Attachment: AMENDMENT TO FORM 8-K/A


 

NextPlay Technologies, Inc. 8-K/A

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT AUDITORS

 

We consent to the incorporation by reference in the Registration Statements Nos. 333-224309, 333-226951, 333-252580, 333-256060, 333-220619 and 333-257457 on Form S-3 and Registration Statements Nos. 333-248475 and 333-229370 on Form S-8 of NextPlay Technologies, Inc., of our report dated 8/30/2021, relating to the consolidated financial statements of HotPlay Enterprise Limited, as of and for the period from March 6, 2020 (Inception) to February 28, 2021 appearing in Form 8-K/A of NextPlay Technologies, Inc.

 

 

 

/s/ TPS Thayer, LLC

 

Sugar Land, Texas

 

September 8, 2021

 

 


 

NextPlay Technologies, Inc. 8-K/A

 

Exhibit 99.1

 

Hotplay Enterprise Limited

 

Consolidated Financial Statements

 

(Expressed in United States Dollars)

 

For the period from March 6, 2020 (inception) to February 28 , 2021

 

 

 

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheet F-2
   
Consolidated Statement of Comprehensive Loss F-3
   
Consolidated Statement of Changes in Shareholders’ Equity F-4
   
Consolidated Statement of Cash Flows F-5
   
Notes to the Consolidated Financial Statements F-6 – F-16

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Stockholders and Board of Directors

Hotplay Enterprise Limited

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of Hotplay Enterprise Limited (“the Company”) for the period from March 6, 2020 (inception) to February 28, 2021, and the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flow for the period 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 flow for the period from March 6, 2020 (inception) to 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.

 

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 1 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 revenues to sustain its operations. For the period from March 6, 2020 (inception) to February 28, 2021, the Company incurred net losses of USD 1.633 million and used the net cash in operating activities of USD 1.014 million. As of February 28, 2021, the accumulated deficit amounted to USD 1.2 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 receipt of funds subsequent to the period end. Management’s evaluation of the Company’s going concern also included obtaining a contract to develop software for a related party.

 

 

TPS Thayer, LLC 

We have served as the Company’s auditor since 2021

Sugar Land, Texas 

August 30, 2021

 

 

 

 

HOTPLAY ENTERPRISE LIMITED 

Consolidated Balance Sheet

As of February 28 , 2021 

(Expressed in United States Dollars) 

 

   February 28 , 2021 
     
Assets     
Current assets     
Cash and cash equivalents  $444,920 
Convertible notes receivable – related party   3,000,000 
Prepaid expense and other current assets   235,746 
Total current assets   3,680,666 
      
Non-current assets     
Property and equipment, net   25,793 
Intangible assets, net   7,759,603 
TOTAL ASSETS  $11,466,062 
      
Liabilities     
Current liabilities     
Accounts payable and accrued expenses  $343,941 
Amount due to related parties   38,260 
Notes payable – related parties   1,053,082 
Other current liabilities   11,163 
TOTAL LIABILITIES  $1,446,446 
      
Commitments and contingencies     
      
Equity     
Common stock, $100.00 par value; 144,000 authorized; 144,000 shares issued and outstanding as of February 28 , 2021   14,400,000 
Additional paid in capital   (2,800,019)
Accumulated deficits   (1,200,309)
Accumulated other comprehensive income   10,221 
Total deficit attributable to Hotplay Enterprise Limited   10,409,893 
Non-controlling interests   (390,277)
TOTAL EQUITY   10,019,616 
      
TOTAL LIABILITIES AND EQUITY  $11,466,062 

 

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

 

F-2

 

 

HOTPLAY ENTERPRISE LIMITED 

Consolidated Statement of Comprehensive Loss 

For the period from March 6, 2020 (inception) to February 28 , 2021 

(Expressed in United States Dollars)  

 

Operating Expenses    
General and administrative  $784,945 
Salaries and benefits   325,473 
Technology and development   3,180 
Selling and promotions expense   4,702 
Depreciation and Amortization   461,596 
Total Expense   1,579,896 
      
Operating Loss   (1,579,896)
      
Other Income (Expense)     
Foreign Exchange Loss   (2,110)
Interest expense - net   (51,827)
Other income   425 
Total other expense   (53,512)
      
Loss before income taxes   (1,633,408)
      
Net Loss   (1,633,408)
      
Share of non-controlling interests   (433,099)
      
Net (loss) attributable to parent   (1,200,309)
      
