websites of our distributors, (ii) drive additional travelers to our websites, (iii) retain existing property owners and managers, (iv) attract new property owners and managers, (v) retain existing distributors, and/or (vi) attract new distributors. Our efforts to develop new and upgraded services and products could require us to incur significant costs.
In order to attract travelers to (i) our distributors, as well as (ii) our own online marketplace while retaining, and attracting new, distributors, property owners and managers, we will need to continue to invest in the development of new products, services and features that both add value for travelers, distributors, property owners and managers and differentiate us from our competitors. The success of new products, services and features depends on several factors, including the timely completion, introduction and market acceptance of the product, service or feature. If travelers, distributors, property owners or managers do not recognize the value of our new services or features, they may choose not to utilize our products or list on our online marketplace.
Attempting to develop and deliver these new or upgraded products, services or features involves inherent hazards and difficulties, and is costly. Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks, and we may not be able to manage these product developments and enhancements successfully. We may not succeed in developing new or upgraded products, services or features or new or upgraded products, services or features may not work as intended or provide value. In addition, some new or upgraded products, services or features may be difficult for us to market and may also involve unfavorable pricing. Even if we succeed, we cannot guarantee that our property owners and managers will respond favorably.
In addition to developing our own improvements, we may choose to license or otherwise integrate applications, content and data from third parties. The introduction of these improvements imposes costs on us and creates a risk that we may be unable to continue to access these technologies and content on commercially reasonable terms, or at all. In the event we fail to develop new or upgraded products, services or features, the demand for our services and ultimately our results of operations may be adversely affected.
We have a relatively limited operating history and we operate in a rapidly evolving industry, which makes it difficult to evaluate our current business and future prospects. If we fail to predict the manner in which our business will perform or how the market will develop, our business and prospects may suffer materially.
Our limited operating history, together with our rapidly changing industry, may make it difficult to evaluate our current business and our future prospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries. These include challenges in accurate financial planning and forecasting as we develop new products or strategic plans with little or no historical reference as a basis for such planning and forecasting. These risks will be exacerbated by the effects and extent of the COVID-19 pandemic and the duration thereof. Our business and prospects should be considered in light of the risks and difficulties we may encounter as a company operating in a highly competitive environment where changes to our business, plans, and products may be required to respond to such changes.
In addition, the market for online ALRs is relatively new and, in many territories, is unproven with little data or research available regarding the market and industry. It is uncertain whether the ALR market in many territories will continue to develop or if our services will achieve and sustain a level of demand and market acceptance sufficient for us to generate revenue, net income and cash flow growth, at anticipated levels or at all; we may need to focus on, or offer, different types of products and services in order to remain competitive. Our success will depend, to a substantial extent, on the willingness of property owners and managers to use commercial online rental property listing services. Some property managers have developed (and use) their own proprietary online listing services and, therefore, may be reluctant or unwilling to use our services to market their properties. Furthermore, some travelers and property owners and managers may be reluctant or unwilling to use online listing services because of concerns regarding the security of data, the potential for fraudulent activity, including phishing, or the integrity of the online marketplace. If property owners and managers do not perceive the benefits of marketing their properties online, then our market may not develop as we expect, or it may develop more slowly than we expect, either of which could significantly harm our business and operating results. Moreover, our success will depend on travelers’ use of our distributors, as well as our own, online marketplace to search, locate and rent vacation rentals, which will depend on their willingness to use the Internet and their belief in the integrity of the websites. In addition, since we operate in unproven and unstudied markets, we have limited insight into trends that may develop in those markets and may affect our business. We may make errors in predicting and reacting to other relevant business trends, which could harm our business.
We are exposed to fluctuations in currency exchange rates.
Because we plan to conduct a significant portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. In addition, fluctuation in our mix of U.S. and foreign currency denominated transactions may contribute to this effect as exchange rates vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other operating results may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation. For example, if the U.S. dollar strengthens relative to foreign currencies our non-U.S. revenue would be adversely affected when translated into U.S. dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue when translated into U.S. dollars. We may enter into hedging arrangements in order to manage foreign currency exposure but such activity may not completely eliminate fluctuations in our operating results.
Our business depends on retaining and attracting capable management and operating personnel.
Our success depends in large part on our ability to attract and retain high-quality management and operating personnel, as well as skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. Competition for qualified employees is intense in our industry, and the loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business could harm our operating results and impair our ability to grow. To attract and retain key personnel, we use various measures, including an equity incentive program and incentive bonuses for executive officers and other key employees. While we attempt to provide additional or different incentive compensation tools to mitigate this impact, the measures we employ to attract and maintain key personnel may not be effective enough to enable us to attract and retain the personnel we require to operate our business effectively.
If we lose the services of our key personnel, including Mr. William Kerby, our Chief Executive Officer, our business would be materially and adversely affected. Furthermore, we do not have “key person” life insurance, and we do not presently intend to purchase such insurance, on Mr. Kerby or any of our other key personnel. We believe that our success is substantially dependent upon: (1) our ability to retain and motivate our senior management team and other key employees; and (2) our ability to identify, attract, hire, train, retain and motivate other qualified personnel. The development of our business and operations is dependent upon the efforts and talents of our executive officers, whose extensive experience and contacts within the industries in which we wish to compete are a critical component of our business strategy. We may not be successful in retaining the services of any of the members of our senior management team or other key personnel, or in hiring qualified technical, managerial, marketing and administrative personnel. If we do not succeed in retaining our employees and in attracting new employees, our business could suffer significantly.
The employment agreements of our officers include limited non-solicitation and non-compete provisions and provide for severance pay upon termination of such agreements for certain reasons.
We are party to employment agreements with our Chief Executive Officer, William Kerby, our Chief Financial Officer, Sirapop “Kent” Taepakdee, and our Chief Operating Officer and Chief Information Officer, Timothy Sikora.
Mr. Kerby’s employment agreement remains in effect indefinitely until either party provides the other at least 30 days prior written notice of its intent to terminate the agreement, or until terminated pursuant to the terms of the agreement. The agreement includes a non-compete provision, prohibiting Mr. Kerby from competing against the Company during the term of the agreement and for a period of 12 months after termination thereof (subject to certain exceptions), in any state or country in connection with (A) the offer of ALR properties (Vacation Home Rentals) which are distributed on a B2B Basis; (B) the commercial sale of specialty products sold by the Company during the six (6) months preceding the termination date; and (C) any services the Company commercially offered during the six (6) months prior to the termination date (collectively, the “Non-Compete”).
In the event of termination of the agreement for death or disability, or termination by Mr. Kerby without good reason (defined in the agreement), or for cause (defined in the agreement) by the Company, Mr. Kerby is due all consideration due and payable to him through the date of termination. In the event of termination of the agreement by Mr. Kerby for good reason or the Company for any reason other than cause (or if Mr. Kerby’s employment is terminated other than for cause within six (6) months before or twenty-four (24) months following the occurrence of a change of control (defined in the agreement) of the Company, provided that we believe the closing of the HotPlay Exchange Agreement will be deemed a change of control under the agreement), Mr. Kerby is due all consideration due and payable through the date of termination; a lump sum payment equal to twelve (12) months of base salary; continued participation in all benefit plans and programs of the Company for twelve (12) months after termination (or at the option of the Company, reimbursement of COBRA insurance premiums for substantially similar coverage as the Company’s plans); and the Non-Compete will not apply to Mr. Kerby.
Mr. Taepakdee, our Chief Financial Officer, entered into an employment agreement, dated January 30, 2020. If the agreement is terminated by Mr. Taepakdee for good reason (as defined in the agreement) or by the Company without cause, and other than due to Mr. Taepakdee’s death or disability, Mr. Taepakdee is due two calendar months of severance pay. If the agreement is terminated due to Mr. Taepakdee’s disability, Mr. Taepakdee is due compensation through the remainder of the month during which such termination is effective. If the Company terminates the agreement within 24 months after a change in control event, then the Company is required to pay Mr. Taepakdee a severance payment equal to twelve (12) months’ salary, plus continue to provide benefits equal to those provided prior to the change in control event for a period of six (6) months (we believe the closing of the HotPlay exchange agreement will be deemed a change of control under the agreement). The agreement includes a one-year non-solicitation and non-competition clause following the date of the termination of the agreement, which non-competition clause prohibits him (without the prior written consent of the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying on or being engaged in any business within North America which is competitive with the business of the Company, however, the non-compete shall terminate in the event of a termination of employment by Mr. Taepakdee for good reason or a termination by the Company other than for cause or disability.
Mr. Sikora, our Chief Operating Officer and Chief Information Officer, entered into an employment agreement, dated January 30, 2020. If the agreement is terminated by Mr. Sikora for good reason (as defined in the agreement) or by the Company without cause, and other than due to Mr. Sikora’s death or disability, Mr. Sikora is due two calendar months of severance pay. If the agreement is terminated due to Mr. Sikora’s disability, Mr. Sikora is due compensation through the remainder of the month during which such termination is effective. If the Company terminates the agreement within 24 months after a change in control event, then the Company shall pay Mr. Sikora a severance payment equal to twelve (12) months’ salary, plus continue to provide benefits equal to those provided prior to the change in control event for a period of six (6) months (we believe the closing of the HotPlay exchange agreement will be deemed a change of control under the agreement). The agreement includes a one-year non-solicitation and non-competition clause following the date of the termination of the agreement, which non-competition clause prohibits him (without the prior written consent of the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying on or being engaged in any business within North America which is competitive with the business of the Company, however, the non-compete shall terminate in the event of a termination of employment by Mr. Sikora for good reason or a termination by the Company other than for cause or disability.
The automatic renewal feature of Mr. Kerby’s agreement may prevent us from terminating the employment of such officer, and the non-solicitation and non-compete provisions of the agreements with the executive officers may not provide us adequate protection from such persons competing with us after their termination, and the severance pay payable to such individuals may make it costly to terminate the employment of such individuals, make us less attractive for potential acquirers or prevent a change of control.
We agreed to pay certain fees to Mr. William Kerby, our Chief Executive Officer in consideration for such individual guarantying and continuing to guarantee, certain of our obligations.
Pursuant to Mr. Kerby’s employment agreement, as additional consideration for Mr. Kerby having entered into numerous personal guarantees with the Airline Reporting Commission, sellers of travel services, merchant providers, financial institutions, associations and service providers on behalf of the Company, the Company agreed that, for as long as Mr. Kerby is employed by the Company, provides services under the employment agreement and is willing to continue to support the Company in connection with such guarantees, he will receive a $2,000 per month guarantee fee. In the event Mr. Kerby resigns for good reason (defined in the employment agreement), or his employment is terminated by the Company, the Company agreed to eliminate any and all guarantees within thirty (30) days, failing which, for each month the guarantees remain in place, the monthly guarantee fee will rise to $10,000 per month, until such time as the Company has assumed or terminated all such guarantees.
The aggregate of such guaranty fees may be significant and may reduce the amount of available funding available for the Company to undertake its operations, repay its liabilities and/or expand its operations. In the event the guaranty fees rise as described above, the Company may not have available funds to pay such fees, and the amount of such fees may further reduce the amount of cash the Company has for business activities and growth. The amount of such guaranty fees may reduce the trading value of the Company’s common stock and/or have a material adverse effect on the Company’s available cash and results of operations.
If we fail to protect confidential information against security breaches, or if distributors, property owners, managers or travelers are reluctant to use our online marketplace because of privacy or security concerns, we might face additional costs, and activity on our websites could decline.
We collect and use personally identifiable information of distributors, property owners, managers and travelers in the operation of our business. Our systems may be vulnerable to computer viruses or physical or electronic break-ins that our security measures may not detect. Anyone that is able to circumvent our security measures could misappropriate confidential or proprietary information, cause an interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches of our systems, or even the systems of third parties we rely upon, such as credit card processors, could damage our reputation and expose us to litigation and possible liability under various laws and regulations. In addition, industry-wide incidents, or incidents specific to us, could deter people from using our distributors’, as well as our online marketplaces. Concern among distributors, property owners, managers and travelers regarding our use of personal information collected on our websites could keep them from using, or continuing to use, our online marketplace.
There are risks of security breaches both on our own systems and on third party systems which store our information as we increase the types of technology that we use to operate our marketplace, such as mobile applications. New and evolving technology systems and platforms may involve security risks that are difficult to predict and adequately guard against. In addition, third parties that process credit card transactions between us and property owners and managers maintain personal information collected from them. Such information could be stolen or misappropriated, and we could be subject to liability as a result. Further, property owners and managers may develop a lack of confidence in these third parties or in their ability to securely conduct credit card transactions on our distributors’ websites, our websites or the Internet in general, which could adversely impact our business, revenue and operating results. Our property owners, managers and travelers may be harmed by such breaches and we may in turn be subject to costly litigation or regulatory compliance costs, and harm to our reputation and brand. Moreover, some property owners, managers and travelers may cease using our marketplace altogether.
The laws of some states and countries require businesses that maintain personal information about their residents in electronic databases to implement reasonable measures to keep that information secure. Our practice is to encrypt all sensitive information, but we do not know whether our current practice will be challenged under these laws. In addition, under certain of these laws, if there is a breach of our computer systems and we know or suspect that unencrypted personal data has been stolen, we are required to inform any user whose data was stolen, which could harm our reputation and business. Complying with the applicable notice requirements in the event of a security breach could result in significant costs. We may also be subject to contractual claims, investigation and penalties by regulatory authorities, and claims by persons whose information was disclosed.
Compounding these legal risks, many states and countries have enacted different and often contradictory requirements for protecting personal information collected and maintained electronically. Compliance with these numerous and contradictory requirements is particularly difficult for us because we collect personal information from users in multiple jurisdictions. While we intend to comply fully with these laws, failure to comply could result in legal liability, cause us to suffer adverse publicity and lose business, traffic and revenue. If we were required to pay any significant amount of money in satisfaction of claims under these or similar laws, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully, our business, operating results and financial condition could be adversely affected.
In addition, third parties may target users of our websites directly with attempts to breach the security of their email accounts or management systems, such as through phishing attacks, which are fraudulent identity theft schemes designed to appear as legitimate emails from us or from our property owners and managers. Criminals may also employ other schemes aimed at defrauding our property owners, managers or travelers in ways that we may not anticipate or be able to adequately guard against. Although phishing attacks and other fraud schemes are generally not carried out through our systems, victims may nevertheless seek recovery from us. As a result, we may be required to defend ourselves in costly litigation and may suffer harm to our reputation, brand and business.
In the event any of the above risks were to occur, our reputation could be harmed, we and/or our distributors could lose either website traffic or users, and as a result, our results of operations and the value of our securities could be adversely affected.
If we are unable to adapt to changes in technology, our business could be harmed.
Because property owners, managers and travelers can access our websites using a variety of hardware and software platforms, we will need to continuously modify and enhance our service to keep pace with related technological changes. We may not be successful in developing necessary, functional and popular modifications and enhancements. Furthermore, uncertainties about the timing and nature of these necessary changes could result in unplanned research and development expenses. In addition, any failure of our online marketplace to operate effectively with future technologies could result in dissatisfaction from travelers, distributors, property owners, and managers, any of which could harm our travel division business.
We may be subject to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating costs.
We may receive complaints related to certain activities on our websites, including disputes over the authenticity of an ALR listing. We may be subject to claims of liability for unauthorized use of credit card and/or bank account information, identity theft, phishing attacks, potential breaches of system security, libel, and infringement of third-party copyrights, trademarks or other intellectual property rights. Fraud may be purported by owners or managers listing properties which either do not exist or are significantly not as described in the listing. The methods used by perpetrators of fraud constantly evolve and are complex. Moreover, our trust and security measures may not detect all fraudulent activity. Consequently, we expect to receive complaints from travelers and requests for reimbursement of their rental fees, as well as actual or threatened related legal action against us in the usual course of business.
We may also be subject to claims of liability based on events that occur during travelers’ stays at ALRs, including those related to robbery, injury, death, and other similar incidents. These types of claims could increase our operating costs and adversely affect our business and results of operations, even if these claims do not result in liability, as we incur costs related to investigation and defense. The available terms and conditions of our websites specifically state that we are exempt from any liability to travelers relating to these matters. However, the enforceability of these terms varies from jurisdiction to jurisdiction, and the laws in this area are consistently evolving. If we are subject to liability or claims of liability relating to the acts of our property owners or managers, or due to fraudulent listings, we may be subject to negative publicity, incur additional expenses and be subject to liability, any of which could harm our business and our operating results.
Loss or material modification of our credit card acceptance privileges could have a material adverse effect on our travel division business and operating results. Credit card acceptance privileges involve additional potential costs relating to reimbursements and fraud.
The loss of our credit card acceptance privileges could significantly limit the availability and desirability of our products and services. Moreover, if we fail to fully perform our contractual obligations, we could be obligated to reimburse credit card companies for refunded payments that have been contested by the cardholders. In addition, even when we are in compliance with these obligations, we bear other expenses including those related to the acceptance of fraudulent credit cards. As a result of all of these risks, credit card companies may require us to set aside additional cash reserves, may increase the transaction fees they charge us, or may even refuse to renew our acceptance privileges.
In addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under these rules, we are required to adopt and implement internal controls over the use, storage and security of card data. We assess our compliance with the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. Failure to comply may subject us to fines, penalties, damages and civil liability and could prevent us from processing or accepting credit cards. However, we cannot guarantee that compliance with these rules will prevent illegal or improper use of our payment systems or the theft, loss or misuse of the credit card data.
The loss of, or the significant modification of, the terms under which we obtain credit card acceptance privileges could have a material adverse effect on our travel division business, revenue and operating results.
Our travel division revenue, expenses and operating results could be negatively affected by changes in travel, real estate and ALR markets, as well as general economic conditions.
Our travel division business is particularly sensitive to trends in the travel, real estate and vacation rental markets, which are unpredictable, as well as trends in the general economy. Therefore, our travel division operating results, to the extent they reflect changes in the broader travel, real estate and vacation rental industries, may be subject to significant fluctuations. For example, changes in the travel industry, such as disruptions caused by war, terrorist attacks, pandemics and epidemics (including the recent changes caused by COVID-19), natural disasters, weather, bankruptcies or diseases could significantly reduce the willingness of potential travelers to plan vacation and other travel. Such disruptions that harm or destroy vacation homes could cause the property owners and managers of such homes to cancel or fail to renew their listings. Downturns in real estate markets may result in decreased new building rates and increases in foreclosures, which could also result in fewer vacation rentals available for listing. Also, since vacation travel is generally dependent on discretionary spending, negative general economic conditions could significantly reduce the overall amount that travelers spend on vacation travel.
Additionally, property owners may choose or be forced to sell their vacation rentals during periods of economic slowdown or recession. Any or all of these factors could reduce the demand for vacation rentals and our services, thereby reducing our revenue. This in turn could increase our need to make significant expenditures to continue to attract distributors, property owners, managers and travelers to our websites.
Vacation rentals are often located in popular vacation destinations around the world and utilized on a seasonal basis. Factors influencing the desirability of vacation rentals in a particular region or season could adversely affect our ability to obtain new listings and retain existing listings.
ALRs are often located in popular vacation destinations and utilized on a seasonal basis. As a result, our listings involve properties that are often concentrated in particular regions, and our revenue is dependent upon our ability (or willingness) to list properties in those regions. If we became unable (or unwilling) to list properties in a particular region, our listings in the region could decline or cease to grow, and revenue and results of operations could be adversely impacted. Notwithstanding the above, adverse economic conditions, or pandemics, including COVID-19, could result in future seasonal patterns that are different from historical trends.
In addition, factors influencing the desirability of ALRs in a particular region or during a specific season could adversely affect our ability to obtain new listings and retain existing listings. A significant natural disaster, political turmoil, pandemic, epidemic or other regional disturbance could reduce the number of available vacation rentals in that area, reducing our listing base and our revenue. In addition, if we do not have sufficient property listings in a newly popular vacation destination, we could fail to attract travelers; consequently, property owners and managers may opt to list their properties with a competitor having a greater presence in that area.
As described above, the global travel industry has experienced sharp declines in demand as a result of COVID-19 and the ultimate effects and longevity of such decreased demand is currently not known; however, such decrease in demand is expected to have a material adverse effect on our fiscal 2022 revenues and results of operations.
We could face liability for transactions and information on (or accessible through) our or, our distributors’, online marketplaces.
A significant portion of the information available through our and our distributors’ online marketplaces is submitted by property owners and managers and third parties. Property owners and managers could assert that information concerning them on our websites contains errors or omissions and third parties could seek damages from us for losses incurred if they rely upon such incorrect information. We could also be subject to claims that such information is defamatory, libelous, or infringes on third-party copyrights and privacy and publicity rights. We might be subject to claims that by providing links to third party websites, we are liable for wrongful actions by those third parties. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims.
In addition, our services will feature a property review platform, which allows travelers to post property reviews and other information about properties, property owners and managers. Although this feedback is generated by users and not by us, claims of libel, defamation or other injury have been made against other Internet service providers offering similar forums and may be made against us for content posted in this forum. Our potential liability for this information could require us to expend substantial resources to reduce our liability exposure and may limit the attractiveness of our and our distributors’ online marketplace. Moreover, our general liability insurance may not cover all potential claims to which we are exposed and may not be adequate to indemnify us for all liability that may be imposed and as a result we could face significant liability for such claims which could have a material adverse effect on our cash flows.
Property owner, distributor, manager or traveler complaints or negative publicity about our company, our services or our business activities could diminish use of our online marketplace and our travel division brand.
Property owner, distributor, manager or traveler complaints or negative publicity about our company, our services or our business activities could severely diminish consumer confidence in and use of our online marketplace and negatively affect our travel division brand. Our measures to combat risks of fraud and breaches of privacy and security can damage relations with our property owners and managers, for instance when we remove listings which have repeatedly been reported as misleadingly described. These measures heighten the need for prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could significantly impact our profitability. Failure to manage or train our customer service representatives properly could compromise our ability to handle property owner, manager and traveler complaints effectively. If we do not handle these complaints effectively, our reputation may suffer, and we may lose the confidence of property owners, distributors, managers and travelers. We may also be the subject of blog or forum postings that include inaccurate statements and create negative publicity. As a result of these complaints or negative publicity, property owners, distributors and managers may discontinue their listing or services with us or travelers may discontinue their use of our websites, and our business, brand and results of operations could be adversely impacted.
We currently rely on a small number of third-party service providers to host and deliver a significant portion of our services, and any interruptions or delays in services from these third parties could impair the delivery of our services and harm our business.
We rely on third-party service providers for numerous products and services, including payment processing services, data center services, web hosting services, insurance products for customers and travelers and some customer service functions. We rely on these companies to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.
We use a combination of third-party data centers to host our websites and core services. We do not control the operation of any of the third-party data center facilities we use. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place nor do our systems provide complete redundancy of data storage or processing. As a result, the occurrence of any of these events, a decision by our third-party service providers to close their data center facilities without adequate notice or other unanticipated problems could result in loss of data as well as a significant interruption in our services and harm to our reputation and brand. Additionally, our third-party data center facility agreements are of limited durations, and our third-party data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with these facilities on commercially reasonable terms, we may experience delays in the provisioning of our services until an agreement with another data center facility can be arranged. This shift to alternate data centers could take more than 24 hours depending on the nature of the event.
Furthermore, we depend on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason or if their services are disrupted, we could experience disruption in our services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business and reputation.
Our operations are dependent on the availability of electricity, which also comes from third-party providers. If we or the third-party data center facilities that we use to deliver our services were to experience a major power outage, it could result in disruption of our services and harm to our business.
If these companies experience difficulties and are not able to provide services in a reliable and secure manner, if they do not operate in compliance with applicable laws, rules and regulations and, with respect to payment and card processing companies, if they are unable to effectively combat the use of fraudulent payments on our websites, our results of operations and financial positions could be materially and adversely affected. In addition, if such third-party service providers were to cease operations or face other business disruption either temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs and delays until we find or develop an equivalent replacement, any of which could have an adverse impact on our business and financial performance.
Our processing, storage, use and disclosure of personal data will expose us to risks of internal or external security breaches and could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
The security of data when engaging in electronic commerce is essential in maintaining consumer and supplier confidence in our services. Substantial or ongoing security breaches whether instigated internally or externally on our systems or other internet-based systems could significantly harm our future business. It is possible that advances in computer circumvention capabilities, new discoveries or other developments, including our own acts or omissions, could result in a compromise or breach of customer transaction data.
We cannot guarantee that our security measures will prevent security breaches or attacks. A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could steal customer information or transaction data, proprietary information or cause significant interruptions in our operations. For instance, from time to time, companies have experienced “denial-of-service” type attacks that have made portions of websites slow or unavailable for periods of time. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches, and reductions in website availability and response time could cause loss of substantial business volumes during the occurrence of any such incident. Security breaches could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions. Security breaches could also cause customers and potential customers to lose confidence in our security, which would have a negative effect on the value of our brand.
We also face risks associated with security breaches affecting third parties conducting business over the Internet. Consumers generally are concerned with security and privacy on the Internet, and any publicized security problems could inhibit the growth of the Internet and, therefore, our services as a means of conducting commercial transactions. Additionally, security breaches at third parties such as supplier or distributor systems upon which we may rely could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions.
In our processing transactions, we expect to receive a large volume of personally identifiable data but, we will not store personally identifiable data. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, results of operations and financial condition.
If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of the Sarbanes-Oxley Act. These provisions require annual management assessments of the effectiveness of our internal controls over financial reporting. We also operate in a complex environment and expect these obligations, together with our rapid growth and expansion through acquisitions, to place significant demands on our management and administrative resources, including accounting and tax resources. If we are unable to conclude that our internal control over financial reporting is effective, our investors could lose confidence in the accuracy and completeness of our financial reports.
We have significant indebtedness, which could adversely affect our business and financial condition.
Risks relating to our indebtedness include:
● increasing our vulnerability to general adverse economic and industry conditions;
● requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;
● making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;
● limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;
● possibly placing us at a competitive disadvantage compared to our competitors that have less debt; and
● limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable.
Risks Relating to The Share Exchanges
The number of shares of common stock issuable pursuant to the HotPlay Share Exchange and in connection with the Axion Preferred Conversion will cause significant dilution to existing stockholders and a change of control of the Company.
Pursuant to the HotPlay Share Exchange, following the completion of the HotPlay Share Exchange and at the time the outstanding shares of the Company’s Series B Convertible Preferred Stock and Series C Convertible Preferred Stock automatically converts into common stock of the Company (anticipated to occur five days after the closing of the HotPlay Share Exchange), the current HotPlay securityholders are expected to own approximately 60.0% of the aggregate outstanding shares of common stock of Monaker, and the Axion Stockholders and Axion Creditors are expected to own approximately 13.0% of the aggregate outstanding common stock of Monaker (without taking into account shares of common stock issuable upon exercise of the Creditor Warrants), with the Monaker stockholders prior to the effective date of the closing and conversion holding approximately 27.1% of the aggregate outstanding common stock of the combined company (without taking into account shares of common stock issuable upon exercise of the Creditor Warrants). As a result, the total shares of common stock issuable upon closing of the HotPlay Share Exchange and in connection with the Axion Preferred Conversion will cause significant dilution to existing stockholders, and result in a change of control.
The Company has not yet been transferred the shares of Axion acquired pursuant to the closing of the Axion Share Exchange into its name.
Although the Axion Share Exchange closed on November 16, 2020, the Company has yet to formally complete the transfer of the ownership of the Axion shares into its name, due to a Cease Trade Order issued by the British Columbia Securities Commission, which impacts Axion, and the Company may choose to not formally complete such transfer, but to instead obtain the contractual rights to vote and receive the economic rights to such shares, until such time as such shares can be formally transferred. In the event the transfer of the Axion shares is not approved, or delayed, the Company may be unable to take title to such shares, which could have adverse effects on the Company’s accounting for such acquisition and may ultimately prevent the Company from recognizing the value of such shares. For example, as of February 28, 2021, the Company has accounted for its 33.85% interest in Axion as an investment in affiliate, valued at the aggregate liquidation preference of the Series B Convertible Preferred Stock issued in consideration for such shares of Axion, as ownership of such Axion shares have not yet been formally transferred to the Company. The Company may also be prohibited by the Cease Trade Order issued by the British Columbia Securities Commission to obtain the contractual rights to vote and receive the economic rights to the shares, and as such, may not be able to obtain the full value of such shares or account for such shares to their greatest value in the Company’s financial statements moving forward. Currently the Company has no written agreements with the holders of the Axion shares acquired; however, the Company believes that such stockholders would, at the request of the Company, agree to vote such shares as requested by the Company from time to time.
Combining HotPlay and the Company may be more difficult, costly or time-consuming than expected and the Company may fail to realize the anticipated benefits of the HotPlay Share Exchange, including expected financial and operating performance of the combined company.
The success of the HotPlay Share Exchange will depend, in part, on the combined company’s ability to realize anticipated cost savings from combining the businesses of the Company and HotPlay. To realize the anticipated benefits and cost savings from the HotPlay Share Exchange, the Company and HotPlay must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized. If the Company and HotPlay are not able to successfully achieve these objectives, the anticipated benefits of the HotPlay Share Exchange may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the HotPlay Share Exchange could be less than anticipated.
The Company and HotPlay have operated and, until the completion of the HotPlay Share Exchange, must continue to operate independently. It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers, suppliers and employees or to achieve the anticipated benefits and cost savings of the HotPlay Share Exchange. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on each of the Company and HotPlay during this transition period and for an undetermined period after completion of the HotPlay Share Exchange on the combined company.
The combined company may be unable to retain Company and/or HotPlay personnel successfully after the HotPlay Share Exchange is completed.
The success of the HotPlay Share Exchange will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by the Company and HotPlay. It is possible that these employees may decide not to remain with the Company or HotPlay, as applicable, while the HotPlay Share Exchange is pending, or with the combined company after the HotPlay Share Exchange is consummated. If key employees terminate their employment, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating the Company and HotPlay to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, the Company and HotPlay may not be able to locate or retain suitable replacements for any key employees who leave either company.
The consummation of the HotPlay Share Exchange will result in a change of control of the Company.
Due to the significant number of shares issuable at the closing of the HotPlay Share Exchange (i.e., 52,000,000 shares of Monaker common stock (currently representing approximately 60.0% of the shares of common stock which will be outstanding at closing, based on Monaker’s current outstanding shares)), a change of control of the Company will be deemed to have occurred, and the owners of HotPlay prior to the HotPlay Share Exchange will obtain control of the Company (both as to the board of directors and voting control over the Company). Additionally, the HotPlay Exchange Agreement requires all but three of our current directors to resign and the appointment of four new directors, which are to be nominated by the principal stockholder of HotPlay, and such principal stockholder and Monaker are required to mutually agree on a seventh, eight and nineth director who will be independent, unless otherwise agreed by the parties (one of which is currently anticipated to be one of Monaker’s current directors). Additionally, the new stockholders obtaining shares in the HotPlay Share Exchange will exercise control in determining the outcome of all corporate transactions or other matters, including the election and removal of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a further change in control. Any investors who purchase shares or hold shares prior to the HotPlay Share Exchange will be minority stockholders and as such will have little to no say in the direction of the Company and the election of directors. Additionally, it will be difficult if not impossible for investors to remove the directors appointed by the prior owners of HotPlay, which will mean they will remain in control of who serves as officers of the Company as well as whether any changes are made in the board of directors. An owner of the Company’s securities should keep in mind that your shares, and your voting of such shares, will likely have little effect on the outcome of corporate decisions.
Upon the closing of the HotPlay Share Exchange we plan to transition the majority of our business operations to those of HotPlay.
While we plan to continue to operate in the travel industry, and through Longroot and our other ventures, following the closing of the HotPlay Share Exchange, we anticipate that the more significant portion of our assets and operations will be related to in-game advertising. We have no experience operating as an in-game advertising company and our operations in such industry will be subject to all of the risks of any new business in a new industry. Our change in business structure may not be successful. Additionally, such new controlling stockholders, directors and officers may not be able to properly manage our new direction. If our new management fails to properly manage and direct our operations, we may be forced to scale back or abandon our operations, which may cause the value of our common stock to decline or become worthless.
We will be subject to business uncertainties and contractual restrictions while the HotPlay Share Exchange is pending.
Uncertainty about the effect of the HotPlay Share Exchange on employees and partners may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the HotPlay Share Exchange is completed, and could cause partners and others that deal with us to seek to change existing business relationships, cease doing business with us or cause potential new partners to delay doing business with us until the HotPlay Share Exchange has been successfully completed or terminated. Retention of certain employees may be challenging during the pendency of the HotPlay Share Exchange, as certain employees may experience uncertainty about their future roles or compensation structure. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business following the HotPlay Share Exchange could be negatively impacted. In addition, the HotPlay Share Exchange restricts us from making certain acquisitions and taking other specified actions until the HotPlay Share Exchange is completed without certain consents and approvals. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the HotPlay Share Exchange.
The HotPlay Share Exchange limits our ability to pursue alternatives to the HotPlay Share Exchange.
The HotPlay Share Exchange contains provisions that could adversely impact competing proposals to acquire us. These provisions include the prohibition on us generally from soliciting any acquisition proposal or offer for a competing transaction. These provisions might discourage a third party that might have an interest in acquiring all or a significant part of our company from considering or proposing an acquisition, even if that party were prepared to pay consideration with a higher value than the current proposed consideration payable pursuant to the HotPlay Share Exchange.
The HotPlay Exchange Agreement may be terminated in accordance with its terms and the HotPlay Share Exchange may not be completed.
The HotPlay Exchange Agreement is subject to several conditions that must be fulfilled in order to complete the HotPlay Share Exchange. These conditions to the closing of the HotPlay Share Exchange may not be fulfilled and, accordingly, the HotPlay Share Exchange may not be completed. In addition, the parties to the HotPlay Exchange Agreement can generally terminate such agreement if the transactions contemplated thereby do not close by May 31, 2021, under certain other conditions if the terms of the HotPlay Share Exchange are breached, and the parties can mutually decide to terminate the HotPlay Exchange Agreement at any time. In addition, the Company and the counterparties to the HotPlay Exchange Agreement may elect to terminate the HotPlay Exchange Agreement in certain other circumstances. The parties are fully committed to closing the HotPlay Share Exchange and the Company expects to extend the May 31, 2021 date, or otherwise continue to work together with HotPlay and the HotPlay Stockholders to close the HotPlay Share Exchange, following the date of this Report.
Litigation could prevent or delay the closing of the HotPlay Share Exchange or otherwise negatively impact the business and operations of the Company.
The Company may incur costs in connection with the defense or settlement of any stockholder lawsuits filed in connection with the HotPlay Share Exchange. Such litigation could have an adverse effect on the financial condition and results of operations of the Company and could prevent or delay the consummation of the HotPlay Share Exchange. Such litigation, affecting HotPlay and/or the HotPlay Stockholders, could delay or prevent the closing of the HotPlay Share Exchange.
Certain of the Company’s warrant holders will need to approve the HotPlay Share Exchange or agree to modify such warrants, or such warrant holders will have the right to require the Company to repurchase such warrants upon the closing of the HotPlay Share Exchange.
Certain of the Company’s outstanding warrants agreements include provisions which allow such holders the right, following a fundamental transaction, such as the HotPlay Share Exchange, to require the Company to repurchase such securities at their Black Scholes values, which repurchase amounts may be significant and may be several times more than the exercise prices of such warrants, even if they are out-of-the-money. As a result, in the event such warrant holders do not consent to the HotPlay Share Exchange, exercise their warrants prior to the date of closing of the HotPlay Share Exchange, or otherwise agree to modify such warrants, the Company may be forced to expend significant resources repurchasing such warrants and the funding for such repurchases may not be available on favorable terms, if at all, and/or such conditions and requirements may ultimately prevent the HotPlay Share Exchange from closing.
Termination of the HotPlay Share Exchange could negatively impact the Company.
In the event the HotPlay Share Exchange is terminated, our business may have been adversely impacted by our failure to pursue other beneficial opportunities due to the focus of management on the HotPlay Share Exchange, and the market price of our common stock might decline to the extent that the current market price reflects a market assumption that the HotPlay Share Exchange will be completed. If the HotPlay Share Exchange is terminated and our board of directors seeks another acquisition or business combination, our stockholders cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than the consideration provided for by the HotPlay Share Exchange.
The combined company is required to re-meet the initial listing standards of The NASDAQ Capital Market in order to close the HotPlay Share Exchange.
The closing of the HotPlay Share Exchange requires that the Company requalify for initial listing on The NASDAQ Capital Market, pursuant to the applicable guidance and requirements of NASDAQ as of the date of the closing of the HotPlay Share Exchange. The NASDAQ Capital Market initial listing standards include more stringent requirements than The NASDAQ Capital Market continued listing standards. The NASDAQ Capital Market initial listing standards require that issuers meeting one of the following tests: (1) $750,000 of pre-tax income (in either the last fiscal year or two of the three most recent years), $5 million of public float, $4 million of stockholders’ equity and a minimum closing price of $3 per share; (2) $15 million of public float, $5 million of stockholders’ equity, a $3 per share price and 2 years of operating history; or (3) a $50 million market cap; $15 million of public float, $4 million of stockholders’ equity, and a $2 per share price, plus in each case 300 round lot stockholders and 1,000,000 shares of total public float, with at least half of such required number of round lot stockholders holding unregistered securities with a minimum value of $2,500.
While we believe that we will meet the initial listing requirements of NASDAQ following the closing of the HotPlay Share Exchange, if we cannot, we will not be able to close the HotPlay Share Exchange as currently contemplated.
Failure to complete the HotPlay Share Exchange could negatively impact our stock price and future business and financial results.
If the HotPlay Share Exchange is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:
● we will not realize the benefits expected from the HotPlay Share Exchange, including a potentially enhanced competitive and financial position, expansion of assets and therefore opportunities, and will instead be subject to all the risks we currently face as an independent company;
● we may experience negative reactions from the financial markets and our partners and employees;
● the HotPlay Share Exchange places certain restrictions on the conduct of our business prior to the completion of the HotPlay Share Exchange or the termination of the HotPlay Share Exchange. Such restrictions, the waiver of which is subject to the consent of the counterparties to such agreement, may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the HotPlay Share Exchange; and
● matters relating to the HotPlay Share Exchange (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.
Significant costs are expected to be incurred in connection with the consummation of the HotPlay Share Exchange and integration of the Company and HotPlay into a single business, including legal, accounting, financial advisory and other costs.
If the HotPlay Share Exchange is consummated, the Company and HotPlay expect to incur significant costs in connection with integrating their operations and personnel. These costs may include costs for:
● employee redeployment, relocation or severance;
● integration of information systems; and
● reorganization or closures of facilities.
In addition, the Company and HotPlay expect to incur a number of non-recurring costs associated with combining the operations of the two companies, which cannot be estimated accurately at this time. The Company and HotPlay will also incur transaction fees and other costs related to the HotPlay Share Exchange. Additional unanticipated costs may be incurred in the integration of the businesses of the Company and HotPlay. Although the Company and HotPlay expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the near term, or at all. There can be no assurance that the Company and HotPlay will be successful in these integration efforts.
The conversion of the HotPlay Notes into common stock pursuant to their terms, will cause immediate and substantial dilution.
In certain situations, the HotPlay Notes automatically convert into common stock of the Company at a conversion price of $2.00 per share. If converted in full as of the date of this Report, without taking into account accrued interest, which also converts into common stock at a conversion price of $2.00 per share, HotPlay would be issued an aggregate of 7,500,000 shares of common stock (subject to the NASDAQ Limitation). Such issuance would result in immediate and substantial dilution to the interests of other stockholders.
Risks Relating to Longroot Thailand
Cryptocurrency exchanges and other trading venues are relatively new.
When cryptocurrency exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, such events could result in a reduction in cryptocurrency prices, impact the success of Longroot Thailand and have a material adverse effect on the ability of Longroot Thailand to continue as a going concern, which correspondingly could harm the business, prospects and operations of the Company. Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, commodities or currencies. In the event Longroot Thailand faces fraud, security failures, operational issues or similar events, such factors would have a material adverse effect on the ability of Longroot Thailand to continue as a going concern, which could have a material adverse effect on the business, prospects or operations of Longroot Thailand.
Longroot Thailand’s business may be adversely affected by market uncertainty or lack of confidence among investors.
Longroot Thailand’s revenues are derived from the participation in fundraising activities via the issuance of crypto tokens through its Initial Coin Offering (ICO) Portals. Uncertain economic and market conditions, and other poor geopolitical conditions, may adversely affect investor confidence and business activities of potential clients. This could result in declines in size and number of fundraises, which would likely negatively impact Longroot Thailand’s results of operations.
Regulatory changes or actions may alter the nature of the Company’s ownership of Longroot Thailand or restrict the use of cryptocurrencies in a manner that adversely affects Longroot Thailand’s business, prospects or operations.
As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies, with certain governments deeming them illegal while others have allowed their use and trade. Thailand, where Longroot Thailand is regulated, is the first country to approve a legal initial coin offering (“ICO”) portal for issuers. Under Thai Securities and Exchange Commission (“Thai SEC”) regulation, all crypto token issuances in Thailand must be approved by the Thai SEC and carried out via an approved ICO Portal such as Longroot Thailand. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. Similar actions by governments or regulatory bodies could impact the ability of Longroot Thailand to continue to operate and such actions could affect the ability of Longroot Thailand to continue as a going concern, which could have a material adverse effect on the business, prospects or operations of the Company.
Furthermore, tokens issued by Longroot Thailand may be classified as securities depending on the nature of the token and the regulatory frameworks of the respective jurisdictions. Longroot Thailand’s activities may be subject to securities regulations in different jurisdictions, which could limit its business activity, such as limits on the personnel it can issue tokens to, and this may negatively impact Longroot Thailand’s profitability. In addition, compliance with existing laws and regulations, will involve significant amounts of time, including that of Longroot Thailand’s senior leaders and that of dedicated compliance personnel, all of which might negatively impact Longroot Thailand’s results of operations.