Comprehensive loss:     
Net loss  $(1,633,408)
Other comprehensive income (loss):     
Foreign currency translation adjustments   20,859 
Total other comprehensive loss   (1,612,549)
Comprehensive loss attributable to non-controlling interests   (422,461)
Comprehensive loss attributable to Hotplay Enterprise Limited  $(1,190,088)
      
Weighted average number of common shares outstanding     
Basic and diluted   120,667 
      
Basic and diluted net (loss) per share  ($9.9473)

 

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

 

F-3

 

 

HOTPLAY ENTERPRISE LIMITED  

Consolidated Statement of Changes in Shareholders’ Equity  

(Expressed in United States Dollars) 

For the period from March 6, 2020 (inception) to February 28 , 2021

 

  

Common

Stock

  

Additional

paid in capital

  

Accumulated

deficit

  

Accumulated

other comprehensive

income

  

Shareholders’

equity

  

Non-

controlling interests

  

Total

shareholders’ equity

 
                             
Balance at March 6, 2020 (Date of inception)                            
Stock issued for cash   5,400,000    600,000            6,000,000    32,184    6,032,184 
Stock issued for Intangible assets   9,000,000    (3,400,019)           5,599,981        5,599,981 
Net loss for the period           (1,200,309)       (1,200,309)   (433,099)   (1,633,408)
Foreign currency translation adjustment                10,221    10,221    10,638    20,859 
Balance at February 28 , 2021   14,400,000    (2,800,019)   (1,200,309)   10,221    10,409,893    (390,277)   10,019,616 

 

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

 

F-4

 

 

HOTPLAY ENTERPRISE LIMITED 

Consolidated Statement of Cash Flow 

For the period from March 6, 2020 (Date of inception) to February 28 , 2021

 

(Expressed in United States Dollars)

 

CASH FLOWS USED IN OPERATING ACTIVITIES:    
Net loss  $(1,200,309)
Adjustments to reconcile net loss to net cash used in operating activities:     
Depreciation   1,381 
Amortization of intangible assets   460,215 
Share of non controlling interest   (433,099)
Effect of currency translation   (342)
Changes in operating assets and liabilities:     
Amounts due to related parties   38,260 
Prepaid expense and other current assets   (235,746)
Account Payable and accrued expenses   343,941 
Other current liabilities   11,163 
Net cash used in operating activities   (1,014,536)
      
CASH FLOWS USED IN INVESTING ACTIVITIES:     
Convertible notes receivable – related party   (3,000,000)
Additions of intangible assets – related party   (2,619,047)
Purchases of computer software   (790)
Purchases of property and equipment   (27,174)
Net cash used in investing activities   (5,647,011)
      
CASH FLOWS FROM FINANCING ACTIVITIES:     
Proceeds from issuance of ordinary shares – related parties   6,000,000 
Proceeds from issuance of ordinary shares – non controlling interest   32,184 
Proceeds from notes payable – related parties   2,171,982 
Repayment of notes payable – related parties   (1,118,900)
Net cash generated from financing activities   7,085,266 
      
Net Increase in cash and cash equivalents   423,719 
Effect of currency translation   21,201 
Cash and cash equivalents at the end of the period  $444,920 
      
Supplemental disclosures of cash flow information:     
Interest paid  $52,175 
Supplemental disclosures of non-cash activities:     
Addition of intangible assets through stock issuance   (5,599,981)

 

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

 

F-5

 

 

HOTPLAY ENTERPRISE LIMITED 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

 

Hotplay Enterprise Limited (“HotPlay”), a British Virgin Islands corporation formed on April 14, 2020, is under the common control of Red Anchor Trading Corp. (“RATC”), a British Virgin Island Company by 58% of share. RATC is dominance of Nithinan Boonyawattanapisut and John Todd Bonner (“Bonner family”). The three other Thai shareholders are Tree Roots Entertainment Group Company Limited (“TREG”), T&B Media Global (Thailand) Company Limited (“T&B”) and Dees Supreme Company Limited (“DS”).

 

Hotplay (Thailand) Company Limited (“HP Thailand”), was established in Thailand on March 6, 2020 by RATC, TREG, T&B, DS and Nithinan Boonyawattanapisut (the CEO of Hotplay and HP Thailand). HP Thailand is structured as an operating affiliate of HotPlay, to create a collaboration between the partners to expand the HotPlay Platform, an In-Game Advertising (IGA) platform which was originated and built by RATC. HotPlay and HP Thailand (collectively “the Company”) believes that the functionality of IGA platform will bridge the gap between advertisers and gamer populations.

 

The accompanying consolidated financial statements as of February 28, 2021, include the accounts of the Hotplay and HP Thailand. Prior to the acquisition of HP Thailand, 49% or 49,000 shares of HP Thailand’s common stock had been held by RATC on behalf of HotPlay since March 6, 2020. After incorporation and pursuant to the Share Exchange Agreement, HotPlay received 49% shares transfer of HP Thailand’s from RATC on September 17, 2020. As a result, HP Thailand was consolidated HP Thailand as the entity was under common control. All significant transactions and balances among the Company and its subsidiary have been eliminated upon consolidation.

 

On July 21, 2020, HotPlay and HP Thailand entered into binding definitive Share Exchange Agreements with Monaker Group, Inc, “MKGI”, a technology leader in the travel and vacation rental markets, and shareholders of HotPlay (RTAC, T&B, TREG and DS) relating to the proposed acquisition of 100% of the outstanding shares of HotPlay from the shareholders of HotPlay in exchange of a majority stake in MKGI. Under the terms of the Agreements, upon the closing thereof, the shareholders of HotPlay will become the majority shareholders of MKGI and HotPlay will become a wholly-owned subsidiary of MKGI following the closings.

 

Going Concern

 

The company was incorporated in 2020, although the company had a net loss of $1,633,408 in the period, due to initial costs to get the Company operational, the Company has positive equity of $10,019,616, current assets of $3,680,666 and total assets of $11,466,062, where as total liabilities were $1,446,446 and accumulated deficit of $1,200,309. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

 

Management’s plans with regard to this going concern are as follows: the Company will continue to raise funds through MKGI by way of public offerings of equity pursuant to the Share Exchange Agreeement, develop an IGA Platform to serve all aspects of commercial requirements, the HotPlay’s management is working aggressively to increase market penetration of IGA platform and continuously driving the activities to create brand awareness and connect with new customers and the strong partnerships which are anticipated to result in generating revenues. Subsequent to the period, the Company entered into software development and licensing agreement with MKGI to develop online travel platform and applications. In addition, the Company has engaged partnership agreements with media advertising exchanges to expand the future collaboration. 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.

 

F-6

 

 

Basis of Presentation

 

The Consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and present the Consolidated balance sheet of HotPlay and its subsidiary, HP Thailand as of February 28, 2021 and the audited Consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the period from March 6, 2020 (inception) to February 28 , 2021. All significant intercompany balances and transactions among the legal entities were eliminated upon the consolidating of the financial statements.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Cash and Cash Equivalents

 

Cash and cash equivalents represent cash on hand and deposits with banks. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

 

Intangible Assets

 

The Company recognizes internal use software in accordance with ASC 350-40, Intangibles - Goodwill and Other - Internal Use Software (“ASC 350-40”). Thus, the Company capitalizes software development costs, including Payroll and payroll-related costs, external direct costs of services consumed in developing or obtaining internal-use computer software, beginning when it determines certain factors are present including, among others, that technology exists to achieve the performance requirements and/or buy versus internal development decisions have been made. Capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.

 

Other intangible assets are acquired through related parties, and mainly consist of In-Game-advertising application and copyright license. The Company records other intangible assets acquired at historical cost on the date invested. Other Intangible assets are carried at cost less accumulated amortization and impairment loss, if any, and amortized using the straight-line method over their estimated useful life.

 

Impairment of Intangible Assets

 

In accordance with Accounting Standards Update No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived 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.

 

Foreign Currency Matters — Translation of Financial Statements

 

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the period. Any translation adjustments are reflected as a separate component of stockholders’ equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations.

 

F-7

 

 

During the period ended from March 6, 2020 (inception) to February 28 , 2021, the Company had aggregate foreign currency translation gains of $20,859.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740, the Company determines deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which it expects the differences to reverse. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely that the net deferred asset will not be realized.

 

Uncertain tax positions

 

In order to assess uncertain tax positions, the Company applies a more-likely-than-not threshold and a two step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more-likely- than-not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties, if any, under accrued expenses and other current liabilities on its Consolidated balance sheets and under income tax expenses in its Consolidated statements of operations and comprehensive loss

 

Earnings per Share

 

The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during the period. Basic earnings per share are computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing the net income or loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. There are no such common stock equivalents outstanding and no other dilutive securities outstanding as of February 28 , 2021.

 

Comprehensive Loss

 

Comprehensive loss is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from shareholders and distributions to shareholders. Accumulated other comprehensive loss, as presented on the accompanying Consolidated statement of financial position are the cumulative foreign currency translation adjustments.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

 

F-8

 

 

The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

 

Level 1— Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access. 