The development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies are subject to a variety of factors that are difficult to evaluate.
The use of cryptocurrencies to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs digital assets based upon a computer-generated mathematical and/or cryptographic protocol. The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur and is unpredictable.
Longroot Thailand’s coins might be used for illegal or improper purposes, which could expose Longroot Thailand to additional liability and harm its business.
Longroot Thailand’s coins remain susceptible to potentially illegal or improper uses as criminals are using increasingly sophisticated methods to engage in illegal activities involving internet services, such as money laundering, terrorist financing, drug trafficking, human trafficking, illegal online gaming, romance and other online scams, prohibited sales of pharmaceuticals, fraudulent sale of goods or services, piracy of software, movies, music and other copyrighted or trademarked goods, unauthorized uses of credit and debit cards or bank accounts and similar misconduct. Coinholders may also encourage, promote, facilitate or instruct others to engage in illegal activities. If the measures Longroot Thailand has taken are too restrictive and inadvertently screen proper transactions, this could diminish customer experience which could harm its business. Thailand’s business could be harmed if customers use its system for illegal or improper purposes.
Acceptance and/or widespread use of cryptocurrency is uncertain.
Currently, there is a relatively small use of cryptocurrencies in the retail and commercial marketplace for goods or services. In comparison, there is relatively large use by speculators contributing to price volatility. The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace limits the ability of end-users to use them to pay for goods and services. Such lack of acceptance or decline in acceptances would have a material adverse effect on the ability of Longroot Thailand to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on the business, prospects or operations of Longroot Thailand and ultimately the Company.
There are cyber security risks related to cryptocurrency trading.
Trading platforms and third-party service providers may be vulnerable to hacking or other malicious activity. As with any computer code generally, flaws in cryptocurrency codes may be exposed to such negative activities. Several errors and defects have been found previously, including those that disabled some functionality for users of cryptocurrency trading platforms and exposed such users’ personal information. Flaws in and exploitations of the source code allowing malicious actors to take or create money have previously occurred. Any of the above events effecting Longroot Thailand may adversely affect its operations and results of operations and ultimately have a material adverse effect on the Company.
Competing blockchain platforms and technologies may cause consumers to use alternative distributed ledgers.
The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or an alternative to distributed ledgers altogether. This may adversely affect Longroot Thailand.
Future regulatory changes affecting Longroot Thailand are unable to predict.
Digital assets in Thailand are regulated under the Securities and Exchange Commission of Thailand, and are subject to comprehensive statutes, regulations and margin requirements. In addition, the Securities and Exchange Commission of Thailand is authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of digital assets both inside and outside Thailand is a rapidly changing area of law and is subject to modification by government and judicial action. Digital assets also currently face an uncertain regulatory landscape in various jurisdictions. Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect digital assets and its users, particularly digital asset operators and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations or directives may conflict with those of Thailand and may negatively impact the acceptance of digital assets by users, merchants and service providers outside of Thailand and may therefore impede the growth of the digital asset economy. The effect of any future domestic or foreign regulatory change on the Longroot Thailand is unable to be predicted, but such change could be substantial and adverse to Longroot Thailand’s operations and prospects.
Risks Related to our Pending Acquisition of IFEB
We have paid a significant amount of cash to certain sellers of the IFEB Shares in connection with the proposed acquisition of the control of IFEB, which transaction may not be approved, and which consideration we have no ability to obtain the return of.
As described above under “Item 1. Business-Recent Material Events-IFEB Bank Transaction”, on April 1, 2021, we entered into the Bill of Sale with certain third parties pursuant to which the Company agreed to purchase 2,191,489 shares of authorized and outstanding Class A Common Stock of IFEB, which IFEB Shares total approximately 57.1% of the outstanding Class A Common Stock of IFEB. The purchase price of the IFEB Shares was $6,400,000, which amount was paid to the sellers on April 1, 2021. Notwithstanding the terms of the Bill of the Sale, and the payment by the Company of the aggregate purchase price pursuant thereto, the transfer of the IFEB Shares to the Company and the Company’s acquisition of control of IFEB is subject to review of the Company’s financial viability, as well as other matters, by OCIF, and as such, the Company has filed a formal change of control application which must be approved before taking ownership and control of the IFEB Shares. The Company anticipates completing acquisition of the IFEB Shares in or around June 2021, however, the Company has no way of unwinding the transaction to purchase the IFEB Shares, or of obtaining the return of the $6,400,000 paid to the sellers in connection therewith if the transaction is not completed. The Company anticipates that if it is not able to obtain control of the IFEB Shares, it would attempt to sell such shares to a third party. Such sale may not be able to be completed on the same terms as the original proposed acquisition of the IFEB Shares by the Company, or at all. Any failure to complete the transfer of the IFEB Shares may have an adverse effect on the Company’s financial condition and results of operations.
Combining IFEB and the Company may be more difficult, costly or time-consuming than expected and the Company may fail to realize the anticipated benefits of the acquisition of control of IFEB.
The success of the acquisition of control of IFEB will depend, in part, on the combined company’s ability to realize anticipated cost savings from combining the businesses of the Company and IFEB. Combining IFEB and the Company may be more difficult, costly or time-consuming than expected and the Company may fail to realize the anticipated benefits of the planned acquisition of IFEB.
We will be subject to business uncertainties until the acquisition of IFEB is completed.
Uncertainty about the effect of the Bill of Sale on employees and partners may have an adverse effect on us. These uncertainties may impair our and IFEB’s ability to attract, retain and motivate key personnel until the Bill of Sale are completed, and could cause partners and others that deal with us and IFEB to seek to change existing business relationships, cease doing business with us and IFEB or cause potential new partners to delay doing business with us and IFEB until the Bill of Sale transactions have been successfully completed. Retention of certain employees may be challenging during the pendency of the Bill of Sale, as certain employees may experience uncertainty about their future roles or compensation structure. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business following the Bill of Sale could be negatively impacted. In addition, the Exchange Agreements restrict us from making certain acquisitions and taking other specified actions until the Bill of Sale are completed without certain consents and approvals. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Bill of Sale.
Failure to complete the acquisition of IFEB could negatively impact our stock price and future business and financial results.
If the acquisition of control of IFEB is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:
● we will not realize the benefits expected from the acquisition of control of IFEB, including a potentially enhanced competitive and financial position, expansion of assets and therefore opportunities, and will instead be subject to all the risks we currently face as an independent company;
● we may experience negative reactions from the financial markets and our partners and employees; and
● matters relating to the acquisition of control of IFEB (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.
Our inability to fully integrate IFEB’s business into our operations could adversely affect our operations or results.
Our future growth and profitability depend on our ability to successfully integrate IFEB’s banking operations into our operations. Integration of an acquired business can be complex and costly, sometimes including combining relevant accounting and data processing systems and management controls and policies, as well as managing relevant relationships with employees, clients, suppliers and other business partners. Integration efforts have diverted and could continue to divert management attention and resources, which could adversely affect our operations or results. The loss of key employees in connection with this acquisition could adversely affect our ability to successfully conduct the combined operations. There can be no assurance that any of these executives will choose to continue working with us, or if they do, that we will be able to successfully integrate these executives as part of our management team in the combined business.
The acquisition of IFEB may result in business disruptions that cause IFEB to lose customers or cause customers to move their accounts or business to competing financial institutions. It is possible that the integration process related to the acquisition could disrupt our ongoing business or result in inconsistencies in customer service that could adversely affect IFEB’s ability to maintain relationships with clients, customers, depositors and employees. Our inability to overcome these risks could have a material adverse effect on our business or financial condition, results of operations and future prospects. There is no assurance that our integration efforts will not result in other unanticipated costs.
The operations of IFEB are in a completely different industry than our current operations and we may not be successful in that new industry.
IFEB was incorporated in 2017 as a corporation under the laws of the Commonwealth of Puerto Rico and received its international financial entity license on June 18, 2017 from the Office of the Commissioner of Financial Institutions of Puerto Rico, in Spanish, “Oficina del Comisionado de Instituciones Financieras”, as license #51. As a result, IFEB is regulated by OCIF. Our officers do not have significant experience running a bank and we may not be profitable in this new line of business, assuming the acquisition of control of IFEB is approved. Even if we achieve profitability in the future by adopting this new business strategy, we may not be able to sustain profitability in subsequent periods. The operation of IFEB may subject us to unknown costs, liabilities, regulations and expenses which we haven’t budgeted for and we may ultimately be unsuccessful in this new line of business in the event the acquisition of IFEB is approved.
Risks Related to Monaker’s Common Stock
Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.
Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or where shares are to be issued to our officers, directors and applicable consultants, free trading shares pursuant to Form S-8 registration statements. Our board of directors has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued shares of common stock. In addition, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to the market price of such securities. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.
Nevada law and our Articles of Incorporation authorize us to issue shares of common and preferred stock, which shares may cause substantial dilution to our existing stockholders.
We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.00001 par value per share, 3,000,000 shares of Series A Preferred stock, $0.01 par value per share, 10,000,000 shares of Series B Preferred Stock, $0.00001 par value per share and 3,828,500 shares of Series C Preferred Stock, $ 0.00001 par value per share. As of the date of this Report, we have 23,454,203 shares of common stock issued and outstanding, 10,000,000 shares of Series B Preferred Stock, and 3,828,500 shares of Series C Preferred Stock, issued and outstanding. As a result, our board of directors can issue a large number of additional shares of common stock and/or effect a reverse stock split, without stockholder approval, and if additional shares are issued, it could cause substantial dilution to our then stockholders. Additionally, shares of preferred stock may be issued by our board of directors without stockholder approval with voting powers, and such preferences and relative, participating, optional or other special rights and powers as determined by our board of directors, which may be greater than the shares of common stock currently outstanding. As a result, shares of preferred stock may be issued by our board of directors which cause the holders to have super-majority voting power over our shares, provide the holders of the preferred stock the right to convert the shares of preferred stock they hold into shares of our common stock, which may cause substantial dilution to our then common stock stockholders and/or have other rights and preferences greater than those of our common stock stockholders. Investors should keep in mind that the board of directors has the authority to issue additional shares of common stock and preferred stock, which could cause substantial dilution to our existing stockholders. Additionally, the dilutive effect of any preferred stock, which we may issue may be exacerbated given the fact that such preferred stock may have super-majority voting rights and/or other rights or preferences which could provide the preferred stockholders with voting control over us subsequent to this offering and/or give those holders the power to prevent or cause a change in control. As a result, the issuance of shares of common stock and/or preferred stock may cause the value of our securities to decrease and/or become worthless.
The outstanding Series B Preferred Stock and Series C Preferred Stock have a liquidation preference on parity with our common stock.
If the HotPlay Share Exchange is not completed, the Series B Preferred Stock and Series C Preferred Stock, will not be convertible into common stock. If that were to occur Monaker would likely hold another special or annual meeting of stockholders to again request approval for such conversions/exercise separate from the HotPlay Share Exchange, if necessary or required; provided that until converted in full, such Series B Preferred Stock and Series C Preferred Stock, which have a liquidation preference of $9,272,121 and $7,657,000, respectively, will remain outstanding, and will, upon any liquidation of Monaker, reduce pro-rata, the amount of any consideration that the common stock stockholders of Monaker would receive upon liquidation of Monaker.
Our outstanding warrants may adversely affect the trading price of our common stock.
As of the date of this Report, there were outstanding warrants to purchase 1,131,671 shares of common stock at a weighted average exercise price of $3.34 per share, not including the creditor warrants. For the life of the warrants, the holders have the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding securities will also dilute the ownership interests of our existing stockholders.
The availability of these shares for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock. We cannot predict the size of future issuances of our common stock pursuant to the exercise of outstanding options or warrants or conversion of other securities, or the effect if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our common stock to decline.
Certain warrants we have granted include anti-dilutive rights
The warrants to purchase 724,000 shares of common stock which we granted to certain purchases in our October 2018 offering (of which warrants to purchase 527,400 shares are currently outstanding) include anti-dilution rights, which provide that if at any time while the warrants are outstanding, we issue or are deemed to have issued (which includes shares issuable upon exercise of warrants and options and conversion of convertible securities) securities for consideration less than the then current exercise price of the warrants, subject to certain excepted issuances, the exercise price of such warrants is automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities, not to be less than $0.57 per share (subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions). The warrants which originally had an exercise price of $2.85 per share currently have any exercise price of $2.00 per share as a result of our April 2019 underwritten offering.
Our Common Stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements.
Among the conditions required for continued listing on the Nasdaq Capital Market, Nasdaq requires us to maintain at least $2.5 million in stockholders’ equity or $500,000 in net income over the prior two years or two of the prior three years, to have a majority of independent directors, and to maintain a stock price over $1.00 per share. As of the date of this Report, our stockholders’ equity is above Nasdaq’s $2.5 million minimum and, we have maintained our stock price over $1.00 per share (provided that our stock price traded as low as $0.61 during calendar 2020).
Moving forward, we may not be able to maintain at least $2.5 million in stockholders’ equity, may not generate over $500,000 of yearly net income, we may not be able to maintain independent directors, we may not be able to maintain a stock price over $1.00 per share and/or may not be able to meet the requirements related to the number of independent directors on our board of directors and/or hold an annual meeting of stockholders on a timely basis. If we fail to timely comply with the applicable requirements, and/or to timely cure the deficiencies described above, our stock may be delisted. In addition, even if we demonstrate compliance with the requirements above, we will have to continue to meet other objective and subjective listing requirements to continue to be listed on the Nasdaq Capital Market. Delisting from the Nasdaq Capital Market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. Without a Nasdaq Capital Market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading volume and liquidity of our stock could decline. Delisting from the Nasdaq Capital Market could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our common stock. In the event our common stock is delisted from the Nasdaq Capital Market, we may not be able to list our common stock on another national securities exchange or obtain a quotation on an over-the-counter quotation system.
If we are delisted from the Nasdaq Capital Market, your ability to sell your shares of our common stock could also be limited by the penny stock restrictions, which could further limit the marketability of your shares.
If our common stock is delisted from Nasdaq, it could come within the definition of “penny stock” as defined in the Exchange Act and would then be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
Due to the fact that our common stock is listed on the Nasdaq Capital Market, we are subject to financial and other reporting and corporate governance requirements which increase our costs and expenses.
We are currently required to file annual and quarterly information and other reports with the Securities and Exchange Commission that are specified in Sections 13 and 15(d) of the Exchange Act. Additionally, due to the fact that our common stock is listed on the Nasdaq Capital Market, we are also subject to the requirements to maintain independent directors, comply with other corporate governance requirements, and are required to pay annual listing and stock issuance fees. These obligations require a commitment of additional resources including, but not limited, to additional expenses, and may result in the diversion of our senior management’s time and attention from our day-to-day operations. These obligations increase our expenses and may make it more complicated or time-consuming for us to undertake certain corporate actions because we may require Nasdaq approval for such transactions and/or Nasdaq rules that may require us to obtain stockholder approval for such transactions.
General Risk Factors
Our stock price may be volatile.
The market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described herein and other factors beyond our control. Factors affecting the trading price of our common stock could include:
● variations in our operating results;
● variations in operating results of similar companies and competitors;
● changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;
● changes in our outlook for future operating results which are communicated to investors and analysts;
● announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors;
● marketing and advertising initiatives by us or our competitors;
● the increase or decrease of listings;
● threatened or actual litigation;
● changes in our management;
● recruitment or departures of key personnel;
● market conditions in our industry, the travel industry and the economy as a whole;
● the overall performance of the equity markets;
● sales of shares of our common stock by existing stockholders;
● global pandemics and epidemics, such as COVID-19;
● the reports of industry research analysts who cover our competitors and us;
● stock-based compensation expense under applicable accounting standards; and
● adoption or modification of regulations, policies, procedures or programs applicable to our business.
Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could harm the value of our common stock.
In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation; and we have previously been the target of this type of litigation. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert our management’s attention from other business concerns, which could materially harm our business.
If the holders of our common stock sell a large number of shares all at once or in blocks, the market price of our shares would most likely decline.
Certain of our stockholders and warrant holders hold shares of common stock that are freely tradable and/or freely tradable upon exercise. Should such holders decide to sell their shares at a price below the market price as quoted on NASDAQ, or any exchange on which our common stock might be listed in the future, the price may continue to decline. A steep decline in the price of our common stock upon being quoted on NASDAQ, or any exchange on which our common stock might be listed in the future, would adversely affect our ability to raise additional equity capital, and even if we were successful in raising such capital, the terms of such raise may be substantially dilutive to current stockholders.
If securities analysts and other industry experts do not publish research or publish negative research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research, reports and other media that securities analysts and other industry experts publish about us or our business. If security analysts don’t cover our stock, downgrade our stock or publish negative research about our business, our stock price could decline. If analysts do not cover us in the future, cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the stock market and demand for our stock could decrease, which could cause our stock price or trading volume to decline. If one or more industry analysts publish negative statements about our business, our stock price could decline.
Failure to adequately manage our growth may seriously harm our business.
We plan to grow our business as rapidly as possible. If we do not effectively manage our growth, the quality of our services may suffer, which could negatively affect our reputation and demand for our services. Our growth may place a significant strain on our managerial, administrative, operational, and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:
● implement additional management information systems;
● further develop our operating, administrative, legal, financial, and accounting systems and controls;
● hire additional personnel;
● develop additional levels of management within our company;
● locate additional office space;
● maintain close coordination among our operations, legal, finance, sales and marketing, and client service and support teams; and
● manage our expanding international operations.
As a result, we may lack the resources to deploy our services on a timely and cost-effective basis. Failure to accomplish any of these requirements could impair our ability to deliver services in a timely fashion or attract and retain new customers.
We do not anticipate paying any dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, our stockholders could receive a return on their investment in our common stock only if the market price of our common stock has increased when they sell their shares.
Our incorporation documents and Nevada law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our common stock, which may inhibit an attempt by our stockholders to change our direction or management.
Nevada law and our articles of incorporation contain provisions that could delay or prevent a change in control of our Company. Some of these provisions include the following:
● authorize our board of directors to determine the rights, preferences, privileges and restrictions granted to, or imposed upon, the preferred stock and to fix the number of shares constituting any series and the designation of such series without further action by our stockholders; and
● prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
These and other provisions in our articles of incorporation, as amended, and under Nevada law could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions. Furthermore, these provisions may inhibit an attempt by our stockholders to change our direction or management.
We adopted provisions in our amended and restated articles of incorporation limiting the liability of management to stockholders.
We have adopted provisions, and will maintain provisions, to our amended and restated articles of incorporation that limit the liability of our directors, and provide for indemnification by us of our directors and officers to the fullest extent permitted by Nevada law. Our Articles of Incorporation and Nevada law provide that directors have no personal liability to third parties for monetary damages for actions taken as a director, except for breach of duty of loyalty, acts or omissions not in good faith involving intentional misconduct or knowing violation of law, unlawful payment of dividends or unlawful stock repurchases, or transactions from which the director derived improper personal benefit. Such provisions limit the stockholders’ ability to hold directors liable for breaches of fiduciary duty and reduce the likelihood of derivative litigation against directors and officers.
If we do not adequately protect our intellectual property, our ability to compete could be impaired.
Our intellectual property includes the content of our websites, registered domain names, as well as registered and unregistered trademarks. We believe that our intellectual property is an essential asset of our business and that our domain names and our technology infrastructure currently give us a competitive advantage in the online market for ALR listings and cryptocurrency. If we do not adequately protect our intellectual property, our brand, reputation and perceived content value could be harmed, resulting in an impaired ability to compete effectively.
To protect our intellectual property, we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action we deem appropriate to protect our rights. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites without authorization. We may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive, distracting and result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete.
Effective trademark, copyright and trade secret protection may not be available in every country in which our products are available over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving.
We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.
Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or business methods. Any intellectual property claims against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, content, branding or business methods found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and be inferior. Any of these results could harm our operating results.
Uncertainty and illiquidity in credit and capital markets can impair our ability to obtain credit and financing on acceptable terms and can adversely affect the financial strength of our business partners.
Our ability to obtain credit and capital depends in large measure on the state of the credit and capital markets, which is beyond our control. Our ability to access credit and capital markets may be restricted at a time when we would like, or need, access to those markets, which could constrain our flexibility to react to changing economic and business conditions. In addition, the cost and availability of debt and equity financing may be adversely impacted by unstable or illiquid market conditions. Protracted uncertainty and illiquidity in these markets also could have an adverse impact on our lenders or our customers, preventing them from meeting their obligations to us.
Our business could be materially and adversely affected if we are unable to obtain necessary funds from financing activities. Uncertainty and illiquidity in financial markets may materially impact the ability of the participating financial institutions to fund their commitments to us under our liquidity facilities. Accordingly, we may not be able to obtain the full amount of the funds available under our liquidity facilities to satisfy our cash requirements, and our failure to do so could have a material adverse effect on our operations and financial position.
Future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.
From time to time, we are involved in lawsuits, regulatory inquiries and may be involved in governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our results of operations and liquidity.
Changes in our effective tax rate could harm our future operating results.
We are subject to federal and state income taxes in the United States and in various foreign jurisdictions. Our provision for income taxes and our effective tax rate are subject to volatility and could be adversely affected by several circumstances, including:
● earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;
● effects of certain non-tax-deductible expenses;
● changes in the valuation of our deferred tax assets and liabilities;
● transfer pricing adjustments, including the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;
● adverse outcomes resulting from any tax audit;
● our ability to utilize our net operating losses and other deferred tax assets; and
● changes in accounting principles or changes in tax laws and regulations, or the application of the tax laws and regulations, including possible U.S. changes to the deductibility of expenses attributable to foreign income, or the foreign tax credit rules.
Significant judgment is required in the application of accounting guidance relating to uncertainty in income taxes. If tax authorities challenge our tax positions and any such challenges are settled unfavorably, it could adversely impact our provision for income taxes.
Our websites may encounter technical problems and service interruptions.
Our websites may in the future experience slower response times or interruptions as a result of increased traffic or other reasons. These delays and interruptions resulting from failure to maintain Internet service connections to our site could frustrate visitors and reduce our future web site traffic, which could have a material adverse effect on our business.
If we do not successfully implement any acquisition strategies, our operating results and prospects could be harmed.
We face competition within our industry for acquisitions of businesses, technologies and assets, and, in the future, such competition may become more intense. As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or at all because of such competition. Furthermore, if we enter into negotiations that are not ultimately consummated, those negotiations could result in the diversion of management time and significant out-of-pocket costs. Even if we are able to complete such acquisitions, we may additionally expend significant amounts of cash or incur substantial debt to finance them, which indebtedness could result in restrictions on our business and use of available cash. In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in dilution of our existing stockholders. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize their benefits. If we are unable to successfully address any of these risks, our business, financial condition or operating results could be harmed.
Because we are a small company, the requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company with listed equity securities, we must comply with the federal securities laws, rules and regulations, including certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act and the Dodd-Frank Act, related rules and regulations of the SEC, with which a private company is not required to comply. Complying with these laws, rules and regulations will occupy a significant amount of time of our directors and management and will significantly increase our costs and expenses, which we cannot estimate accurately at this time. Among other things, we must:
● establish and maintain a system of internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
● prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;
● maintain various internal compliance and disclosures policies, such as those relating to disclosure controls and procedures and insider trading in our common stock;
● involve and retain to a greater degree outside counsel and accountants in the above activities;
● maintain a comprehensive internal audit function; and
● maintain an investor relations function.
In addition, being a public company subject to these rules and regulations may require us to accept less director and officer liability insurance coverage than we desire or to incur substantial costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
The Company leases its office space and certain office equipment under non-cancellable operating leases.
The Company leased 2,500 square feet of office space at 2893 Executive Park Drive Suite 201, Weston, Florida 33331, from April 15, 2018, through February 28, 2021, which it used as its headquarters. Monthly rental costs for the periods ending April 14, 2019, 2020 and 2021, were $6,243, $6,492 and $6,781, respectively.
On March 1, 2021 the Company moved into a new 5,962 square feet facility located at 1560 Sawgrass Corporate Parkway Suite 130 Sunrise, FL 33323. On January 4, 2021, the Company made a payment of $188,061 to Sunrise Sawgrass LLC for a security and rent deposit relating to the new office space. The term of the lease, which commenced on March 1, 2021, will expire on the last day of the 89th month following the commencement date (i.e., August 31, 2028). Monthly rent under the lease increases each year during the term of the lease, from between $11,160 per month (for the first year of the lease), to $13,734 during the last year of the lease term. Annual rental costs for the periods ending February 28, 2022, 2023, and February 29, 2024 are $75,094, $209,989 and $226,342, respectively. The Company has received 12 months of rent abatement for FYE 2022 in the amount of $133,920 and 1 month for FYE 2023, in the amount of $11,160.
On October 1, 2019, the Company entered a new contract for a new call/support center, totaling approximately 4,048 square feet, at 6345 South Pecos Road, Suites 206, 207, and 208, Las Vegas, Nevada 89120. The lease had a term of one year from October 1, 2019 through September 30, 2020. Monthly base rental costs were (i) $ 3,643 from October 1, 2019 through November 30, 2019; and (ii) $3,789 from December 1, 2019 through September 30, 2020. The rent also included the monthly payment of the operating expenses (Tenant’s Proportionate Share of the Building and/or Project) which was approximately $1,100 per month. We did not renew this lease. As of February 28, 2021, the Call Center previously in Las Vegas was moved to the Company’s new facility in Sunrise, Florida.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.
Such current litigation or other legal proceedings, if any, are described in, and incorporated by reference in, this “Item 3. Legal Proceedings” of this Annual Report on Form 10-K from, “Part II-Item 8. Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in “Note 12 - Commitments and Contingencies”, under the heading “Legal Matters”. The Company believes that the resolution of any currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation, if any, or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected. The Company settled certain matters subsequent to the year ended February 28, 2021, that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock trades on the NASDAQ Capital Market under the ticker symbol “MKGI”.
Holders
As of June 7, 2021, there were approximately 438 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number of record stockholders is not indicative of the total number of stockholders of the Company when including securities beneficially owned.
Dividends
To date, we have not declared or paid any dividends on our outstanding shares. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings to finance our operations and future growth, our board of directors will have discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements and other factors, which our board of directors may deem relevant.
There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. We would not be able to pay our debts as they become due in the usual course of business, or;
2. Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
Transfer Agent
Our stock transfer agent is Colonial Stock Transfer Co, Inc. (“Colonial”), 66 Exchange Place, 1st floor, Salt Lake City, UT 84111. Colonial’s telephone number in the U.S. is (801) 355-5740 and their internet address is www.colonialstock.com.
Recent Issuances of Unregistered Securities
There have been no sales of unregistered securities during and from the period from December 1, 2020 to the filing date of this report, which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K, except as set forth below:
On September 1, 2020, the Company entered into a consulting agreement with Beachfront Travel Consulting LLC for their services and expertise in Call Center and Sales Operations. The consultant agreed to assist the Company in the development and design of a Call Center Operation to support the Company’s brand. The Company agreed to pay the consultant compensation of 1,500 restricted shares of common stock per month, with a price equal to the closing price on the last day of the month and the consultant agreed to advise the Company on policies and procedures, performance metrics and reporting, operational standards and training of call center staff. The Company issued the consultant 1,500 shares of restricted common stock for the month of December 2020. The agreement was terminated on December 7, 2020, and the parties entered into as a new consulting agreement, with an annual fee of $110,000 instead of the 1,500 per month stock compensation.
On or around January 15, 2021, a warrant holder exercised warrants to purchase 15,000 shares of the Company’s common stock and paid the aggregate exercise price of $30,000 ($2.00) per share. The shares underlying the warrants were registered on a Form S-3 registration statement.
On January 22, 2021, the Company issued an aggregate of 185,000 shares of restricted common stock to various consultants in consideration for investor relations related services.
On February 4, 2021, the Company issued an aggregate of 50,000 shares of restricted common stock to a consultant in consideration for investor relations related services.
On March 31, 2021, the Company issued 17,500 shares of common stock to an employee for services rendered.
We claim an exemption from registration for the issuances described above pursuant to Section 4(a)(2) and/or Rule 506(b) of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and we paid no underwriting discounts or commissions. The securities are subject to transfer restrictions, and the certificates evidencing the securities will contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there-from. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
Issuer Purchases of Equity Securities
During the years ended February 28, 2021 and February 29, 2020, there were no repurchases of the Company’s common stock by the Company.
Description of Common Stock
We have authorized capital stock consisting of 500,000,000 shares of common stock, $0.00001 par value per share and 100,000,000 shares of preferred stock, $0.00001 par value per share.
The following summary of certain provisions of our common stock does not purport to be complete. You should refer to our Articles of Incorporation (as amended) and our Bylaws (as amended), both of which have been filed with the SEC, and have been incorporated by reference as exhibits to this Report. The summary below is also qualified by provisions of applicable law.
Each share of our common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by our board of directors. No holder of any shares of our common stock has a pre-emptive right to subscribe for any of our securities, nor are any shares of our common stock subject to redemption or convertible into other securities. Upon liquidation, dissolution or winding-up of the Company, and after payment to our creditors and preferred stockholders, if any, our assets will be divided pro rata on a share-for-share basis among the holders of our common stock. Each share of our common stock is entitled to one vote on all stockholder matters. Shares of our common stock do not possess any cumulative voting rights.
The presence of the persons entitled to vote of 33 1/3% of the outstanding voting shares on a matter before the stockholders constitutes the quorum necessary for the consideration of the matter at a stockholders’ meeting.
Except as otherwise required by law, the Articles of Incorporation, or any certificate of designations, (i) at all meetings of stockholders for the election of directors, a plurality of votes cast are sufficient to elect such directors; (ii) any other action taken by stockholders are be valid and binding upon the Company if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, at a meeting at which a quorum is present, except that adoption, amendment or repeal of the Bylaws by stockholders requires the vote of a majority of the shares entitled to vote; and (iii) broker non-votes and abstentions are considered for purposes of establishing a quorum but not considered as votes cast for or against a proposal or director nominee. Each stockholder has one vote for every share of stock having voting rights registered in his or her name, except as otherwise provided in any preferred stock designation setting forth the right of preferred stock stockholders.
The common stock does not have cumulative voting rights, which means that the holders of 51% of the common stock voting for election of directors can elect 100% of our directors if they choose to do so.
Description of Preferred Stock
Shares of preferred stock may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by our board of directors prior to the issuance of any shares thereof. Preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the board of directors prior to the issuance of any shares thereof.
The powers, preferences and relative, participating, optional and other special rights of each class or series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
Series A Convertible Preferred Stock
The holders of record of shares of Series A Preferred Stock are entitled to vote on all matters submitted to a vote of the stockholders of the Company and are entitled to one hundred (100) votes for each share of Series A Preferred Stock. Each share of Series A Preferred Stock is redeemable at $1.00 per share. The Series A Preferred Stock is entitled to a 10% annual dividend, payable as, when and if, declared by the board of directors, payable on the first day of April, July, October and January.
Per the terms of the Amended and Restated Certificate of Designations relating to the Series A Preferred Stock, subject to the availability of authorized and unissued shares of Series A Preferred Stock, the holders of Series A Preferred Stock may, by written notice to the Company:
● elect to convert all or any part of such holder’s shares of Series A Preferred Stock into common stock at a conversion rate of the lower of:
(a) $62.50 per share; or
(b) at the lowest price the Company has issued stock as part of a financing.
● convert all or part of such holder’s shares (excluding any shares issued pursuant to conversion of unpaid dividends) into debt obligations of the Company, secured by a security interest in all of the assets of the Company and its subsidiaries, at a rate of $62.50 of debt for each share of Series A Preferred Stock.
In the event of any liquidation, dissolution or winding up of this Company, either voluntary or involuntary (any of the foregoing, a “liquidation”), holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company to the holders of the common Stock or any other series of preferred stock by reason of their ownership thereof an amount per share equal to $1.00 for each share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Preferred Stock held by each such holder, plus the amount of accrued and unpaid dividends thereon (whether or not declared) from the beginning of the dividend period in which the liquidation occurred to the date of liquidation. Additionally, each holder of Series A Preferred Stock holds a security interest in substantially all of our assets in order to secure our obligations in connection with such Series A Preferred Stock.
On July 9, 2013, the Company amended the Certificate of Designations for the Company’s Series A Preferred Stock to allow for conversion into Series C Preferred stock to grant to a holder of the Series A Preferred Stock the option to:
● elect to convert all or any part of such holder’s shares of Series A Preferred Stock into shares of the Company’s Series C Convertible Preferred Stock, par value $0.00001 per share (which has since been withdrawn and is no longer designated), at a conversion rate of five (5) shares of Series A Preferred Stock for every one (1) share of Series C Preferred Stock; or to allow conversion into common stock at the lowest price the Company has issued stock as part of a financing to include all financings such as new debt and equity financing and stock issuances as well as existing debt conversions into stock.
On February 28, 2014, the Company’s Series A Preferred Stock stockholders agreed to authorize a change to the Certificate of Designations of the Series A Preferred Stock to lock the conversion price to the lower of (a) a fixed price of $2.50 per share; and (b) the lowest price the Company has issued stock as part of a financing after January 1, 2006.
Except for transfers to family members, or trusts for the benefit of Series A Preferred Stock holders, no holder of Series A Preferred Stock is able to transfer his/her/its shares of Series A Preferred Stock.
There are currently no shares of Series A Preferred Stock issued or outstanding.
Series B Convertible Preferred Stock
In connection with the Axion Exchange Agreement, Monaker filed a certificate of designation of its Series B Convertible Preferred Stock with the Secretary of State of Nevada on November 13, 2020, which was amended and restated by an amended and restated certificate of designation of its Series B Convertible Preferred Stock, filed with the Secretary of State of Nevada on January 8, 2021 (as amended and restated, the “Series B Designation”). The Series B Designation designated 10,000,000 shares of Series B Preferred Stock, $0.00001 par value per share (“Series B Preferred Stock”). The Series B Preferred Stock has the following rights:
Dividend Rights. The Series B Preferred Stock does not accrue dividends.
Liquidation Preference. The Series B Designation provides that the Series B Preferred Stock has a liquidation preference which is (a) pari passu with respect to the Company’s common stock and Series C Preferred Stock; and (b) junior to all current and future senior indebtedness of the Company. If the Company determines to liquidate, dissolve or wind-up its business and affairs, the Company will prior to or concurrently with the closing, effectuation or occurrence of any such action, pay the holders of the Series B Preferred Stock, pari passu with the holders of the Series C Preferred Stock and common stock, an amount equal to $0.9272121 per share, or $9,272,121 in aggregate.
Conversion Rights. Each share of Series B Preferred Stock is automatically convertible on the Approval Date (defined below), into 0.74177 shares of common stock. For the purposes of the following sentence:
● “Approval Date” means the later of (a) the fifth business day after the approval by Monaker’s stockholders of the Axion Preferred Conversion; (b) the business day that the Company has affected a reverse stock split of its outstanding common stock subsequent to the approval by Monaker’s stockholders of the Axion Preferred Conversion, to the extent such reverse stock split is deemed necessary by a Majority In Interest (defined below); (c) the date that NASDAQ has approved the continued listing of the Company’s common stock on NASDAQ following the closing of the HotPlay Share Exchange; and (d) the closing of the HotPlay Share Exchange.
● “Majority In Interest” means holders holding a majority of the then aggregate shares of Series B Preferred Stock issued and outstanding or the majority of the then aggregate shares of Series C Preferred Stock issued and outstanding, depending on which class of preferred stock holders are approving such matter.
Additionally, the maximum number of shares of common stock to be issued in connection with the conversion of all of the outstanding shares of Series B Preferred Stock and Series C Preferred Stock shares (and upon conversion or exercise of any other securities required to be aggregated with the Series B Preferred Stock and Series C Preferred Stock shares pursuant to the applicable rules and requirements of NASDAQ), cannot exceed such number of shares of common stock that would violate applicable listing rules of NASDAQ in the event the Company’s stockholders do not approve the issuance of the common stock issuable in connection with such conversion.
Voting Rights. The Series B Preferred Stock have no voting rights on general matters to come before the stockholders of the Company; however, the Company is prohibited from undertaking any of the following actions without the approval of a Majority In Interest:
(a) Increasing or decreasing (other than by redemption or conversion) the total number of authorized shares of Series B Preferred Stock;
(b) Re-issuing any shares of Series B Preferred Stock converted pursuant to the terms of the Series B Designation;
(c) Effecting an exchange, reclassification, or cancellation of all or a part of the Series B Preferred Stock;
(d) Effecting an exchange, or creating a right of exchange, of all or part of the shares of another class of shares into shares of Series B Preferred Stock;
(e) Issuing any shares of Series B Preferred Stock other than pursuant to the Axion exchange agreement;
(f) Altering or changing the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares of such series; or
(g) Amending or waiving any provision of the Company’s articles of incorporation or bylaws relative to the Series B Preferred Stock so as to affect adversely the shares of Series B Preferred Stock in any material respect as compared to holders of other series of shares.
Redemption Rights. The Series B Preferred Stock does not have any redemption rights.
Series C Convertible Preferred Stock
In connection with the Axion exchange agreement, Monaker filed a certificate of designation of its Series C Convertible Preferred Stock with the Secretary of State of Nevada on November 13, 2020 (the “Series C Designation”). The Series C Designation, which was approved by the board of directors of the Company on November 12, 2020, designates 3,828,500 shares of Series C Preferred Stock, $0.00001 par value per share of the Company (“Series C Preferred Stock”). The Series C Preferred Stock has the following rights:
Dividend Rights. The Series C Preferred Stock does not accrue dividends.
Liquidation Preference. The Series C Designation provides that the Series C Preferred Stock has a liquidation preference which is (a) pari passu with respect to the Company’s common stock and Series B Preferred Stock; and (b) junior to all current and future senior indebtedness of the Company. If the Company determines to liquidate, dissolve or wind-up its business and affairs, the Company will prior to or concurrently with the closing, effectuation or occurrence any such action, pay the holders of the Series C Preferred Stock, pari passu with the holders of the Series B Preferred Stock and common stock, an amount equal to $2.00 per share, or $7,657,000 in aggregate.
Conversion Rights. Each share of Series C Preferred Stock is automatically convertible on the Approval Date (defined and described above under “Series B Convertible Preferred Stock”), into one share of common stock (adjustable for stock splits and similar recapitalizations).
Additionally, the maximum number of shares of common stock to be issued in connection with the conversion of all of the outstanding shares of Series C Preferred Stock and Series B Preferred Stock shares (and upon conversion or exercise of any other securities required to be aggregated with the Series C Preferred Stock and Series B Preferred Stock shares pursuant to the applicable rules and requirements of NASDAQ), cannot exceed such number of shares of common stock that would violate applicable listing rules of NASDAQ in the event the Company’s stockholders do not approve the issuance of the common stock issuable in connection with such conversion.
Voting Rights. The Series C Preferred Stock have no voting rights on general matters to come before the stockholders of the Company; however, the Company is prohibited from undertaking any of the following actions without the approval of a Majority In Interest:
(a) Increasing or decreasing (other than by redemption or conversion) the total number of authorized shares of Series C Preferred Stock;
(b) Re-issuing any shares of Series C Preferred Stock converted pursuant to the terms of the Series C Designation;
(c) Effecting an exchange, reclassification, or cancellation of all or a part of the Series C Preferred Stock;
(d) Effecting an exchange, or creating a right of exchange, of all or part of the shares of another class of shares into shares of Series C Preferred Stock;
(e) Issuing any shares of Series C Preferred Stock other than pursuant to the A&R Axion Exchange Agreement;
(f) Altering or changing the rights, preferences or privileges of the shares of Series C Preferred Stock so as to affect adversely the shares of such series; or
(g) Amending or waiving any provision of the Company’s articles of incorporation or bylaws relative to the Series C Preferred Stock so as to affect adversely the shares of Series C Preferred Stock in any material respect as compared to holders of other series of shares.
Redemption Rights. The Series C Preferred Stock does not have any redemption rights.
Anti-Takeover Provisions Under the Nevada Revised Statutes
Certain provisions of Nevada law, and our Articles of Incorporation and our Bylaws, each as amended and subject, where applicable as described below, our opting out of certain provisions of Nevada law, contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Business Combinations
Sections 78.411 to 78.444 of the Nevada revised statues (the “NRS”) prohibit a Nevada corporation from engaging in a “combination” with an “interested stockholder” for three years following the date that such person becomes an interested stockholder and place certain restrictions on such combinations even after the expiration of the three-year period. With certain exceptions, an interested stockholder is a person or group that owns 10% or more of the corporation’s outstanding voting power (including stock with respect to which the person has voting rights and any rights to acquire stock pursuant to an option, warrant, agreement, arrangement, or understanding or upon the exercise of conversion or exchange rights) or is an affiliate or associate of the corporation and was the owner of 10% or more of such voting stock at any time within the previous three years.
A Nevada corporation may elect not to be governed by Sections 78.411 to 78.444 by a provision in its Articles of Incorporation. We have such a provision in our Articles of Incorporation, as amended, pursuant to which we have elected to opt out of Sections 78.411 to 78.444; therefore, these sections do not apply to us.
Control Shares
Nevada law also seeks to impede “unfriendly” corporate takeovers by providing in Sections 78.378 to 78.3793 of the NRS that an “acquiring person” shall only obtain voting rights in the “control shares” purchased by such person to the extent approved by the other stockholders at a meeting. With certain exceptions, an acquiring person is one who acquires or offers to acquire a “controlling interest” in the corporation, defined as one-fifth or more of the voting power. Control shares include not only shares acquired or offered to be acquired in connection with the acquisition of a controlling interest, but also all shares acquired by the acquiring person within the preceding 90 days. The statute covers not only the acquiring person but also any persons acting in association with the acquiring person.