Level 2 — Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.

Level 3 — Inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. 

 

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The Company has various financial instruments, including cash and cash equivalents, and other current assets, payables, amount due to related parties, notes payable and certain other current liabilities. The carrying value of such financial instruments in the accompanying consolidation as of the balance sheet approximate their fair values due to their 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 Not Yet Adopted

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis. That model replaces the probable, incurred loss model for those assets and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Through the amendments in this Update, the FASB added Topic 326, Financial Instruments-Credit Losses, and made several consequential amendments to the standard. For public business entities, the amendments in this Update will be effective for fiscal years beginning after December 15, 2020. The Company is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance.

 

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company will adopt the new standard effective March 1, 2021 and do not expect the adoption of this guidance to have a material impact on our Consolidated financial statements.

 

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company currently has no security investment, thus, the Company is anticipating that the there is no material impact from adoption of the new guidance.

 

F-9

 

 

NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

  

February 28, 

2021 

 
     
Input Value-Added Taxes  $209,305 
Other current assets   26,441 
Total  $235,746 

 

NOTE 4. PROPERTY AND EQUIPMENT, NET

 

The Company depreciates its property and equipment on a straight-line basis over the assets’ useful lives, which range from 5 to 10 years.

 

  

February 28, 

2021 

   Average useful lives 
         
Furniture and fixtures  $494    5-10 years 
Office Equipment   510    5 years 
Computers   26,170    5 years 
Total   27,174      
Less: Accumulated depreciation   (1,381)     
Net  $25,793      

 

Depreciation expense was $1,381 for the period from March 6, 2020 (inception) to February 28 , 2021

 

NOTE 5. INTANGIBLE ASSETS

 

The Company amortizes its intangible assets on a straight-line basis over the estimated useful lives, which range from 5 to 20 years. No amortization is provided on software under development.

 

Intangible assets as of February 28 , 2021 consisted of the following:

 

  

February 28, 

2021 

   Average useful lives 
         
In-game-advertising application and platform  $2,126,064    6-10 years 
Copyright licensing – animated characters   3,473,917    10-20 years 
Software under development   2,619,047     
Computer Software   790    5 years 
Total  $8,219,818      
Less: Accumulated amortization   (460,215)     
Net  $7,759,603      

 

F-10

 

 

Amortization expense for the intangible assets was $460,215 for the period from March 6, 2020 (inception) to February 28, 2021. 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 

Expense 

 
      
As of February 28, 2021     
2022    532,190 
2023    532,190 
2024    532,190 
2025    532,190 
2026 onwards    5,630,843 
Total   $7,759,603 

 

NOTE 6. ACCOUNT PAYABLE AND ACCRUED EXPENSES

 

  

February 28, 

2021 

 
     
Accounts Payable - Professional fee   72,667 
Accounts Payable - Other   9,112 
Accrued expenses - Software development   176,062 
Accrued expenses   86,100 
Total  $343,941 

 

NOTE 7. RELATED PARTIES TRANSACTIONS

 

a)Related parties

 

Name of related parties Relationship with the Company
Red Anchor Trading Corporation (“RTAC”) A shareholder of the Company and controlled by CEO of the Company and a director of the Company
Tree Roots Entertainment Group Company Limited (“TREG”) A shareholder of the Company
T&B Media Global (Thailand) Company Limited (“T&B”) A shareholder of the Company
Dees Supreme Company Limited A shareholder of the Company
Hotnow (Thailand) Company Limited (“Hotnow”) An entity controlled by the CEO of the Company
True Axion Interactive Company Limited (“TAI”) An entity controlled by the CEO of the Company

Magnolia Quality Development Corporation Limited (“MQDC”) 

A shareholder of TREG which is a shareholder of the Company 

Longroot (Thailand) Limited An entity controlled by a director of the Company
Longroot Holding (Thailand) Limited An entity controlled by a director of the Company
Nithinan Boonyawattanapisut

CEO of the Company, A shareholder of the Company, RTAC, Hotnow and TAI 

Monaker Group. (“MKGI”)

An entity that the Company entered into binding definitive share exchange agreement 

 

F-11

 

 

b)Other than disclosed elsewhere, the Company had the following significant related party transactions for the period from March 6, 2020 (inception) to February 28 , 2021.

     
Payment for convertible notes receivable from:     
Monaker Group, Inc.  $3,000,000 
Short-term Loan from:     
Magnolia Quality Development Corporation Limited   493,633 
Tree Roots Entertainment Group Co., Ltd   1,678,349 
Interest income of convertible notes receivable:     
Monaker Group, Inc.   11,393 
Repayment of Short-term Loan:     
Tree Roots Entertainment Group Co., Ltd   1,118,900 
Interest expense of loan from:     
Magnolia Quality Development Corporation Limited   40,612 
Tree Roots Entertainment Group Company Limited   22,706 
Initial intangible assets for stock issuance:     
Red Anchor Trading Corporation   2,582,064 
T&B Media Global (Thailand) Company Limited   618,009 
Tree Roots Entertainment Group Co., Ltd   2,399,908 
Cash receipt from issuance of ordinary shares:     
Red Anchor Trading Corporation   3,000,000 
T&B Media Global (Thailand) Company Limited   500,000 
Tree Roots Entertainment Group Co., Ltd   1,900,000 
Dees Supreme Company Limited   600,000 
Cash receipt from issuance of ordinary shares – non controlling interest:     
T&B Media Global (Thailand) Company Limited   6,311 
Tree Roots Entertainment Group Co., Ltd   22,087 
Dees Supreme Company Limited   3,155 
Nithinan Boonyawattanapisut   631 
Rental expense:     
Tree Roots Entertainment Group Co., Ltd   18,365 
Payment of loan interest:     
Magnolia Quality Development Corporation Limited   37,287 
Tree Roots Entertainment Group Co., Ltd   14,888 
Payment of contract cost – Related party:     
Hotnow (Thailand) Company Limited   2,114,909 
True Axion Interactive Company Limited   535,920 
Payment of utilities expense:     
Hotnow (Thailand) Company Limited   6,342 
      

 

F-12

 

 

c)The Company had the following related party balances as of February 28, 2021:

 

   Nature  February 28, 2021 
        
Notes receivable:
Monaker Group, Inc.     $3,000,000 
Other current assets:        
Monaker Group, Inc.  Accrued Interest income   11,393 
Amounts due to related parties:
Magnolia Quality Development Corporation Limited   Accrued Interest expense    3,408 
Monaker Group, Inc.  Advance   7,500 
Tree Roots Entertainment Group Company Limited   Other payable    4,523 
   Accrued Interest expense   4,005 
   Accrued expense   18,824 
Total     $38,260 
Notes payable:        
Magnolia Quality Development  Corporation Limited       493,632 
Tree Roots Entertainment Group Company Limited      559,450 
Total     $1,053,082 
         

 

The Company entered into a convertible promissory note agreements with MKGI. The notes were issued pursuant to the terms of the Share Exchange Agreement dated July 21, 2020 (Note 1). Conditions of the promissory notes includes (a) total

 

$3,000,000 with an interest rate of 1% per annum; (b) a provision providing for the forgiveness in the event that the share exchange agreement is terminated under certain circumstances and (c) an automatic conversion into restricted MKGI. Common Stock under certain circumstances subject in all cases to the rules and requirements of the Principal Market.

 

The Company entered into a short term loan with MQDC for $493,632 (15,000,000 Thai Baht) with an accrued interest rate of 9% per annum which is payable on demand and unsecured. Accured interest on this loan was $3,408 as of February 28, 2021.

 

The Company entered into a short term loan with TREG for $559,450 (17,000,000 Thai Baht) with an accrued interest rate of 9.7% per annum which is payable on demand and unsecured. Accured interest on this loan was $4,005 as of February 28, 2021.

 

NOTE 8. TAXATION

 

British Virgin Islands

 

HotPlay is incorporated in the British Virgin Islands and conducts its primary business operations through the related companies in Thailand. Under the current laws of the British Virgin Islands, HotPlay is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.

 

Thailand

 

HP Thailand is incorporated in Thailand and is subject to the statutory income tax rate of 20%. Dividends, interests, rent or royalties payable by HP Thailand to non-Thai resident enterprises, and proceeds from any such nonresident enterprise investor's disposition of assets (after deducting the net value of such assets) shall be subject to 10-15% withholding tax, unless the respective non-Thai resident enterprise's jurisdiction of incorporation has a tax treaty or arrangements with Thailand that provides for a reduced withholding tax rate or an exemption from withholding tax.