A Nevada corporation may elect to opt out of the provisions of Sections 78.378 to 78.3793 of the NRS. We have no provision in our Articles of Incorporation pursuant to which we have elected to opt out of Sections 78.378 to 78.3793; therefore, these sections do not apply to us.
Removal of Directors
Section 78.335 of the NRS provides that 2/3rds of the voting power of the issued and outstanding shares of the Company are required to remove a director from office. As such, it may be more difficult for stockholders to remove directors due to the fact the NRS requires greater than majority approval of the stockholders for such removal.
Undesignated Preferred Stock
The ability to authorize undesignated preferred stock pursuant to our Articles of Incorporation, as amended, will make it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of the Company.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
A registrant such as the Company, that qualifies as a smaller reporting company, as defined by §229.10(f)(1), is not required to provide the information required by this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this filing. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. These statements involve risks and uncertainties and our actual results could differ materially from those discussed below. See “Cautionary Note Regarding Forward-Looking Statements” above for a discussion of the uncertainties, risks and assumptions associated with these statements. See also the disclosures under “Item 1A. Risk Factors”, above for additional discussion of such risks.
Growth Opportunities and Trends
Our ability to further grow our travel revenue will depend largely on increasing the number of distributors and suppliers, number of units, and revenue per listing for our Booking Engine; increasing the number of subscriptions on our NextTrip Business platform, and increasing the number and dollar value of our bookings in our leisure product.
Our achievement of these objectives will further depend on our ability to successfully enable more online bookable listings. Achieving growth in the number of distributors and the number of listings involves our ability to (i) increase our listing renewal rates, (ii) reach new distributors, property managers and owners through marketing activities, and/or (iii) obtain new listings through geographic expansion, strategic acquisitions, or investments. Increasing revenue per listing and revenue from other products and services will involve our ability to successfully drive more bookings and to successfully introduce new products to our marketplace.
In the future, we believe it will become more important to increase marketing investments to grow and further advertise our brand and products to distributors and travelers. We have seen other companies launch online businesses offering ALRs or other alternatives to hotels and we believe this growing favorable awareness of alternatives to hotels will support growth in our business. However, we have also seen a trend of increased government regulation and taxation of the industry. We continue to monitor the effects of these trends and will take actions as necessary to mitigate their effects.
Novel Coronavirus (COVID-19)
The COVID-19 pandemic, and governmental responses thereto, including travel restrictions, ‘stay-at-home’ orders and required social distancing orders, have severely restricted the level of economic activity around the world, and is having an unprecedented effect on the global travel industry. Additionally, the ability to travel has been curtailed through border closures, mandated travel restrictions and limited operations of hotels, airlines, and may be further limited through additional voluntary or mandated closures of travel-related businesses.
The measures implemented to contain the COVID-19 pandemic have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position. In particular, such measures have led to unprecedented levels of cancellations and limited new travel bookings. Moreover, any additional measures or changes in laws or regulations, whether in the United States or other countries, that further impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring the closure of hotels or other travel-related businesses (such as restaurants) or otherwise restricting travel due to the risk of the spreading of COVID-19, may exacerbate the negative impact of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows and liquidity position.
The duration and severity of the COVID-19 pandemic are uncertain and difficult to predict at this time. The pandemic could continue to impede global economic activity for an extended period of time, even as restrictions are being lifted in many jurisdictions (including the United States) and vaccines are being made available, leading to decreased per capita income and disposable income, increased and sustained unemployment or a decline in consumer confidence, all of which could significantly reduce discretionary spending by individuals and businesses on travel and may create a recession in the United States or globally. In turn, that could have a negative impact on demand for our services. We also cannot predict the long-term effects of the COVID-19 pandemic on our partners and their business and operations or the ways that the pandemic may fundamentally alter the travel industry. The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2022 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2021 ended February 28, 2021. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently. Separately, our capital requirements may increase in the near term and long-term due to the impact of the COVID 19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
As a result of the above, in the event the HotPlay Share Exchange described above does not close timely, if at all, and/or if the HotPlay Share Exchange is terminated, 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.
Recent Significant Funding Transactions
● On November 23, 2020, the Company borrowed $3.5 million from Streeterville and in March 2021, the Company borrowed an additional $8.4 million from Streeterville. On May 26, 2021, Streeterville funded an additional $1.4 million to the Company.
● On September 1, 2020, September 18, 2020, September 30, 2020, on or around November 2, 2020, and on November 24, 2020, and on around December 28, 2020 and on and around January 6, 2021 HotPlay advanced Monaker $300,000, $700,000, $1,000,000, $400,000, $100,000, $450,000, $50,000 respectively, under the terms of the HotPlay Exchange Agreement. On March 16, 2021, March 19, 2021, and April 15, 2021, HotPlay loaned the Company $9 million, $1 million and $2 million, respectively. The loans were made pursuant to the terms of the HotPlay Exchange Agreement and were evidenced by Convertible Promissory Notes dated effective March 16, 2021, March 19, 2021, and April 15, 2021, in the amount of $9,000,000, $1,000,000, and $2,000,000 respectively. The advances were evidenced by HotPlay Convertible Notes in the amount of each advance, and an effective date as of the date of each advance. The HotPlay Convertible Notes totaled $3.0 million as of February 28, 2021 and $15 million as of the date of this Report.
● On December 29, 2020, the Company engaged Kingswood Capital and Aegis Capital Corp. as underwriters for a public offering of 3,080,000 shares of common stock with an offering price of $2.50. The offering was fully subscribed, and the Company received $7,700,000. On January 13, 2021, the underwriters exercised their option and sold the additional 462,000 shares at $2.50 per share. The Company received $1,155,000 in connection with the over-allotment exercise.
● On May 13, 2021, the Company sold an aggregate of 3,714,500 shares of common stock in a public offering with an offering price of $2.50. The offering was fully subscribed, and the representative of the underwriters, Kingswood, exercised its over-allotment option in full. The Company received approximately $8.5 million as a result of the offering.
Additionally, we were significantly dependent during the year ended February 28, 2021, on funds provided by our Chairman, as described in greater detail under “Item 8. Financial Statements and Supplementary Data” - “Note 10 - Related Party Promissory Notes and Transactions”.
Key Financial Highlights
Key financial highlights for the fiscal year ended (FYE) February 28, 2021 include the following:
● Travel and commission revenues were $48,338, compared to $441,769 for the FYE February 29, 2020, a decrease of 89.1%;
● Net loss attributable to the consolidated group was approximately $16.5 million, or $(1.12) per basic and diluted share for the FYE February 28, 2021, compared to a net loss of approximately $9.5 million or $(0.80) per basic and diluted share for the FYE February 29, 2020;
● Cash used in operating activities was approximately $7.4 million for the FYE February 28, 2021, compared to cash used in operating activities of approximately $4.9 million for the FYE February 29, 2020;
● Cash used in investing activities was approximately $2.2 million for the FYE February 28, 2021 compared to cash provided in investing activities of approximately $1.8 million for the FYE February 29, 2020;
● Cash provided by financing investing activities was approximately $12.3 million for the FYE February 28, 2021 compared to cash provided by financing activities of approximately $3.3 million for the FYE February 29, 2020;
● There was a net increase in cash of approximately $2,478,482 for the FYE February 28, 2021, compared to an increase in cash of approximately $129,527 for the FYE February 29, 2020; and
● Cash and cash equivalents as of February 28, 2021 was approximately $2,640,988.
RESULTS OF OPERATIONS
Results of Operations for the Fiscal Year Ended February 28, 2021 Compared to the Fiscal Year Ended February 29, 2020
Revenues
Total travel and commission revenues decreased 89.1% to $48,338 for the fiscal year ended (FYE) February 28, 2021, compared to $441,769 for the FYE February 29, 2020, a decrease of $393,431. The decrease is mainly attributable to COVID-19 and its impact on the travel industry which was felt due to many international locations not being open for travel and tourism, cruise lines not operating, general travel restrictions as well as stay-at-home orders for most of the world.
Cost of Revenues
We had cost of revenues of $43,204 for the year ended February 28, 2021, compared to $352,963 for the year ended February 29, 2020, which decreased similarly to the decrease in revenues over the same period driven mainly by the impacts of COVID-19.
Operating Expenses
Our operating expenses, including technology and development, salaries and benefits, selling and promotion, amortization of intangibles and general and administrative expenses, increased 32.3% to $7,974,383 for the FYE February 28, 2021, compared to $6,056,421 for the fiscal year ended February 29, 2020, an increase of $1,917,962. The increase in operating expenses were driven by a $924,901 increase in general and administrative expenses, primarily due to an increase in Professional Legal fees of approximately $1,070,216 related to the IDS and Axion matters; an increase in salaries and benefits of $990,886; an increase in selling and promotion expense of $326,303; and an increase in stock-based compensation of $256,332 and an increase of $211,510 in depreciation and amortization which were partially offset by a $791,970 decrease in technology and development expenses.
Other Income (Expenses)
Other income/(expense) includes gain on sale of assets, valuation gain/(loss), interest expense, loss on legal settlement, contract settlement expenses, realized gain/(loss) on sale of unconsolidated affiliates and non-controlling interest in consolidated affiliates. Total other expenses increased to $8,539,405 for FYE February 28, 2021, as compared to $3,487,071 for FYE February 29, 2020 or a change of $5,052,334. The increased expenses were mainly due to $551,763 of realized losses on the sale of unconsolidated affiliates for the FYE of February 28, 2021 as compared to realized gains on the sale of unconsolidated affiliates of $1,984,870 for the FYE February 28, 2020, or a decrease of $2,536,633, which was mainly related to the sale of Verus and Recruiter holdings securities. Additionally, the Company recorded an impairment of the intangible asset related to IDS of $2,070,000 for the FYE February 28, 2021, due to the settlement of the prior pending legal matter with IDS.
Net Income/Loss
We had net loss of $16,508,665 for the FYE February 28, 2021, compared to net loss of $9,454,686 for the FYE February 29, 2020, an increase in net loss of $7,053,969 from the prior period. The increased loss is primarily attributed to an increase of $2,001,634 in operating (loss) and an increase in other (expense) of $5,052,334 for the reasons described above.
Contractual Obligations
The following schedule represents obligations and commitments on the part of the Company that are not included in liabilities:
Current Long Term
FYE 2022 FYE 2023 Totals
Office Leases $ 75,094 $ 209,629 $ 284,723
Insurance and Other 55,916 55,916 111,832
Totals $ 131,010 $ 265,545 $ 396,555
Liquidity and Capital Resources
On February 28, 2021, we had $2,640,988 of cash on-hand which was an increase of $2,478,482 from $162,506 at February 29, 2020. The increase in cash on hand was mainly attributed to net proceeds received from financing activities of $11,991,438, which was partially offset by cash used for operating expenses of $7,356,215 and cash used by investing activities of $2,156,740.
As of February 28, 2021, the Company had total current liabilities of $6,835,072, consisting mainly of notes payable in the form of a Note Purchase Agreement with Streeterville Capital LLC of $2,260,000 and convertible notes payable to HotPlay of $3,000,000, as well as Accounts Payable and Accrued Expenses of $1,793,239. We anticipate that we will satisfy these amounts from proceeds derived from equity sales, sales of marketable securities, financing, cash on hand and revenue generated from sales.
As of February 28, 2021, we had $26.0 million in total assets, $6.8 million in total liabilities, working capital of $6.1 million and a total accumulated deficit of $132.3 million.
Net cash used in operating activities increased to $7,356,216 for the FYE February 28, 2021, compared to $4,937,697 of cash used in operating activities during the FYE February 29, 2020. The increase was mainly the result of the Company’s net loss from operations, payments relating to prepaid expenses for software, licenses and games along with increases in other current assets.
Net cash used in investing activities decreased to $2,156,740 for the FYE February 28, 2021 as compared to net cash provided by investing activities of $1,781,491 for FYE February 29, 2020. The decrease can be attributed mainly to cash used for the purchase of intangible assets related to the business acquisition of Longroot, Inc., a decrease in proceeds from the sale of unconsolidated affiliates related to the Verus and Recruiter holdings, and payments related to website development costs.
Net cash provided by financing activities increased to $11,991,438 for the FYE February 28, 2021, compared to $3,285,733 for the FYE February 29, 2020. The increase was primarily due to funds received from the sale of common stock and net cash provided by promissory notes activity.
On June 15, 2016, we entered into a revolving line of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, which merged with National Bank of Commerce, which continued as the surviving entity, on July 8, 2019 (“National Bank”). The revolving line of credit has been amended various times to date, and on May 7, 2020, we entered a new Promissory Note with National Bank (“New Note”) in connection with the line of credit. The New Note replaced a prior promissory Note we had in place with National Bank in connection with our $1,200,000 revolving line of credit and extended the due date of the prior Note from June 30, 2020 to December 31, 2020. The New Note also amended the interest rate of the prior Note to provide that amounts due under the New Note accrue interest at the rate of prime plus 3% (which rate is currently 6.25%)(the interest rate of the prior Note was prime plus 1%), subject to a floor of 4.5%, which interest is payable monthly in arrears. The New Note may be prepaid at any time without penalty. The New Note contains standard and customary events of default. On December 1, 2020 the company paid off the full balance of the New Note of $1,192,746.
Additional information regarding our notes payable, notes receivable, investments in equity instruments, acquisitions and dispositions and line of credit can be found under “Item 8. Financial Statements and Supplementary Data” - “Note 4 - Notes Receivable”; “Note 10 - Related Party Promissory Notes and Transactions”, “Note 5 - Investment in Equity Instruments”, “Note 6 - Acquisitions and Dispositions”, “Note 8 - Line of Credit”; and “Note 17 - Subsequent Events”.
We have very limited financial resources. We currently have a monthly cash requirement of approximately $600,000, exclusive of capital expenditures. We anticipate funds raised through the May 2021 underwritten offering and funds borrowed from Streeterville, will be sufficient to provide us working capital through the closing of the HotPlay Share Exchange. In the event the HotPlay Share Exchange does not close on a timely basis or the HotPlay Share Exchange is terminated, we anticipate requiring additional funding, because our projected cash generated from operations is not sufficient to meet our cash needs for working capital and capital expenditures, and if such additional funds are required, management intends to seek additional equity or obtain additional credit facilities or loans. However, we may be unable to raise additional capital upon terms acceptable to us. The sale of additional equity will result in additional dilution to our shareholders. A portion of our cash may be used to acquire or invest in complementary businesses, or to increase our ownership of Axion or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies.
We will need substantial additional capital to support the on-going operation and increased market penetration of our products including the development of national advertising relationships, increases in operating costs resulting from additional staff and office space until such time as we generate revenues sufficient to support ourselves. We believe that in the aggregate, we could require several millions of dollars to support and expand the marketing and development of our travel products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from all products are fully implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all, will negatively impact our business, financial condition, and liquidity. As of February 28, 2021, we had approximately $6.8 million of current liabilities. We currently do not have the 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 equity or debt financing, which funds may not be available on favorable terms, if at all. We anticipate that we would need several millions of dollars to properly market our services and fund the operations for the next 12 months.
Separately, our capital requirements may increase in the near term and long-term due to the impact of the COVID-19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. To the extent there are material differences between these estimates and our actual results, our consolidated financial statements will be affected.
Our significant accounting policies are described in “Item 8. Financial Statements and Supplementary Data” - “Note 1 - Description of Business and Summary of Significant Accounting Policies” to the accompanying consolidated financial statements.
The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. We believe that the policies listed below involve the greatest degree of complexity and judgment by our management and are critical for understanding and evaluating our financial condition and results of operations. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.
Revenue Recognition
We recognize revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired, the sales price is fixed or determinable and collectability is reasonably assured.
Revenues for customer travel packages purchased directly from the Company are recorded in gross amounts (the amount paid to the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
We generate our travel revenues from sales directly to customers as well as through other distribution channels of tours and activities at destinations throughout the world. We also generate revenue from commissions on bookings and sales of ancillary products and services. We generate revenue in the form of commissions from the sale of cryptocurrency offerings which are recognized at the time funds are raised.
Payments for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized at the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
Business Combinations
The purchase prices of acquired businesses or acquired assets have been allocated to the tangible and intangible assets acquired and liabilities assumed, based upon their estimated fair value at the date control is obtained. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.
Most of the businesses we have acquired did not have a significant amount of tangible assets. We typically identified the following identifiable intangible assets in each acquisition: trade name, licenses, customer relationships and internal software. In making certain assumptions on valuation and useful lives, we considered the unique nature of each acquired asset.
Determining the estimated fair value of assets involves the use of significant estimates, judgment and assumptions, such as future cash flows and selection of comparable companies. Future changes in our assumptions or the interrelationship of those assumptions may negatively impact future valuations and could result in an impairment of goodwill or intangible assets that may have a material effect on our financial condition and operating results.
Definite-lived intangible assets are recorded at cost and amortized using a method that reflects our best estimate of the pattern in which the economic benefit of the related intangible asset is utilized.
Goodwill and indefinite-lived intangible assets, such as certain trade names and licenses, are not amortized and are subject to annual impairment tests during the fourth quarter, or whenever events or circumstances indicate impairment may have occurred. For goodwill and indefinite lived intangible assets, we complete a quantitative analysis that compares the fair value of our reporting unit or indefinite-lived intangible assets to the carrying amounts, and an impairment loss is recognized equivalent to the excess of the carrying amount over the fair value.
Accounts Receivable
We extend credit to our customers in the normal course of business. Further, we regularly review outstanding receivables, and provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, we make judgments regarding our customers’ ability to make required payments, economic events, and other factors. As the financial condition of these parties’ change, circumstances develop or additional information becomes available, and adjustments to the allowance for doubtful accounts may be required. We maintain reserves for potential credit losses, and such losses traditionally have been within our expectations. As of February 28, 2021, and February 29, 2020, we had $0 and $0 of accounts receivable, respectively. Our allowance for doubtful accounts was $0 as of February 28, 2021.
Impairment of Long-Lived Assets
In accordance with Accounting Standards Codification 360-10, “Property, Plant and Equipment”, we periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. As of February 28, 2021, we had not impaired any long-lived assets.
Website Development Costs
We account for website development costs in accordance with Accounting Standards Codification 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 subject to straight-line amortization over a three-year period and costs incurred in the day-to-day operation of the website are expensed as incurred.
Goodwill and Other Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, we assess the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important, which could trigger an impairment review include the following:
1. Significant underperformance to historical or projected future operating results;
2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business; and
3. Significant negative industry or economic trends.
When we determine that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flow, we record an impairment charge. We measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. We evaluated the remaining useful life of the intangibles and wrote-down the intellectual property assets related to IDS in the amount of $2,070,000, during the year ended February 28, 2021, but had no write-downs or impairments for the fiscal year ended February 29, 2020.
Intellectual properties that have finite useful lives are amortized over their useful lives. We incurred amortization expense of $210,507 and $293,804 for the years ended February 28, 2021 and February 29, 2020, respectively, which is included in operating expenses.
Convertible promissory notes
Upon issuance of convertible promissory senior notes, we separated the notes into liability and equity components. We record debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the notes using the effective interest rate method. The equity component is not re-measured if it continues to qualify for equity classification. The balance of convertible promissory senior notes, as of February 28, 2021 and February 29, 2020, was $3,000,000 and $0, respectively.
In accounting for the transaction costs related to the Note issuance, we allocated the total amount incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to expense over the term of the notes using the effective interest rate method, and transaction costs attributable to the equity component were netted with the equity component in stockholders’ equity.
Derivative Instruments
We enter into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. We account for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.
We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk-free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of the new accounting standard, increases in the trading price of our common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of our common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.
Based upon ASC 815-25 the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible debentures. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 intends to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the FASB determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings and is effective in fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company adopted the new standard during 2017, preventing the need to account for several outstanding warrants that contain down round features as derivative instruments.
Stock-Based Compensation
We have stock-based compensation plans which allow for the issuance of stock-based awards, including stock options, restricted stock units and restricted stock awards. We compute share-based payments in accordance with Accounting Standards Codification 718-10 “Compensation” (ASC 718-10). ASC 718-10 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services at fair value, focusing primarily on accounting for transactions in which an entity obtains employees services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of an entity’s equity instruments or that may be settled by the issuance of those equity instruments.
SAB No. 107, Share-Based Payment (“SAB 107”) provides guidance regarding the interaction of ASC 718-10 and certain SEC rules and regulations. We have applied the provisions of SAB 107 in its adoption of ASC 718-10. We account for stock-based compensation expense by amortizing the fair value of each stock-based award expected to vest over the requisite service or performance period. The fair value of restricted stock awards is based on the number of shares granted and the closing price of our common stock on the date of grant. The fair value of each stock option award is calculated on the date of grant using the Black-Scholes option-pricing model.
The Black-Scholes model requires various assumptions including fair value of the underlying stock, volatility, expected term, risk-free interest rate and expected dividends. We use our historical experience to estimate the expected forfeiture rate of awards, and only recognize expense for those awards expected to vest. To the extent the actual forfeiture rate is different from the estimate, the stock-based compensation expense is adjusted accordingly. If any of the assumptions we use in estimating the fair value of awards change significantly or the actual forfeiture rate is different than the estimate, stock-based compensation expense may differ materially in the future.
We have implemented all new relevant accounting pronouncements that are in effect through the date of these financial statements. These pronouncements did not have a material impact on the financial statements and unless otherwise disclosed, we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes” in accordance with the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We then assess the likelihood that the deferred tax assets will be recovered from future taxable income and the reversal of temporary taxable differences. A valuation allowance is established against deferred tax assets to the extent we believe that recovery is not likely. Significant judgment is required in determining any valuation allowance to be recorded. In assessing the need for a valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, reversals of taxable temporary differences and the feasibility of tax planning over the periods in which the temporary differences are deductible. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which the determination is made.
The difference between our effective income tax rate and the federal statutory rate is primarily a function of the mix of uncertain tax positions and permanent differences including non-deductible charges. Our provision for income taxes is subject to volatility and could be adversely impacted if earnings or tax rates differ from our expectations or if new tax laws are enacted.
Significant judgment is required in evaluating any uncertain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions. We are required to identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the amount of these positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments are reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities. We adjust these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. To the extent that the final outcome of a matter is different than the amount recorded, such differences will impact the provision for income taxes in the period in which the determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as any related net interest and penalties.
We have adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of February 28, 2021, the Company’s income tax returns for tax years ending February 29, 2020, February 28, 2019, 2018, 2017, February 29, 2016, February 28, 2015, and 2014 remain potentially subject to audit by the taxing authorities.
We follow the guidance of ASC 740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry- forwards. No current tax provision has been made in the accompanying statement of income (loss) because no taxes are due currently or were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry- forward has been recognized, as it is not deemed likely to be realized.
Earnings per Share
Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted loss per common share is not presented because it is anti-dilutive.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Description
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statement of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Monaker Group, Inc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Monaker Group, Inc (“the Company”), as of February 28, 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of February 28, 2021, and the consolidated results of its operations and its cash flows for the year ended February 28, 2021, in conformity with U.S generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements and going concern assessment of critical audit matter below, the Company has suffered recurring losses from operations and has stockholders’ deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgement. The communication of a critical audit matter does not alter in anyway our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Going Concern Assessment
As described in Note 2 to the financial statements, the Company prepared its financial statements on a going concern basis, and management has concluded that the Company has not generated sufficient income to sustain its operations. For the year ended February 28, 2021, the Company incurred net losses of USD 16.5 million and used the net cash in operating activities of USD 7.4 million. As of February 28, 2021, the accumulated deficit amounted to USD 132.3 million.
The principal consideration for our determination that performing procedures relating to the Company’s going concern assessment is a critical audit matter is the significant judgment by management related to the Company’s ability to raise funds and continue operations.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the issuance of additional equity and debt securities by the Company subsequent to the year end.
/S/ TPS Thayer, LLC
TPS Thayer, LLC
We have served as the Company’s auditor since 2020
Sugar Land, Texas
June 7, 2021
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Monaker Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Monaker Group, Inc. (“the Company”), as of February 29, 2020 and February 28, 2019, and the related statements of operations, changes in stockholder’s equity and cash flows for the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of February 29, 2020 and February 28, 2019, and the consolidated results of its operations and its cash flows for the years ended February 29, 2020 and February 28, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of a Matter
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note #2 to the financial statements, the Company has an accumulated deficit and limited financial resources. This raises substantial doubt about its ability to continue as a going concern. Management’s plan with regard to these matters is also described in Note #2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ Thayer O’Neal Company, LLC
Thayer O’Neal Company, LLC
We have served as the Company’s auditor since
Sugar Land, Texas
May 29, 2020
Monaker Group, Inc.
Consolidated Balance Sheet
As of
February 28, 2021 February 29, 2020
Assets
Current Assets
Cash $ 2,640,988 $ 162,506
Prepaid expenses and other current assets 1,864,279 334,995
Investment in unconsolidated affiliates - short-term 264,884 979,954
Security Deposits 258,296 53,279
Notes Receivable, related parties 7,657,024 -
Other Receivable, related parties 216,647 -
Note Receivable, net - 37,500
Total current assets 12,902,118 1,568,234
Non-current Assets
Investment in unconsolidated affiliates - long term 4,912,111 1,849,077
Website development costs and intangible assets, net 8,081,718 6,712,547
Fixed Assets, net 101,573 19,664
Operating lease right-of-use asset - 76,762
Total assets $ 25,997,520 $ 10,226,284
Liabilities and Stockholders’ Equity
Current Liabilities
Line of Credit & Notes Payable, net $ 1,807,462 $ 1,192,716
Convertible Notes Payable, related parties 3,000,000 -
Accounts payable and accrued expenses 1,793,239 833,679
Other current liabilities 234,372 400,692
Operating lease liability - 76,762
Revolving promissory notes, related party - 1,575,000
Total current liabilities 6,835,073 4,078,849
Total liabilities 6,835,073 4,078,849
Commitments and Contingencies
Stockholders’ equity
Series A Preferred Stock, $0.01 par value; 3,000,000 authorized; no shares issued and outstanding at February 28, 2021 and February 29, 2020 - -
Series B Preferred Stock, $0.00001 par value; 10,000,000 authorized; 10,000,000 and 0 shares issued and outstanding at February 28, 2021 and February 29, 2020, respectively -
Series C Preferred Stock, $0.00001 par value; 3,828,500 authorized; 3,828,500 and 0 shares issued and outstanding at February 28, 2021 and February 29, 2020, respectively -
Common stock, $0.00001 par value; 500,000,000 shares authorized; 18,765,839 and 13,069,339 shares issued and outstanding at February 28, 2021 and February 29, 2020, respectively
Additional paid-in-capital 151,427,224 122,000,201
Currency Translation 53,712 -
Accumulated deficit (132,340,979 ) (115,852,897 )
Stockholders’ equity attributable to parent 19,140,282 6,147,435
Non-Controlling Interest 22,165 -
Total stockholders’ equity $ 19,162,447 $ 6,147,435
Total liabilities and total stockholders’ equity $ 25,997,520 $ 10,226,284
The accompanying notes are an integral part of these consolidated financial statements.
Monaker Group, Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the years ended
February 28, February 29,
Revenues
Travel revenues $ 48,338 $ 441,769
Gross revenues 48,338 441,769
Cost of revenues (43,204 ) (352,963 )
Gross profit 5,134 88,806
Operating expenses
General and administrative 2,939,655 2,014,753
Salaries and benefits 2,776,748 1,785,862
Technology and development 655,667 1,447,637
Stock-based compensation 633,713 377,381
Selling and promotions expense 461,606 135,303
Depreciation and Amortization 506,995 295,485
Total operating expenses 7,974,384 6,056,421
Operating loss (7,969,250 ) (5,967,615 )
Other income (expense)
Valuation (loss) gain, net (5,851,149 ) (5,267,208 )
Interest expense (392,749 ) (164,177 )
Contract and legal settlement expenses - (75,000 )
Realized gain/(loss) on sale of unconsolidated affiliates (551,763 ) 1,984,870
Other income/(expense), net 326,256 34,444
Impairment of Intangible Asset (2,070,000 ) -
Total other (expense) (8,539,405 ) (3,487,071 )
Net (loss) $ (16,508,655 ) $ (9,454,686 )
Share of non-controlling interest 4,616 -
Net (loss) attributable to parent $ (16,504,039 ) $ (9,454,686 )
Other comprehensive (loss) income:
Foreign currency translation gain $ 53,712 $ -
Total other comprehensive gain $ 53,712 $ -
Comprehensive loss $ (16,450,327 ) $ (9,454,686 )
Weighted average number of common shares outstanding
Basic 14,728,741 11,773,633
Diluted 14,728,741 11,773,633
Basic net (loss) per share $ (1.12 ) $ (0.80 )
Diluted net (loss) per share $ (1.12 ) $ (0.80 )
The accompanying notes are an integral part of these consolidated financial statements.
Monaker Group, Inc.
Consolidated Statements of Cash Flows
For the years ended
February 28,
February 29,
Cash flows from operating activities:
Net (loss)
$ (16,504,039 )
$ (9,454,686 )
Adjustments to reconcile net loss to net cash (used in) operating activities:
Amortization and depreciation
193,534
295,485
Amortization of debt issuance costs
313,462
Stock based compensation
577,197
706,957
Valuation loss on unconsolidated affiliates
5,851,149
-
Realized (gain)/loss on sale of unconsolidated affiliates
551,763
(1,984,870 )
Unrealized (gain)/loss on sales of unconsolidated affiliates
-
5,267,208
Allowance for bad debt
37,500
-
Impairment of Intangible Asset
2,070,000
-
Shares issued for services
1,176,421
-
(Gain)/Loss on Currency Translation
53,712
-
Changes in operating assets and liabilities:
Decrease/(increase) in prepaid expenses and other current assets
(1,877,172 )
(264,962 )
Increase/(decrease) in accounts payable and accrued expenses
(76,762 )
141,296
Increase/(Decrease) in other current liabilities
277,019
355,875
Net cash used in operating activities
$ (7,356,216 )
$ (4,937,697 )
Cash flows from investing activities:
Purchase of Furniture, Fixture and Equipment
(90,710 )
(21,345 )
Payment related to website development costs and intangible assets
(1,213,738 )
(144,534 )
Proceeds from sale of unconsolidated affiliates
521,245
1,984,870
Payments for business acquisition
(1,373,537 )
-
Payment for note receivable, related parties
-
(37,500 )
Net cash (used in) / provided by investing activities
$ (2,156,740)
$ 1,781,491
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants
10,015,154
1,785,930
Proceeds from exercise of common stock warrants
250,000
275,087
Proceeds from notes payable
3,870,000
(284 )
Payments for line of credit and notes payable
(2,802,716)
-
Payment of debt issuance costs
(766,000)
-
Proceeds from promissory notes, related parties
3,000,000
1,225,000
Payments for promissory notes, related parties
(1,575,000)
-
Net cash provided by financing activities
$ 11,991,438
$ 3,285,733
Net increase in cash
$ 2,478,482
$ 129,527
Cash at beginning of year
$ 162,506
$ 32,979
Cash at end of year
$ 2,640,988
$ 162,506
Supplemental disclosure:
Cash paid for interest
$ 392,749
$ 164,177
Supplemental disclosure of non-cash investing and financing activity:
Shares issued for intellectual property purchase
$ -
$ 4,920,000
Shares issued for investments
16,929,145
-
The accompanying notes are an integral part of these consolidated financial statements.
Monaker Group, Inc.
Consolidated Statements of Stockholders’ Equity
For the years ended February 28, 2021 and February 29, 2020
Preferred Stock B Preferred Stock C Common Stock Additional Paid-in Accumulated Accumulated Other Stockholders Non-controlling Total
Shares Amount Shares Amount Shares Amount Capital Deficit Comprehensive Income Equity Interests Equity
Balances, February 28, 2019 - - - - 9,590,956 $ 96 $ 114,265,762 $ (106,398,211 ) - $ 7,867,647 $ - $ 7,867,647
Common stock issued for cash - - - - 1,000,500 $ 10 1,785,920 - - 1,785,930 - 1,785,930
Warrants Exercised - - - - 122,350 $ 1 275,086 - - 275,087 - 275,087
Stock issued for stock compensation - - - - 188,533 $ 1 302,305 - - 302,307 - 302,307
Shares issued for Investor Relations - - - - 174,000 $ 2 404,648 - - 404,650 - 404,650
Shares issued for Intangible Assets - - - - 1,968,000 $ 20 4,919,980 - - 4,920,000 - 4,920,000
Shares issued for marketing services - - - - 25,000 $ - 46,500 - - 46,500 - 46,500
Net income (loss) - - - - - $ - - (9,454,686 ) - $ (9,454,686 ) - (9,454,686 )
Balances, February 29, 2020 - - - - 13,069,339 $ 131 $ 122,000,201 $ (115,852,897 ) - $ 6,147,435 $ - $ 6,147,435
Common stock issued for cash - - - - 4,542,000 $ 45 $ 10,015,109 $ - - $ 10,015,154 $ - $ 10,015,154
Warrants Exercised
125,000 $ 1 $ 249,999 $ - - $ 250,000
$ 250,000
Shares issued for stock compensation - - - - 255,000 $ 2 $ 577,195 $ - - $ 577,197 $ - $ 577,197
Shares issued for Investor Relations - - - - 460,000 $ 5 $ 978,391 $ - - $ 978,396 $ - $ 978,396
Shares issued for marketing services - - - - 114,500 $ 1 $ 249,324 $ - - $ 249,325 $ - $ 249,325
Shares issued for business acquistion - - - - 200,000 $ 2 $ 427,998 $ - - $ 428,000 $ - $ 428,000
Shares issued for Investment in Affiliate 10,000,000 $ 100 3,828,500 $ 38 - $ - $ 16,929,007 $ - - $ 16,929,145 $ - $ 16,929,145
Minority interest acquired for business combination and others
$ 15,957
$ 15,957 $ 26,781 $ 42,738
Currency translation
$ -
$ 53,712 $ 53,712
$ 53,712
Net (loss) - $ - - $ - - $ - $ - $ (16,504,039 )
$ (16,504,039 ) $ (4,616 ) $ (16,508,655 )
Balances, February 28, 2021 10,000,000 $ 100 3,828,500 $ 38 $ 18,765,839 $ 187 $ 151,427,224 $ (132,340,979 ) $ 53,712 $ 19,140,282 $ 22,165 $ 19,162,447
The accompanying notes are an integral part of these consolidated financial statements.
Monaker Group, Inc.
Notes to the Consolidated Financial Statements
February 28, 2021 and February 29, 2020
Note 1 - Description of Business and Summary of Significant Accounting Policies
Nature of Operations and Business Organization
Monaker Group, Inc. and its subsidiaries (“Monaker”, “we”, “our”, “us”, or “Company”) is an innovative technology company that is building next generation solutions to power the travel, gaming, and cryptocurrency industries. We believe the most promising part of the business plan for our travel operations is the incorporation of Monaker’s proprietary Booking Engine and sizeable alternative lodging rental (ALR) properties into well-established marketplaces (i.e., a business-to-business (B2B) model) thereby facilitating easy access of alternative lodging rentals inventory to contracted global distributor partners.
The Company’s travel operation serves three major constituents: (1) property managers, (2) travelers, and (3) other travel/lodging distributors. Property managers integrate their detailed property listings into the Monaker Booking Engine with the goal of reaching a broad audience of travelers seeking ALRs, through distribution channels they could not access otherwise.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with 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 consolidated 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 consolidated financial position. Significant items subject to estimates and assumptions include the fair value of investments, the carrying amounts of intangible assets, depreciation and amortization, the valuation of stock options and deferred income taxes.
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 at February 28, 2021 and February 29, 2020.
Website Development Costs
The Company accounts for website development costs in accordance with 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.
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.
Fixed Assets
The Company purchases computers, laptops, furniture and fixture. The computers and laptops are recorded as fixed assets with a useful life of 3 years. The furniture and fixture are recorded as a fixed asset with a useful life of 5 years. Straight-line depreciation is used for all fixed assets.
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.
Impairment of Intangible Assets
In accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:
1. Significant underperformance compared to historical or projected future operating results.
2. Significant changes in the manner or use of the acquired assets or the strategy for the overall business, and
3. Significant negative industry or economic trends.
When the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. Intangible assets that have finite useful lives are amortized over their useful lives. The Company incurred amortization expense of $210,507 and $293,804 during the years ended February 28, 2021 and February 29, 2020, respectively.
Convertible Debt Instruments
The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.
Foreign Currency Translation
The Company prepares the financial statements of its foreign subsidiaries using the local currency as the functional currency. The assets and liabilities of the Company’s foreign subsidiaries are translated in to U.S. dollars at the rates of exchange at the balance sheet date with the resulting translation adjustments included as a separate component of stockholder’s 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.
Derivative Instruments
The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with ASC topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.
The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, the Company generally uses the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk-free rates) necessary to determine the fair value of these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of this accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial period result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial period result in the application of non-cash derivative income.
Based upon ASC 815-25 the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible debentures. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 intends to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the FASB determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings and is effective in fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company adopted the new standard during 2017, preventing the need to account for several outstanding warrants that contain down round features as derivative instruments.
Reclassification
Certain prior period amounts have been reclassified to conform with the current period presentation. The reclassification has no impact on the total assets, total liabilities, stockholders’ equity and net loss for the period.
Earnings per Share
Basic earnings per share are computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is 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.
Revenue Recognition
We recognize revenue when the customer has purchased the product, the occurrence of the earlier of date of travel or the date of cancellation has expired, the sales price is fixed or determinable and collectability is reasonably assured.
Revenue for customer travel packages purchased directly from the Company are recorded gross (the amount paid to the Company by the customer is shown as revenue and the cost of providing the respective travel package is recorded to cost of revenues).
We generate our revenues from sales directly to customers as well as through other distribution channels of tours and activities at destinations throughout the world. We also generate revenue from commissions on bookings and sales of ancillary products and services, where any commissions received was insignificant.
Payments for tours or activities received in advance of services being rendered are recorded as deferred revenue and recognized as revenue at the earlier of the date of travel or the last date of cancellation (i.e., the customer’s refund privileges lapse).
Cost of Revenue
Cost of revenue consists of cost of the tours and activities, transactions and merchant fees charged by credit card processors.
Selling and Promotions Expense
Selling and promotion expenses consist primarily of advertising and promotional expenses, expenses related to our participation in industry conferences, and public relations expenses.
Advertising Expense
Advertising costs are charged to expense as incurred and are included in selling and promotions expense in the accompanying consolidated financial statements. Advertising expense for the years ended February 28, 2021 and February 29, 2020, was $461,606 and $135,303, respectively.
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718, “Compensation - Stock Compensation”, which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.
The Company adopted ASU No. 2018-7, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting awards (“ASU 2018-7”) on January 1, 2018. As a result, awards made to independent consultants/contractors on or subsequent to January 1, 2018 are measured based on the grant date closing price of the Company’s common stock consistent with awards made to the Company’s employees and directors. Unvested awards issued to independent consultants/ contractors as of the adoption date of January 1, 2018 were remeasured at the adoption date stock price. The Company will recognize the remaining unrecognized value of unvested awards over the remaining performance period, with no further remeasurement through the performance completion date. Prior to the adoption of ASU 2018-7, the Company determined that the fair value of the awards made to independent contractors would be measured based on the fair value of the equity instrument as it is more reliably measurable than the fair value of the consideration received. The Company used the grant date as the performance commencement date, and the measurement date was the date the services were completed, which was the vesting date. As a result, the Company recorded stock-based compensation for these awards over the vesting period on a straight-line basis with periodic adjustments during the vesting period for changes in the fair value of the awards. If there are any modifications or cancellations of the underlying unvested share-based awards, the Company may be required to accelerate, increase or cancel any remaining unrecognized or previously recorded stock-based compensation expense.
Warrant Modifications
The Company treats a modification of the terms or conditions of an equity award in accordance with ASC Topic 718-20-35-3 by treating the modification as an exchange of the original award for a new award. In substance, the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation cost for any incremental value. Incremental compensation cost shall be measured as the excess, if any, of the fair value of the modified award determined in accordance with the provisions of this Topic 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.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of February 28, 2021, the Company’s income tax returns for tax years ending February 29, 2020, February 28, 2019, 2018, 2017, February 29, 2016, February 28, 2015, and 2014 remain potentially subject to audit by the taxing authorities.
Monaker Group, Inc. follows the guidance of ASC 740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No current tax provision has been made in the accompanying statement of income (loss) because no taxes are due currently or were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
Our effective tax rate was 25.5% for the years ended February 28, 2021 and February 29, 2020. On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act significantly changed the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, a move from a worldwide tax system to a territorial system, as well as other changes. As a result of enactment of the legislation, we have not incurred additional income tax expense during the February 28, 2021 and February 29, 2020 fiscal year-ends. The Company does not have exposure to tax on accumulated foreign earnings or an exposure from the repeal of foreign tax credits.
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 provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
○ Level 1 - Quoted prices in active markets for identical assets or liabilities.
○ Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
○ Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities.
Financial instruments consist principally of cash, accounts receivable, prepaid expenses, notes receivable, net, accounts payable, accrued liabilities, notes payable, related parties, line of credit and certain other current liabilities. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
Recent Accounting Pronouncements
Income Taxes (TOPIC 740): Simplifying the Accounting for Income Taxes
On December 18, 2019, the FASB issued new guidance that simplifies the accounting for income taxes as part of the Board’s overall initiative to reduce complexity in accounting standards. Amendments include the removal of certain exceptions to the general principles of ASC 740, Income taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period.
The Company is assessing the impact of the new guidance. The management anticipates that the adoption of the new guidance will have no significant impact to our financial statements.
Measurement of Credit Losses on Financial Instruments.
In June 2016, the FASB issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. This update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those annual periods. The pronouncement was adopted in the fiscal year ended February 29, 2020 with no impact to our financial statements.
Note 2 - Going Concern
As of February 28, 2021, and February 29, 2020, the Company had an accumulated deficit of $132,340,979 and $115,852,897, respectively. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
We have very limited financial resources. We currently have a monthly cash requirement of approximately $600,000.