 

The reconciliation of tax computed by applying the statutory income tax rate of 20% for the period from March 6, 2020 (inception) to February 28 , 2021 is as follows:

 

Loss before income taxes  $(1,633,408)
Income tax benefit computed at the Thai statutory income tax rate at 20%   326,682 
Non-deductible expenses   (92)
Impact of different tax rates in other jurisdictions   (492,668)
Change in valuation allowance   166,078 
Income tax expense    

 

F-13

 

 

Deferred Taxes

 

The significant components of deferred taxes are as follows:

 

  

February 28, 

2021 

 
Deferred tax assets:     
Tax losses   166,078 
Less: Valuation allowance   (166,078)
     

 

As of February 28 , 2021, the Company was in cumulative loss position, valuation allowance was provided against deferred tax assets in entities where it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized. As February 28 , 2021, the Company had tax losses of $830,390 derived from HP Thailand, which can be carried forward per tax regulation to offset future taxable income. The Thailand taxable losses will expire beginning in 2026 if not utilized.

 

The Company adopted the guidance on accounting for uncertainties in income taxes, which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining its provision for income taxes for the period from March 6, 2020 (date of inception) to February 28 , 2021, and the Company did not have any significant interest or penalties associated with uncertain tax positions. As of February 28 , 2021, the Company did not have any significant unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

 

NOTE 9. SHARE CAPITAL

 

As of April 14, 2020, Hotplay Enterprise Limited (“HotPlay”) was authorized to issue 120,000 shares with US$100 par value per share of a single class of Common stock.

 

On February 9, 2021, HotPlay registered an additional 24,000 shares of common stock, with the Registrar of Corporate Affairs, Territory of the British Virgin Islands for a total of 144,000 shares at a par value of $100 per share to facilitate the business operations of the Company, which were sold for cash of $3,000,000.

 

As of February 28 , 2021, Hotplay has 144,000 shares issued and outstanding.

 

NOTE 10. LOSS PER SHARE

 

The calculation of basic and diluted loss per share is based on the following data:

 

  

For the period from March 6, 2020 (date of inception) to February 28, 2021

 
Numerator    
Loss for the period and loss used in basic and diluted EPS (US$)   (1,200,309)
      

Denominator 

     
Weighted average number of ordinary shares used in basic and diluted loss per share   120,667 
      
Basic and diluted loss per share (US$)   (9.9473)

 

F-14

 

 

Basic net loss per share is computed using the weighted average number of the ordinary shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of ordinary shares and ordinary equivalent shares outstanding during the period. Due to the loss for For the period from March 6, 2020 (date of inception) to February 28 , 2021, approximately 23,000 shares were excluded from the calculation of diluted net loss per share, because the effect would be anti-dilutive.

 

NOTE 11. LEASE

 

During the period, the Company entered into a lease agreement with a related party effective from January 1, 2021 to September 30, 2021, for the monthly fee of 286,002 Thai Baht (approximately $18,000).

 

NOTE 12. COMMITMENTS AND CONTINGENCIES

 

The Company is subject to certain claims and lawsuits typically filed against personal computer and mobiles games companies, alleging primarily professional errors or omissions. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters. As of February 28 , 2021, the Company did not have any other significant indemnification claims that were probable or reasonably possible, except the following.

 

As described in note 1, pursuant to the Share Exchange Agreement, until the earlier of the (a) the termination of the Share Exchange; and (b) the Closing, MKGI and the Company (both for itself and HP Thailand) have agreed to only operate in the ordinary course of business, including: to not enter into any material agreements (other than in the ordinary course of business); to not issue any securities other than securities issued in connection with raising funding which is required as a condition to closing, or increase any compensation payable to any employees; to not amend their organizational documents or amend or terminate any material agreements; to not incur any indebtedness, or pay or settle any claims; to not change any reporting methods, or declare any dividends; to not make any capital expenditures over $100,000, or take certain other actions, with any of the foregoing permitted with written approval as to HotPlay and HP Thailand, and HotPlay as to MKGI, subject to certain exceptions relating to MKGI which have previously been agreed to by HotPlay and the HotPlay Stockholders.

 

In addition to Share Exchange Agreement, the obligations of HotPlay and the stockholders to close the transaction contemplated therein and perform obligation under the agreement, (a) Immediately prior to Closing, HotPlay shall have available cash of at lease $15,000,000, less any funds advanced to MKGI (b) HotPlay shall have timely loaned all of the funds required to MKGI $1,000,000 (“Initial Bridge Loan”) with the conditions described in note 7(c) and an additional $1,000,000 (each a “Subsquent Loan”, and together with the initial Bridge Loan, the “HotPlay Loans”) to provide funding to support any fees of transactions in connection with the agreement, each on substantially similar terms as the initial Bridge Loan and to be evidenced by promissory notes, (c) HotPlay shall have acquired 49% of HP Thailand’s shares prior to HotPlay obtains grant of a Foreign Business Certificate by Ministry of Commerce (MOC). Accordingly, until such time, HotPlay shall take action for HP Thailand to file an application to the BOI for grant of Investment Promotion, which shall entitle HP Thailand to certain benefits and privileges, including 99.8% foreign ownership of HP Thailand.