We will need to raise substantial additional capital to support the on-going operation and increased market penetration of our products including the development of national advertising relationships and increases in operating costs resulting from additional staff and office space until such time as we generate revenues sufficient to support current operations. We believe that in the aggregate, we could require several millions of dollars to support and expand the marketing and development of our travel products, repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business, and cover other operating costs until our planned revenue streams from travel products are fully implemented and begin to offset our operating costs. We anticipate obtaining a portion of such funds from HotPlay (defined below), pursuant to the terms of HotPlay Exchange Agreement (defined below), and in the event the HotPlay Exchange Agreement closes. Our failure to close the HotPlay Share Exchange or obtain additional capital to finance our working capital needs on acceptable terms, or at all, will negatively impact our business, financial condition, and liquidity. As of February 28, 2021, we had approximately $6,835,072 of current liabilities. We currently do not have the 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.
Our current plan is to close the transactions contemplated by the HotPlay Share Exchange. We currently operate in the travel and cryptocurrency industries. Upon the completion of the HotPlay Exchange Agreement, the Company plans to transition its operations to those of a travel, cryptocurrency, and an in-game advertising company. During the period until the Closing of the HotPlay Exchange Agreement, and in the event the HotPlay Exchange Agreement is not consummated, the Company intends to continue to actively operate in the travel and cryptocurrency industries.
Management’s plans with regard to this going concern are as follows: the Company plans to work towards closing the HotPlay share exchange, which is subject to certain closing conditions and other requirements, will continue to attempt to raise funds with third parties by way of public or private offerings (similar to the December 2020 underwritten offering and the May 2021 underwritten offering, discussed below under “Note 17 - Subsequent Events”). The Company is working aggressively to increase the viewership of its products by promoting it across other mediums which the Company hopes will result in higher revenues. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan and generate greater revenues. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.
Although we currently cannot predict the full impact of the COVID-19 pandemic on our fiscal 2022 financial results relating to our operations, we anticipate an increase in year-over-year revenue as compared to fiscal year 2021 ended February 28, 2021. However, the ultimate extent of the COVID-19 pandemic and its impact on global travel and overall economic activity is constantly changing and impossible to predict currently.
Separately, our capital requirements may increase in the near term and long-term due to the impact of the COVID-19 pandemic, the resulting reduced demand for travel services, the increases in cancellations and re-bookings, and the extent to which such pandemic may further impact the ability of our customers to fulfill their payment obligations.
Note 3 - Notable Financial Information
Prepaid Expenses and Other Current Assets
As of February 28, 2021 and February 29, 2020, the Company had prepaid and other current assets of $1,864,279 as compared to $334,995 respectively. The increase of $1,529,284 is mainly driven by $532,950 of Board of Director compensation, $393,260 of annual and perpetual license fees, and $353,357 of business consulting service contracts.
Security Deposits
As of February 28, 2021 and February 29, 2020, the Company had security deposits of $258,296 as compared to $53,279, respectively. The increase of $205,017 is primarily related to a $169,930 deposit for the new corporate office leased space and the $14,234 deposit for the previous Weston leased office.
Other Receivable - Related Parties
The Other Receivable, related parties balance of $216,647 as of February 28, 2021 is associated with the consolidation of Longroot, Inc. following the business acquisition. The balance is comprised mainly of a receivable from True Axion Interactive, Ltd of approximately $99,456 and with HotNow Company Limited of approximately $96,527.
Fixed Assets
As of February 28, 2021 and February 29, 2020, the Company had net fixed assets of $101,573 as compared to $19,664, respectively. The increase of $81,909 is primarily related to additions of office equipment such as computers and monitors of $18,300 and associated programs of $63,550 necessary to support the increased headcount as well as the new leased office space.
Accounts Payable and Accrued Expenses
As of February 28, 2021 and February 29, 2020, the Company had accounts payable and accrued expenses $1,793,239 as compared to $833,679 respectively. The increase of $959,560 is primarily driven by the $450,000 liability to Jason Morton for the final payment of the Longroot acquisition, $400,000 of accrued expense related to William Kerby’s annual bonus, $123,000 of accrued legal expense, $113,438 of accrued stock compensation and $57,690 of accrued marketing and networking expenses.
Note 4 - Notes Receivable
Current
$230,000 Promissory Note from Bettwork Industries Inc.
On October 10, 2018, we entered into a Promissory Note with Bettwork Industries Inc. (“Bettwork”), a related party, in the amount of $200,000 which was amended and superseded by an Amended Promissory Note dated October 19, 2018, in the amount of $230,000 (the “Bettwork Note”). The Bettwork Note bears interest at 12% per year and matured on February 28, 2019. All interest and the principal balance are due and payable on the maturity date. The Bettwork Note includes a “Default Rate” of eighteen percent (18.0%) per annum and is secured by all of the outstanding preferred stock shares held by the Chairman of the Board of Directors of Bettwork (which provide for super-majority voting rights) and Bettwork is precluded from issuing additional shares of common stock or preferred stock without consent from Monaker. In November 2018, a payment of $40,000 was received and the outstanding principal balance of the Bettwork Note as of February 28, 2021 and February 29, 2020 is $190,000 and $190,000, respectively. An allowance for bad debt of $190,000 (i.e., 100%) was reserved against the Bettwork Note as of February 28, 2019.
$37,500 Promissory Note from Crystal Falls Investments LLC.
On January 13, 2020, we entered a Promissory Note with Crystal Falls Investments LLC. (“Crystal”), a related party, in the amount of $37,500. The Crystal Note bears interest at 12% per year and matured on April 14, 2020. On April 16, 2020 and effective April 14, 2020, a first amendment to the Crystal Note was entered into extend the maturity date to August 14, 2020. All interest and the principal under the Crystal Note are due and payable on the maturity date. The Crystal Note includes a “Default Rate” of eighteen percent (18.0%) per annum and is secured by 2,000,000 shares of Bettwork’s common stock currently held in escrow. The Company has the right to elect at maturity of the Crystal Note to either take payment of the amount due (i) in cash, or (ii) pledged shares, or any combination of cash and shares. The outstanding principal balance of the Crystal Note as of February 28, 2021 and February 29, 2020 is $37,500 and $37,500, respectively.
On September 15, 2020, and effective August 14, 2020, a second amendment to the Crystal Note was entered into between us and Crystal Falls, to extend the maturity date of the Crystal Note to February 14, 2021. An allowance for bad debt of $37,500 (i.e., 100%) was reserved against the Bettwork Note as of February 28, 2021.
Non-current
Conversion of $1,600,000 Promissory Note Into 2,133,333 Common Stock Shares of Bettwork Industries Inc
On November 21, 2017, we entered into a Purchase Agreement and an addendum thereto (the “Purchase Addendum”) with A-Tech LLC (“A-Tech”) on behalf of its wholly owned subsidiary Parula Village Ltd. (“Parula”) whereby we purchased from A-Tech, through Parula, ownership of 12 parcels of land on Long Caye, Lighthouse Reef, Belize (the “Property”) for 240,000 shares of restricted common stock valued at a total of $1,500,000. As part of the same consideration, A-Tech agreed to construct 12 vacation rental residences on the Property within 270 days of closing of the transaction (the “Construction Obligation”); and the agreement provided that if the vacation rental residences were not completed within the 270 days, Monaker would cancel 12,000 shares, valued at $75,000 (of the previously issued 240,000 shares of restricted common stock) for each residence not completed. Additionally, in the event the average closing price of Monaker’s common stock for the 10 trading days prior to the 90th day after the closing of the transaction was less than $6.25 per share, Monaker was required to issue additional shares of restricted common stock such that the value of the shares issued to A-Tech totaled $1.5 million. On February 20, 2018 (the first business day following the 90th day after the closing), Monaker issued an additional 66,632 shares of common stock valued at $4.80 per share, for a total of $319,834, to meet the 90-day look-back provision for a guaranteed purchase price of $1.5 million. Bettwork and A-Tech share a common principal.
On May 31, 2018, Monaker and Bettwork entered into an agreement whereby Bettwork acquired the ‘right to own’ the Property from the Company in consideration for a Secured Convertible Promissory Note in the amount of $1.6 million (the “Secured Note”). The amount owed under the Secured Note accrues interest at a fluctuating interest rate, based on the prime rate, and is due and payable on May 31, 2020. The repayment of the Secured Note is secured by first priority security interest in the ‘right to own’ and subsequent to the exercise thereof, the Property. Bettwork may prepay the Secured Note at any time, subject to its obligation to provide the Company 15 days prior written notice prior to any prepayment. The Secured Note was convertible into shares of Bettwork’s common stock, at our option, subject to a 9.99% beneficial ownership limitation. The conversion price of the Secured Note was $1.00 per share, unless, prior to the Secured Note being paid in full, Bettwork completed a capital raise or acquisition and issued common stock or common stock equivalents (including, but not limited to convertible securities) with a price per share (as determined in our reasonable discretion) less than the Conversion Price then in effect (each a “Transaction”), at which time the Conversion Price was to be adjusted to match such lower pricing structure associated with the Transaction (provided such repricing shall continue to apply to subsequent Transactions which occur prior to the Secured Note being paid in full as well). On July 2, 2018, this promissory note was exchanged for 2,133,333 shares of Bettwork’s common stock at $0.75 per share. The outstanding principal balance of the Secured Note as of February 28, 2021 and February 29, 2020 is $0 and $0, respectively. A deferred gain liability of $1.6 million had been reserved against the Secured Note on May 31, 2018. Upon the exchange of the note for common stock shares of Bettwork, on July 2, 2018, the deferred gain liability reserve of $1.6 million was reversed and recognized in net income as other income, gain on sales of assets as of February 28, 2019. Bettwork’s common stock is quoted on the OTC Pink market under the symbol “BETW”.
Conversion of $2,900,000 Promissory Note Into 3,866,667 Common Stock Shares of Bettwork Industries Inc
Effective on August 31, 2017, we entered into a Purchase Agreement (the “Purchase Agreement”) with Bettwork. Pursuant to the Purchase Agreement, we sold Bettwork:
(a) Our 71.5% membership interest in Voyages North America, LLC, a Delaware limited liability company (“Voyages”), including the voyage.tv website and 16,000 hours of destination and promotional videos;
(b) Our 10% ownership in Launch360 Media, Inc., a Nevada corporation (“Launch360”);
(c) Rights to broadcast television commercials for 60 minutes every day on R&R TV network stations which rights remain in place until the earlier of (i) the date the shares of Launch360 are no longer held by Bettwork; and (ii) the date that Launch360 no longer has rights to broadcast television commercials on R&R TV network stations, for whatever reason; and
(d) Our Technology Platform for Home & Away Club and supporting I.C.E. partnership (collectively (a) through (d), the “Assets”).
Bettwork agreed to pay $2.9 million for the assets, payable in the form of a Secured Convertible Promissory Note (the “$2.9 Million Secured Note”). The amount owed under the $2.9 Million Secured Note accrues interest at the rate of (a) six percent per annum until the end of the last day of the month in which the sale occurred; and (b) the greater of (i) six percent per annum and (ii) the prime rate plus 3 3/4% per annum, thereafter through maturity, which maturity date is August 31, 2020, provided that the interest rate increases to twelve percent upon the occurrence of an event of default. As of February 28, 2021 and February 29, 2020, no interest income has been accrued.
Bettwork may prepay the $2.9 Million Secured Note at any time, subject to its obligation to provide us 15 days written notice prior to any prepayment. The $2.9 Million Secured Note is convertible into shares of Bettwork’s common stock, at our option, subject to a 4.99% beneficial ownership limitation (which may be waived by us with at least 61 days prior written notice). The conversion price of the $2.9 Million Secured Note is $1.00 per share (the “Conversion Price”), unless, prior to the $2.9 Million Secured Note being paid in full, Bettwork completes a capital raise or acquisition and issues common stock or common stock equivalents (including, but not limited to convertible securities) with a price per share (as determined in our reasonable discretion) less than the Conversion Price then in effect (each a “Transaction”), at which time the Conversion Price will be adjusted to match such lower pricing structure associated with the Transaction (provided such repricing shall continue to apply to subsequent Transactions which occur prior to the Secured Note being paid in full as well). On July 2, 2018, this promissory note was exchanged for 3,866,667 shares of Bettwork’s common stock at $0.75 per share. The outstanding principal balance of the $2.9 Million Secured Note as of February 28, 2021 and February 29, 2020 is $0 and $0, respectively, and, an allowance of $2,900,000 (i.e., 100%) had been reserved against the $2.9 Million Secured Note upon its inception on August 31, 2017. Upon the exchange of the note into common stock shares of Bettwork on July 2, 2018, the deferred gain liability reserve of $2.9 million was reversed and recognized in net income as other income, gain on sales of assets for the year ended February 28, 2019. Bettwork’s common stock is quoted on the OTC Pink market under the symbol “BETW”.
Note 5 - Investment in Unconsolidated Affiliates
We assess the potential impairment of our equity method investments when indicators such as a history of operating losses, negative earnings and cash flow outlook, and the financial condition and prospects for the investee’s business segment might indicate a loss in value.
Verus International, Inc and NestBuilder.com Corp (OTCMKTS: VRUS)
We have recognized an impairment loss on investment in unconsolidated affiliate. As of February 28, 2021, and February 29, 2020, Monaker owned 3,845,101 and 61,247,139 shares of Verus International, Inc. (formerly known as RealBiz Media Group, Inc. (“Verus”)) Series A Preferred Stock, respectively. This interest was written down to zero ($0) as of February 28, 2015.
On December 22, 2017, we entered into a Settlement Agreement with Verus, NestBuilder.com Corp. (“Nestbuilder”) and American Stock Transfer & Trust Company, LLC (“AST”) relating to the dismissal with prejudice of certain pending lawsuits with Verus, including Case No.: 1:16-cv-24978- DLG in the United States District Court for the Southern District of Florida. As part of the Settlement Agreement, Monaker agreed to pay Nestbuilder $100,000 and to issue 20,000 shares of Monaker’s restricted common stock to person(s) to be designated by Nestbuilder; Verus reinstated to Monaker 44,470,101 shares of Verus Series A Convertible Preferred Stock and ratified all rights under the Certificate of Designation as reformed and amended (to provide for a conversion ratio of 1 share of Verus common stock for each 1 share of Verus Series A preferred stock converted) and remove any dividend obligations. The Verus designation was also amended to provide us with anti-dilution protection below $0.05 per share. Also, as part of the Settlement Agreement, Monaker received 49,411 shares of common stock of Nestbuilder. The agreement further provided for each party to dismiss the above referenced lawsuits with prejudice and for general releases from each party. As a result of the settlement, (i) the investment in equity securities, representing 44,470,101 shares of Verus Series A Preferred Stock, is recorded at $0 as of February 28, 2019 and, (ii) the investment in equity securities, representing 49,411 shares of Nestbuilder’s common stock, is recorded at $0 as of February 28, 2019.
On April 10, 2019 and effective on February 8, 2019, we entered into an Inducement Agreement with Verus. Pursuant to the Inducement Agreement, we agreed to amend the designation of the Series A Convertible Preferred Stock of Verus (the “Series A Preferred Stock”)(of which we held 44,470,101 shares of Series A Preferred Stock, which converts into common stock of Verus, and votes on all stockholder matters, on a one-for-one basis, subject to the Ownership Blocker (discussed below)), to remove certain anti-dilution rights described therein; and Verus agreed to issue us 152,029,899 shares of its common stock, following Verus’ planned increase in authorized shares of common stock, pursuant to the anti-dilution rights of that certain Settlement Agreement by and among the Company, Verus, American Stock Transfer & Trust Company, LLC and NestBuilder.com Corp. executed on or about December 22, 2017, as previously disclosed. The designation of the Series A Preferred Stock, as amended, includes a 9.99% beneficial ownership limitation, preventing the Company from converting such Series A Preferred Stock into common stock of Verus (and reducing the voting rights of such preferred stock proportionally), if upon such conversion, the Company, its affiliates and/or any group which it is a part of, would own greater than 9.99% of Verus’ common stock (the “Ownership Blocker”).
On April 16, 2019, Verus filed a Certificate of Amendment (the “Amendment”) to its Amended and Restated Certificate of Incorporation, as amended, to increase its authorized common stock from 1,500,000,000 shares to 7,500,000,000 shares and to decrease the par value of its common stock and preferred stock from $0.001 per share to $0.000001 per share. On April 23, 2019, Verus issued us the 152,029,899 shares of common stock.
As of January 31, 2020, Verus has 2,320,876,565 shares of common stock outstanding, 41,444,601 shares of Series A preferred stock outstanding and 430,801 shares of Series C preferred stock outstanding.
On February 29, 2020, the Company owned 61,247,139 shares of Verus’s common stock at $0.016 per share valued at $979,954.
During March 2020 and April 2020, the Company sold 3,367,664 and 2,991,929 shares of Verus common stock in the open market for $53,883 and $35,903, respectively.
On January 12, 2021, the Company owned 54,887,546 shares of common stock of Verus when Verus affected a 500 to 1 reverse stock split. The Company held 109,775 shares of Verus common stock after the reverse split.
Between January 13 - 31, 2021, the Company sold in open market transactions 109,775 shares of Verus stock, divesting its holdings in Verus. The divestiture resulted in a decrease in the fair value of such shares of $649,020 for the twelve months ended February 28, 2021. The change in fair value of $649,020 is recognized in realized gain or (loss) in unconsolidated affiliates as other expense as of February 28, 2021.
6,142,856 shares of Bettwork Industries Inc. Common Stock (OTC Pink: BETW)
On July 2, 2018, three Secured Convertible Promissory Notes aggregating $5,250,000 (as described in “Note 4 - Notes Receivable”), evidencing amounts we were owed by Bettwork, were exchanged for 7,000,000 shares of Bettwork’s common stock at $0.75 per share, for a fair value of $5,250,000 as of July 2, 2018. Bettwork’s common stock has a readily determinable fair value as it is quoted on the OTC Pink market under the symbol “BETW”.
On February 29, 2020, the shares of Bettwork’s common stock held by the Company were trading at $0.25 per share which decreased the fair value of the 6,142,856 remaining shares of Bettwork common stock to $1,535,714 and caused an accumulated fair value loss of $6,081,427 to be realized. The change in fair value of $6,081,427 is recognized in net income (loss) as other income, valuation loss, net, as a valuation loss as of February 29, 2020.
As February 28, 2021, the 6,142,856 shares of Bettwork’s common stock held by the Company were trading at $0.09 per share valued at $55,286, which decreased the fair value by $1,480,428 for the fiscal year to date. The change in fair value of $1,480,428 is recognized in net loss as other expense, valuation loss, net for the twelve months ended February 28, 2021.
Recruiter.com Group, Inc. formerly Truli Technologies Inc (OTCQB: RCRT).
On August 31, 2016, Monaker entered into a Marketing and Stock Exchange Agreement with Recruiter.com (“Recruiter”). The Agreement required Monaker to issue to Recruiter 75,000 shares of Monaker common stock in exchange for 2,200 shares of Recruiter common stock. Also, Monaker issued to Recruiter an additional 75,000 shares of Monaker common stock for marketing initiatives within the Recruiter platform. In essence, Monaker issued 75,000 shares of its common stock to purchase 2,200 shares of Recruiter and, Monaker issued an additional 75,000 shares of its common stock as a prepayment for marketing and advertising within the Recruiter platform. Recruiter was at that time a private company with a platform that companies and individuals use for employment placements.
On February 29, 2020, the Company owned 139,273 shares of Recruiter’s common stock compared to 78,137 shares of Recruiter’s common stock as of February 28, 2021. As of February 28, 2021, each share of Recruiter.com’s common stock was valued at $3.39 per share which increased the fair value of the 103,435 shares of Recruiter.com common stock to $350,645 and caused an accumulated fair value gain of $37,282 to be realized. The change in fair value of $37,282 is recognized in net income as other income, valuation loss, net, as a valuation loss as of February 28, 2021.
Acquisition of Axion Shares
The investment in affiliate of $4,856,825 as of February 28, 2021, represents the Company’s acquisition of Axion equity by the transactions contemplated with the Axion Share Exchange Agreement, described in greater detail in “Item 1. Business-Recent Material Events-HotPlay and Axion Share Exchanges”, on November 16, 2020. Pursuant to the Axion Exchange Agreement, which closed on November 16, 2020, the Axion Stockholders, exchanged ordinary shares of Axion equal to approximately 33.85% of the outstanding common shares of Axion, in consideration for 10,000,000 shares of newly designated shares of Series B Convertible Preferred Stock of the Company, which are automatically convertible into common shares of the Company upon the occurrence of certain events, including the closing of the HotPlay Share Exchange, into an aggregate of 7,417,700 shares of Monaker common stock. As of February 28, 2021, the value of this investment decreased by $4,415,296 from $9,272,121 to $4,856,825 due to the change in the market price of Axion shares.
Also pursuant to the Axion Share Exchange Agreement, which closed on November 16, 2020, the Axion Creditors exchanged debt of Axion in the aggregate amount of $7,657,024, for 3,828,500 shares of newly designated shares of Series C Convertible Preferred Stock of the Company, which are automatically convertible into common shares of the Company upon the occurrence of certain events, including the approval of such issuances by the stockholders of the Company, on a one-for-one basis. As of February 28, 2021, the values associated with the assumed debt has remained unchanged.
Also pursuant to the Axion Share Exchange Agreement, which closed on November 16, 2020, the Company granted a warrant to Cern One, to purchase 1,914,250 shares of the Company’s common stock. The Creditor Warrants vest on the later of (a) the date the Series B Preferred Stock and Series C Preferred Stock convert into common stock and the earlier of (i) the date the Axion Debt is fully repaid by Axion or (ii) the date that the Company obtains 51% or more of the voting control of, and economic rights to, Axion, provided that such vesting date must occur before November 16, 2021, or the Creditor Warrants will terminate. As of February 28, 2021, there has been no activity related to the warrant.
Note 6 - Acquisitions and Dispositions
Purchase of Longroot, Inc.
On November 16, 2020, the Company acquired 100% of Longroot, which in turn owned 57% of 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.
The acquisition was made pursuant to the November 2, 2020 SPA entered into with Dr. Jason Morton, and for certain limited purposes set forth therein, Longroot. Pursuant to the SPA, the Company purchased, 100% of Longroot, in consideration for (a) $1,650,000 in cash; and (b) 200,000 shares of restricted common stock at $2.14 per share for a total value of $428,000 as well as 150,000 shares of restricted common stock at $3.00 per share for a total value of $450,000.
Up to and included in the closing, as part of the cash consideration paid, the Company paid $1,200,000 to Longroot which was used for working capital and other shareholder related acquisition purposes as well as $428,000 of Company stock to complete the purchase. The remaining $900,000 owed to Morton pursuant to the terms of the SPA was payable in three installments of $300,000 each, due on or prior to (i) December 16, 2020 (30 days after the closing), which amount has been paid in full; (ii) March 16, 2021 (120 days after the closing); and (iii) April 15, 2021 (150 days after the closing), of which $150,000 was paid at the same time the first payment was made in December 2020. Pursuant to the SPA in consideration for the $900,000 owed post-closing, Morton received cash payments of $450,000 and elected to receive the remaining $450,000 in shares of common stock of the Company, of which the Company issued 150,000 shares at stock price of $3.00 per share.
On January 5, 2021, the Company, through Longroot, subscribed to purchase an additional 100 shares of Longroot Cayman, in consideration for $1 million. The subscription was made pursuant to certain pre-emptive rights set forth in a shareholders’ agreement entered into between the shareholders of Longroot Cayman, and increased Longroot’s ownership of Longroot Cayman up to 75% (from 57%).
Pursuant to the SPA, Morton agreed not to compete for a period of two years following the closing date, in connection with the operation of an initial coin offering portal in Thailand, subject to customary exceptions. The SPA also contains an indemnification obligation whereby the Company agreed to indemnify and hold Morton harmless against any claims made by Axion or any of its shareholders, directors, officers, agents or representatives against Morton in connection with the SPA or the Company’s purchase of Longroot.
The Company hopes that the access to Longroot Limited’s technology and digital asset capabilities will enable the Company to offer new financing mechanisms and participation options, including in wholesale travel, gaming, and digital advertising.
In accordance with ASC 805, as described in “Note 1 - Summary of Business Operations and Significant Accounting Policies”, the Company has accounted for this business combination utilizing the following values in connection with the purchase of Longroot, Inc.: total consideration to selling shareholder of $2,528,000 (and $2,250,636, net of cash acquired) and the purchase price has been provisionally allocated as follows. The fair value of net assets acquired were $219,940 and an intangible asset (license) of $2,212,702 with the liabilities assumed of $142,983 and minority interest of $39,023. The intangible assets include a license granted by the Thai Securities and Exchange Commission which has an indefinite useful life and therefore is not amortized but will be tested for impairment annually in alignment with the Company’s other intangible asset impairment analysis. The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date and we will continue to evaluate the asset values within the 1-year timeframe as provided in the guidance.
Note 7 - Website Development Costs and Intangible Assets
The following table sets forth the intangible assets, both acquired and developed, including accumulated amortization as of February 28, 2021 and February 29, 2020:
February 28, 2021
Useful Life Cost Impairment Accumulated
Amortization Net Carrying
Value
In-Service Date (Estimate)
Website platform 1.0 years $ 400,000
$ 400,000 $
Contracts, domains, customer lists 2.0 years 1,199,446
1,199,446
Website platform 3.0 years 635,756
635,756
Website development costs 3.0 years 912,416
885,367 27,049
Software development costs 3.0 years 1,431,321
100,492 1,330,829
Trademark & License Indefinite 2,218,985
- 2,218,985
CIP - IDS Project 3.0 years 5,196,543 2,070,000 - 3,126,543
09/01/2021
Website development costs (not in service) 3.0 years 1,378,312
1,378,312
04/01/2021
$ 13,372,779 2,070,000 $ 3,221,061 8,081,718
Intangible assets with indefinite useful lives, referred to in the table above totaling $2,218,985, are not amortized but are tested for impairment annually in alignment with the Company’s other intangible asset impairment analysis.
February 29, 2020
Useful Life Cost Accumulated
Amortization Net Carrying
Value
Website platform 1.0 years $ 400,000 $ 400,000 $ -
Contracts, domains, customer lists 2.0 years 1,199,447 1,199,447 -
Website platform 3.0 years 37,657 37,657 -
Website development costs 3.0 years 883,776 801,126 82,650
Website development costs (not placed in service) 3.0 years 1,559,262 - 1,559,262
Web platform 4.0 years 598,099 598,099 -
Trademark Indefinite 6,283 - 6,283
Software Development Costs 3.0 years 48,759
48,759
CIP - IDS Project
5,015,593 - 5,015,593
$ 9,748,876 $ 3,036,329 $ 6,712,547
During the years ended February 29, 2020 and February 28, 2021, the Company purchased a total of $5,196,543 of the intellectual property including an e-commerce platform from IDS, Inc. The cost of purchases was recorded as Capital in Progress (CIP). In addition, The Company incurred $183 in fees to register its trademark and capitalized $48,759 of software development costs.
This capitalization of these costs fall within the scope of ASC 350-50-25-15 wherein costs of upgrades and enhancements should be capitalized as they will result in added functionality of the website.
Intangible assets are amortized on a straight-line basis over their expected useful lives which is estimated to be 3 years. Amortization expense related to website development costs and intangible assets was $210,507 and $293,804 for the years ended February 28, 2021 and February 29, 2020, respectively.
The Based on the carrying value of definite-lived intangible assets as of February 28, 2021, we estimate our amortization expense for the next five years will be as follows:
Amortization
Year Ended February 28, Expense
$ 1,423,605
1,970,932
1,857,553
610,643
-
$ 5,862,733
According to the amendment of the Intellectual Property Purchase Agreement dated May 18, 2021, the Company and IDS, Inc agreed to amend the purchase price of the Intellectual property from $4,920,000 to $2,850,000. As a result, the Company recorded an impairment of $2,070,000 on the Intangible assets related to the IDS Intellectual property, based on its current value in use as of February 28, 2021.
Note 8 - Line of Credit
The National Bank of Commerce (FKA: Republic Bank) Line of Credit
On May 7, 2020, the Company entered a new Promissory Note with National Bank (the “New Note”). The Note replaced a prior promissory note the Company had in place with National Bank and extended the due date of the prior note from June 30, 2020 to December 31, 2020. The New Note also amended the interest rate of the prior note to provide that amounts due under the New Note accrue interest at the rate of prime plus 3% (which rate was 6.25%)(the interest rate of the prior note was prime plus 1%), subject to a floor of 4.5%. The New Note may be prepaid at any time without penalty. The New Note contains standard and customary events of default. On December 1, 2020, the Company repaid the New Note in full according to its terms.
As of February 28, 2021, the principal balance of the note payable was $0. Interest expense charged to operations relating to this line of credit was $3,313 and $74,858, respectively for the years ended February 28, 2021 and February 29, 2020. The Company has accrued interest as of February 28, 2021 and February 29, 2020 of $-0- and $-0-, respectively.
Note 9 - Notes Payable
Note Purchase Agreement: Streeterville Capital, LLC
On November 23, 2020, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”), pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $5,520,000 (the “Streeterville Note”). Streeterville paid consideration of an initial cash purchase price of $3,500,000 for the note and issued the Company a promissory note in the amount of $1,500,000 (the “Investor Note”). The associated debt issuance costs of the note were $370,000 for total amount due $3,870,000. In addition to the $370,000 of debt issuance costs the Company paid $245,000 for advisory fees, giving net proceeds of $3,255,000.
The Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after the date of the note (i.e., on November 23, 2021). From time to time, beginning six months after issuance, Streeterville may redeem a portion of the Streeterville Note, not to exceed $0.8 million if the Investor Note has not been funded and $1.25 million if the Investor Note has been funded. In the event we do not pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the Streeterville Note. Under certain circumstances the Company may defer the redemption payments up to three times, for a duration of 30 days each, provided that upon each such deferral the outstanding balance of the Streeterville Note is increased by 2%. Subject to the terms and conditions set forth in the Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the Streeterville Note remains outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock, which payments will be applied towards and will reduce the outstanding balance of the Streeterville Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the Streeterville Note (each an “Equity Payment”). Each time that we fail to pay an Equity Payment, the outstanding balance of the Streeterville Note automatically increases by 10%. Additionally, in the event we fail to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment.
The November 2020 Streeterville Note provided that if any of the following events had not occurred on or before April 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof (the “April 2021 Note Increase”): (a) HotPlay Enterprise Limited (“HotPlay”) must have become a wholly-owned subsidiary of the Company; (b) during the period beginning on July 21, 2020, and ending on the date that certain Share Exchange Agreement entered into with HotPlay and the HotPlay stockholders dated July 23, 2020, as amended from time to time (the “HotPlay Share Exchange Agreement” and the transactions contemplated therein, the “HotPlay Share Exchange”) is consummated, HotPlay must have raised at least $15,000,000 in cash through equity investments; (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; (d) HotPlay must have become a co-borrower on the November 2020 Streeterville Note; and (e) the Company must have paid off all outstanding debt obligations to the Donald P. Monaco Insurance Trust and National Bank of Commerce, in full (collectively, the “November 2020 Note Transaction Conditions”). To date, the Company has not yet completed the acquisition of HotPlay, and as such, the November 2020 Note Transaction Conditions have not been met.
Pursuant to the Streeterville Note, we provided Streeterville a right of first refusal to purchase any promissory note, debenture or other debt instrument which we propose to sell, other than sales to officers or directors of the Company and/or sales to the government. Each time, if ever, that we provide Streeterville such right, and Streeterville does not exercise such right to provide such funding, the outstanding balance of the Streeterville Note increases by 3%. Each time, if ever, that we fail to comply with the terms of the right of first refusal, the outstanding balance of the Streeterville Note increases by 10%. Additionally, upon each major default described in the Streeterville Note (i.e., the failure to pay amounts under the Streeterville Note when due or to observe any covenant under the Note Purchase Agreement (other than the requirement to make Equity Payments)) the outstanding balance of the Streeterville Note automatically increases by 15%, and for each other default, the outstanding balance of the Streeterville Note automatically increases by 5%, provided such increase can only occur three times each as to major defaults and minor defaults, and that such aggregate increase cannot exceed 30% of the balance of the Streeterville Note immediately prior to the first event of default.
In connection with the Note Purchase Agreement and the Streeterville Note, the Company has entered into a Security Agreement with Streeterville (the “Security Agreement”), pursuant to which the obligations of the Company are secured by substantially all the assets of the Company, subject to a priority lien and security interest in the collateral of the Company.
The Investor Note, in the principal amount of $1,500,000, evidences the amount payable by Streeterville to the Company as partial consideration for the acquisition of the Streeterville Note. The Investor Note accrues interest at the rate of 10% per annum, payable in full on November 23, 2021, subject to a 30-day extension exercisable at the option of Streeterville and may be prepaid at any time. Streeterville may, in its sole discretion, designate collateral as security for its obligations under the Investor Note, provided that currently there is no collateral evidencing the repayment of such note. In the event (i) of the occurrence of any event of default under the Streeterville Note, (ii) of a breach of any material term, condition, representation, warranty, covenant or obligation of the Company under any agreement entered into with Streeterville along with the Note Purchase Agreement, or (iii) if the Company sells, transfers, assigns, pledges or hypothecates the Investor Note, or attempts to do any of the foregoing, Streeterville is entitled to deduct and offset any amount owing by the Company under the Streeterville Note from any amount owed by Streeterville under the Investor Note (provided that such amount is automatically offset if Streeterville has not exercised its offset right within 30 days prior to the maturity date of the Investor Note). The Investor Note includes customary events of default, subject to cure rights where applicable. The amount of the Investor Note has been offset against the amount of the Streeterville Note in the balance sheet as of February 28, 2021, as both notes have substantially similar terms, and the Investor Note was provided in consideration for the acquisition of a portion of the Streeterville Note. The Investor Note was subsequently funded in full in January 2021.
The Paycheck Protection Program (PPP) Loan
On May 8, 2020, the Company obtained a $176,534 loan (the “Loan”) from The Commercial Bank (the “Lender”), pursuant to the Paycheck Protection Program (the “PPP”) under the “CARES Act”. The Loan is evidenced by a promissory note (the “PPP Note”), dated effective May 8, 2020, issued by the Company to the Lender. The Note is unsecured with a 2-year term, matures on May 8, 2022, and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 8, 2020, following an initial deferral period as specified under the PPP. The PPP Note may be prepaid at any time prior to maturity with no prepayment penalties. Proceeds from the Loan were available to the Company to fund designated expenses, including certain payroll costs, rent, utilities and other permitted expenses, in accordance with the PPP. Under the terms of the PPP, up to the entire amount of principal and accrued interest could be forgiven to the extent Loan proceeds were used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration under the PPP (including that at least 60% of such Loan funds are used for payroll).
On August 14, 2020, the Company submitted the loan forgiveness application to Commercial Bank for the entire amount of $176,534. The accrued interest was $561 as of August 31, 2020.
On November 10, 2020, the Company received notification from The Commercial Bank that the entire loan balance was forgiven. The principal was recorded as other income and the accrued interest was reversed.
HotPlay Convertible Notes Dates - Current
On September 1, 2020, September 18, 2020, September 30, 2020, on or around November 2, 2020, and on November 24, 2020, and on around December 28, 2020 and on and around January 6, 2021 HotPlay advanced Monaker $300,000, $700,000, $1,000,000, $400,000, $100,000, $450,000, $50,000 respectively, under the terms of the HotPlay Exchange Agreement. The advances were evidenced by convertible promissory notes (“HotPlay Convertible Notes”) in the amount of each advance, and an effective date as of the date of each advance. The HotPlay Convertible Notes totaled $3.0 million as of February 28, 2021.
The advances, and the entry into the HotPlay Convertible Notes, were required conditions to the HotPlay Exchange Agreement, pursuant to which HotPlay was required to loan us $1,000,000 on or before August 31, 2020 (provided that Monaker waived such delay in providing such initial $1,000,000 of HotPlay advances) and was required to loan us an additional $1,000,000 (each a “Subsequent Loan”, and such loans, the “HotPlay Loans”), on September 30, 2020, and on the 15th day of each calendar month thereafter (each a “Required Lending Date”), through the date of closing of the HotPlay Exchange Agreement (provided that Monaker has waived any delay in timely providing such amounts to date).
The HotPlay Notes are automatically forgiven by HotPlay in the event the HotPlay Exchange Agreement is terminated (a) by written agreement of the parties thereto; (b) by HotPlay (and its stockholders) or the Company, if the closing has not occurred on or before the required date set forth in the HotPlay Exchange Agreement (currently May 31, 2021, provided that the parties are continuing to work together to close the HotPlay Exchange Agreement), unless the failure of the closing to have occurred is attributable to a failure on the part of the terminating party; (c) by the Company, if there is a material adverse effect on HotPlay or any schedule delivered by HotPlay is found to be materially misleading or conflict with any prior written or oral statement delivered to the Company; or (d) by the Company, if any representations or warranties made by HotPlay or its stockholders in the HotPlay Exchange Agreement are found to be materially inaccurate or any covenants are breached.
Alternately, if the HotPlay Exchange Agreement is terminated (a) by HotPlay or its principal stockholder (as applicable) because a governmental authority of competent jurisdiction issues a final non-appealable order, or takes any other action having the effect of, permanently restraining, enjoining, or otherwise prohibiting the consummation of the transactions contemplated by the HotPlay Exchange Agreement (a “Government Action”); (b) by HotPlay if any event occurs that makes it impossible to satisfy a condition precedent to the HotPlay Exchange Agreement; (c) by HotPlay if there is a material adverse effect on the Company; or (d) by HotPlay if any representations or warranties made by the Company in the HotPlay Exchange Agreement are found to be materially inaccurate or any covenant of the Company is breached; or by the Company in connection with a Government Action or any event occurs that makes it impossible to satisfy a condition precedent to the HotPlay Exchange Agreement (except as discussed above in connection with events which result in the automatic forgiveness of the HotPlay Notes), then the outstanding principal amount of the HotPlay Notes together with all accrued and unpaid interest thereon, automatically convert into fully paid and nonassessable shares of the Company’s common stock at a conversion price of $2.00 per share.
In the event the transactions contemplated by the Share Exchange close, it is anticipated that the HotPlay Notes will be forgiven as intracompany loans.
If the Company fails to deliver the shares due upon a conversion within five business days, or the Company enters into a voluntary or involuntary bankruptcy proceeding, then HotPlay can declare the entire amount of the notes due and payable (provided the notes are automatically due upon the occurrence of certain bankruptcy events), and such note will accrue interest at the rate of 18% per annum until paid in full.
Note 10 - Related Party Promissory Notes and Transactions
Related Party Transactions
Dividends in arrears on the previously outstanding Series A Preferred Stock shares totaled $1,102,066 as of August 21, 2020, May 31, 2020, February 29, 2020 and February 28, 2019. These dividends were payable when and if declared by the board of directors. The dividends were owed to an entity controlled by Donald P. Monaco, our Chairman, and William Kerby, our CEO and a director. On April 8, 2021, the Company entered into an Exchange Agreement with William Kerby, its Chief Executive Officer and director and Monaco Investment Partners II, LP (“MI Partners”), of which Donald P. Monaco is the managing general partner and the Chairman of the board of directors of the Company (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the terms of which were approved by the board of directors of the Company, Mr. Kerby and MI Partners exchanged their right to an aggregate of $1,016,314 in accrued dividends (the “Accrued Dividends”) which had accrued on the Company’s outstanding Series A Preferred Stock, which had been held by Mr. Kerby and MI Partners prior to the conversion of such Series A Preferred Stock into common stock of the Company in August 2017, for Convertible Promissory Notes. Specifically, Mr. Kerby exchanged rights to $430,889 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $430,889 and MI Partners exchanged rights to $585,425 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $585,425 (the “Convertible Promissory Notes”).
The Convertible Promissory Notes accrue interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Notes is convertible, at the option of the holders thereof, into shares of the Company’s common stock, at any time beginning seven days after the Closing Date (defined below) and prior to the payment in full of such Convertible Promissory Notes by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default.
On October 29, 2019, the Company entered into Promissory Notes with Robert “Jamie” Mendola, Jr. (a Director of the Company) and Pasquale “Pat” LaVecchia (a Director of the Company) in the amounts of $150,000 and $25,000, respectively (the “Director Notes”). The Director Notes have an interest rate of 12% per annum (18% upon the occurrence of an event of default) and were originally due and payable on February 1, 2020, but were subsequently extended as discussed below, provided that the notes may be prepaid at any time without penalty (provided that all interest that would have been due had the notes remained outstanding through maturity must be paid at the time of repayment). The Company paid a 2% original issue discount in connection with the notes. The Director Notes were repaid in full in April and May 2020.
On October 29, 2019, the Company entered into Stock Purchase Agreements with (a) Monaco Investment Partners, LP, of which Donald Monaco is the managing partner and a member of the Board of Directors of the Company; (b) Simon Orange, a member of the Board of Directors of the Company; and (c) William Kerby, the Chief Executive Officer and director of the Company. Pursuant to the Stock Purchase Agreements, the Company sold the purchasers 25,562,500 shares (1,562,500 shares to Mr. Kerby and 12,500,000 shares to each of Monaco Investment Partners, LP and Mr. Orange) of Series A Preferred Stock of Verus. The purchase price for the Verus shares was determined by the Board of Directors of the Company, based on among other things, the recent trading prices of Verus’ common stock on the OTCQB Market, as publicly reported. The Company received net proceeds of $425,000 from the Stock Purchase Agreements. The proceeds of $250,000 (which represent 15,625,000 shares sold to Simon Orange and William Kerby that were transferred to buyers) were recorded in realized gain/(loss) on the sale of unconsolidated affiliates within the fiscal year February 28, 2021.
On December 9, 2019, the Company entered into an Amended and Restated Promissory Note with the Monaco Trust, in the amount of up to $2,700,000 (the “Revolving Monaco Trust Note”). The Revolving Monaco Trust Note amended and restated a previous promissory Note entered into by the Company in favor of the Monaco Trust on February 4, 2019 (the 2019 Monaco Trust Note discussed above), in the amount of up to $700,000, which had a balance as of December 9, 2019 of $700,000. On the same date, the Company borrowed $200,000 from the Monaco Trust under the Revolving Monaco Trust Note. On December 27, 2019 and February 12, 2020, the Company borrowed an additional $300,000 and $200,000, respectively, from the Monaco Trust under the Revolving Monaco Trust Note, which had a balance of $1,200,000 as of February 29, 2020. On January 29, 2020, the Company entered into first amendments to the Director Notes and Revolving Monaco Trust Note with the directors and the Monaco Trust, respectively, to extend the maturity date of such notes from February 1, 2020 to April 1, 2020 (the “Note Amendments”). No other changes were made to such notes as a result of such amendments.
On January 22, 2020, the Company entered into Stock Purchase Agreements with William Kerby, the Chief Executive Officer and director of the Company (“Kerby”), (the “Purchaser” and the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, the Company agreed to sell the Purchaser 1,562,500 shares of restricted Series A Convertible Preferred Stock of Verus International, Inc. (formerly known as RealBiz Media Group, Inc. (“Verus”), which the Company then held (out of the 31,970,101 shares of Series A Convertible Preferred Stock of Verus which the Company then held) for an aggregate of $25,000, or $0.016 per share. The purchase price for the Verus shares was determined by the Board of Directors of the Company, based on among other things, the recent trading prices of Verus’ common stock on the OTCQB Market, as publicly reported. The sale contemplated by the Stock Purchase Agreement closed on January 22, 2020.
On January 29, 2020, the Company entered into first amendments to the Director Notes and Revolving Monaco Trust Note with the directors and the Monaco Trust, respectively, to extend the maturity date of such notes from February 1, 2020 to April 1, 2020 (the “Note Amendments”). No other changes were made to such notes as a result of such amendments.
On March 13, 2020 and March 26, 2020, the Company borrowed an additional $100,000 and $75,000, respectively, from the Monaco Trust pursuant to the terms of the Revolving Monaco Trust Note.
On March 27, 2020, the Company entered into second amendments to the Director Notes to extend the maturity date of such Director Notes from April 1, 2020 to June 1, 2020, and entered into an amendment to extend the due date of the Revolving Monaco Trust Note from April 1, 2020 to December 1, 2020. All remaining terms of the promissory notes remained unchanged.
On April 17, 2020, the Company paid off the Promissory Note with Pasquale “Pat” LaVecchia, a member of the board of directors, in the amount of $26,225 (the principal of $25,000 and the interest of $1,225).
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS (a greater than 5% stockholder of the Company) and certain other defendants affiliated with IDS in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. Pursuant to the complaint, the Company alleges causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and seeks a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 shares of common stock disclosed above to the Company and preventing such persons from selling or transferring any shares, seeks damages from the defendants, rescission of the IP Purchase Agreement pursuant to which the shares were issued, attorneys fees and other amounts. The complaint was filed as a result of IDS’s failure to deliver certain intellectual property assets which were acquired by the Company from IDS in August 2019, certain other actions of IDS and the other defendants which the Company alleges constitutes fraud and to seek to unwind the IP Purchase Agreement and provide damages to the Company due to IDS’s and the other defendants’ breaches thereunder.
On March 13, 2020 and March 26, 2020, the Company borrowed an additional $100,000 and $75,000, respectively, from the Monaco Trust pursuant to the terms of the Revolving Monaco Trust. On June 9, 2020 and June 10, 2020, the Company borrowed an additional $300,000 and $50,000, respectively, from the Monaco Trust. On July 7, 2020 and July 20, 2020, the Company borrowed an additional $250,000 and $50,000, respectively, from the Monaco Trust. On July 27, 2020, the Company paid principal of $50,000 and accrued interest of $49,784. On September 22, 2020, the Company made a payment of $200,000 under the Revolving Monaco Trust Note, including $142,408 of principal and $57,592 of interest owed thereunder.
On May 1, 2020, the Company paid off the Promissory Note with Robert “Jamie” Mendola, Jr., in the amount of $157,595 (the principal of $150,000 and the interest of $7,595).
On June 9, 2020, June 10, 2020, July 7, 2020, we borrowed an additional $300,000, $50,000 and $250,000 from the Monaco Trust under the Revolving Monaco Trust Note.
On September 1, 2020, the Company entered into a consulting agreement with Beachfront Travel Consulting LLC for their services and expertise in Call Center and Sales Operations. The consultant agreed to assist the Company in the development and design of a Call Center Operation to support the Company’s brand. The Company agreed to pay the consultant compensation of 1,500 restricted shares of common stock per month, with a price equal to the closing price on the last day of the month and the consultant agreed to advise the Company on policies and procedures, performance metrics and reporting, operational standards and training of call center staff. The Company issued the consultant 1,500 shares of restricted common stock for the month of December 2020. The agreement was terminated on December 7, 2020, and the parties entered into as a new consulting agreement, with an annual fee of $110,000 instead of the 1,500 per month stock compensation. A consultant to Beachfront is Beth Sikora, the wife of the COO of the Company, Tim Sikora. The agreement provides that Mrs. Sikora will manage the Consumer Programs and Call Center operations based on her experience and background.
On September 8, 2020, the Company issued Sirapop “Kent” Taepakdee, then Acting Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) and Timothy Sikora, the Chief Operating Officer and Chief Information Officer of the Company, an aggregate of 17,500 and 15,000 shares of common stock of the Company, respectively, as a bonus in consideration for services rendered. The issuances were authorized by the board of directors and the Compensation Committee of the board of directors of the Company, and granted under the Company’s 2017 Amended and Restated Equity Incentive Plan. The shares vested immediately upon issuance.
On November 6, 2020, the Company entered into a third amendment to the Revolving Trust Note with the Monaco Trust, to extend the maturity date of such Revolving Monaco Trust Note to February 28, 2021. No other changes were made to such note as a result of such amendment.
On November 16, 2020, the Company entered into a fourth amendment to the Revolving Trust Note with the Monaco Trust, to increase the amount available under such Revolving Monaco Trust Note to $2,800,000. No other changes were made to such note as a result of such amendment.
On November 16, 2020, the Company acquired 100% of Longroot, which was in turn owned 57% of Longroot Cayman. Longroot Cayman owned 49% of the outstanding ordinary shares (with 51% of the Preferred shares owned by two Thai citizen nominee shareholders) of Longroot Thailand, provided that Longroot Cayman controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand. Subsequent to this acquisition, the Company signed a service contract with Atato, an IT provider of cryptocurrency website maintenance. As of November 30, 2020, Miss Worapin Tatun, wife of the CEO of Atato and Mr. Pongsabutra Viraseranee, an employee and developer employed by Atato, both are minority shareholders of Longroot Thailand with a 25.5% interest of preferred stock in Longroot Thailand each.
On December 1, 2020, the Company paid $800,000 of principal and interest due under the Revolving Trust Note. The Revolving Trust Note was subsequently repaid in full in December 2020, with funds raised through our December 2020 underwritten offering.
Dividends in arrears on the previously outstanding Series A Preferred Stock shares totaled $1,102,066 and $1,102,066 as of February 28, 2021 and February 29, 2020, respectively. These dividends will only be payable when and if declared by the Board. The dividends are owed to an entity controlled by Donald P. Monaco, our Chairman and William Kerby, our CEO. See also the information under “$230,000 Promissory Note from Bettwork Industries Inc.”, “Conversion of $1,600,000 Promissory Note Into 2,133,333 Common Stock Shares of Bettwork Industries Inc“ and “Conversion of $2,900,000 Promissory Note Into 3,866,667 Common Stock Shares of Bettwork Industries Inc” under “Note 4 - Notes Receivable”, above.
On December 4, 2020, the Company entered into a Consulting Agreement with Beachfront Travel Consulting, LLC, whose consultant is Beth Sikora, the wife of the COO of the Company, Tim Sikora. The agreement provides that Mrs. Sikora will manage the Consumer Programs and Call Center operations based on her experience and background.
In December 2020 and January 2021, Sabby Management, LLC, which previously filed a Schedule 13G with the SEC disclosing its ownership of over 5% of our outstanding shares of common stock, exercised warrants to purchase 125,000 shares of our common stock with an exercise price of $2.00 per share, paid the aggregate $250,000 exercise price for such shares, and was issued 125,000 shares of common stock, which were covered under a registration statement filed under the Securities Act. Sabby is no longer a greater than 5% shareholder of the Company.
On April 7, 2021, each of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr. and Ms. Alexandra C. Zubko, each then members of the board of directors of the Company, provided letters of resignation to the Company, resigning as directors (and from any other positions they hold with the Company), with such resignations effective automatically as of the closing of the HotPlay Exchange Agreement.
Such resignations were solely in connection with the required terms and conditions of the HotPlay Exchange Agreement, which requires that the board of directors of the Company at the closing thereof increase to nine members, with four appointed by HotPlay, two appointed by Monaker, and three appointed mutually by Monaker and HotPlay.
Also on April 7, 2021, the board of directors of the Company ratified the current compensation payable to members of the board of directors, which provides that each non-executive member of the Board be paid (a) compensation of 20,000 shares per year; (b) compensation of 5,000 shares per year, if they are the chairperson of any committee of the board of directors; and (c) compensation of 10,000 shares per year, to the Chairman of the Board (collectively, the “Board Compensation Terms”), except that all shares due to the Directors serving as of March 1, 2021, for the fiscal year ending February 28, 2022, were agreed to be issued up front and to be fully-vested/earned on the date of grant, instead of vesting over time, as previously awarded. In total, an aggregate of 165,000 shares of common stock were issued to the non-executive directors on April 8, 2021 for compensation for fiscal 2022 (such shares, the “Fiscal 2022 Board Compensation Shares”). The Fiscal 2022 Board Compensation Shares were issued under the Company’s Amended and Restated 2017 Equity Incentive Plan (the “Plan”).
On April 7, 2021, the Company entered into a Lock-Up Agreement with each of the non-executive members of the board of directors. Pursuant to the Lock-Up Agreements, each non-executive director agreed not to transfer, sell, pledge or assign any of their applicable Fiscal 2022 Board Compensation Shares until March 1, 2022.
On April 7, 2021, the board of directors of the Company, consistent with the employment agreement of Mr. William Kerby, the Chief Executive Officer of the Company, which provides for Mr. Kerby to receive a base salary of $400,000 per year, and an annual bonus payable at the discretion of the board of directors, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals), and other bonuses which may be granted from time to time in the discretion of the board of directors, agreed to award Mr. Kerby a discretionary bonus for fiscal 2021 of $400,000, which is payable in cash or shares of common stock, at Mr. Kerby’s option, under the Plan, with a conversion price of $3.02 per share, the closing sales price of the Company’s common stock on the date the board of directors approved such bonus. If Mr. Kerby exercises his right to receive the entire bonus in shares of common stock he would be due 132,450 shares of common stock.
The Audit Committee of the board of directors of the Company is tasked with reviewing and approving any issues relating to conflicts of interests and all related party transactions of the Company (“Related Party Transactions”). The Audit Committee, in undertaking such review and approval, will analyze the following factors, in addition to any other factors the Audit Committee deems appropriate, in determining whether to approve a Related Party Transaction: (1) the fairness of the terms for the Company (including fairness from a financial point of view); (2) the materiality of the transaction; (3) bids / terms for such transaction from unrelated parties; (4) the structure of the transaction; (5) the policies, rules and regulations of the U.S. federal and state securities laws; (6) the policies of the Committee; and (7) interests of each related party in the transaction.
The Audit Committee will only approve a Related Party Transaction if the Audit Committee determines that the terms of the Related Party Transaction are beneficial and fair (including fair from a financial point of view) to the Company and are lawful under the laws of the United States. In the event multiple members of the Audit Committee are deemed a related party, the Related Party Transaction will be considered by the disinterested members of the board of directors in place of the Committee.
Note 11 - Stockholders’ Equity
Preferred stock
The aggregate number of shares of preferred stock that the Company is authorized to issue is up to One Hundred Million (100,000,000), with a par value of $0.00001 per share (the “Preferred Stock”) with the exception of Series A Preferred Stock shares having a $0.01 par value per share. The Preferred Stock may be divided into and issued in series. The board of directors of the Company is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. The board of directors of the Company is authorized, within any limitations prescribed by law and the articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of Preferred Stock.
Series A Preferred Stock
The Company has authorized and designated 3,000,000 shares of Preferred Stock as Series A 10% Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”). The holders of record of shares of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the shareholders of the Company and shall be entitled to one hundred (100) votes for each share of Series A Preferred Stock.
Dividends in arrears on the previously outstanding Series A Preferred Stock shares totaled $1,102,066 as of February 28, 2021 and February 29, 2020, respectively. These dividends will only be payable when and if declared by the Board.
The Company had 0 shares of Series A Preferred Stock issued and outstanding as of February 28, 2021 and February 29, 2020.
Series B Preferred Stock
The Company has authorized and designated 10,000,000 shares of Preferred Stock as Series B Convertible Preferred Stock which shares were issued to certain Axion stockholders in exchange for their ordinary shares of Axion equal to approximately 33.85% of the outstanding common shares of Axion pursuant to the Axion Exchange Agreement (see “Note 2 - Going Concern”). Each share of Series B Preferred Stock automatically, and without any required action by any holder, converts into 0.74177 shares of common stock, upon the occurrence of certain events, including five business days after the closing of the HotPlay Exchange Agreement. The Company had 10,000,000 shares and 0 shares of Series B Preferred Stock outstanding as of February 28, 2021 and February 29, 2020, respectively.
Series C Preferred Stock
The Company has authorized and designated 3,828,500 shares of Preferred Stock as Series C Convertible Preferred Stock. The Series C Preferred Stock was issued to certain debt holders of Axion who are party to the Axion Share Exchange Agreement and who agreed to exchange certain debt owed to such debt holders by Axion for shares of Series C Preferred Stock pursuant to the Share Exchange Agreement. Each share of Series C Preferred Stock is automatically, and without any required action by any Holder, converted into common stock, on a one-for one basis, upon the occurrence of certain events, including five business days after the closing of the HotPlay Exchange Agreement. The Company had 3,828,500 shares and 0 shares outstanding as of February 28, 2021 and February 29, 2020, respectively
Share Repurchase Transactions
During the years ended February 28, 2021 and February 29, 2020, there were no repurchases of the Company’s common stock by Monaker.
The Company had 18,765,839 and 13,069,339 shares of common stock issued and outstanding as of February 28, 2021 and February 29, 2020, respectively.
Common Stock Warrants
The following table sets forth common stock purchase warrants outstanding as of February 28, 2021, and February 29, 2020, and changes in such warrants outstanding for the years ending February 28, 2021 and February 29, 2020:
Warrant Weighted
Average
Exercise
Outstanding, February 29, 2020 1,347,391 $ 3.90
Warrants granted 1,923,850 $ 2.00
Warrants exercised/forfeited/expired (225,320 ) $ (2.00 )
Outstanding, February 28, 2021 3,045,921 $ 2.50
Common stock issuable upon exercise of warrants 3,045,921 $ 2.50
Common Stock Issuable Upon Exercise of
Warrants Outstanding Common Stock Issuable Upon
Warrants Exercisable
Range of
Exercise
Prices Number
Outstanding at
February 29, 2021 Weighted
Average
Remaining
Contractual
Life (Years) Weighted
Average
Exercise
Price Number
Exercisable at
February 28, 2021 Weighted
Average
Exercise
Price
$ 2.00 2,436,250 2.30 $ 2.00 2,436,250 $ 2.00
$ 2.85 175,000 0.82 $ 2.85 175,000 $ 2.85
$ 5.00 2,000 0.09 $ 5.00 2,000 $ 5.00
$ 5.13 411,671 1.42 $ 5.13 411,671 $ 5.13
$ 5.63 21,000 1.28 $ 5.63 21,000 $ 5.63
3,045,921 1.18 $ 2.50 3,045,921 $ 2.50
At February 29, 2020, there were warrants outstanding to purchase 1,347,391 shares of common stock with a weighted average exercise price of $3.32 and weighted average remaining life of 2.30 years.
At February 28, 2021, there were warrants outstanding to purchase 3,045,921 shares of common stock with a weighted average exercise price of $2.50 and weighted average remaining life of 1.18 years.
During the year ended February 28, 2021, the Company granted:
● warrants to purchase 1,923,850 shares of common stock in connection with subscriptions for shares of common stock.
Note 12 - Commitments and Contingencies
The Company’s office lease at 2893 Executive Park Drive Suite 201, Weston, Florida 33331 was terminated early on February 28, 2021 at the request of the landlord, without penalties to the Company.
The Company entered into a new office lease to relocate our executive, administrative, and operating offices located in Sunrise, Florida where we leased approximately 5,279 square feet of office space at 1560 Sawgrass Corporate Parkway Suite 130 Sunrise, FL 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. Monthly rental costs, including building maintenance assessment, for fiscal years 2022, 2023, 2024, 2025, 2026, 2027 and 2028 are estimated to be $6,224, $17,499 $18,862, $19,243, $19,635, $20,037, and $20,450, respectively.
On October 1, 2019, the Company entered into a new contract for a new call center, approximately 4,048 square feet, at 6345 South Pecos Road, Suite 206, 207, and 208, Las Vegas, Nevada 89120. The lease had a term of one year from October 1, 2019 through September 30, 2020. Monthly base rental costs were (i) $ 3,643 from October 1, 2019 through November 30, 2019; and (ii) $3,789 from December 1, 2019 through September 30, 2020. The rent also included the monthly payment of the operating expenses (Tenant’s Proportionate Share of the Building and/or Project) which cost approximately $1,100 per month. We did not renew this lease.
The rent for the years ended February 28, 2021 and February 29, 2020 was $75,094 and $77,659, respectively. The Company recorded operating lease Right-to-Use asset of $15,843 along with current operating lease liability of $16,362 and long-term operating lease liability of $0 as of February 28, 2021.
The following schedule represents obligations and commitments on the part of the Company that are not included in liabilities:
Current Long Term
FYE 2022 FYE 2023 Totals
Office Leases $ 75,094 $ 209,629 $ 284,723
Insurance and Other 55,916 55,916 111,832
Totals $ 131,010 $ 265,545 $ 396,555
Legal Matters
The Company is involved, from time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other related claims and vendor matters. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation or other legal claims could change considering the discovery of facts not presently known to the Company or by judges, juries or other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.
IDS Settlement
On August 15, 2019, the Company entered into an Intellectual Property Purchase Agreement with IDS Inc. (“IDS” and the “IP Purchase Agreement”). Pursuant to the agreement, the Company purchased certain proprietary technology from IDS for the reservation and booking of air travel, hotel accommodations, car rentals, and ancillary products, services, and amenities, integration of the same with the providers of such products and services, associated functions, including website addresses, patents, trademarks, copyrights and trade secrets relating thereto, and all goodwill associated therewith (collectively, the “IP Assets”). In consideration for the purchase, the Company issued IDS 1,968,000 shares of restricted common stock (the “IDS Shares”) valued at $2.50 per share, or $4,920,000 in aggregate.
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS and TD Assets Holding, LLC (“TD Asset”), Navarro McKown, Aaron McKown and Ari Daniels (“Daniels”), which parties are affiliated with IDS, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. CACE-20-007088). Pursuant to the complaint, the Company alleged causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and sought a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 IDS Shares issued pursuant to the terms of the IP Purchase Agreement and preventing such persons from selling or transferring any IDS Shares, sought damages from the defendants, rescission of the IP Purchase Agreement, attorneys fees and other amounts. The defendants subsequently filed various counterclaims against the Company.
The complaint was filed because of IDS’s failure to deliver certain components of the IP Assets, certain other actions of IDS and the other of the defendants which the Company alleged constituted fraud. The Company sought to unwind the IP Purchase Agreement and sought damages for the Company due to IDS’s and the other defendants’ breaches thereunder. IDS, through its counsel, sent a letter threatening to bring a shareholders’ derivative action and/or direct suit against the Company. In response to such letter, the board of directors empowered the governance committee to conduct an internal investigation into the claims. The results of the investigation, conducted by several law firms, were presented to the Board and the Board concluded that no fraudulent activities occurred. The investigation concluded in October 2020.
On April 29, 2020, the Company filed a Verified Motion for Temporary Injunction (the “Injunction Motion”). Defendants IDS, TD Assets, and Ari Daniels filed an answer, affirmative defenses, and counterclaims (the “Answer and Counterclaim”). The Answer and Counterclaim included alleged breach of contract and tort claims against the Company. On September 17, 2020, the Company moved to strike the affirmative defenses and dismiss the counterclaims. On October 15, 2020, defendants IDS, TD Assets, and Ari Daniels filed an amended Answer and Counterclaim, including alleged breach of contract, tort, and federal securities claims against the Company, Mr. William Kerby, our Chief Executive Officer and an employee of the Company.
On July 27, 2020, the Company entered into a confidential settlement agreement with certain of the defendants in the IDS matter, Navarro Hernandez, P.L., Aaron M. McKown, and Jeffery S. Bailey. The settlement provided for mutual releases of the parties and amounts payable from such parties to the Company in four tranches, in consideration for such settlement, of which all such payments have been timely paid pursuant to the terms of the settlement.
The remaining parties to the litigation subsequently attempted to mediate their pursuant to a court ordered mediation in February 2021.
Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (the “IP Purchase Amendment”). Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000 (the “Payment”), payable by way of an initial payment of $500,000, and twelve monthly payments of approximately $195,833 (collectively, the “Required Payments”), with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment.
Axion Claim
On January 15, 2021, Axion Ventures, Inc., filed a civil claim in the Supreme Court of British Columbia, against J. Todd Bonner, Nithinan Boonyawattanapisut, the Company, William Kerby, our Chief Executive Officer, Cern One Limited, Red Anchor Trading Corp., CC Asia Pacific Ventures Ltd., HotPlay Enterprise Limited, HotPlay (Thailand) Ltd., Longroot, Inc. and certain other parties. The claim alleges that Mr. Bonner and his wife, Ms. Boonyawattanapisut, used their positions as directors and officers of Axion and certain of its subsidiaries, together with the other defendants, to unlawfully take ownership of Axion’s subsidiaries and assets, including its intellectual property. Axions’ claim includes causes of action for conspiracy and fraud; theft of Axion intellectual property and ownership of Longroot; an investor scheme; breaches of fiduciary duty by Mr. Bonner and Ms. Boonyawattanapisut and others; negligence; knowing assistance of breach of fiduciary duty; collective trust; knowing receipt of trust property; knowing assistance in dishonest conduct; unjust enrichment; and breach of honest performance. The claim seeks general and special damages for conspiracy, damages for breaches of fiduciary duties, accountings and repayments of amounts alleged improperly paid, including to Monaker, interim, interlocutory and permanent injunctions, rescission of the issuance of shares of Longroot Cayman; restitution; the return of Axion’s intellectual property; and other accountings, damages, punitive damages, interest and special costs.
On April 9, 2021, the Company, on behalf of itself, Mr. Kerby and Longroot, Inc., filed a response to Axion’s claim whereby all parties disputed Axion’s claims and argued all such transactions involving the Company, Mr. Kerby and Longroot which are the subject of Axion’s claims were legitimate and pleading various other defenses. The Company, Mr. Kerby and Longroot dispute Axion’s claims and intend to vigorously defend themselves against the allegations made.
Note 13 - Business Segment Reporting
Accounting Standards Codification 280-16 “Segment Reporting”, established standards for reporting information about operating segments in annual consolidated financial statements and required selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
The Company has two operating segments consisting (i) NextTrip and Maupintour which have various products and services related to its technology solutions platforms related to travel marketplaces and (ii) Longroot Thailand operates ICO Portal Platform where applicable investors are able to sign up and invest in available ICOs, and issuers can issue tokens and list information related to their offerings. The travel related services include destination tours / activities, accommodation rental listings, hotel listings, air and car rental. The Company’s chief operating decision maker is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.
For the year ended February 28, 2021
NextTrip
Longroot
Total
Sales
$ 48,338
$ -
$ 48,338
Net loss
$ (16,490,188 ) $ (18,467)
$
(16,508,655)
For the year ended February 29, 2020
NextTrip
Longroot
Total
Sales
$ 441,769
$ -
$ 441,769
Net loss
$ (9,454,686 ) $ -
$
(9,454,686)
There were no reconciling or inter-company items between segments.
Sales
United States
$ 48,338
$ 441,769
Non-United States
$ -
$ -
$ 48,338
$ 441,769
Long-lived Assets
United States
$ 10,517,697
$ 8,658,050
Non-United States
$ 2,577,705
$ -
$ 13,095,402
$ 8,658,050
Note 14 - Fair Value Measurements
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 provides 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.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrants, and option derivatives are valued using the Black-Scholes model.
The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
The Company’s investments in unconsolidated affiliates; short term and long term, are recorded at fair value based on level 1 heirarchy as discussed above. The values of these investments as of February 28, 2021 and February 29, 2020 are $5,176,995 and $2,829,031 respectively.
Note 15 - Income Taxes
Monaker follows the guidance of ASC 740, “Income Taxes.” Deferred income taxes reflect the net effect of (a) temporary differences between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry- forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
The provision for income taxes consists of the following components for the years ended February 28, 2021 and February 29, 2020:
Current $ - $ -
Deferred - -
$ - $ -
The components of deferred income tax assets and liabilities for the years ended February 28, 2021 and February 29, 2020, are as follows:
Net operating loss carry-forwards $ 38,760,093 $ 32,292,252
Equity based compensation 4,329,000 4,329,000
Amortization and impairment of intangibles 581,529 74,920
Total deferred assets 43,670,622 36,696,172
Valuation allowance (43,670,622 ) (36,696,172 )
$ - $ -
The income tax provision differs from the expense that would result from applying statutory rates to income before income taxes principally because of the valuation allowance on net deferred tax assets for which realization is uncertain.
The effective tax rates for years ended February 28, 2021 and February 29, 2020 were computed by applying the federal and state statutory corporate tax rates as follows:
Statutory Federal income tax rate -21.0 % -21.0 %
State taxes, net of Federal -4.5 % -4.5 %
Permanent difference -1.0 % -1.0 %
Change in valuation allowance 26.5 % 26.5 %
0 % 0 %
The valuation allowance has decreased by $6,974,450 for the fiscal year ended 2021 primarily as a result of a current year tax loss of $6,467,841 which increased net operating loss carryforward to $38,760,093 at February 28, 2021, from $32,292,252 at February 29, 2020. There is $506,609 increase in amortization of intangibles at February 28, 2021, which was $0 at February 29, 2020.
The net operating loss (“NOL”) carry-forward balance as of February 28, 2021 is approximately $43.7 million, expiring between 2029 and 2039. Management has reviewed the provisions of ASC 740 regarding assessment of their valuation allowance on deferred tax assets and based on that criteria determined that it does not have sufficient taxable income to offset those assets. Therefore, management has assessed the realization of the deferred tax assets and has determined that it is more likely than not that they will not be realized and has provided a full valuation allowance against these assets. The utilization of the NOL’s may be limited by Internal Revenue Code Section 382 which restricts annual utilization following a greater than 50% change in ownership.
At the adoption date the Company applied ASC 740 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC 740, the Company did not recognize a material increase in the liability for uncertain tax positions as of February 28, 2021.
Note 16 - Earnings Per Share
The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings per-share computations for each of the past two fiscal years:
For the year ended February 28, 2021: Income
(Numerator) Weighted
Average
Shares
(Denominator) Per Share
Amount
Basic earnings $ (16,504,039 ) 14,728,741 $ (1.12 )
Effect of dilutive securities - - -
Dilutive earnings $ (16,504,039 ) 14,728,741 $ (1.12 )
For the year ended February 29, 2020:
Basic earnings (losses) $ (9,454,686 ) 11,773,633 $ (0.80 )
Effect of dilutive securities - - -
Dilutive earnings $ (9,454,686 ) 11,773,633 $ (0.80 )
Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted earnings per common share is not presented because it is anti-dilutive.
Note 17 - Subsequent Events
Soma Innovation Lab Joint Venture
On March 8, 2021, the Company entered into a Joint Venture Agreement with Soma Innovation Lab (“Soma”). Pursuant to the agreement, the parties agreed to form a joint venture for designing hyper-personalized experiences for targeted gamers. The agreement requires us to provide Soma the use of the HotPlay technology, assuming we acquire ownership of such technology because of the closing of our pending Share Exchange Agreement with HotPlay and its stockholders, which technology is owned by HotPlay, and that we would issue the principals of Soma 72,000 shares of restricted common stock (valued at $180,000), of which $45,000 was earned immediately and the remaining shares will be earned at the rate of 6,000 per month. Pursuant to the agreement, Soma agreed to provide us use of an email client list and other services. The joint venture is owned 50/50 between us and Soma, with net profits/revenues paid pursuant to the same 50/50 split. In the event the joint venture achieves revenue more than expenses and the Company recovers the $180,000 value of the shares, then we agreed to issue Soma a bonus of 50,000 shares of restricted common stock. The joint venture (and agreement) each have a term of two years. The Company also agreed to use Soma for certain work to be performed on its websites and travel magazine and agreed to pay Soma $75,000 per month ($225,000 in aggregate) for such work, payable by way of the issuance of 90,000 shares of restricted common stock. As of May 29, 2021, a total of 108,000 of the shares due to Soma have been issued, and a total of 54,000 shares are potentially due pursuant to the terms of the agreement discussed above.
HotPlay Convertible Notes
On March 16, 2021, March 19, 2021, and April 15, 2021, HotPlay loaned the Company $9 million, $1 million and $2 million, respectively. The loans were made pursuant to the terms of the HotPlay Exchange Agreement and were evidenced by Convertible Promissory Notes dated effective March 16, 2021, March 19, 2021, and April 15, 2021, in the amount of $9,000,000, $1,000,000, and $2,000,000 respectively. The Convertible Promissory Notes have substantially similar terms as the HotPlay Convertible Notes described above under “Note 9 - Notes Payable-HotPlay Convertible Notes”. With the April 15, 2021 loan, HotPlay has loaned the Company all $15 million of the funds required to be funded pursuant to the terms of the HotPlay Exchange Agreement.
March 2021 Streeterville Note Purchase
On March 22, 2021, the Company entered into a Note Purchase Agreement dated March 23, 2021 (the “March 2021 Note Purchase Agreement”) with Streeterville, an accredited investor, pursuant to which the Company sold Streeterville a Secured Promissory Note in the original principal amount of $9,370,000 (the “March 2021 Streeterville Note”). Streeterville paid consideration of (a) $7,000,000 in cash; and (b) issued the Company a promissory note in the amount of $1,500,000 (the “March 2021 Investor Note”), in consideration for the March 2021 Streeterville Note, which included an original issue discount of $850,000 (the “OID”) and reimbursement of Streeterville’s transaction expenses of $20,000. A total of $700,000 of the OID is fully earned and the remaining $150,000 is not fully earned until the March 2021 Investor Note is fully-funded by Streeterville, which March 2021 Investor Note was fully funded on May 26, 2021.
The March 2021 Streeterville Note bears interest at a rate of 10% per annum and matures 12 months after its issuance date (i.e., on March 23, 2022). From time to time, beginning six months after issuance, Streeterville may redeem a portion of the March 2021 Streeterville Note, not to exceed an amount of $1.750 million per month if the March 2021 Investor Note has not been funded by Streeterville, and $2.125 million in the event the March 2021 Investor Note has been funded in full. In the event we don’t pay the amount of any requested redemption within three trading days, an amount equal to 25% of such redemption amount is added to the outstanding balance of the March 2021 Streeterville Note. Under certain circumstances, the Company may defer the redemption payments up to three times, for 30 days each, provided that upon each such deferral the outstanding balance of the March 2021 Streeterville Note is increased by 2%. Subject to the terms and conditions set forth in the March 2021 Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the March 2021 Streeterville Note at any time subject to a prepayment penalty equal to 10% of the amount of the outstanding balance to be prepaid. For so long as the March 2021 Streeterville Note remains outstanding, the Company has agreed to pay to Streeterville 20% of the gross proceeds that the Company receives from the sale of any of its common stock or preferred stock, which payments will be applied towards and will reduce the outstanding balance of the March 2021 Streeterville Note, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the March 2021 Streeterville Note (each an “Equity Payment”). Each time that we fail to pay an Equity Payment, the outstanding balance of the March 2021 Streeterville Note automatically increases by 10%. Additionally, in the event we fail to timely pay any such Equity Payment, Streeterville may seek an injunction which would prevent us from issuing common or preferred stock until or unless we pay such Equity Payment.
The March 2021 Streeterville Note provides that if any of the following events have not occurred on or before June 30, 2021, the then outstanding balance of the note (including accrued and unpaid interest) increases by an amount equal to 25% of the then-current outstanding balance thereof: (a) HotPlay must have become a wholly-owned subsidiary of the Company; (b) during the period beginning on July 21, 2020, and ending on the date that the HotPlay Share Exchange is consummated, HotPlay must have raised at least $15,000,000 in cash or debt through equity investments (which has been completed); (c) upon consummation of the HotPlay Share Exchange, all outstanding debt owed by the Company to HotPlay must have either been forgiven by HotPlay or converted into the Company’s common stock; and (d) HotPlay must have become a co-borrower on the March 2021 Streeterville Note (collectively, the “March 2021 Note Transaction Conditions”).
The March 2021 Note Purchase Agreement required that we complete the purchase of the Reinhart Interactive TV AG equity interests discussed below (the “Reinhart Interest”), within ten days of the date of the sale of the March 2021 Streeterville Note, and that the Company pledge the Reinhart Interest to Streeterville pursuant to a pledge agreement thereafter, both of which were timely completed.
Also, on March 23, 2021, the Company and Streeterville entered into a Forbearance Letter (the “Forbearance Letter”), whereby Streeterville waived breaches of agreements and defaults which occurred under the terms of that certain $5.52 million Secured Promissory Note (the “November 2020 Streeterville Note”) and related agreements dated November 23, 2020, between the Company and Streeterville, relating to the Company’s failure to timely terminate prior UCC filings. In the event we fail to terminate all outstanding UCC financing statements by April 15, 2021, the outstanding balance of the November 2020 Streeterville Note will automatically increase by 5%; provided, however, that such failure will not be considered an event of default under such note.
On May 26, 2021, with funds raised through our May 2021 Underwritten Offering (discussed below), we made a payment of $1,857,250 on the March 2021 Streeterville Note, which had a balance of approximately $6 million as of May 29, 2021.
Letter of Intent to Acquire Axion shares
On October 28, 2020, the Company entered into a non-binding Letter of Intent (as amended by the first amendment thereto dated March 10, 2021, the “Letter of Intent”) with Radiant Ventures Limited, which manages Radiant VC1 Limited and Radiant PV 1 Limited, two stockholders of Axion, which entity the Company acquired 33.85% of (provided that such ownership of Axion has not been formally transferred to the Company to date) on November 16, 2020, as discussed above in “Note 6 - Acquisitions and Dispositions-Acquisition of Axion Shares”.
Pursuant to the Letter of Intent, the Company agreed, subject to certain condition precedents, including regulatory approvals and the entry into material agreements with the sellers, to acquire approximately 12 million shares of Axion, equal to 5.7% of Axion’s outstanding shares, from the stockholders for approximately $2 million, payable in a combination of stock and cash. In connection with our entry into the Letter of Intent, we paid the sellers a $500,000 non-refundable deposit towards the cash purchase price of the shares in or around October 2020 (representing 25% of such purchase price). We also issued the sellers 235,000 shares of common stock in March 2020, representing an additional 25% of the purchase price. Both payments are non-refundable. A final payment of 50% of the purchase price is due 10 days after the British Columbia Securities Commission (BCSC) lifts a cease trade order on Axion’s shares and is payable at the option of the sellers in cash or shares of the Company’s common stock, based on a 20% discount to the Company’s stock price at the time the election to take such final payment in shares is made, provided that such stock price valuation will not be less than $2.00 per share and not more than $3.00 per share. The Letter of Intent terminates if the final payment has not been made by the earlier of June 30, 2021 and 15 days after the BCSC lifts the Axion no trade order. The purchase is also contingent on the sellers granting the Company a proxy to vote the shares to be purchased of Axion through closing. The purchase remains subject to the negotiation of, and entry into, a definitive purchase agreement with the sellers, as well as other closing conditions, which have not been entered into and/or which have not been completed, to date.
Reinhart Interactive TV AG and Zappware N.V. Acquisition
On January 15, 2021, the Company entered into a Founding Investment and Subscription Agreement (the “Investment Agreement”) with Reinhart Interactive TV AG, a company organized in Switzerland (“Reinhart”), and Jan C. Reinhart, the founder of Reinhart (“Founder”).
The Investment Agreement contemplated the Company acquiring 51% of the ownership of Reinhart, in consideration for 10,000,000 Swiss Francs (approximately $10.8 million US), The closing of the transactions contemplated by the Investment Agreement was to take place on April 1, 2021, or earlier if the conditions to closing were earlier satisfied. Conditions to closing included the Company paying the required capital contribution, approval of the transaction by the board of directors of the Company and Reinhart, and certain requirements and confirmations required by Swiss law. The Investment Agreement included customary representations and warranties of the parties. We also agreed to reimburse the Founder’s legal fees of up to 30,000 Swiss Francs (approximately $33,670) in connection with the transaction. Additionally, in the event we failed to close the transactions contemplated by the Investment Agreement by April 1, 2021, we agreed to pay the Founder 500,000 Swiss Francs (approximately $560,000), as a break-up fee.
We closed the transactions contemplated by the Investment Agreement on March 31, 2021, by paying the Founder $10.8 million in cash. The consideration paid to the Founder came largely from funds advanced by HotPlay pursuant to HotPlay Notes.
Reinhart is in the business of providing a software-based TV and video distribution platform to telecom operators and digital content owners and providing services to telecom operators and digital content owners for user interaction design, as well as software development, deployment and support.
In connection with our entry into the Investment Agreement, we entered into a Founding Shareholders’ Agreement with the Founder (the “Shareholders’ Agreement”). The Shareholders’ Agreement set forth certain rules for the governance and control of Reinhart. The Shareholders’ Agreement provides that the board of directors of Reinhart will consist of five members, three of which will be appointed by the Founder and other shareholders of Reinhart, and two of which will be appointed by the Company which include William Kerby, the Company’s Chief Executive Officer, and Mark Vange, the Chief Technology Officer of HotPlay; that any material shareholder matters are required to be approved by shareholders holding at least 66 2/3% of the total outstanding vote of Reinhart; that in the event Reinhart issues, within five years after the closing date, any equity or convertible equity, with a price less than the most recent valuation of Reinhart’s shares, the shares held by each director who is appointed by the Founder are subject to weighted average anti-dilution protection; provides for various restrictions on transfers of shares of Reinhart, including right of first refusal rights, tag-along rights, and drag-along rights, as well as certain rights which would trigger the right of the other parties to the Shareholders’ Agreement to acquire the shares held by an applicable shareholder, for the higher of the fair market value and the nominal value of the shares (except in the case of (c) where the purchase price is the lower of such amounts), if such shareholder (a) commits a criminal act against the interests of another party, Reinhart or its affiliates; (b) breaches the Shareholders’ Agreement, and fails to cure such breach 20 days after notice thereof is provided; or (c) the employment of any employed shareholder is terminated for certain reasons.
The Shareholders’ Agreement also provides a right for the Founder and any other persons appointed as directors by the Founder to put their shares to the Company, at which time the Company will be required to purchase such shares (the “Founder’s Shares”).
The Shareholders’ Agreement also allows the parties to file for an initial public offering on a Swiss trading exchange. The Shareholders’ Agreement has a term of 10 years, extendable thereafter for successive five-year periods, unless terminated by either party with 12 months prior written notice (provided that any such termination shall only be applicable to the terminating shareholder), subject to earlier termination in connection with certain initial public offerings.
Convertible Promissory Notes
On April 8, 2021, the Company entered into an Exchange Agreement with William Kerby, its Chief Executive Officer and director and Monaco Investment Partners II, LP (“MI Partners”), of which Donald P. Monaco is the managing general partner and the Chairman of the board of directors of the Company (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the terms of which were approved by the board of directors of the Company, Mr. Kerby and MI Partners exchanged their right to an aggregate of $1,016,314 in accrued dividends (the “Accrued Dividends”) which had accrued on the Company’s outstanding Series A Preferred Stock, which had been held by Mr. Kerby and MI Partners prior to the conversion of such Series A Preferred Stock into common stock of the Company in August 2017, for Convertible Promissory Notes. Specifically, Mr. Kerby exchanged rights to $430,889 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $430,889 and MI Partners exchanged rights to $585,425 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $585,425 (the “Convertible Promissory Notes”).
The Convertible Promissory Notes accrue interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Notes is convertible, at the option of the holders thereof, into shares of the Company’s common stock, at any time beginning seven days after the Closing Date (defined below) and prior to the payment in full of such Convertible Promissory Notes by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default.
IFEB Bank Transaction
On April 1, 2021, we entered into a Bill of Sale for Common Stock, effective March 22, 2021 (the “Bill of Sale”), with certain third parties pursuant to which the Company agreed to purchase 2,191,489 shares (the “IFEB Shares”) of authorized and outstanding Class A Common Stock of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity headquartered in San Juan Puerto Rico (“IFEB”), which IFEB Shares total approximately 57.1% of the outstanding Class A Common Stock of IFEB. The purchase price of the IFEB Shares was $6,400,000, which amount was paid to the Sellers on April 1, 2021.