 

On January 8, 2021 and February 1, 2021 HotPlay entered into Note purchase agreement with TREG to loan convertible promissory note in the total of $12,000,000. Conditions of the promissory notes includes (a) the Note shall be solely used for the satisfying the funding obligations of HotPlay to MKGI set forth in the Share Exchange Agreement (b) upon the closing of the Share Exchange Agreement, the outstanding principal amount of the Note shall automatically convert into fully paid in exchange for shares of common stock of MKGI at a price per share equal to the conversion price (c) total principal amount with an interest rate of 5% per annum shall accrued and repaid upon the conversion of the Note.

 

On January 15, 2021, Axion Ventures, Inc., filed a civil claim in the Supreme Court of British Columbia, against John Todd Bonner, Nithinan Boonyawattanapisut, HotPlay, MKGI, Cern One Limited, RTAC., CC Asia Pacific Ventures 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 MGKIr, 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.

 

F-15

 

 

According to the lawsuit, the plaintiff intentionally aims to prosecute an individual, not HotPlay directly, and all defendants filed a jurisdictional response to dispute Axion’s claims. The Company therefore believes that this litigation is without merit.

 

NOTE 13. SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, “Subsequent Events”, the Company has analyzed its operations subsequent to February 28, 2021 to August 30, 2021, the date when the financial statements were issued. The Management of the Company determined that there were no reportable events that occurred during that subsequent period that have not been disclosed.

 

Related party Transactions

 

Upon the condition set forth in Note purchase agreement with TREG, HotPlay received transfers of loan in amount of

 

$9,000,000, $1,000,000, and $2,000,000, on March 16, 2021, March 24, 2021, and April 15, 2021 respectively. With the April 15, 2021, HotPlay has loaned from TREG all $12,000,000 of the funds required to be funded pursuant to the Share Exchange Agreement.

 

Simultaneously, pursuant to the terms of Share Exchange Agreement, HotPlay loaned to MKGI in amount of $9,000,000,

 

$1,000,000, and $2,000,000, respectively and were evidenced by Convertible Promissory Notes dated effective March 16, 2021, March 24, 2021, and April 15, 2021. With the April 15, 2021, HotPlay has loaned to MKGI all $15,000,000 of the funds required to be funded and the loan conditions were similar to thenote receivable to MKGI as described in note 7(c).

 

On June 30, 2021, MKGI was able to close the transaction contemplated by the Share Exchange Agreement by issuing 52,000,000 shares of MKGI’s common stock to HotPlay stockholders in exchange for 100% of the outstanding capital shares of HotPlay, making HotPlay a wholly-owned subsidiary of MKGI. Subsequently, MKGI completely changed its name to NextPlay Technologies (“NextPlay”).

 

Currently, HP Thailand is in process of filing an application to obtain grant of a Foreign Business Certificate by MOC allowing HotPlay hold 99.8% of HP Thailand and HotPlay is in preparation of delivering NextPlay a share certificates of HotPlay.

 

On March 17, 2021 HotPlay entered into Development and Licensing agreement with MKGI to license software frameworks “HotNow Platform” using the Platform as the foundation, to develop MKGI online traval platform and applications. The service fee and upfront fee are in total of $1,100,000. In addition, on May 20, 2021 HotPlay entered into Development and Licensing agreement with MKGI to expand services in the business of developing traval platform, Game publishing platform and solutions. The upfront retainer fee amounted to $900,000. The payment was made by MKGI on March 26, 2021 and May 24, 2021 respectively.

 

On March 31, 2021 HP Thailand entered into Asset purchase agreement with Hotnow, a related party, which is also under the same common control of HotPlay to purchase some of the assets, all software used in the business including all rights under licenses and other agreements and employees.

 

On May 31, 2021, HP Thailand repaid 7,000,000 Thai Baht (approximately $267,000) short-term loan from TREG.