IFEB was incorporated in 2017 as a corporation under the laws of the Commonwealth of Puerto Rico and received its international financial entity license on June 18, 2017 from the Office of the Commissioner of Financial Institutions of Puerto Rico, in Spanish, “Oficina del Comisionado de Instituciones Financieras” or “OCIF”, as license #51. As a result, IFEB is regulated by OCIF, and intends to update its application to establish a Fedwire account with the Federal Reserve Bank, New York (“FRB”). IFEB conducts its business activities out of its head office in Puerto Rico at 268 Ponce de Leon Ave., in San Juan.
Notwithstanding the terms of the Bill of the Sale, and the payment by the Company of the aggregate purchase price pursuant thereto, the transfer of the IFEB Shares to the Company and the Company’s acquisition of control of IFEB is subject to review of the Company’s financial viability, as well as other matters, by OCIF, and as such, the Company has filed a formal change of control application which must be approved before taking ownership and control of the IFEB Shares. The Company anticipates completing the acquisition of the IFEB Shares by approximately the end of June 2021.
On May 6, 2021, in anticipation of the acquisition of the IFEB Shares, and control of IFEB, the Company and IFEB entered into a Preferred Stock Exchange Agreement, which was amended by a First Amendment to Preferred Stock Exchange Agreement entered into May 10, 2021 and effective May 6, 2021 (as amended by the first amendment, the “Preferred Exchange Agreement”), pursuant to which the Company agreed to exchange 1,950,000 shares of the Company’s restricted common stock (the “Monaker Shares”) for 5,850 shares of cumulative, non-compounding, non-voting, non-convertible, perpetual Series A preferred shares of IFEB (the “IFEB Preferred Shares”).
The IFEB Preferred Shares will have a coupon of 2% per annum, payable in quarterly installments in arrears. The IFEB Preferred Shares will be redeemable by the Company; however, IFEB may, by the vote of the holders of a majority of its outstanding common stock, call and redeem the IFEB Preferred Shares in exchange for the Monaker Shares, plus accrued interest on the IFEB Preferred Shares at the time of any such redemption; and upon a Change of Control (defined below), the Company may cause IFEB to repurchase the IFEB Preferred Shares in exchange for the Monaker Shares, plus accrued interest at the time of any such Change of Control. “Change of Control” means the sale of all or substantially all the assets of IFEB; any merger, consolidation or acquisition of IFEB with, by or into another corporation, entity or person; or any change in the ownership of more than fifty percent (50%) of IFEB’s voting securities or the economic rights of such IFEB’s securities.
The closing of the transactions contemplated by the Preferred Exchange Agreement, including the issuance of the Monaker Shares and IFEB Preferred Shares, are subject to various closing conditions, including, but not limited to IFEB receiving approval from OCIF to issue preferred stock (including the Series A preferred shares), and the filing of a formal designation of the Series A preferred stock by IFEB with the Secretary of State of Puerto Rico. As such, the transactions contemplated by the Preferred Exchange Agreement may not close on a timely basis, if at all. If not closed by June 30, 2021, the Preferred Exchange Agreement can be terminated by either party with written notice to the other.
Equity Incentive Plan
On April 7, 2021, stockholders approved the adoption of the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), which is intended to secure for the Company and its affiliates the benefits arising from ownership of the Company’s common stock by the employees, officers, directors and consultants of the company and its affiliates, all of whom are and will be responsible for the Company’s future growth. The 2021 Plan is designed to help attract and retain for the Company and its affiliates personnel of superior ability for positions of exceptional responsibility, to reward employees, officers, directors and consultants for their services and to motivate such individuals through added incentives to further contribute to the success of the Company and its affiliates. Awards under the Plan may be made to an eligible person in the form of (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock awards; (v) performance shares; or (vi) any combination of the foregoing. The shares eligible for future awards under the 2021 will be equal (i) 15% of the Company’s total outstanding shares of common stock of the Company outstanding immediately after the closing of the HotPlay Share Exchange and conversion of the Axion preferred stock, and (ii) an annual increase on April 1st of each calendar year, beginning in 2022 and ending in 2030, in each case subject to the approval of the board of directors or the compensation committee of the Company on or prior to the applicable date, equal to the lesser of (A) 5% of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year; (B) 5,000,000 shares of common stock; and (C) such smaller number of shares as determined by the board of directors or Compensation Committee (the “Share Limit”), also known as an “evergreen” provision.
Warrant Grants
On or around March 19, 2021 and March 22, 2021, the Company issued warrants to purchase an aggregate of 160,000 shares of common stock to seven warrant holders (all unrelated third parties) in consideration for the immediate exercise of newly granted warrants. The warrants replaced prior warrants which had expired in 2020 (which had exercise prices from between $3.75 and $5.00 per share) and had an exercise price of $2.00 per share and an expiration date on March 31, 2021 (the “New Warrants”). Those warrants were subsequently exercised for cash on or around March 31, 2021, and the Company received cash of $320,000 in connection with such exercises. The 160,000 shares of common stock issuable upon exercise thereof were issued on or around April 1, 2021. The Company has agreed to register the shares of common stock issuable upon exercise of the warrants in the future.
Warrant Exchanges
On or around March 19, 2021 and March 22, 2021, the Company exchanged warrants to purchase an aggregate of 51,900 shares of common stock held by two of the same warrant holders who were granted New Warrants, which had an exercise price of $5.13 per share and an expiration date of July 30, 2022, for new warrants had an exercise price of $2.00 per share and an expiration date on March 31, 2021 (the “Exchanged Warrants”). Those warrants were subsequently exercised for cash on or around March 31, 2021, and the Company received cash of $103,800 in connection with such exercises. The 51,900 shares of common stock issuable upon exercise thereof were issued on or around April 1, 2021. The Company has agreed to register the shares of common stock issuable upon exercise of the warrants in the future.
Director Compensation and Resignations
On April 7, 2021, each of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr. and Ms. Alexandra C. Zubko, each then members of the board of directors of the Company, provided letters of resignation to the Company, resigning as directors (and from any other positions they hold with the Company), with such resignations effective automatically as of the closing of the HotPlay Exchange Agreement.
Such resignations were solely in connection with the required terms and conditions of the HotPlay Exchange Agreement, which requires that the board of directors of the Company at the closing thereof increase to nine members, with four appointed by HotPlay, two appointed by Monaker, and three appointed mutually by Monaker and HotPlay.
Also on April 7, 2021, the board of directors of the Company ratified the current compensation payable to members of the board of directors, which provides that each non-executive member of the Board be paid (a) compensation of 20,000 shares per year; (b) compensation of 5,000 shares per year, if they are the chairperson of any committee of the board of directors; and (c) compensation of 10,000 shares per year, to the Chairman of the Board (collectively, the “Board Compensation Terms”), except that all shares due to the Directors serving as of March 1, 2021, for the fiscal year ending February 28, 2022, were agreed to be issued up front and to be fully-vested/earned on the date of grant, instead of vesting over time, as previously awarded. In total, an aggregate of 165,000 shares of common stock were issued to the non-executive directors on April 8, 2021 for compensation for fiscal 2022 (such shares, the “Fiscal 2022 Board Compensation Shares”). The Fiscal 2022 Board Compensation Shares were issued under the Company’s Amended and Restated 2017 Equity Incentive Plan (the “Plan”).
On April 7, 2021, the Company entered into a Lock-Up Agreement with each of the non-executive members of the board of directors. Pursuant to the Lock-Up Agreements, each non-executive director agreed not to transfer, sell, pledge or assign any of their applicable Fiscal 2022 Board Compensation Shares until March 1, 2022.
William Kerby Bonus
On April 7, 2021, the board of directors of the Company, consistent with the employment agreement of Mr. William Kerby, the Chief Executive Officer of the Company, which provides for Mr. Kerby to receive a base salary of $400,000 per year, and an annual bonus payable at the discretion of the board of directors, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals), and other bonuses which may be granted from time to time in the discretion of the board of directors, agreed to award Mr. Kerby a discretionary bonus for fiscal 2021 of $400,000, which is payable in cash or shares of common stock, at Mr. Kerby’s option, under the Plan, with a conversion price of $3.02 per share, the closing sales price of the Company’s common stock on the date the board of directors approved such bonus. If Mr. Kerby exercises his right to receive the entire bonus in shares of common stock, he would be due 132,450 shares of common stock.
May 2021 Underwritten Offering
On May 13, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Kingswood Capital Markets, division of Benchmark Investments, Inc. (“Kingswood”), as representatives of the underwriters name therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 3,230,000 shares of the Company’s common stock at a public offering price of $2.50 per share. The Company also granted the underwriters a 45-day option to purchase up to an additional 484,500 shares of common stock to cover over-allotments, if any, which over-allotment option was exercised in full. The Offering (including the sale of the over-allotment shares) closed on May 18, 2020.
Kingswood acted as sole book-running managers for the Offering. The Company paid the Underwriters a cash fee equal to 6% of the aggregate gross proceeds received by the Company in connection with the Offering, paid the Underwriters a non-accountable expense allowance equal to 1% of the aggregate gross proceeds received by the Company in connection with the Offering, and reimbursed certain expenses of the Underwriters.
The net proceeds to the Company from the Offering, after deducting the underwriting discounts and commissions and Offering expenses, were approximately $8.5 million. The Company intends to use the net proceeds from the Offering to repay approximately $4.2 million owed to Streeterville, provide capital to IFEB in advance of the closing of the acquisition of control of IFEB (which acquisition is pending, subject to closing conditions, and may not be completely timely, if at all), for general corporate purposes and working capital or for other purposes that the board of directors, in their good faith, deems to be in the best interest of the Company. We may also use all or a portion of the remaining net proceeds from this offering (after the payments described above) to fund possible investments in, or acquisitions of, complementary businesses, technologies or products; however, we currently have no definitive agreements or commitments with respect to any investment or acquisition.
Pursuant to the Underwriting Agreement, the Company agreed, subject to certain exceptions, not to offer, issue or sell any shares of Common Stock or securities convertible into or exercisable or exchangeable for shares of Common Stock for a period of 45 days following the Offering, without the prior written consent of Kingswood.
In connection with the Offering, each of our officers and directors agreed, subject to certain exceptions, not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of our Common Stock or other securities convertible into or exercisable or exchangeable for shares of our Common Stock for a period of 45 days after the Offering is completed, without the prior written consent of Kingswood.
Streeterville Waiver and Funding
Effective on May 26, 2021, Streeterville agreed to waive the requirement that we use 20% of the proceeds from our May 2021 underwritten offering to repay amounts owed under the November 2020 Streeterville Note, contingent upon our payment of 20% of the proceeds from our May 2021 underwritten offering towards the balance of the March 2021 Streeterville Note.
We made a required monthly redemption payment of $1,250,000 to Streeterville under the November 2020 Streeterville Note on May 26, 2021, with funds obtained pursuant to the May 2021 underwritten offering.
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 the May 2021 underwritten offering, which represented approximately 20% of the funds raised in such offering.
Also on May 26, 2021, Streeterville funded the March 2021 Investor Note (in the amount of $1.5 million) in full.
On June 1, 2021, Streeterville agreed to defer 50% of the April 2021 Note Increase which was otherwise to occur due to the Company’s failure to timely meet all of the November 2020 Note Transaction Conditions. As such, a total of $506,085 has been capitalized into the outstanding balance of the November 2020 Streeterville Note effective as of April 30, 2021, and the remaining $506,085 of the April 2021 Note Increase will only be added to the balance of the November 2020 Streeterville Note if the Company fails to meet the November 2020 Transaction Conditions by June 30, 2021. Separately, if the Company does not meet the March 2021 Note Transaction Conditions by June 30, 2021, the March 2021 Streeterville Note will be subject to the June 2021 Note Increase.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of February 28, 2021, the end of the period covered by this Annual Report on Form 10-K, were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that our degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal controls over financial reporting as of February 28, 2021, based on the framework in Internal Control-Integrated Framework (COSO 2013) issued by the Committee of Sponsoring Organization of the Treadway Commission. On the basis of that assessment, management determined that our internal controls over financial reporting were effective as of that date.
Changes in Internal Control over Financial Reporting
The Company implemented the new accounting system named Sage Intacct during the first and second quarter of fiscal 2021. We hired three additional personnel for greater segregation of duties. There were no other changes in our internal control over financial reporting during the year ended February 28, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table and biographical summaries set forth information, including principal occupation and business experience for at least the last five years, about our directors and executive officers. The terms of all the directors, as identified below, will run until their successors are elected and qualified or until their earlier resignation or removal.
Name
Age
Position
Officer and/or
Director Since
William Kerby
Chief Executive Officer and Vice-Chairman
Sirapop ‘Kent’ Taepakdee
Controller, Vice President of Finance, Chief Financial Officer, Treasurer and Secretary
Tim Sikora
Chief Operating Officer and the Chief Information Officer
Donald P. Monaco
Chairman
Pat LaVecchia
Director
Doug Checkeris
Director
Simon Orange
Director
Rupert Duchesne
Director
Robert “Jamie” Mendola
Director
Alexandra C. Zubko
Director
Information about our Executive Officers:
William Kerby - Chief Executive Officer and Vice-Chairman of the Board of Directors
William Kerby is the Founder, Vice-Chairman, and CEO of Monaker Group, Inc. From July 2008 to present, he has been the architect of the Monaker model, overseeing the development and operations of the Company’s Travel, Real Estate and Television Media divisions. In October 2012, Monaker transferred its real estate assets into a public company - Verus International, Inc., formerly Realbiz Media Group, Inc., where Mr. Kerby served as CEO until August 2015 and on the Board until April of 2016. In July 2015, the decision was made to separate the Television and Real Estate operations from Monaker thereby allowing management to focus all efforts on the development of its travel operations. From April 2002 to July 2008, Mr. Kerby served as the CEO of various media and travel entities that ultimately became part of Extraordinary Vacations Group. Operations included Cruise & Vacation Shoppes, Maupintour Extraordinary Vacations, Attaché Travel and the Travel Magazine - a TV series of 160 travel shows. From February 1999 to April 2002, Mr. Kerby founded and managed Travelbyus, a publicly- traded company on the TSX and NASD Small Cap. The launch included an intellectually patented travel model that utilized technology-based marketing to promote its travel services and products. Mr. Kerby negotiated the acquisition and financing of 21 companies encompassing multiple tour operators, 2,100 travel agencies, media that included print, television, outdoor billboard and wireless applications and leading-edge technology in order to build and complete the Travelbyus model. The company had over 500 employees, gross revenues exceeding $3 billion and a Market Cap over $900 million. From June 1989 to January 1999, Mr. Kerby founded and grew Leisure Canada - a company that included the Master Franchise for Thrifty Car Rental British Columbia, TravelPlus (a nationwide Travel Agency), Bluebird Holidays (an international tour company with operations in the U.S., Canada, Great Brittan, France, South Africa and the South Pacific) and Canadian Traveler (a travel magazine). Leisure Canada was acquired in May 1998 by Wilton Properties, a Canadian company developing hotel and resort properties in Cuba. From October 1980 through June 1989, Mr. Kerby worked in the financial industry as an investment advisor. Mr. Mr. Kerby also serves as a member of the Board of Directors of Longroot Limited, a Cayman Islands company, which the Company own 75% of, through its ownership of Longroot, Inc., a Delaware corporation. Kerby graduated from York University in May 1980 with a Specialized Honors Economics degree.
Director Qualifications:
The Company believes that Mr. Kerby’s experience in the travel and leisure industry allows him to contribute business expertise and qualifies him to be a member of the Board.
Sirapop ‘Kent’ Taepakdee - Chief Financial Officer, Treasurer and Secretary
Mr. Taepakdee has served as the Chief Financial Officer of the Company since December 2020. Mr. Taepakdee has served as the Controller of the Company since July 2019. On October 9, 2019, the board of directors appointed Mr. Taepakdee as the principal financial and accounting officer of the Company. Mr. Taepakdee has served as the Vice President of Finance, Treasurer, and Secretary of the Company since February 1, 2020 and served as the acting Chief Financial Officer from this time until December 2020 when he became the Chief Financial Officer. From February 2012 to January 2018, Mr. Taepakdee served as the Controller of INCEPTRA LLC and JTH Holdings LLC, located in Weston, Florida. From September 2007 to December 2011, Mr. Taepakdee served as a Senior Accountant - Fixed Asset Tax/Assistant Manager, for Office Depot’s international headquarters located in Boca Raton, Florida. Prior to working for Office Depot, Mr. Taepakdee served as Controller of Hilda Flack Interiors, in Palm Beach Gardens, Florida, from January 2005 to August 2007. From 2000 to 2004, Mr. Taepakdee served as a Senior Accountant - Financial Reporting and Analysis, with Vanguard Car Rental USA Inc. (Alamo and National Car Rental), in Boca Raton, Florida. Mr. Taepakdee also served as the Chief Financial Officer at the Bangkok Naval Base (Royal Thai Navy) from 1986 to 1996. Mr. Taepakdee also serves as a member of the Board of Directors of Longroot Limited, a Cayman Islands company, which the Company owns 75% of, through its ownership of Longroot, Inc., a Delaware corporation. Mr. Taepakdee received an MBA (with a specialization in Finance), from Ramkhamhaeng University, in Bangkok, Thailand and a BBA in Accounting (First Class Honors / Valedictorian), from Krirk University, in Bangkok, Thailand.
Tim Sikora - Chief Operating Officer and the Chief Information Officer
Mr. Sikora joined the Company as Chief Information Officer (non-executive) in October 2019, and was promoted to Chief Operating Officer and Chief Information Officer (executive) on February 1, 2020, where he is responsible for managing all of the Company’s information technology (IT) platforms, including the software development activities for the Company’s Monaker Booking Engine (MBE), a customizable, instant-booking platform for alternative lodging rentals NextTrip, the Company’s Travel Management Solution for small to medium-sized business, and Maupintour, an innovative leader in personalized travel experiences. Mr. Sikora also leads Monaker’s commercial sales and technical teams. Mr. Sikora served as director of North America Sales at The Boeing Company, the world’s largest aerospace company, prior to joining the Company, from May 2013 to October 2019. Prior to working with Boeing, he managed and led the expansion of two IT services companies: Peak 10, a leading data center and cloud services company, where he served as Director Information Technology Service Delivery from July 2012 to May 2013, and CIBER, Inc., a global information technology infrastructure services provider, where he served as Information Technology Infrastructure Service Delivery Manager from November 2010 to July 2012. Prior to that, from November 2007 to November 2010, Mr. Sikora served as director of Information Technology End User Services at US Airways, Inc. While there, Mr. Sikora led the airline’s integration of IT end-user platforms following its merger with America West and was responsible for governing IT resource planning, budgeting, and operational management for end-user services. Prior to joining US Airways, Mr. Sikora served as VP of Airline Operations and Chief Information Officer at Caribbean Sun Airlines Holdings (September 2005 to November 2007), where he directed all IT and airline resource planning, budgeting and operational initiatives. Prior to that, Mr. Sikora served as manager of Information technology at DHL Airways, a $500 million cargo airline where he directed the Information Technology group, a provider of contract aircraft services to DHL Worldwide Express. Mr. Sikora also serves as a member of the Board of Directors of Longroot Limited, a Cayman Islands company, which the Company owns 75% of, through its ownership of Longroot, Inc., a Delaware corporation. Mr. Sikora has also held several other software development positions, including at Midwest Express Airlines. Mr. Sikora received a Bachelor’s of Science in Business Administration (Magna Cum Laude) and a Master’s of Science in Leadership, from Embry-Riddle Aeronautical University.
Information about our Directors:
Donald P. Monaco - Chairman
Donald P. Monaco has served as a member of the board of directors since August 2011 and Chairman of the Board since August 2018. Mr. Monaco served on the Verus International, Inc., formerly RealBiz Media Group, Inc., board of directors from October 2012 until April 2016, serving as Chairman of the Board from August, 2015. Mr. Monaco has served on the board of directors of Enderby Entertainment Inc. since March 2018, serving as its Chief Financial Officer since January, 2020. Mr. Monaco is the founder and owner of Monaco Air Duluth, LLC, a full service, fixed-base operator aviation services business at Duluth International Airport in Duluth, Minnesota serving airline, military, and general aviation customers since November 2005. Mr. Monaco has been appointed and reappointed by Minnesota Governors since 2009 to serve as a Commissioner of the Metropolitan Airports Commission in Minneapolis-St. Paul, Minnesota and currently serves as Chairman of the Operations, Finance and Administration Committee. Mr. Monaco was a Director at Republic Bank in Duluth, Minnesota between May 2015 until October 2019 and served as Vice Chairman of the Board, and subsequently serves on the Bell Bank Twin-Ports Market Advisory Board. Mr. Monaco is the President and Chairman of the Monaco Air Foundation, Treasurer of Honor Flight Northland, Treasurer of the Duluth Aviation Institute, and a member of the Duluth Chamber of Commerce Military Affairs Committee. Mr. Monaco spent over 18 years as a Partner and Senior Executive of the 28 years he served as an international information technology and business management consultant with Accenture in Chicago, Illinois. Mr. Monaco holds B.S. and M.S. degrees in Computer Science Engineering from Northwestern University.
Director Qualifications:
We selected Mr. Monaco to serve on our Board because he brings a strong business background to the Company, and adds significant strategic, business and financial experience. Mr. Monaco’s business background provides him with a broad understanding of the issues facing us, the financial markets and the financing opportunities available to us.
Pasquale “Pat” LaVecchia - Director
Pasquale “Pat” LaVecchia has served as a member of the board of directors since 2011. Mr. LaVecchia is the Co-Chairman and CEO of Oasis Pro Markets, a FINRA member broker-dealer. Previously he had been a founding principal and Managing Member of LaVecchia Capital LLC (“LaVecchia Capital”), a broker dealer, since 2009 and has over 25+ years of experience in the financial industry. Mr. LaVecchia has built and run several major Wall Street groups and has extensive expertise in capital markets, including initial public offerings, secondary offerings, raising capital for private companies and PIPEs as well as playing the leading role in numerous mergers, acquisitions, private placements and high yield transactions. Prior to forming LaVecchia Capital, Mr. LaVecchia ran several groups at major firms including: Managing Director and Head of the Private Equity Placement Group at Bear, Stearns & Company (1994 to 1997); Group Head of Global Private Corporate Equity Placements at Credit Suisse First Boston (1997 to 2000); Managing Director and Group Head of the Private Finance and Sponsors Group at Legg Mason Wood Walker, Inc (2001 to 2003); co-founder and Managing Partner of Viant Group (2003-2005) and Managing Director and Head of Capital Markets at FTN Midwest Securities Corp. (2005 to 2007). Mr. LaVecchia received his B.A., magna cum laude (and elected to Phi Beta Kappa), from Clark University and an M.B.A. from The Wharton School of the University of Pennsylvania with a major in Finance and a concentration in Strategic Planning. In the past, Mr. LaVecchia has served on several public company boards, including as Vice Chairman of InfuSystems, Inc. (INFU). Mr. LaVecchia is also currently a managing partner of Sapphire Capital Management. Mr. LaVecchia also sits on several private company boards, advisory boards and non-profit boards.
Director Qualifications:
The Company believes that Mr. LaVecchia’s investment banking and business experience allows him to contribute business and financing expertise and qualifies him to be a member of the Board.
Doug Checkeris - Director
Doug Checkeris has served as a member of the board of directors since September 2012. Mr. Checkeris also served as the Company’s Chief Marketing Officer from February 2012 to February 2014. Mr. Checkeris is a Senior Media and Advertising Executive with nearly three decades of hands-on management in all facets of interactive media. Mr. Checkeris’s work experience includes 14 years of service with Mediacom where he rose through the ranks to become the CEO for Mediacom North America, until recently headquartered in New York. With close to $18 billion in global billings, 4,600 employees, and 116 offices in 89 countries, Mediacom provides and specializes in business-building media solutions for some of the world’s largest, well-known advertisers. Previous to Mediacom, Mr. Checkeris started his career in a media company in Toronto, Canada, and was a partner when the company was acquired by Grey Worldwide and the WPP. Mr. Checkeris served on the Verus International, Inc., formerly RealBiz Media Group, Inc. board of directors from October 2012 until April 2016.
Director Qualifications:
We selected Mr. Checkeris to serve on our Board because he brings to the board extensive knowledge of the media industry. Having served in senior corporate positions in many media related companies, Mr. Checkeris has a vast knowledge of the industry.
Simon Orange - Director
Simon Orange has served as a member of the board of directors since January 2017. Mr. Orange is the founding partner and chairman of CorpAcq, a corporate acquisitions and investments company located in the United Kingdom. Mr. Orange served as the chairman of CorpAcq from 2006 to 2009 and from April 2014 to present. At CorpAcq, Mr. Orange is responsible for identifying and negotiating acquisitions in conjunction with its corporate finance partners, as well as overseeing strategic development, funding, and partnerships. Following a “buy and build” approach, CorpAcq maintains long-term investments in a diverse portfolio of successful businesses. Currently comprised of over 30 portfolio companies’, CorpAcq has been recognized as one of the fastest growing enterprises in the United Kingdom. Mr. Orange has been involved in funding and managing the growth of numerous business ventures, some which have been acquired by NASDAQ and London Stock Exchange listed companies.
Director Qualifications:
The Company believes that Mr. Orange’s experience in corporate acquisitions and financing will assist the Company and qualifies him to be a member of the Board.
Rupert Duchesne, C.M. - Director
Mr. Rupert Duchesne, C.M., a resident of Toronto, Canada, is an independent director, corporate advisor, and is currently the CEO of Mattamy Ventures, part of Mattamy Asset Management. He served as Group Chief Executive and as a director of Aimia Inc (TSX:AIM), as the founding CEO, from June 2005 to May 2017. Through Mr. Duchesne’s stewardship Aimia grew from its carve-out as a division of Air Canada in 2002, the initial public offering as the Aeroplan Income Fund in 2005, conversion to corporate status as Groupe Aeroplan Inc. in 2008 and the re-branding of the Corporation as Aimia in 2011. Mr. Duchesne helped build Aimia into the world’s leading loyalty company with operations in 20 countries, more than 4,000 employees and many well-known brands such as Aeroplan, Nectar, Club Premier, and Air Miles Middle East. Previously, he joined Air Canada in 1996 as Vice-President of Marketing; he then served as Senior Vice President of International in 1999, and then Chief Integration Executive responsible for overseeing the integration of Air Canada and Canadian Airlines International. Prior to Air Canada, Mr. Duchesne served as Vice President and leader of the global Aviation Practice for Mercer Management Consulting (now Oliver Wyman) from 1994 to 1996. Earlier, Mr. Duchesne was an owner and director of LCB Consultants of London, England. He was previously a Director on the Boards of Mattamy Group Corporation, Alliance Atlantis and Dorel Industries. Mr. Duchesne is a Vice President of the Board of Trustees of the Art Gallery of Ontario, and Vice Chair of the Board of the Luminato Festival Toronto, and was previously Chair of the Brain Canada Foundation. Mr. Duchesne earned a Bachelor of Science (Hons) degree in Pharmacology from the University of Leeds and an M.B.A. from the Manchester Business School, both in the United Kingdom. Mr. Duchesne was appointed as a Member of the Order of Canada in 2016.
Director Qualifications:
The Company believes that Mr. Duchesne’s significant experience with public companies, loyalty companies and general corporate matters makes him a strong addition to the Board.
Robert “Jamie” Mendola, Jr. - Director
Robert “Jamie” Mendola, Jr. has served as the Head of Strategy and Mergers and Acquisitions at Mercer Park LP, a U.S. family office, with a focus on cannabis since January 2019. Mr. Mendola has nearly 20 years of experience as a public and private equity investor and has significant experience in negotiating merger and acquisitions transactions and travel industry investments.
Prior to joining Mercer Park, from February 2014 to December 2018, Mr. Mendola served as the Founder and Chief Investment Officer of Pacific Grove Capital, a hedge fund focused primarily on investments in consumer, technology and payments. Prior to founding Pacific Grove in 2014, Mr. Mendola was a Partner at Scout Capital, from September 2009 to January 2014. He was a senior member of the firm’s Investment and Risk Committees and helped to build Scout’s Palo Alto office. Previously, Mr. Mendola worked as a Principal of Watershed Asset Management, a private equity analyst (from July 2005 to January 2009), at JLL Partners, a private equity firm, as an analyst (September 2001 to July 2003) and as an analyst in the investment banking program of J.P. Morgan Chase (July 1999 to August 2001).
Mr. Mendola graduated with a B.S. in Management, from Binghamton University in Binghamton, New York, in 1999 and earned his M.B.A. from Stanford’s Graduate School of Business in 2005.
Director Qualifications:
The Company believes that Mr. Mendola’s experience with mergers and acquisitions, private equity and public companies will be of significant use on the Board.
Alexandra C. Zubko - Director
Since November 2019, Ms. Zubko has served as the Chief Executive Officer of Troupe, an online group travel company. Ms. Zubko served as the co-founder and as a board member of Triptease, a $100 million enterprise value company in the Travel industry which provides SaaS-based digital tools designed to create a seamless booking journey for hotel guests, from April 2014 to September 2019 (also serving as General Sales Manager Americas (May 2015 to May 2017); General Manager/Head of Strategic Accounts Customer Success (March 2017 to April 2018); and Chief Customer Officer (April 2018 to September 2019)). Ms. Zubko served as the Vice President/Head of Global Strategy (from April 2012 to July 2013) and Head of EMSA Strategy (July 2008 to April 2012) of InterContinental Hotels Group (IHG), a British multinational hospitality company. Prior to joining IHG, Ms. Zubko held positions with NBC Universal/General Electric in business development and with Goldman Sachs as a financial analyst. She also founded TripTips, an online social networking platform for sharing travel recommendations. Ms. Zubko received a Bachelor’s of Arts Degree in economics from Columbia College in New York, New York and an MBA from the Stanford Graduate School of Business in Palo Alto, California. Ms. Zubko received Six Sigma certification from GE’s Crotonville Leadership Institute and was also the recipient of the 2012 International Hotel Investment Forum (IHIF) Young Leader Award, one of the top awards in the travel industry.
Director Qualifications:
The Company believes that Ms. Zubko’s significant experience with online travel and the travel industry in general will be of significant use on the Board.
We promote accountability for adherence to honest and ethical conduct; endeavor to provide full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in other public communications made by us; and strive to be compliant with applicable governmental laws, rules and regulations.
Board Leadership Structure
Our board of directors (our “Board”) has the responsibility for selecting our appropriate leadership structure. In making leadership structure determinations, the board of directors considers many factors, including the specific needs of our business and what is in the best interests of our stockholders. Our current leadership structure is comprised of a separate Chairman of the board of directors and Chief Executive Officer (“CEO”). Mr. Donald P. Monaco serves as Chairman and Mr. William Kerby serves as CEO. The board of directors does not have a policy as to whether the Chairman should be an independent director, an affiliated director, or a member of management. Our board of directors believes that the Company’s current leadership structure is appropriate because it effectively allocates authority, responsibility, and oversight between management (the Company’s CEO, Mr. Kerby) and the members of our board of directors. It does this by giving primary responsibility for the operational leadership and strategic direction of the Company to its CEO, while enabling our Chairman to facilitate our board of directors’ oversight of management, promote communication between management and our board of directors, and support our board of directors’ consideration of key governance matters. The board of directors believes that its programs for overseeing risk, as described below, would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of structure.
Risk Oversight
Effective risk oversight is an important priority of the board of directors. Because risks are considered in virtually every business decision, the board of directors discusses risk throughout the year generally or in connection with specific proposed actions. The board of directors’ approach to risk oversight includes understanding the critical risks in the Company’s business and strategy, evaluating the Company’s risk management processes, allocating responsibilities for risk oversight, and fostering an appropriate culture of integrity and compliance with legal responsibilities. The directors exercise direct oversight of strategic risks to the Company (the Company’s committees are described in greater detail below (under “Committees of the Board of Directors”)).
Family Relationships
None of our directors are related by blood, marriage, or adoption to any other director, executive officer, or other key employees.
Arrangements Between Officers and Directors
There is no arrangement or understanding between our current directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management stockholders that may directly or indirectly participate in or influence the management of our affairs except as discussed below.
On or around February 22, 2021, each of the HotPlay Stockholders, and Ms. Nithinan Boonyawattanapisut, Mr. J. Todd Bonner, Mr. Athid Nanthawaroon and Mr. Komson Kaewkham, each nominees for appointment to the Monaker board of directors at the closing of the HotPlay Exchange Agreement, entered into a Voting Agreement with Mr. William Kerby, the Chief Executive Officer and director of Monaker and Mr. Donald P. Monaco, the Chairman of the board of directors of Monaker (the “Voting Agreement”). Pursuant to the Voting Agreement, each of the HotPlay Stockholders agreed to vote all voting shares of Monaker which they hold and may hold in the future (during the term of the agreement) to elect Mr. Kerby and Mr. Monaco to the board of directors of the Company, and each of the HotPlay nominees agreed to continue to nominate each of Mr. Kerby and Mr. Monaco to the board of directors of Monaker. The agreement continues in effect until the earlier of February 26, 2026, the date of both Mr. Kerby’s and Mr. Monaco’s death, or the date that both Mr. Kerby and Mr. Monaco have provided notice of termination to such HotPlay Stockholders.
Other Directorships
No directors of the Company are also directors of issuers with a class of securities registered under Section 12 of the Exchange Act (or which otherwise are required to file periodic reports under the Exchange Act).
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law; (5) being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or (6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Board of Directors Meetings
During the fiscal year that ended on February 28, 2021, the Board held 11 meetings, and took various other actions via the unanimous written consent of the board of directors and the various committees described above. All directors attended at least 75% of the board of directors’ meetings and committee meetings relating to the committees on which each director served during the 2020 fiscal year.
The Company held a virtual 2021 annual meeting on February 24, 2021, which was attended by Mr. Monaco, Mr. Kerby, Mr. Duchesne, Mr. Orange and Ms. Zubko. Each director of the Company has historically been expected to be present at annual meetings of stockholders, absent exigent circumstances that prevent their attendance; however, due to COVID-19, some members of the board of directors were unable to attend the February 2021 meeting. Where a director is unable to attend an annual meeting in person but is able to do so by electronic conferencing, the Company will arrange for the director’s participation by means where the director can hear, and be heard, by those present at the meeting.
Director Independence
The board of directors annually determines the independence of each director and nominee for election as a director. The Board makes these determinations in accordance with The NASDAQ Capital Market’s (“NASDAQ’s”) listing standards for the independence of directors and the SEC’s rules.
In assessing director independence, the Board considers, among other matters, the nature and extent of any business relationships, including transactions conducted, between the Company and each director and between the Company and any organization for which one of our directors is a director or executive officer or with which one of our directors is otherwise affiliated.
The Board has affirmatively determined that each of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Simon Orange, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr., and Ms. Alexandra C. Zubko, are independent.
In accordance with NASDAQ requirements, our Board is comprised of a majority of independent directors and the Nominating and Corporate Governance, Compensation and Audit Committees are all comprised entirely of independent directors.
Committees of the Board
We currently maintain an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, which have the committee members described below. We have also established a disclosure committee, comprised of senior executives, directors and employees who are actively involved in the disclosure process, to specify, coordinate and oversee the public disclosure of information regarding the Company, other than through periodic and current report filings with the SEC.
Board Committee Membership
Independent Audit
Committee Compensation
Committee
Nominating and
Corporate Governance
Committee
William Kerby
Donald P. Monaco (1)
Pasquale “Pat” LaVecchia X C M
Doug Checkeris X
M C
Simon Orange X
M
Rupert Duchesne X M
M
Robert “Jamie” Mendola, Jr. X
C M
Alexandra C. Zubko X M
(1) - Chairman of board of directors.
C - Chairman of Committee.
M - Member.
Each of these committees has the duties described below and operates under a charter that has been approved by our board of directors.
Audit Committee
The Audit Committee, which is comprised exclusively of independent directors, has been established by the Board to oversee our accounting and financial reporting processes and the audits of our financial statements.
The Audit Committee has the responsibility for reviewing the disclosures made by the Chief Executive Officer and the Chief Financial Officer in connection with their required certifications accompanying the Company’s periodic reports to be filed with the SEC; reviewing and discussing the Company’s quarterly financial results and related press releases, if any, with management and the independent auditors prior to the release of such information to the public; reviewing with the management the proposed scope and plan for conducting internal audits of Company operations and obtaining reports of significant findings and recommendations, together with management’s corrective action plans; seeking to ensure the corporate audit function has sufficient authority, support and access to Company personnel, facilities and records to carry out its work without restrictions or limitations; reviewing the corporate audit function of the Company, including its charter, plans, activities, staffing and organizational structure; reviewing progress of the internal audit program, key findings and management’s action plans to address findings; periodically reviewing the Company’s policies with respect to legal compliance, conflicts of interest and ethical conduct; seeking to ensure the adequacy of procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting control or auditing matters, including the confidential submission of complaints by employees regarding such matters; and recommending to the Board any changes in ethics or compliance policies that the committee deems appropriate.
The Board has selected the members of the Audit Committee based on the Board’s determination that the members are financially literate (as required by NASDAQ rules) and qualified to monitor the performance of management and the independent auditors and to monitor our disclosures so that our disclosures fairly present our business, financial condition and results of operations.
The Board has also determined that Mr. LaVecchia is an “audit committee financial expert” (as defined in the SEC rules) because he has the following attributes: (i) an understanding of generally accepted accounting principles in the United States of America (“GAAP”) and financial statements; (ii) the ability to assess the general application of such principles in connection with accounting for estimates, accruals and reserves; (iii) experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee functions. Mr. LaVecchia has acquired these attributes by means of having held various positions that provided relevant experience, as described in his biographical below.
The Audit Committee has the sole authority, at its discretion and at our expense, to retain, compensate, evaluate and terminate our independent auditors and to review, as it deems appropriate, the scope of our annual audits, our accounting policies and reporting practices, our system of internal controls, our compliance with policies regarding business conduct and other matters. In addition, the Audit Committee has the authority, at its discretion and at our expense, to retain special legal, accounting or other advisors to advise the Audit Committee.
During the fiscal year ended February 28, 2021, the committee held four meetings.
The Audit Committee Charter was filed as Exhibit 99.1 to the Current Report on Form 8-K which we filed with the SEC on April 25, 2017.
Compensation Committee
The Compensation Committee, which is comprised exclusively of independent directors, is responsible for the administration of our stock compensation plans, approval, review and evaluation of the compensation arrangements for our executive officers and directors and oversees and advises the Board on the adoption of policies that govern the Company’s compensation and benefit programs. In addition, the Compensation Committee has the authority, at its discretion and at our expense, to retain special legal, accounting or other advisors to advise the Compensation Committee.
During the fiscal year ended February 28, 2021, the committee held three meetings, and took various other actions via consent to actions without meetings.
The Compensation Committee Charter was filed as Exhibit 99.2 to the Current Report on Form 8-K which we filed with the SEC on April 25, 2017.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Robert “Jamie” Mendola, Jr. (Chairman), Pasquale “Pat” LaVecchia, Doug Checkeris, and Simon Orange, who are each independent members of our board of directors. No member of the Compensation Committee is an employee or a former employee of the Company. During fiscal 2020, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on our Compensation Committee. Accordingly, the Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.
Nominating and Governance Committee
The Nominating and Governance Committee, which is comprised exclusively of independent directors, is responsible for identifying prospective qualified candidates to fill vacancies on the Board, recommending director nominees (including chairpersons) for each of our committees, developing and recommending appropriate corporate governance guidelines and overseeing the self-evaluation of the Board.
In considering individual director nominees and Board committee appointments, our Nominating and Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and Board committees and to identify individuals who can effectively assist the Company in achieving our short-term and long-term goals, protecting our stockholders’ interests and creating and enhancing value for our stockholders. In so doing, the Nominating and Governance Committee considers a person’s diversity attributes (e.g., professional experiences, skills, background, race and gender) as a whole and does not necessarily attribute any greater weight to one attribute. Moreover, diversity in professional experience, skills and background, and diversity in race and gender, are just a few of the attributes that the Nominating and Governance Committee takes into account. In evaluating prospective candidates, the Nominating and Governance Committee also considers whether the individual has personal and professional integrity, good business judgment and relevant experience and skills, and whether such individual is willing and able to commit the time necessary for Board and Board committee service.
While there are no specific minimum requirements that the Nominating and Governance Committee believes must be met by a prospective director nominee, the Nominating and Governance Committee does believe that director nominees should possess personal and professional integrity, have good business judgment, have relevant experience and skills, and be willing and able to commit the necessary time for Board and Board committee service. The Company does not have a formal diversity policy. However, the Nominating and Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending individuals that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound business judgment using their diversity of experience in various areas. We believe our current directors possess diverse professional experiences, skills and backgrounds, in addition to (among other characteristics) high standards of personal and professional ethics, proven records of success in their respective fields and valuable knowledge of our business and our industry.
The Nominating and Governance Committee uses a variety of methods for identifying and evaluating director nominees. The Nominating and Governance Committee also regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or other circumstances. In addition, the Nominating and Governance Committee considers, from time to time, various potential candidates for directorships. Candidates may come to the attention of the Nominating and Governance Committee through current Board members, professional search firms, stockholders or other persons. These candidates may be evaluated at regular or special meetings of the Nominating and Governance Committee and may be considered at any point during the year.
The Committee evaluates director nominees at regular or special Committee meetings pursuant to the criteria described above and reviews qualified director nominees with the Board. The Committee selects nominees that best suit the Board’s current needs and recommends one or more of such individuals for election to the Board.
The Committee will consider candidates recommended by stockholders, provided the names of such persons, accompanied by relevant biographical information, and other information as required by the Company’s Bylaws, are properly submitted in writing to the Secretary of the Company in accordance with the Bylaws and applicable law. The Secretary will send properly submitted stockholder recommendations to the Committee. Individuals recommended by stockholders in accordance with these procedures will receive the same consideration received by individuals identified to the Committee through other means. The Committee also may, in its discretion, consider candidates otherwise recommended by stockholders without accompanying biographical information, if submitted in writing to the Secretary.
During the fiscal year ended February 28, 2021, the committee held ten meetings and took various other actions via consent to actions without meetings.
The Nominating and Governance Committee Charter was filed as Exhibit 99.3 to the Current Report on Form 8-K which we filed with the SEC on April 25, 2017.
Stockholder Communications with the Board of Directors
In connection with all other matters other than the nomination of members of our board of directors (as described above), our stockholders and other interested parties may communicate with members of the board of directors by submitting such communications in writing to our Secretary, 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323, who, upon receipt of any communication other than one that is clearly marked “Confidential,” will note the date the communication was received, open the communication, make a copy of it for our files and promptly forward the communication to the director(s) to whom it is addressed. Upon receipt of any communication that is clearly marked “Confidential,” our Secretary will not open the communication, but will note the date the communication was received and promptly forward the communication to the director(s) to whom it is addressed. If the correspondence is not addressed to any particular member of the board of directors, the communication will be forwarded to a Board member to bring to the attention of the Board.
Executive Sessions of the Board of Directors
The independent members of our board of directors meet in executive session (with no management directors or management present) from time to time. The executive sessions include whatever topics the independent directors deem appropriate.
Code of Ethics
We maintain a Code of Ethics and Code of Business Conduct, which are applicable to all of our directors, officers and employees. These codes set forth ethical standards to which these persons must adhere and other aspects of accounting, auditing and financial compliance, as applicable. We undertake to provide a printed copy of these codes free of charge to any person who requests. Any such request should be sent to our principal executive offices attention: Chief Financial Officer.
We intend to disclose any amendments to our Code of Ethics and Code of Business Conduct and any waivers with respect to our Code of Ethics and Code of Business Conduct granted to our principal executive officer, our principal financial officer, or any of our other employees performing similar functions on our website at www.monakergroup.com, within four business days after the amendment or waiver. In such case, the disclosure regarding the amendment or waiver will remain available on our website for at least 12 months after the initial disclosure. There have been no waivers granted with respect to our Code of Ethics and Code of Business Conduct to any such officers or employees to date.
Whistleblower Protection Policy
On April 18, 2017, the Company adopted a Whistleblower Protection Policy (“Whistleblower Policy”) that applies to all of its directors, officers, employees, consultants, contractors and agents of the Company. The Whistleblower Policy has been reviewed and approved by the Board.
Policy on Equity Ownership
The Company does not have a policy on equity ownership at this time. However, as illustrated in the table set forth under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Principal Stockholders, Directors and Management”, all of our Named Executive Officers and all of our directors are beneficial owners of stock of the Company.
Policy Against Hedging
The Company recognizes that hedging against losses in Company shares may disturb the alignment between stockholders and executives that equity awards are intended to build. Accordingly, the Company has incorporated prohibitions on ‘short sales’ within its insider trading policy, which applies to directors, officers and employees.
Compensation Recovery
Under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), in the event of misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer and Chief Financial Officer. We plan to implement a clawback policy in the future, although we have not yet implemented such policy.
Executive Officers and Directors of the Combined Company Following the HotPlay share exchange
Effective as of the closing of the HotPlay Share Exchange, (i) the officers of the combined company are expected to include Co-Chief Executive Officers (1) Mr. William Kerby (the Company’s current Chief Executive Officer) and (2) Ms. Nithinan Boonyawattanapisut (who will also become a member of the Company’s board of directors, a director of HotPlay and of Red Anchor Trading Corporation, a HotPlay Stockholder which is controlled by Ms. Boonyawattanapisut (“Red Anchor”), and the spouse of Mr. J. Todd Bonner (who will become a director of the Company following the closing as discussed below)); Mr. Mark Vange (the Chief Technology Officer of HotPlay) as Chief Technology Officer of the Company; Mr. Sirapop ‘Kent’ Taepakdee (the Company’s current Chief Financial Officer), as Chief Financial Officer of the Company; and Mr. Timothy Sikora (the Company’s current Chief Operating Officer and Chief Information Officer), as Chief Operating Officer and Chief Information Officer of the Company; and (ii) the combined company’s board directors will be comprised of nine members:
(1) Mr. J. Todd Bonner (who is the Chairman and a director of HotPlay and the spouse of Ms. Boonyawattanapisut);
(2) Ms. Nithinan Boonyawattanapisut;
(3) Mr. Athid Nanthawaroon (who is a director of HotPlay and the Chief Executive Officer and director of Tree Roots Entertainment Group Co., Ltd., one of the HotPlay Stockholders); and
(4) Mr. Komson Kaewkham (who is a Senior Vice President with DTGO Corporation Limited),
who have been designated by Red Anchor and the Axion Stockholders, and of whom Mr. Komson Kaewkham is anticipated to be ‘independent’;
(5) Mr. Donald P. Monaco, the current Chairman of the Company; and
(6) Mr. Kerby, the current Chief Executive Officer (who will become a Co-Chief Executive Officer following the closing),
who are both current members of the board of directors of Monaker (and were nominated by the board of directors), and of which Mr. Donald P. Monaco will be ‘independent’ under applicable NASDAQ rules; and
(7) Mr. Simon Orange, a current member of the Board of the Company, who has been agreed to mutually by Red Anchor and the Company’s board of directors, and who is ‘independent’; and
(8) Mr. Yoshihiro Obata, who has been agreed to mutually by Red Anchor and the Monaker board of directors, and will be ‘independent’; and
(9) Ms. Stacey Riddell, who has been agreed to mutually by Red Anchor and the Monaker board of directors, and will be ‘independent’.
On April 7, 2021, each of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr. and Ms. Alexandra C. Zubko, each then members of the Board of Directors of the Company, provided letters of resignation to the Company, resigning as directors (and from any other positions they hold with the Company), with such resignations effective automatically as of the closing of the HotPlay Exchange Agreement.
Biographical information for each of the to be appointed officers of the Company and members of the board of directors of the Company following the closing of the HotPlay Exchange Agreement, are included in the Definitive Proxy Statement on Schedule 14A filed by the Company with the Securities and Exchange Commission on March 4, 2021.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and officers, and persons who beneficially own more than 10% of a registered class of the Registrant’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of our securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of the Section 16(a) filings that have been furnished to us and filed publicly, we believe that during FYE February 28, 2021, that no director, executive officer, or beneficial owner of more than 10% of our common stock failed to file a report on a timely basis, except that: Sirapop ‘Kent’ Taepakdee, our Chief Financial Officer, inadvertently failed to timely disclose one transaction on Form 4 and as a result one Form 4 was filed untimely; Rupert Duchesne, our director inadvertently failed to timely disclose two transactions on Form 4 and as a result two Form 4s were filed untimely; Alexandra Zubko, our director, inadvertently failed to timely disclose two transactions on Form 4 and as a result two Form 4s were filed untimely; Pasquale “Pat” LaVecchia, our director, inadvertently failed to timely disclose two transactions on Form 4 and as a result two Form 4s were filed untimely; Donald P. Monaco, our Chairman, inadvertently failed to timely disclose two transactions on Form 4 and as a result two Form 4s were filed untimely; Simon Orange, our director, inadvertently failed to timely disclose three transactions on Form 4 and as a result three Form 4s were filed untimely; Doug Checkeris, our director, inadvertently failed to timely disclose three transactions on Form 4 and as a result three Form 4s were filed untimely; and Robert “Jamie” Mendola, our director, inadvertently failed to timely disclose three transactions on Form 4 and as a result three Form 4s were filed untimely.
Pursuant to SEC rules, we are not required to disclose in this filing any failure to timely file a Section 16(a) report that has been disclosed by us in a prior annual report or proxy statement.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Summary Executive Compensation Table
The following table sets forth certain information concerning compensation earned by or paid to certain persons who we refer to as our “Named Executive Officers” for services provided for the fiscal years ended February 28, 2021 and February 29, 2020 (Fiscal 2021 and Fiscal 2020, respectively). Our Named Executive Officers include persons who (i) served as our principal executive officer or acted in a similar capacity during Fiscal 2021 and Fiscal 2020, (ii) were serving at fiscal year-end as our two most highly compensated executive officers, other than the principal executive officer, whose total compensation exceeded $100,000, and (iii) if applicable, up to two additional individuals for whom disclosure would have been provided as a most highly compensated executive officer, but for the fact that the individual was not serving as an executive officer at fiscal year-end.
Name and
Principal
Position Fiscal
Year
Ended Salary Bonus
Stock
Awards (1)
Option
Awards
All Other
Compensation
Total
William Kerby,
CEO and Vice-Chairman of the Board $ 400,000 $ - $ - $ - $ 124,759 (2), (3), (9) $ 524,759
$ 400,000 $ - $ - $ - $ 42,000 (2), (3) $ 442,000
Sirapop “Kent” Taepakdee,
VP of Finance and Chief Financial Officer (4)
$ 157,834 $ 10,000 $ 64,850 (8) $ - $ 11,211 (9) $ 243,895
$ 64,917 $ - $ - $ - $ -
$ 64,917
Timothy Sikora,
COO and CIO (5) $ 200,000 $ - $ 36,300 (8) $ - $ 7,762 (9) $ 244,062
$ 75,769 $ - $ 31,800 (8) $ - $ -
$ 107,569
Omar Jimenez,
Former CFO, COO and Director (6) $ 297,917 $ - $ - $ - $ 103,195 (7) $ 401,112
*Does not include perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is more than $10,000. None of our executive officers received any change in pension value and nonqualified deferred compensation earnings during the periods presented.
(1) The value of the Stock Awards in the table above was calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
(2) William Kerby receives additional compensation in the form of a car allowance in the amount of $1,500 per month.
(3) William Kerby received additional compensation in the form of a Merchant Banking Guarantee in the amount of $2,000 per month through November 1, 2018, when he began receiving $2,000 as a guaranty fee under his employment agreement, as discussed below.
(4) Appointed as the principal financial officer and principal accounting officer of the Company on October 9, 2019, and as the Vice President of Finance, acting Chief Financial Officer (since Chief Financial Officer), Treasurer, and Secretary of the Company effective February 1, 2020.
(5) Appointed as the Chief Operating Officer and the Chief Information Officer of the Company (executive positions) effective February 1, 2020. Served as the Chief Information Officer (non-executive) from October 9, 2019, to February 1, 2020, when he was appointed as an executive of the Company.
(6) Resigned as Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary on January 17, 2020. Ceased serving as a member of the board of directors on August 15, 2019.
(7) Represents cash-out of unused vacation time which had accrued as of Mr. Jimenez’s resignation, which was paid in the form of cash.
(8) Represents the Stock Awards to Mr. Taepakdee for 27,500 shares, and to Mr. Sikora for 27,000 shares (12,000 in FY 2020 and 15,000 in FY 2021).
(9) Includes cash-out of unused vacation time, which was paid in the form of cash, totaling $82,759 for Mr. Kerby, $11,211 for Mr. Taepakdee, and $7,762 for Mr. Sikora.
Outstanding Equity Awards at Fiscal Year-End
None.
Employment and Compensation Agreements
We have the following employment contracts and compensation agreements in place with our Named Executive Officers and Chairman:
William Kerby, Employment Agreement
On October 31, 2018, the Company entered into an Employment Agreement with William Kerby, its Chief Executive Officer and Vice Chairman of its board of directors. The agreement was effective as of November 1, 2018, and replaced and superseded the terms of Mr. Kerby’s prior employment agreement dated October 15, 2006.
The agreement remains in effect (renewing automatically on a month-to-month basis), until either party provides the other at least 30 days prior written notice of its intent to terminate the agreement, or until terminated as discussed below.
The agreement includes a non-compete provision, prohibiting Mr. Kerby from competing against the Company during the term of the agreement and for a period of 12 months after termination thereof (subject to certain exceptions described below), in any state or country in connection with (A) the offer of Alternative Lodging Rental properties (Vacation Home Rentals) which are distributed on a Business to Business Basis; (B) the commercial sale of specialty products sold by the Company during the six (6) months preceding the termination date; and (C) any services the Company commercially offered during the six (6) months prior to the termination date (collectively, the “Non-Compete”).
During the term of the agreement, Mr. Kerby is to receive a base salary of $400,000 per year, which may be increased at any time at the discretion of the Compensation Committee of the board of directors of the Company; an annual bonus payable at the discretion of the Compensation Committee, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals, which are determined from time to time by the Compensation Committee); other bonuses which may be granted from time to time in the discretion of the Compensation Committee; 25,000 shares of common stock issued as a sign-on bonus under the terms of the Company’s 2017 Equity Incentive Plan; up to four weeks of annual paid time off, which can be rolled-over year to year, or which in the discretion of Mr. Kerby, can be required to be paid in cash at the end of any year or the termination of the agreement; and a car allowance of $1,500 per month during the term of the agreement.
The agreement provides Mr. Kerby with the option of receiving some or all of the base salary and/or any bonus in shares of the Company’s common stock, with such shares being based on the higher of (a) the closing sales price per share on the trading day immediately preceding the determination by Mr. Kerby to accept shares in lieu of cash; and (b) the lowest price at which such issuance will not require stockholder approval under the rules of the stock exchange where the Company’s common stock is then listed or Nasdaq ((a) or (b) as applicable, the “Share Price” and the “Stock Option”), provided that Mr. Kerby shall be required to provide the Company at least five business days prior written notice if he desires to exercise the Stock Option as to any payment of compensation, unless such time period is waived by the Company. The issuance of the shares described above is subject to the approval of the stock exchange where the Company’s common stock is then listed or Nasdaq, and where applicable, stockholder approval, and in the sole discretion of the board of directors, may be issued under, or outside of, a stockholder approved stock plan.
The agreement includes standard provisions relating to the reimbursement of business expenses, indemnification rights, rights to company property and inventions (which are owned by the Company), dispute resolutions, tax savings, clawback rights and provisions entitling Mr. Kerby to receive any fringe benefits offered by the Company to other executives (subsidized in full by the Company) including, but not limited to, family coverage for health/medical/dental/vision, life and disability insurance, as well as amounts under the Company’s 401(k) Savings and Retirement.
Additionally, in consideration for Mr. Kerby having entered into numerous personal guarantees with the Airline Reporting Commission, sellers of travel services, merchant providers, financial institutions, associations and service providers on behalf of the Company, the Company agreed that, for as long as Mr. Kerby is employed by the Company, provides services under the agreement and is willing to continue to support the Company in connection with such guarantees, he will receive a $2,000 per month guarantee fee. In the event Mr. Kerby resigns for Good Reason (defined below), or his employment is terminated by the Company, the Company agreed to eliminate any and all guarantees within thirty days, failing which, for each month the guarantees remain in place, the monthly guarantee fee will rise to $10,000 per month, until such time as the Company has assumed or terminated all such guarantees.
The agreement terminates upon Mr. Kerby’s death and can be terminated by the Company upon his disability (as described in the agreement), by the Company for Cause (defined below) or Mr. Kerby for Good Reason (defined below). For the purposes of the agreement, (A) “Cause” means (i) Mr. Kerby’s gross and willful misappropriation or theft of the Company’s or any of its subsidiary’s funds or property; or (ii) Mr. Kerby’s conviction of, or plea of guilty or nolo contendere to, any felony or crime involving dishonesty or moral turpitude; or (iii) Mr. Kerby materially breaches any obligation, duty, covenant or agreement under the agreement, which breach is not cured or corrected within thirty (30) days of written notice thereof from the Company (except for certain breaches which cannot be cured); or (iv) Mr. Kerby commits any act of fraud; and (B) “Good Reason” means (i) without the consent of Mr. Kerby, the Company materially reduces Mr. Kerby’s title, duties or responsibilities, without the same being corrected within ten (10) days after being given written notice thereof; (ii) the Company fails to pay any regular installment of base salary to Mr. Kerby and such failure to pay continues for a period of more than thirty (30) days; or (iii) a successor to the Company fails to assume the Company’s obligations under the agreement, without the same being corrected within thirty (30) days after being given written notice thereof.
In the event of termination of the agreement for death or disability by Mr. Kerby without Good Reason, or for Cause by the Company, Mr. Kerby is due all consideration due and payable to him through the date of termination. In the event of termination of the agreement by Mr. Kerby for Good Reason or the Company for any reason other than Cause (or if Mr. Kerby’s employment is terminated other than for Cause within six (6) months before or twenty-four (24) months following the occurrence of a Change of Control (defined in the agreement) of the Company), Mr. Kerby is due all consideration due and payable through the date of termination; a lump sum payment equal to twelve (12) months of base salary; continued participation in all benefit plans and programs of the Company for twelve (12) months after termination (or at the option of the Company, reimbursement of COBRA insurance premiums for substantially similar coverage as the Company’s plans); and the Non-Compete will not apply to Mr. Kerby.
The terms of the agreement were approved by the Company’s Compensation Committee, consisting solely of ‘independent’ members of the Company’s board of directors.
Sirapop “Kent” Taepakdee, Employment Agreement
On January 30, 2020, Mr. Sirapop “Kent” Taepakdee entered into an employment agreement with the Company. Pursuant to Mr. Taepakdee’s employment agreement, he agreed to provide services to the Company as the VP of Finance and Chief Financial Officer.
Mr. Taepakdee receives a base salary payable in cash ($200,000 per year) pursuant to his employment agreement and is also eligible to receive equity compensation, when approved by the board of directors and subject to the Company meeting certain metrics as follows - Mr. Taepakdee is eligible, for a bonus of up to (a) 5,000 shares (or $5,000 dollars), upon completion of a review of, the improvement of, the Company’s financial reporting programs, payable in the discretion of the Chief Executive Officer; (b) 7,500 shares (or $10,000) in the event the Company meets certain metrics by June 30, 2020, including achieving a minimum level of gross monthly revenues or achieving an EBITDA profit in any month, payable in the discretion of the Chief Executive Officer; (c) 2,000 shares or $2,000 (in Mr. Taepakdee’s discretion), each quarter that Mr. Taepakdee works with the Chief Executive Officer in order to prepare presentations and other public relations items, payable in the discretion of the Chief Executive Officer; and (d) 3,000 shares (or $4,000) in the event the Company raises more than $3 million during the first 12 months of the agreement, payable in the discretion of the Chief Executive Officer. All shares earned in the first 12 months of the agreement are valued at $2.00 per share. Upon the mutual approval of the executive and the Company, Mr. Taepakdee’s salary may increase to no less than $150,000 per year after the first year.
On September 8, 2020, the Company issued Mr. Taepakdee an aggregate of 17,500 shares of common stock of the Company as a bonus in consideration for services rendered, which vested immediately upon issuance.
Effective on January 31, 2021, the compensation of Mr. Taepakdee was increased from $154,000 to $200,000 per year.
On February 12, 2021, the Company issued Mr. Taepakdee an aggregate of 10,000 shares of common stock of the Company as a bonus in consideration for services rendered, which vested immediately upon issuance.
The agreement has a term of three years, mutually extendable with the consent of the parties.
In the event that Mr. Taepakdee desires to sell more than 10,000 shares of common stock in any one transaction when the daily volume of the Company’s common stock is 10,000 or less, Mr. Taepakdee is required to provide the Company the first right to purchase such shares.
If the agreement is terminated by Mr. Taepakdee for good reason (as defined in the agreement) or by the Company without cause, and other than due to Mr. Taepakdee’s death or disability, Mr. Taepakdee is due two calendar months of severance pay; and if the agreement is terminated due to Mr. Taepakdee’s disability, Mr. Taepakdee, is due compensation through the remainder of the month during which he was terminated. If he is terminated for cause, terminates his employment without good reason or dies, he (or his estate, as applicable) is paid through the date of termination. If the Company terminates the agreement within 24 months after a change in control (as described in the agreement), then the Company is required to pay Mr. Taepakdee a severance payment equal to twelve (12) months’ salary, plus continue to provide benefits equal to those provided prior to the change in control for a period of six (6) months. The agreement contains customary confidentiality requirements and work for hire language. The agreement includes a one year non-solicitation and non-competition clause following the date of the termination of the agreement, which non-competition clause prohibits Mr. Taepakdee (without the prior written consent of the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying on or being engaged in any business within North America which is competitive with the business of the Company, however the non-compete shall terminate in the event of a termination of employment by Mr. Taepakdee for good reason or a termination by the Company other than for cause or disability.
Timothy Sikora - Employment Agreement
On January 30, 2020, Mr. Timothy Sikora entered into an employment agreement with the Company. Pursuant to Mr. Sikora’s employment agreement, he agreed to provide services to the Company as the Chief Information Officer and Chief Operations Officer.
Mr. Sikora receives a base salary payable in cash ($200,000 per year) pursuant to his employment agreement and is also eligible to receive equity compensation, when approved by the board of directors and subject to the Company meeting certain metrics as follows - Mr. Sikora is eligible, for a bonus of up to (a) 10,000 shares (or $10,000 dollars), upon the Company achieving certain gross monthly revenue targets by June 30, 2020 or December 30, 2020, or an EBITDA profit in any month before February 28, 2021; (b) 10,000 shares (or $10,000) in the event certain milestones for product and website launches and integrations are completed during calendar 2020, payable in the discretion of the Chief Executive Officer; and (c) 25,000 shares (or $25,000) in the event the Company completes a merger or acquisition, completes a funding, accelerates profitability or achieves profitability by February 28, 2021, payable in the discretion of the Chief Executive Officer.
On September 8, 2020, the Company issued Mr. Sikora an aggregate of 15,000 shares of common stock of the Company as a bonus in consideration for services rendered, which vested immediately upon issuance.
The agreement has a term of three years, mutually extendable with the consent of the parties.
In the event that Mr. Sikora desires to sell more than 10,000 shares of common stock in any one transaction when the daily volume of the Company’s common stock is 10,000 or less, Mr. Sikora is required to provide the Company the first right to purchase such shares.
If the agreement is terminated by Mr. Sikora for good reason (as defined in the agreement) or by the Company without cause, and other than due to Mr. Sikora’s death or disability, Mr. Sikora is due two calendar months of severance pay; and if the agreement is terminated due to Mr. Sikora’s disability, Mr. Sikora, is due compensation through the remainder of the month during which he was terminated. If he is terminated for cause, terminates his employment without good reason or dies, he (or his estate, as applicable) is paid through the date of termination. If the Company terminates the agreement within 24 months after a change in control (as described in the agreement), then the Company is required to pay Mr. Sikora a severance payment equal to twelve (12) months’ salary, plus continue to provide benefits equal to those provided prior to the change in control for a period of six (6) months. The agreement contains customary confidentiality requirements and work for hire language. The agreement includes a one year non-solicitation and non-competition clause following the date of the termination of the agreement, which non-competition clause prohibits Mr. Sikora (without the prior written consent of the Company which consent will not be unreasonably withheld) from directly or through another person or another entity carrying on or being engaged in any business within North America which is competitive with the business of the Company, however the non-compete shall terminate in the event of a termination of employment by Mr. Sikora for good reason or a termination by the Company other than for cause or disability.
Donald P. Monaco, Guaranty Compensation Agreement
On October 31, 2018, and effective November 1, 2018, the Company entered into a Guaranty Compensation Agreement with Donald P. Monaco, the Chairman of the Company’s board of directors. Pursuant to the Guaranty Compensation Agreement and in consideration for Mr. Monaco previously providing a personal guaranty to a financial institution in connection with our line of credit with such financial institution, we agreed that for as long as Mr. Monaco continues to serve on the board of directors of the Company and continues to maintain the guaranty (and any future guarantees he may provide), we would pay him a $2,000 per month guarantee fee (the “Guarantee Fee”). In December 2020, the Company repaid its credit agreement with National Bank of Commerce (FKA: Republic Bank), which terminated Mr. Monaco’s guaranty and the Guaranty Compensation Agreement.
Payments Due Upon a Change of Control Under Employment Arrangements with Mr. Kerby, Mr. Taepakdee and Mr. Sikora and Certain Other Employees
As described in greater detail above, the employment agreements with Mr. William Kerby, our Chief Executive Officer, Mr. Sirapop “Kent” Taepakdee, our Chief Financial Officer and Mr. Timothy Sikora, our Chief Operating Agreement, include provisions which provide that, if such person’s employment with the Company is terminated within twenty-four months after a Change of Control (descried below)(or in the case of Mr. Kerby’s agreement, within twenty-four months after, or six months prior to, a Change of Control), then Monaker is required to pay such executives a severance payment:
● As to Mr. Kerby, equal to (i) a lump sum payment in an amount equal to twelve months of his base salary at the then current rate (currently $400,000 per year); (ii) all amounts earned, accrued or owing through the date his employment is terminated but not yet paid; and (iii) continued participation in all employee benefit plans, programs or arrangements available to the Company executives in which he was participating on such date of termination of until the earliest of: (a) twelve months after the date of termination of employment; (b) the date the employment agreement would have expired but for the occurrence of the date of termination; or (c) the date, or dates, Mr. Kerby receives similar coverage under a subsequent employer plan. Such payment is required to be made in a lump sum on or before the date ending on the expiration of three months following the date of termination; and
● As to Mr. Taepakdee and Mr. Sikora, a severance payment equal to twelve months salary ($200,000 as to Mr. Taepakdee and $200,000 as to Mr. Sikora), plus continued benefits equal to those provided prior to the Change of Control event for a period of six months.
For the purposes of the employment agreements, “Change of Control” (‘Change in Control’ under Mr. Kerby’s agreement) means (a) any entity or person who becomes either individually or, pursuant to an express agreement among all of the members of such group, as part of a “control group” (as such term is used in Section 13(d) of the Exchange Act) the beneficial owner of 50% or more of the Company’s voting securities (other than an employee, officer or stockholder of the Company as of the date of such applicable employment agreement) or (b) there is a liquidation of all or substantially all of the Company’s assets or the Company dissolves. We anticipate that the closing of the exchange agreements will constitute a Change of Control under the employment agreements.
It is also grounds for a “Good Reason” termination under each of the employment agreements of our officers if, in the case of Mr. Kerby’s agreement, without his consent, the Company materially reduces his title, duties or responsibilities and in the case of Mr. Taepakdee’s and Mr. Sikora’s employment agreements, there is a significant reduction of their duties, position or responsibilities relative to the their duties, position or responsibilities in effect immediately prior to such reduction, or the removal of the executive from such position, duties and responsibilities.
Additionally, in the event Mr. Kerby resigns for Good Reason, we are required to immediately eliminate any and all guarantees which Mr. Kerby has provided on behalf of the Company (which total an aggregate of approximately $2 million as of the date of this Report), and in the event we are unable to eliminate all such guarantees within 30 days, we are required to pay Mr. Kerby $10,000 per month in guaranty fees (compared to $2,000 per month under the current terms of the employment agreement) until such time as such guarantees are eliminated. Finally, in the event Mr. Kerby resigns for Good Reason, Mr. Kerby is due the same severance compensation described above in connection with a Change of Control termination.
In the event Mr. Taepakdee or Mr. Sikora terminates his employment agreement for Good Reason, we are required to pay such applicable executive his salary and other benefits earned or accrued through the date of termination, and continue to pay them two additional months of salary.
Certain employment agreements of other non-executive officers of the Company contain similar provisions as Mr. Taepakdee’s and Mr. Sikora’s agreements discussed above.
There will be no changes to Mr. Kerby’s, Mr. Taepakdee’s or Mr. Sikora’s employment agreements in connection with the closing of the HotPlay Exchange Agreement and it is anticipated that each of such persons will, as part of such assumption, agree to waive any Change of Control or Good Reason termination rights associated with the share exchanges, the Change of Control associated therewith, provided that in the event any such persons refuse to waive such terms, the Company could owe such persons significant consideration upon a termination of their employment prior to, or subsequent to, the HotPlay Exchange Agreement.
Director Compensation
The following table sets forth information concerning the total compensation that we have paid or that has accrued on behalf of our non-executive directors during the fiscal year ended February 28, 2021. Our executive directors do not receive compensation for their service on the board of directors separate from the compensation they receive as an executive officer of the Company, as described above.
Name Fiscal
Year
Fees
Earned
Stock
Awards*
Option
Awards
All other Compensation Total
Pasquale “Pat” LaVecchia, Director $ - $ 53,563 $ - $ - $ 53,563
Donald P. Monaco, Chairman $ - $ 64,275 $ - $ 18,000 (1) $ 82,275
Doug Checkeris, Director $ - $ 53,563 $ - $ - $ 53,563
Simon Orange, Director $ - $ 42,850 $ - $ - $ 42,850
Rupert Duchesne, Director $ - $ 42,850 $ - $ - $ 42,850
Robert “Jamie” Mendola, Jr., Director $ - $ 53,563 $ - $ - $ 53,563
Alexandra C. Zubko, Director $ - $ 42,850 $ - $ - $ 42,850
No director received any Non-Equity Incentive Plan Compensation or Non-Qualified Deferred Compensation for the period above.
* The value of the Stock Awards in the table above was calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
(1) Represents amounts paid under the Guaranty Compensation Agreement described above under “Donald P. Monaco, Guaranty Compensation Agreement”, which agreement was terminated automatically upon the repayment of the Company’s debt owed to National Bank of Commerce (FKA: Republic Bank) in December 2020.
Director Compensation Policy
The compensation payable to the board of directors currently consists solely of equity, and includes (a) compensation of 20,000 shares per year, issuable at the rate of 1/4th of such shares quarterly, to each non-executive member of the Board; (b) compensation of 5,000 shares per year, issuable at the rate of 1/4th of such shares quarterly, to each Chairperson of each Board committee of the Board; and (c) compensation of 10,000 shares per year, issuable at the rate of ¼th of such shares quarterly (provided that compensation for the 2022 fiscal year were issued in April 2021, and vest at the rate of 1/4th of such shares quarterly), to the Chairman of the Board, each under the terms of the Plan (collectively, the “Board Compensation Terms”).

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Stockholders, Directors and Management
The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 29, 2021 (the “Date of Determination”), by (i) each Named Executive Officer, (ii) each member of our board of directors, (iii) each person deemed to be the beneficial owner of more than five percent (5%) of any class of our capital stock, and (iv) all of our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant or upon conversion of a convertible security) within 60 days of the Date of Determination. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.
The Company’s Series B Preferred Stock and Series C Preferred Stock is non-voting, and is not convertible into common stock until the HotPlay Exchange Agreement has closed, the timing of which is unknown, and as such, the ownership of such preferred stock has not been included in the table below.
To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, (a) the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to applicable community property laws; and (b) no person owns more than 5% of our common stock. Unless otherwise indicated, the address for each of the officers or directors listed in the table below is 1560 Sawgrass Corporate Parkway, Suite 130, Sunrise, Florida 33323.
Name of Beneficial Owner
Shares of Common Stock
Beneficially Owned (1)
Percent of
Common Stock
(2)
Executive Officers and Directors
William Kerby 2,999,072 (3)(4) 12.7 %
Sirapop “Kent” Taepakdee 27,500
*
Tim Sikora 27,000
*
Donald P. Monaco 1,994,034 (5) 8.5 %
Simon Orange 481,649 (6) 2.0 %
Pasquale “Pat” LaVecchia 177,232
*
Doug Checkeris 161,250
*
Rupert Duchesne 50,833
*
Robert “Jamie” Mendola, Jr. 526,439
2.2 %
Alexandra C. Zubko 47,055
*
All Executive Officers and Directors as a Group (10 persons) 6,492,064
27.7 %
5% Stockholders
IDS, Inc. (7) 1,968,000 (4) 8.4 %
* Less than 1%.
(1) Includes options, warrants and convertible securities exercisable or convertible for common stock within 60 days of the Date of Determination.
(2) Before offering percentages are based on 24,454,203 shares of common stock outstanding as of the Date of Determination.
(3) William Kerby holds 670,872 shares of common stock and warrants to purchase 15,300 shares of common stock of the Company individually. Mr. Kerby is deemed to own 80,000 shares held by In-Room Retail Systems, LLC, which entity he owns. On April 7, 2021, the board of directors of the Company, consistent with Mr. Kerby’s employment agreement, which provides for Mr. Kerby to receive a base salary of $400,000 per year, and an annual bonus payable at the discretion of the board of directors, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals), and other bonuses which may be granted from time to time in the discretion of the board of directors, agreed to award Mr. Kerby a discretionary bonus for fiscal 2021 of $400,000, which is payable in cash or shares of common stock, at Mr. Kerby’s option, under the Company’s Amended and Restated 2017 Equity Incentive Plan (the “Plan”), with a conversion price of $3.02 per share, the closing sales price of the Company’s common stock on the date the board of directors approved such bonus. If Mr. Kerby exercises his right to receive the entire bonus in shares of common stock, he would be due 132,450 shares of common stock, which shares of common stock are included in his beneficial ownership above. Does not include any shares of common stock issuable upon conversion of that certain Convertible Promissory Note in the amount of $430,889, which accrues interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Note is convertible, at the option of the holder thereof, into shares of the Company’s common stock, at any time beginning seven days after the date the HotPlay Exchange Agreement closes and prior to the payment in full of such Convertible Promissory Note by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default. As the closing date of the HotPlay Exchange Agreement is currently unknown, such shares of common stock issuable upon conversion of the Convertible Promissory Note has not been included in the shareholders beneficial ownership in the table above.
(4) Effective on May 18, 2021, IDS entered into a Shareholder Voting Representation Agreement with Mr. Kerby. Pursuant to the Shareholder Voting Agreement, IDS provided Mr. Kerby the right to, and an irrevocable proxy to, vote all of the IDS Shares held by IDS at any meeting of stockholders of the Company and/or via any written consent of stockholders of the Company. The Shareholder Voting Agreement remains in place until the earlier of the fifth anniversary of the Shareholder Voting Agreement; the disposition of the IDS Shares pursuant to the IP Purchase Amendment; a change of control of Monaker resulting in persons prior to such transaction obtaining more than 50% voting control of the Company following such transaction; the sale of all or substantially all of the assets of the Company; or termination of the agreement by Mr. Kerby. Mr. Kerby may also assign his rights under the agreement to another party and/or the Company may assign Mr. Kerby’s rights under the agreement if Mr. Kerby is unable to make such assignment due to his death or disability. Mr. Kerby was provided the voting rights as the shareholder representative of, and for the benefit of, the Company. The 1,968,000 shares of common stock are included both in Mr. Kerby’s ownership above, due to his rights to vote such shares, and IDS’ ownership above, because IDS has the power to dispose of such shares, subject to certain contractual lockup rights.
(5) Donald P. Monaco beneficially owns (i) 934,224 shares of common stock owned by the Donald P. Monaco Insurance Trust (the “Trust”), and (ii) 822,302 shares are beneficially owned by Monaco Investment Partners II, LP (“MI Partners”). Mr. Monaco also individually owns 237,508 shares of common stock of the Company. Mr. Monaco is the managing general partner of MI Partners and trustee of the Trust. Mr. Monaco disclaims beneficial ownership of all shares held by the Trust and MI Partners in excess of his pecuniary interest, if any. Does not include any shares of common stock issuable upon conversion of that certain Convertible Promissory Note in the amount of $585,425, which accrues interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Note is convertible, at the option of the holder thereof, into shares of the Company’s common stock, at any time beginning seven days after the date the HotPlay Exchange Agreement closes and prior to the payment in full of such Convertible Promissory Note by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default. As the closing date of the HotPlay Exchange Agreement is currently unknown, such shares of common stock issuable upon conversion of the Convertible Promissory Note has not been included in the shareholders beneficial ownership in the table above.
(6) Simon Orange holds 234,542 shares of common stock individually. Mr. Orange is deemed to own 186,557 shares of common stock and warrants to purchase 60,550 shares of common stock of the Company held by Charcoal Investment LTD, which entity he owns.
(7) Address: 21781 Ventura Blvd Ste. 231, Woodland Hills, California 91634. The shares held in the name of IDS, Inc. are beneficially owned by Ari Daniels, the Chief Executive Officer of IDS, Inc. (“IDS”). Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement. Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000, payable by way of an initial payment of $500,000, and twelve monthly payments of approximately $195,833, with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment, which has been made to date. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of Monaker or a third-party), for the benefit of Monaker, which shall be treated for all purposes as a payment by Monaker. As consideration for such Paying Party making such payment on behalf of Monaker, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.6888 as to the first $500,000 payment (which payment has been made, but which shares have not been transferred to the Company to date), and 0.691 as to the monthly payments (as applicable, the “Applicable Portion” of the IDS Shares).Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment as discussed above by Monaker (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company. Until such time as the IDS Shares are no longer held by IDS, IDS agreed not to transfer or encumber any of such shares, except pursuant to the terms of the IP Purchase Amendment. See also Footnote (4).
Changes in Control
The Company is not currently aware of any arrangements which may at a subsequent date result in a change of control of the Company, except that as in connection with the Share Exchanges, as discussed above under “Item 1. Business-Recent Material Events-HotPlay and Axion Share Exchanges”, which provide that, upon the closing of the HotPlay Share Exchange, the former HotPlay Stockholders will be issued 52,000,000 shares of the Company’s common stock in exchange for 100% of the outstanding shares of HotPlay, and the outstanding shares of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock (certain of which are also HotPlay Stockholders) will automatically convert into an aggregate of 11,246,200 shares of our common stock, which will result in such former HotPlay Stockholders obtaining voting control over the Company.
As part of the closing of the HotPlay Share Exchange, and effective upon the closing of such HotPlay Share Exchange, the board of directors will consist of a combination of current members and new members of the board of directors, subject to the terms of the HotPlay Exchange Agreement as may be amended from time to time.
The closing of the HotPlay Share Exchange is subject to customary closing conditions as discussed above.
Equity Compensation Plan Information
On August 25, 2017, the board of directors adopted, subject to the ratification by the majority stockholders, which occurred effective on September 13, 2017, the Company’s 2017 Equity Incentive Plan (the “Plan” or the “2017 Plan”). The Plan is intended to secure for the Company the benefits arising from ownership of the Company’s common stock by the employees, officers, directors and consultants of the Company, all of whom are, and will be, responsible for the Company’s future growth. The Plan is designed to help attract and retain for the Company, qualified personnel for positions of exceptional responsibility, to reward employees, officers, directors and consultants for their services to the Company and to motivate such individuals through added incentives to further contribute to the success of the Company.
The Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to any limitations provided by federal or state securities laws, to receive (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock awards; (v) shares in performance of services; or (vi) any combination of the foregoing. Incentive stock options granted under the Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Nonqualified (non-statutory stock options) granted under the Plan are not intended to qualify as incentive stock options under the Code.
No incentive stock option may be granted under the Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of our Company or any affiliate of our Company, unless the exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and the term of the option does not exceed five years from the date of grant.
The Plan is administered by the board of directors of the Company and/or the Company’s Compensation Committee. Subject to adjustment in connection with the payment of a stock dividend, a stock split or subdivision or combination of the shares of common stock, or a reorganization or reclassification of the Company’s common stock, the maximum aggregate number of shares of common stock which may be issued pursuant to awards under the Plan is 2,000,000 shares. Such shares of common stock shall be made available from the authorized and unissued shares of the Company.
On April 7, 2021, stockholders approved the adoption of the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), which is intended to secure for the Company and its affiliates the benefits arising from ownership of the Company’s common stock by the employees, officers, directors and consultants of the company and its affiliates, all of whom are and will be responsible for the Company’s future growth. The 2021 Plan is designed to help attract and retain for the Company and its affiliates personnel of superior ability for positions of exceptional responsibility, to reward employees, officers, directors and consultants for their services and to motivate such individuals through added incentives to further contribute to the success of the Company and its affiliates. Awards under the Plan may be made to an eligible person in the form of (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock awards; (v) performance shares; or (vi) any combination of the foregoing. The shares eligible for future awards under the 2021 will be equal (i) 15% of the Company’s total outstanding shares of common stock of the Company outstanding immediately after the closing of the HotPlay Share Exchange and conversion of the Axion preferred stock, and (ii) an annual increase on April 1st of each calendar year, beginning in 2022 and ending in 2030, in each case subject to the approval of the board of directors or the compensation committee of the Company on or prior to the applicable date, equal to the lesser of (A) 5% of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year; (B) 5,000,000 shares of common stock; and (C) such smaller number of shares as determined by the board of directors or Compensation Committee (the “Share Limit”), also known as an “evergreen” provision.
The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of February 28, 2021:
Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights as
of February 28, 2021
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of
securities remaining
available for future
issuance under
equity
compensation plans
(excluding securities
reflected in column
(a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
-
$ -
1,336,279
Equity compensation plans not approved by security holders
206,720
$ 3.10
-
Total
206,720
$ 3.10
1,336,279

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Except as discussed below or otherwise disclosed above under “Item 11. Executive Compensation” - “Summary Executive Compensation Table”, “Employment and Compensation Agreements”, and “Director Compensation”, which information is incorporated by reference where applicable in this “Certain Relationships and Related Transactions, and Director Independence” section, the following sets forth a summary of all transactions since the beginning of the fiscal year of 2019, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at the fiscal year-end for 2021 and 2020, and in which any Related Person had or will have a direct or indirect material interest. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions. “Related Persons” include each of our “Named Executive Officers” as defined under “Item 11. Executive Compensation” - “Summary Executive Compensation Table”, above, each person who was serving on our board of directors as of the date that the related party transaction occurred, and IDS, Inc., which is a greater than 5% shareholder of the Company.
Related Party Transactions
Dividends in arrears on the previously outstanding Series A Preferred Stock shares totaled $1,102,066 as of August 21, 2020, May 31, 2020, February 29, 2020 and February 28, 2019. These dividends were payable when and if declared by the board of directors. The dividends were owed to an entity controlled by Donald P. Monaco, our Chairman, and William Kerby, our CEO and a director. On April 8, 2021, the Company entered into an Exchange Agreement with William Kerby, its Chief Executive Officer and director and Monaco Investment Partners II, LP (“MI Partners”), of which Donald P. Monaco is the managing general partner and the Chairman of the board of directors of the Company (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the terms of which were approved by the board of directors of the Company, Mr. Kerby and MI Partners exchanged their right to an aggregate of $1,016,314 in accrued dividends (the “Accrued Dividends”) which had accrued on the Company’s outstanding Series A Preferred Stock, which had been held by Mr. Kerby and MI Partners prior to the conversion of such Series A Preferred Stock into common stock of the Company in August 2017, for Convertible Promissory Notes. Specifically, Mr. Kerby exchanged rights to $430,889 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $430,889 and MI Partners exchanged rights to $585,425 of accrued dividends on the Series A Preferred Stock for a Convertible Promissory Note with a principal balance of $585,425 (the “Convertible Promissory Notes”).
The Convertible Promissory Notes accrue interest at the rate of 12% per annum, compounded monthly at the end of each calendar month, with such interest payable at maturity or upon conversion. The principal and accrued interest owed under the Convertible Promissory Notes is convertible, at the option of the holders thereof, into shares of the Company’s common stock, at any time beginning seven days after the Closing Date (defined below) and prior to the payment in full of such Convertible Promissory Notes by the Company, at a conversion price equal to the greater of (i) the closing consolidated bid price of the Company’s common stock on April 8, 2021 (which was $3.02); and (ii) the five-day volume weighted average price of the Company’s common stock for the five trading days following the date that the HotPlay Exchange Agreement closes. The Convertible Promissory Notes are unsecured, have a maturity date of April 7, 2022, and include standard and customary events of default.
On October 29, 2019, the Company entered into Promissory Notes with Robert “Jamie” Mendola, Jr. (a Director of the Company) and Pasquale “Pat” LaVecchia (a Director of the Company) in the amounts of $150,000 and $25,000, respectively (the “Director Notes”). The Director Notes have an interest rate of 12% per annum (18% upon the occurrence of an event of default) and were originally due and payable on February 1, 2020, but were subsequently extended as discussed below, provided that the notes may be prepaid at any time without penalty (provided that all interest that would have been due had the notes remained outstanding through maturity must be paid at the time of repayment). The Company paid a 2% original issue discount in connection with the notes.
On December 9, 2019, the Company entered into an Amended and Restated Promissory Note with the Monaco Trust, in the amount of up to $2,700,000 (the “Revolving Monaco Trust Note”). The Revolving Monaco Trust Note amended and restated a previous promissory Note entered into by the Company in favor of the Monaco Trust on February 4, 2019 (the 2019 Monaco Trust Note discussed above), in the amount of up to $700,000, which had a balance as of December 9, 2019 of $700,000. On the same date, the Company borrowed $200,000 from the Monaco Trust under the Revolving Monaco Trust Note. On December 27, 2019 and February 12, 2020, the Company borrowed an additional $300,000 and $200,000, respectively, from the Monaco Trust under the Revolving Monaco Trust Note, which had a balance of $1,200,000 as of February 29, 2020.
On January 22, 2020, the Company entered into Stock Purchase Agreements with William Kerby, the Chief Executive Officer and director of the Company (“Kerby”), (the “Purchaser” and the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, the Company agreed to sell the Purchaser 1,562,500 shares of restricted Series A Convertible Preferred Stock of Verus International, Inc. (formerly known as RealBiz Media Group, Inc. (“Verus”), which the Company then held (out of the 31,970,101 shares of Series A Convertible Preferred Stock of Verus which the Company then held) for an aggregate of $25,000, or $0.016 per share. The purchase price for the Verus shares was determined by the Board of Directors of the Company, based on among other things, the recent trading prices of Verus’ common stock on the OTCQB Market, as publicly reported. The sale contemplated by the Stock Purchase Agreement closed on January 22, 2020.
On January 29, 2020, the Company entered into first amendments to the Director Notes and Revolving Monaco Trust Note with the directors and the Monaco Trust, respectively, to extend the maturity date of such notes from February 1, 2020 to April 1, 2020 (the “Note Amendments”). No other changes were made to such notes as a result of such amendments.
On March 13, 2020 and March 26, 2020, the Company borrowed an additional $100,000 and $75,000, respectively, from the Monaco Trust pursuant to the terms of the Revolving Monaco Trust Note.
On March 27, 2020, the Company entered into second amendments to the Director Notes to extend the maturity date of such Director Notes from April 1, 2020 to June 1, 2020, and entered into an amendment to extend the due date of the Revolving Monaco Trust Note from April 1, 2020 to December 1, 2020. All remaining terms of the promissory notes remained unchanged.
On April 17, 2020, the Company paid off the Promissory Note with Pasquale “Pat” LaVecchia, a member of the board of directors, in the amount of $26,225 (the principal of $25,000 and the interest of $6,225).
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS (a greater than 5% stockholder of the Company) and certain other defendants affiliated with IDS in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. Pursuant to the complaint, the Company alleges causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and seeks a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 shares of common stock disclosed above to the Company and preventing such persons from selling or transferring any shares, seeks damages from the defendants, rescission of the IP Purchase Agreement pursuant to which the shares were issued, attorneys fees and other amounts. The complaint was filed as a result of IDS’s failure to deliver certain intellectual property assets which were acquired by the Company from IDS in August 2019, certain other actions of IDS and the other defendants which the Company alleges constitutes fraud and to seek to unwind the IP Purchase Agreement and provide damages to the Company due to IDS’s and the other defendants’ breaches thereunder.
On March 13, 2020 and March 26, 2020, the Company borrowed an additional $100,000 and $75,000, respectively, from the Monaco Trust pursuant to the terms of the Revolving Monaco Trust. On June 9, 2020 and June 10, 2020, the Company borrowed an additional $300,000 and $50,000, respectively, from the Monaco Trust. On July 7, 2020 and July 20, 2020, the Company borrowed an additional $250,000 and $50,000, respectively, from the Monaco Trust. On July 27, 2020, the Company paid principal of $50,000 and accrued interest of $49,784. On September 22, 2020, the Company made a payment of $200,000 under the Revolving Monaco Trust Note, including $142,408 of principal and $57,592 of interest owed thereunder.
On May 1, 2020, the Company paid off the Promissory Note with Robert “Jamie” Mendola, Jr., in the amount of $157,595 (the principal of $150,000 and the interest of $7,595).
On June 9, 2020, June 10, 2020, July 7, 2020, we borrowed an additional $300,000, $50,000 and $250,000 from the Monaco Trust under the Revolving Monaco Trust Note.
On November 6, 2020, the Company entered into a third amendment to the Revolving Trust Note with the Monaco Trust, to extend the maturity date of such Revolving Monaco Trust Note to February 28, 2021. No other changes were made to such note as a result of such amendment.
On November 16, 2020, the Company entered into a fourth amendment to the Revolving Trust Note with the Monaco Trust, to increase the amount available under such Revolving Monaco Trust Note to $2,800,000. No other changes were made to such note as a result of such amendment.
On December 1, 2020, the Company paid $800,000 of principal and interest due under the Revolving Trust Note.
The Revolving Trust Note was subsequently repaid in full in December 2020, with funds raised through our December 2020 underwritten offering.
On September 8, 2020, the Company issued Sirapop “Kent” Taepakdee, then Acting Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer) and Timothy Sikora, the Chief Operating Officer and Chief Information Officer of the Company, an aggregate of 17,500 and 15,000 shares of common stock of the Company, respectively, as a bonus in consideration for services rendered. The issuances were authorized by the board of directors and the Compensation Committee of the board of directors of the Company, and granted under the Company’s 2017 Amended and Restated Equity Incentive Plan. The shares vested immediately upon issuance.
On September 1, 2020, the Company entered into a consulting agreement with Beachfront Travel Consulting LLC for their services and expertise in Call Center and Sales Operations. The consultant agreed to assist the Company in the development and design of a Call Center Operation to support the Company’s brand. The Company agreed to pay the consultant compensation of 1,500 restricted shares of common stock per month, with a price equal to the closing price on the last day of the month and the consultant agreed to advise the Company on policies and procedures, performance metrics and reporting, operational standards and training of call center staff. The Company issued the consultant 1,500 shares of restricted common stock for the month of December 2020. The agreement was terminated on December 7, 2020, and the parties entered into as a new consulting agreement, with an annual fee of $110,000 instead of the 1,500 per month stock compensation. A consultant to Beachfront is Beth Sikora, the wife of the COO of the Company, Tim Sikora. The agreement provides that Mrs. Sikora will manage the Consumer Programs and Call Center operations based on her experience and background.
On November 16, 2020, the Company acquired 100% of Longroot, which was in turn owned 57% of Longroot Cayman. Longroot Cayman owned 49% of the outstanding ordinary shares (with 51% of the Preferred shares owned by two Thai citizen nominee shareholders) of Longroot Thailand, provided that Longroot Cayman controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand. Subsequent to this acquisition, the Company signed a service contract with Atato, an IT provider of cryptocurrency website maintenance. As of November 30, 2020, Miss Worapin Tatun, wife of the CEO of Atato and Mr. Pongsabutra Viraseranee, an employee and developer employed by Atato, both are minority shareholders of Longroot Thailand with a 25.5% interest of preferred stock in Longroot Thailand each.
In December 2020 and January 2021, Sabby Management, LLC, which previously filed a Schedule 13G with the SEC disclosing its ownership of over 5% of our outstanding shares of common stock, exercised warrants to purchase 125,000 shares of our common stock with an exercise price of $2.00 per share, paid the aggregate $250,000 exercise price for such shares, and was issued 125,000 shares of common stock, which were covered under a registration statement filed under the Securities Act. Sabby is no longer a greater than 5% shareholder of the Company.
On April 7, 2021, each of Mr. Pasquale “Pat” LaVecchia, Mr. Doug Checkeris, Mr. Rupert Duchesne, Mr. Robert “Jamie” Mendola, Jr. and Ms. Alexandra C. Zubko, each then members of the board of directors of the Company, provided letters of resignation to the Company, resigning as directors (and from any other positions they hold with the Company), with such resignations effective automatically as of the closing of the HotPlay Exchange Agreement.
Such resignations were solely in connection with the required terms and conditions of the HotPlay Exchange Agreement, which requires that the board of directors of the Company at the closing thereof increase to nine members, with four appointed by HotPlay, two appointed by Monaker, and three appointed mutually by Monaker and HotPlay.
Also on April 7, 2021, the board of directors of the Company ratified the current compensation payable to members of the board of directors, which provides that each non-executive member of the Board be paid (a) compensation of 20,000 shares per year; (b) compensation of 5,000 shares per year, if they are the chairperson of any committee of the board of directors; and (c) compensation of 10,000 shares per year, to the Chairman of the Board (collectively, the “Board Compensation Terms”), except that all shares due to the Directors serving as of March 1, 2021, for the fiscal year ending February 28, 2022, were agreed to be issued up front and to be fully-vested/earned on the date of grant, instead of vesting over time, as previously awarded. In total, an aggregate of 165,000 shares of common stock were issued to the non-executive directors on April 8, 2021 for compensation for fiscal 2022 (such shares, the “Fiscal 2022 Board Compensation Shares”). The Fiscal 2022 Board Compensation Shares were issued under the Company’s Amended and Restated 2017 Equity Incentive Plan (the “Plan”).
On April 7, 2021, the Company entered into a Lock-Up Agreement with each of the non-executive members of the board of directors. Pursuant to the Lock-Up Agreements, each non-executive director agreed not to transfer, sell, pledge or assign any of their applicable Fiscal 2022 Board Compensation Shares until March 1, 2022.
On April 7, 2021, the board of directors of the Company, consistent with the employment agreement of Mr. William Kerby, the Chief Executive Officer of the Company, which provides for Mr. Kerby to receive a base salary of $400,000 per year, and an annual bonus payable at the discretion of the board of directors, of up to 100% of his base salary (50% based on meeting short term goals and 50% based on meeting long-term goals), and other bonuses which may be granted from time to time in the discretion of the board of directors, agreed to award Mr. Kerby a discretionary bonus for fiscal 2021 of $400,000, which is payable in cash or shares of common stock, at Mr. Kerby’s option, under the Plan, with a conversion price of $3.02 per share, the closing sales price of the Company’s common stock on the date the board of directors approved such bonus. If Mr. Kerby exercises his right to receive the entire bonus in shares of common stock he would be due 132,450 shares of common stock.
On August 15, 2019, the Company entered into an Intellectual Property Purchase Agreement with IDS Inc. (“IDS” and the “IP Purchase Agreement”). Pursuant to the agreement, the Company purchased certain proprietary technology from IDS for the reservation and booking of air travel, hotel accommodations, car rentals, and ancillary products, services, and amenities, integration of the same with the providers of such products and services, associated functions, including website addresses, patents, trademarks, copyrights and trade secrets relating thereto, and all goodwill associated therewith (collectively, the “IP Assets”). In consideration for the purchase, the Company issued IDS 1,968,000 shares of restricted common stock (the “IDS Shares”) valued at $2.50 per share, or $4,920,000 in aggregate.
On April 27, 2020, the Company filed a verified complaint for injunctive relief against IDS and TD Assets Holding, LLC (“TD Asset”), Navarro McKown, Aaron McKown and Ari Daniels (“Daniels”), which parties are affiliated with IDS, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (Case No. CACE-20-007088). Pursuant to the complaint, the Company alleged causes of action against the defendants, including IDS, based on among other things, fraud, conspiracy to commit fraud, aiding and abetting fraud, rescission, and breach of contract, and sought a temporary and permanent injunction against the defendants, requiring such persons to return the 1,968,000 IDS Shares issued pursuant to the terms of the IP Purchase Agreement and preventing such persons from selling or transferring any IDS Shares, sought damages from the defendants, rescission of the IP Purchase Agreement, attorneys fees and other amounts. The defendants subsequently filed various counterclaims against the Company.
The complaint was filed because of IDS’s failure to deliver the IP Assets, certain other actions of IDS and the other of the defendants which the Company alleged constituted fraud. The Company sought to unwind the IP Purchase Agreement and sought damages for the Company due to IDS’s and the other defendants’ breaches thereunder. IDS, through its counsel, sent a letter threatening to bring a shareholders’ derivative action and/or direct suit against the Company. In response to such letter, the board of directors empowered the governance committee to conduct an investigation into the claims. The results of the investigation, conducted by several law firms, were presented to the Board and the Board concluded that no fraudulent activities occurred. The investigation concluded in October 2020.
On April 29, 2020, the Company filed a Verified Motion for Temporary Injunction (the “Injunction Motion”). Defendants IDS, TD Assets, and Ari Daniels filed an answer, affirmative defenses, and counterclaims (the “Answer and Counterclaim”). The Answer and Counterclaim included alleged breach of contract and tort claims against the Company. On September 17, 2020, the Company moved to strike the affirmative defenses and dismiss the counterclaims. On October 15, 2020, defendants IDS, TD Assets, and Ari Daniels filed an amended Answer and Counterclaim, including alleged breach of contract, tort, and federal securities claims against the Company, Mr. William Kerby, our Chief Executive Officer and an employee of the Company.
On July 27, 2020, the Company entered into a confidential settlement agreement with certain of the defendants in the IDS matter, Navarro Hernandez, P.L., Aaron M. McKown, and Jeffery S. Bailey. The settlement provided for mutual releases of the parties and amounts payable from such parties to the Company in four tranches, in consideration for such settlement, of which all such payments have been timely paid pursuant to the terms of the settlement.
The remaining parties to the litigation subsequently attempted to mediate their pursuant to a court ordered mediation in February 2021.
Effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, the principal of IDS, entered into an Amendment to Intellectual Property Purchase Agreement (the “IP Purchase Amendment”). Pursuant to the IP Purchase Agreement, the parties amended the IP Purchase Agreement, with the Company agreeing to make a payment to IDS in the amount of $2,850,000 (the “Payment”), payable by way of an initial payment of $500,000, which has been paid to date, and twelve monthly payments of approximately $195,833 (collectively, the “Required Payments”), with such monthly payments beginning 30 days after the initial payment, which is due seven days after the date of the IP Purchase Amendment. Such monthly payments may be pre-paid at any time without penalty. At the Company’s option, any portion of the amount due may be paid to IDS by a party separate from the Company (either a related party of Monaker or a third-party) (a “Paying Party”), for the benefit of Monaker, which shall be treated for all purposes as a payment by Monaker. As consideration for such Paying Party making such payment on behalf of Monaker, IDS agreed to transfer the Paying Party a number of the IDS Shares equal to the amount of the cash payment(s) made by a Paying Party multiplied by 0.6888 as to the first $500,000 payment (which payment has been made, but which shares have not been transferred to the Company to date), and 0.691 as to the monthly payments (as applicable, the “Applicable Portion” of the IDS Shares).
In the event the Company fails to make any payment timely, and the Company does not cure such default within seven days of written notice of default being provided by IDS, IDS is entitled to entry of a default judgment against the Company in the amount of the differential, if any, between the realized value of the IDS Shares upon the future sale thereof in the open market by IDS, and the unpaid amount of any payment due. In the event of any such default, IDS will be entitled to attorneys’ fees incurred to obtain said judgment.
Upon each payment of amounts due to IDS pursuant to the terms of the IP Agreement Amendment as discussed above by Monaker (instead of a Paying Party), IDS agreed to transfer the portion of the IDS Shares equal to the Applicable Portion, to the Company.
Until such time as the IDS Shares are no longer held by IDS, IDS agreed not to transfer or encumber any of such shares, except pursuant to the terms of the IP Purchase Amendment.
IDS also agreed to transfer certain unbranded travel videos back to the Company which were previously purchased by IDS from Monaker, pursuant to the IP Purchase Agreement.
A further requirement of the IP Purchase Amendment was that IDS enter into a Shareholder Voting Representation Agreement with William Kerby, our Chief Executive Officer and director (the “Shareholder Voting Agreement”), which was entered into effective on May 18, 2021. Pursuant to the Shareholder Voting Agreement, IDS provided Mr. Kerby the right to, and an irrevocable proxy to, vote all of the IDS Shares held by IDS at any meeting of stockholders of the Company and/or via any written consent of stockholders of the Company. The Shareholder Voting Agreement remains in place until the earlier of the fifth anniversary of the Shareholder Voting Agreement; the disposition of the IDS Shares pursuant to the IP Purchase Amendment; a change of control of Monaker resulting in persons prior to such transaction obtaining more than 50% voting control of the Company following such transaction; the sale of all or substantially all of the assets of the Company; or termination of the agreement by Mr. Kerby. Mr. Kerby may also assign his rights under the agreement to another party and/or the Company may assign Mr. Kerby’s rights under the agreement if Mr. Kerby is unable to make such assignment due to his death or disability. Mr. Kerby was provided the voting rights as the shareholder representative of, and for the benefit of, the Company.
Also effective on May 18, 2021, the Company, IDS, TD Asset and Ari Daniels, entered into a Confidential Settlement Agreement and Mutual Release, whereby (a) we provided a general release to IDS, TD Asset and Mr. Daniels, and (b) IDS, TD Asset and Mr. Daniel provided a general release to us; the parties agreed to file a Joint Notice of Voluntary Dismissal to dismiss the pending lawsuit discussed above; and the parties agreed that a prior Web Based Booking Engine Development Agreement dated October 24, 2017, was terminated.
We expect the parties to the litigation above to file a joint notice for voluntary dismissal of the lawsuit shortly after the date of this Report.
Review and Approval of Related Party Transactions
The Audit Committee of the board of directors of the Company is tasked with reviewing and approving any issues relating to conflicts of interests and all related party transactions of the Company (“Related Party Transactions”). The Audit Committee, in undertaking such review and approval, will analyze the following factors, in addition to any other factors the Audit Committee deems appropriate, in determining whether to approve a Related Party Transaction: (1) the fairness of the terms for the Company (including fairness from a financial point of view); (2) the materiality of the transaction; (3) bids / terms for such transaction from unrelated parties; (4) the structure of the transaction; (5) the policies, rules and regulations of the U.S. federal and state securities laws; (6) the policies of the Committee; and (7) interests of each related party in the transaction.
The Audit Committee will only approve a Related Party Transaction if the Audit Committee determines that the terms of the Related Party Transaction are beneficial and fair (including fair from a financial point of view) to the Company and are lawful under the laws of the United States. In the event multiple members of the Audit Committee are deemed a related party, the Related Party Transaction will be considered by the disinterested members of the board of directors in place of the Committee.
In addition, our Code of Ethics (described above under “Item 10. Directors, Executive Officers and Corporate Governance-Corporate Governance-Code of Ethics”), which is applicable to all of our employees, officers and directors, requires that all employees, officers and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
The following table presents fees for professional audit and merger and acquisition related services performed by TPS Thayer, LLC (“TPS”) and other professional firms for the audit of our annual financial statements, review of our quarterly financial statements, and all merger and acquisition related activities from September 19, 2020 for the years ended February 28, 2021 and February 29, 2020.
Prior to the appointment of TPS, Thayer O’Neal Company, LLC, served as our independent audit firm from May 16, 2019 to September 19, 2020, and audited our financial statements for the years ended February 29, 2020 and February 28, 2019.
TPS Others
2020
Audit Fees(1) $ 39,500 $ - $ 48,500 89,000
Audit-Related Fees(2)
- - -
M&A Fees(3) 10,000 - - -
All Other Fees(4) 17,000 - 20,000 -
Total $ 66,500 $ 0 $ 68,500 89,000
(1) Audit fees include professional services rendered for (1) the audit of our annual financial statements for the fiscal years ended February 28, 2021 and February 29, 2020 and (ii) the reviews of the financial statements included in our quarterly reports on Form 10-Q for such years.
(2) Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”
(3) Fees include professional services relating to merger and acquisition related activities.
(4) Other fees include professional services for review of various filings and issuance of consents.
Pre-Approval Policies
It is the policy of our board of directors that all services to be provided by our independent registered public accounting firm, including audit services and permitted audit-related and non-audit services, must be pre-approved by our board of directors. Our board of directors pre-approved all services, audit and non-audit, provided to us by TPS for fiscal 2021 and from Thayer O’Neal Company, LLC for fiscal 2020.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a) Documents filed as part of this Annual Report:
The following is an index of the financial statements, schedules and exhibits included in this Form 10-K or incorporated herein by reference.
(1) All Financial Statements
Description
Page
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
(2) Consolidated Financial Statement Schedules
Except as provided above, all financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K.
(3) Exhibits
Incorporated By Reference
Exhibit No.
Description
Furnished or Filed
Form
Exhibit
Filing Date
File No.
Herewith
1.1
Underwriting Agreement, dated December 28, 2020, by and between Monaker Group, Inc., Kingswood Capital Markets, division of Benchmark Investments, Inc. and Aegis Capital Corp.
8-K
1.1
12/31/2020
001-38402
1.2
Underwriting Agreement, dated May 13, 2021, by and between Monaker Group, Inc. and Kingswood Capital Markets, division of Benchmark Investments, Inc.
8-K
1.1
5/18/2021
001-38402
2.1+
Intellectual Property Purchase Agreement by and between Monaker Group, Inc., as Buyer and IDS Inc., as Seller, dated August 15, 2019
8-K
2.1
8/22/2019
001-38402
2.2+
Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, dated as of July 21, 2020
8-K
2.1
7/23/2020
001-38402
2.3
First Amendment to Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, entered into October 28, 2020, and dated as of October 23, 2020
8-K
2.2
10/29/2020
001-38402
2.4
Second Amendment to Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, dated November 12, 2020
8-K
2.3
11/18/2020
001-38402
2.5
Third Amendment to Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, dated January 6, 2021
8-K
2.4
1/11/2021
001-38402
2.6+
Share Exchange Agreement by and among Monaker Group, Inc. and the Stockholders Holding Shares or Debt of Axion Ventures, Inc., dated as of July 21, 2020
8-K
2.2
7/23/2020
001-38402
2.7
First Amendment to Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, entered into October 28, 2020, and dated as of October 23, 2020
8-K
2.4
10/29/2020
001-38402
2.8+
Amended and Restated Share Exchange Agreement by and among Monaker Group, Inc. and the Stockholders Holding Shares or Debt of Axion Ventures, Inc., dated as of November 12, 2020
8-K
2.6
11/18/2020
001-38402
2.9
Stock Purchase Agreement dated November 2, 2020, by and between Dr. Jason Morton (seller), Monaker Group, Inc. (purchaser), and Longroot, Inc., for certain limited purposes
8-K
2.1
11/19/2020
001-38402
2.10
December 11, 2020 Letter Agreement between Monaker Group, Inc. and Dr. Jason Morton relating to the November 2, 2020 Stock Purchase Agreement
8-K
2.2
12/18/2020
001-38402
2.11
First Amendment to Amended and Restated Share Exchange Agreement by and among Monaker Group, Inc. and the Stockholders Holding Shares or Debt of Axion Ventures, Inc., dated as of January 6, 2021
8-K
2.7
1/11/2021
001-38402
2.12
Fourth Amendment to Share Exchange Agreement by and among Monaker Group, Inc., HotPlay Enterprise Limited and the Stockholders of HotPlay Enterprise Limited, dated February 22, 2021
8-K
2.5
2/26/2021
001-38402
2.13
Amendment to Intellectual Property Purchase Agreement by and between Monaker Group, Inc., IDS, Inc. a/k/a IDS International Inc. a/k/a Internet Distribution Systems a/k/a International Distribution Systems, TD Asset Holdings, LLC, and Ari Daniels, dated effective May 18, 2021
8-K
2.2
05/21/2021
001-38402
2.1
Articles of Incorporation of Maximum Exploration Corporation
SB-2
3.1
8/14/2006
333-136630
2.2
Certificate of Amendment to Articles of Incorporation (changing name to Next 1 Interactive, Inc. and increasing authorized shares)
S-1/A
3.1.2
3/12/2009
333-154177
2.3
Certificate of Amendment to Articles of Incorporation (increasing authorized shares)
S-1
3.3
9/25/2017
333-220619
2.4
Certificate of Amendment to Articles of Incorporation (increasing authorized shares)
S-1
3.4
9/25/2017
333-220619
2.5
Certificate of Change Filed Pursuant to NRS 78.209
8-K
3.1
5/21/2012
000-52669
2.6
Certificate of Amendment to Articles of Incorporation (increasing authorized shares)
S-1
3.6
9/25/2017
333-220619
2.7
Amendment to the Articles of Incorporation of Next 1 Interactive, Inc. changing its name to Monaker Group, Inc. and affect a 1-for-50 reverse stock split
8-K
3.1
6/26/2015
000-52669
2.8
Amended and Restated Certificate of Designations of Series A 10% Cumulative Convertible Preferred Stock of Next 1 Interactive, Inc.
8-K
3.1
7/9/2013
000-52669
2.9
Amendment to Certificate of Designation of Series A 10% Cumulative Convertible Preferred Stock, filed with the Secretary of State of Nevada on October 22, 2009
S-1
3.6
9/23/2016
333-213753
2.10
Certificate of Amendment to Articles of Incorporation (1-for-2.5 Reverse Stock Split of Common Stock) filed with the Nevada Secretary of State on February 8, 2018 and effective on February 12, 2018
8-K
3.1
2/12/2018
000-52669
2.11
Certificate of Designation of Monaker Group, Inc. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series B Convertible Preferred Stock as filed with the Secretary of State of Nevada on November 13, 2020
8-K
3.1
11/18/2020
001-38402
2.12
Certificate of Designation of Monaker Group, Inc. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series C Convertible Preferred Stock as filed with the Secretary of State of Nevada on November 13, 2020
8-K
3.2
11/18/2020
001-38402
2.13
Amended and Restated Certificate of Designation of Monaker Group, Inc. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series B Convertible Preferred Stock as filed with the Secretary of State of Nevada on January 8, 2021
8-K
3.1
1/11/2021
001-38402
2.14
Operating Agreement of NextTrip Holdings, LLC
8-K
3.1
1/13/2021
001-38402
2.15
Amended and Restated Bylaws of Monaker Group, Inc., effective July 27, 2017
8-K
3.1
8/1/2017
000-52669
4.1
Description of Registrant’s Securities
10-K
4.1
5/29/2020
001-38402
10.1
Form of Warrant (February and March 2017 Subscriptions)
8-K
10.2
3/10/2017
000-52669
10.2
$750,000 Promissory Note dated May 16, 2016, between Crystal Falls Investments, LLC as borrower and the Company as Lender
10-K
10.35
2/28/2017
000-52669
10.3
$2.9 million Secured Convertible Promissory Note dated August 31, 2017, by Bettwork Industries Inc., as borrower in favor of Monaker Group, Inc., as payee
8-K
10.3
9/5/2017
000-52669
10.4
Assignment and Novation Agreement dated and effective August 31, 2017, by and between Monaker Group, Inc., Crystal Falls Investments, LLC, and Bettwork Industries Inc.
8-K
10.4
9/5/2017
000-52669
10.5
$1.6 Million Secured Convertible Promissory Note owed by Bettwork Industries Inc. to Monaker Group, Inc.
8-K
10.5
6/6/2018
001-38402
10.6
Debt Conversion Agreement Between Monaker Group, Inc. and Bettwork Industries Inc. dated July 3, 2018
8-K
10.1
7/6/2018
001-38402
10.7
Form of Common Stock Purchase Warrant to be provided to each investor (September 2018)
8-K
4.1
10/2/2018
001-38402
10.8***
Employment Agreement dated October 31, 2018, by and between Monaker Group, Inc. and William Kerby
8-K
10.1
11/2/2018
001-38402
10.9
Amended Promissory Note in the amount of $230,000, by Bettwork industries Inc., as borrower and Monaker Group, Inc., as lender, dated October 19, 2018
10-Q
10.13
11/30/2018
001-38402
10.10
Form of First Amendment to Securities Purchase Agreement and Warrants dated January 15, 2019, by and between Monaker Group, Inc. and the investors party thereto
10-Q
10.14
11/30/2018
001-38402
10.11***
Monaker Group, Inc. 2017 Equity Incentive Plan - Form of Stock Incentive Plan Stock Option Award
S-8
4.2
1/25/2019
333-229370
10.12***
Monaker Group, Inc. 2017 Equity Incentive Plan - Form of Stock Incentive Plan Restricted Stock Grant Agreement
S-8
4.3
1/25/2019
333-229370
10.13
First Amendment to Amended Promissory Note in the original amount of $230,000, by Bettwork industries Inc., as borrower and Monaker Group, Inc., as lender, dated March 12, 2019 and effective February 28, 2019
8-K
10.2
3/15/2019
001-38402
10.14***
Amended and Restated Monaker Group, Inc. 2017 Equity Incentive Plan
8-K
10.1
8/19/2019
001-38402
10.15#
Asset Management Services Agreement by and between TD Assets Holding, LLC, as Operator, and Monaker Group, Inc., as Owner, dated August 15, 2019
8-K
10.1
8/22/2019
001-38402
10.16
Second Amendment to Amended Promissory Note in the original amount of $230,000, by Bettwork industries Inc., as borrower and Monaker Group, Inc., as lender, dated October 10, 2019 and effective August 31, 2019
10-Q
10.4
10/15/2019
001-38402
10.17***
$2,700,000 Amended and Restated Promissory Note dated December 9, 2019, entered into by Monaker Group, Inc. and the Donald P. Monaco Insurance Trust
10-Q
10.1
12/9/2019
001-38402
10.18
Business Loan Agreement dated January 7, 2020, by and between Monaker Group, Inc. and National Bank of Commerce, formerly Republic Bank, Inc.
10-Q
10.11
1/13/2020
001-38402
10.19***
First Amendment to Amended and Restated Promissory Note dated January 29, 2020, by and between Monaker Group, Inc. and the Donald P. Monaco Insurance Trust
8-K
10.2
1/31/2020
001-38402
10.20***
Second Amendment to Amended and Restated Promissory Note dated March 27, 2020, by and between Monaker Group, Inc. and the Donald P. Monaco Insurance Trust
8-K
10.3
3/30/2020
001-38402
10.21
$1,200,000 Promissory Note payable by Monaker Group, Inc. to National Bank of Commerce dated May 7, 2020
8-K
10.1
5/13/2020
001-38402
10.22
$176,534 U.S. Small Business Administration Paycheck Protection Plan Note dated May 8, 2020
8-K
10.2
5/13/2020
001-38402
10.23#***
Employment Agreement dated January 30, 2020 by and between Monaker Group, Inc. and Sirapop “Kent” Taepakdee
10-Q
10.61
5/29/2020
001-38402
10.24#***
Employment Agreement dated January 30, 2020 by and between Monaker Group, Inc. and Timothy Sikora
10-Q
10.62
5/29/2020
001-38402
10.25
First Amendment to Promissory Note dated April 16, 2020 and effective April 14, 2020, between Monaker Group, Inc. and Crystal Falls Investments LLC
10-Q
10.11
7/13/2020
001-38402
10.26
Form of Share Purchase Agreement, dated July 24, 2020, by and between the Company and the Purchaser thereunder
8-K
10.1
7/27/2020
001-38402
10.27
$300,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, dated as of September 1, 2020
8-K
10.1
9/8/2020
001-38402
10.28
$700,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, effective as of September 18, 2020
8-K
10.1
9/24/2020
001-38402
10.29
$1,000,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, effective as of September 30, 2020
8-K
10.1
10/1/2020
001-38402
10.30
Second Amendment to Promissory Note dated September 15, 2020 and effective August 14, 2020, between Monaker Group, Inc. and Crystal Falls Investments LLC
10-Q
10.16
10/15/2020
001-38402
10.31
$400,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, effective as of November 3, 2020
8-K
10.1
11/6/2020
001-38402
10.32***
Third Amendment to Amended and Restated Promissory Note dated November 6, 2020, by and between Monaker Group, Inc. and the Donald P. Monaco Insurance Trust
8-K
10.5
11/6/2020
001-38402
10.33
Common Stock Purchase Warrant dated November 16, 2020 (exercisable upon certain events for 1,914,250 shares of common stock and granted to Cern One Limited)
8-K
10.1
11/18/2020
001-38402
10.34***
Fourth Amendment to Amended and Restated Promissory Note dated November 16, 2020, by and between Monaker Group, Inc. and the Donald P. Monaco Insurance Trust
8-K
10.5
11/19/2020
001-38402
10.35+
Note Purchase Agreement dated November 23, 2020, by and between Monaker Group, Inc. and Streeterville Capital, LLC
8-K
10.1
11/27/2020
001-38402
10.36+
$5,520,000 Secured Promissory Note dated November 23, 2020, evidencing amounts owed by Monaker Group, Inc. to Streeterville Capital, LLC
8-K
10.2
11/27/2020
001-38402
10.37
$1,500,000 Investor Note dated November 23, 2020, evidencing amounts owed by Streeterville Capital, LLC to Monaker Group, Inc.
8-K
10.3
11/27/2020
001-38402
10.38
Security Agreement dated November 23, 2020, by Monaker Group, Inc. in favor of Streeterville Capital, LLC
8-K
10.4
11/27/2020
001-38402
10.39
$100,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, effective as of November 24, 2020
8-K
10.5
11/27/2020
001-38402
10.40
$350,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, executed December 14, 2020 and effective as of December 11, 2020
8-K
10.1
12/14/2020
001-38402
10.41***
Form of Lock-Up Agreement (December 2020 Offering)
8-K
10.1
12/31/2020
001-38402
10.42
$150,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, dated January 6, 2021
8-K
10.1
1/7/2020
001-38402
10.43
Subsidiary Formation and Funding Agreement dated and effective January 12, 2021, by and between Monaker Group, Inc., NextTrip Group, LLC, HotPlay Enterprise Limited, and the stockholders of HotPlay
8-K
10.1
1/13/2020
001-38402
10.44+@
Founding Investment and Subscription Agreement dated January 15, 2021, by and between Monaker Group, Inc., Jan C. Reinhart, and Reinhart Interactive IV AG
10-Q
10.3
1/19/2021
001-38402
10.45+
Founding Shareholders’ Agreement dated January 15, 2021, by and between Monaker Group, Inc., Jan C. Reinhart, certain other shareholders of Reinhart Interactive IV AG, certain directors of Reinhart Interactive IV AG and Reinhart Interactive IV AG
10-Q
10.31
1/19/2021
001-38402
10.46
Voting Agreement, dated and effective February 22, 2021, by and between William Kerby and Donald P. Monaco; each of the shareholders of preferred stock, common stock and/or future shareholders of shares of common stock, of Monaker Group, Inc., part thereto, and for certain limited purposes, each of the affiliates of such parties’ party thereto
8-K
10.1
2/26/2021
001-38402
10.47
$9,000,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, dated March 16, 2021
8-K
10.1
3/22/2021
001-38402
10.48
$1,000,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, dated March 19, 2021
8-K
10.2
3/22/2021
001-38402
10.49
Joint Venture Agreement dated March 8, 2021, by and between Monaker Group, Inc. and Soma Innovation Lab
8-K
10.3
3/22/2021
001-38402
10.50+
Note Purchase Agreement dated March 23, 2021, by and between Monaker Group, Inc. and Streeterville Capital, LLC
8-K
10.1
3/26/2021
001-38402
10.51+
$9,370,000 Secured Promissory Note dated March 23, 2021, evidencing amounts owed by Monaker Group, Inc. to Streeterville Capital, LLC
8-K
10.1
3/26/2021
001-38402
10.52
$1,500,000 Investor Note dated March 23, 2021, evidencing amounts owed by Streeterville Capital, LLC to Monaker Group, Inc.
8-K
10.3
3/26/2021
001-38402
10.53
Security Agreement dated March 23, 2021, by Monaker Group, Inc. in favor of Streeterville Capital, LLC
8-K
10.4
3/26/2021
001-38402
10.54
March 23, 2021 Forbearance Letter between Monaker Group, Inc. and Streeterville Capital, LLC
8-K
10.5
3/26/2021
001-38402
10.55
Form of Agreement For Consulting Services to be Provided dated March 25, 2021, and entered into March 26, 2021 between Monaker Group, Inc. and the consultants party thereto
8-K
10.1
4/6/2021
001-38402
10.56
Form of Bill of Sale for Common Stock dated April 1, 2021, by and between Group, Inc. and the Sellers party thereto
8-K
10.1
4/7/2021
001-38402
10.57***
Form of Warrant to Purchase Common Stock (March 2021 Grants)
8-K
10.1
4/9/2021
001-38402
10.58***
Form of Lock-Up Agreement (2020 Fiscal Year End Non-Executive Board Member Shares)
8-K
10.2
4/9/2021
001-38402
10.59***
Exchange Agreement dated April 8, 2021, by and between Monaker Group, Inc., William Kerby and Monaco Investment Partners II, LP
8-K
10.3
4/9/2021
001-38402
10.60***
Convertible Promissory Note in the amount of $430,889 dated April 8, 2021, by and between Monaker Group, Inc. and William Kerby
8-K
10.4
4/9/2021
001-38402
10.61***
Convertible Promissory Note in the amount of $585,425 dated April 8, 2021, by and between Monaker Group, Inc. and Monaco Investment Partners II, LP
8-K
10.5
4/9/2021
001-38402
10.62
$2,000,000 Convertible Note by and among Monaker Group, Inc. and HotPlay Enterprise Limited, dated April 15, 2021
8-K
10.1
4/19/2021
001-38402
10.63***
Monaker Group 2021 Equity Incentive Plan
8-K
10.2
4/19/2021
001-38402
10.64
Preferred Stock Exchange Agreement dated May 6, 2021, by and between Monaker Group, Inc. and International Financial Enterprise Bank, Inc.
8-K
10.1
5/11/2021
001-38402
10.65
First Amendment to Preferred Stock Exchange Agreement dated May 10, 2021, by and between Monaker Group, Inc. and International Financial Enterprise Bank, Inc.
8-K
10.2
5/11/2021
001-38402
10.66
Monaker Letter of Intent to Purchase Radiant Entities’ Axion Shares, by and between Monaker Group, Inc., and Radiant Ventures Limited
S-3
10.98
5/13/2021
333-256060
10.67
Monaker Letter of Intent to Purchase Radiant Entities’ AXV Shares Amendment As of March 10, 2021, by and between Monaker Group, Inc., and Radiant Ventures Limited
S-3
10.99
5/13/2021
333-256060
10.68
Form of Lockup (May 2021 Offering)
8-K
10.1
5/18/2021
001-38402
10.69
Shareholder Voting Representation Agreement by and among Monaker Group Inc., IDS, Inc. a/k/a IDS International Inc. a/k/a Internet Distribution Systems a/k/a International Distribution Systems, and Bill Kerby, dated effective May 18, 2021
8-K
10.1
5/21/2021
001-38402
14.1
Code of Ethics
S-1/A
14.1
3/12/2009
333-154177
14.2
Code of Business Conduct
S-1/A
14.2
3/12/2009
333-154177
14.3
Whistleblower Protection Policy
8-K
14.1
4/25/2017
000-52669
21.1*
Subsidiaries
X
8-K
16.1
5/21/2019
001-38402
23.1*
Consent of TPS Thayer, LLC
X
23.2*
Consent of Thayer O’Neal Company, LLC
X
31.1*
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
X
31.2*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
X
32.1**
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2**
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
99.1
Charter of the Audit Committee
8-K
99.1
4/25/2017
000-52669
99.2
Charter of the Compensation Committee
8-K
99.2
4/25/2017
000-52669
99.3
Charter of the Nominating and Corporate Governance Committee
8-K
99.3
4/25/2017
000-52669
101.INS
XBRL Instance Document X
101.SCH
XBRL Schema Document X
101.CAL
XBRL Calculation Linkbase Document X
101.DEF
XBRL Definition Linkbase Document X
101.LAB
XBRL Label Linkbase Document X
101.PRE
XBRL Presentation Linkbase Document X
* Filed herewith.
** Furnished herewith.
*** Indicates a management contract or any compensatory plan, contract or arrangement.
+ Certain schedules, exhibits, annexes and similar attachments have been omitted pursuant to Item 601(a)(5) and/or Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Monaker Group, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
# Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[****]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.
@ Certain information has been redacted from the exhibit pursuant to Item 601(a)(6) of Regulation S-K (and replaced with #’s) as the disclosure of such information would constitute a clearly unwarranted invasion of personal privacy. A copy of any omitted information will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Monaker Group, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any information so furnished.