 

 F-16


 

NextPlay Technologies, Inc. 8-K/A

 

Exhibit 99.2

 

Hotplay Enterprise Limited

 

Consolidated Financial Statements

 

(Expressed in United States Dollars)

 

For the Three Months Ended May 31 , 2021 and 2020

 

 

 

 

TABLE OF CONTENTS

 

Unaudited Consolidated Balance Sheets F-2
   
Unaudited Consolidated Statements of Comprehensive Loss F-3
   
Unaudited Consolidated Statement of Changes in Shareholders’ Equity F-4
   
Unaudited Consolidated Statements of Cash Flows F-5
   
Notes to the Consolidated Financial Statements F-6

 

 

 

 

HOTPLAY ENTERPRISE LIMITED

Consolidated Balance Sheets (Unaudited)

As of May 31, 2021

(Expressed in United States Dollars)

 

   May 31, 2021   February 28 , 2021 
Assets          
Current assets          
Cash and cash equivalents  $1,069,856   $444,920 
Amount due from related parties   25,037     
Advance payment to a related party   149,533     
Convertible notes receivable – related party   15,000,000    3,000,000 
Prepaid expense and other current assets   264,096    235,746 
Total current assets   16,508,522    3,235,746 
           
Non-current assets          
Property and equipment, net   37,423    25,793 
Intangible assets, net   8,056,112    7,759,603 
TOTAL ASSETS  $24,602,057   $11,466,062 
           
Liabilities          
Current liabilities          
Accounts payable and accrued expenses  $303,078   $343,941 
Amount due to related parties   96,308    38,260 
Convertible Notes Payable, related party   12,000,000     
Notes payable – related parties   800,000    1,053,082 
Deferred revenue, related party   2,000,000     
Other current liabilities   10,973    11,163 
TOTAL LIABILITIES   15,210,359    1,446,446 
           
Commitments and contingencies          
           
Equity          
Common stock, $100.00 par value; 144,000 authorized; 144,000 shares issued and outstanding as of February 28 , 2021 and May 31, 2021   14,400,000    14,400,000 
Additional paid in capital   (2,800,019)   (2,800,019)
 Accumulated deficits   (1,597,436)   (1,200,309)
Accumulated other comprehensive income   (15,270)   10,221 
Total deficit attributable to Hotplay Enterprise Limited   9,987,275    10,409,893 
 Non-controlling interests   (595,577)   (390,277)
TOTAL EQUITY   9,391,698    10,019,616 
           
TOTAL LIABILITIES AND EQUITY  $24,602,057   $11,466,062 

 

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

 

F-2

 

 

HOTPLAY ENTERPRISE LIMITED

Consolidated Statement of Comprehensive Loss

For the three months ended May 31, 2021 and 2020

(Unaudited)

 

(Expressed in United States Dollars)  May 31, 2021   May 31, 2020 
Operating Expenses          
General and administrative  $137,909   $11,934 
Salaries and benefits   178,126    35,243 
Technology and development   55,794     
Selling and promotions expense   27,138     
Depreciation and Amortization   134,758    63,332 
Total Expense   533,725    110,509 
           
Operating Loss   (533,725)   (110,509)
           
Other Income (Expense)          
Foreign Exchange Loss   (1,289)    
Interest expense - net   (40,958)   (7,901)
Other income   77     
Total other expense   (42,170)   (7,901)
           
Loss before income taxes   (575,895)   (118,410)
           
Net Loss   (575,895)   (118,410)
           
Share of non-controlling interests   (178,768)   (118,410)
           
Net (loss) attributable to parent   (397,127)    
           
Comprehensive loss:          
Net loss  $(575,895)  $(118,410)
           
Other comprehensive income (loss):          
 Foreign currency translation adjustments   (52,023)   (401)
    Total other comprehensive loss   (627,198)   (118,811)
       Comprehensive loss attributable to non-controlling interests   (205,300)   (118,811)
       Comprehensive loss attributable to Hotplay Enterprise Limited  $(422,618)  $ 
           
Weighted average number of common shares outstanding          
Basic and diluted   144,000    120,000 
           
Basic and diluted net (loss) per share  ($2.76)    

 

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

 

F-3

 

 

HOTPLAY ENTERPRISE LIMITED

Consolidated Statement of Changes in Shareholders’ Equity

(Expressed in United States Dollars)

For the three months ended May 31, 2021

 

(Unaudited)

 

  

Common

Stock

   Additional paid in capital   Accumulated deficit  

Accumulated

other comprehensive income

   Shareholders’ equity   Non-controlling interests   Total shareholders’ equity 
                             
Balance at March 1, 2021   14,400,000    (2,800,019)   (1,200,309)   10,221    10,409,893    (390,277)   10,019,616 
Net loss for the period           (397,127)       (397,127)   (178,768)   (575,895)
Foreign currency translation adjustment               (25,491)   (25,491)   (26,532)   (52,023)
Balance at May 31 , 2021   14,400,000    (2,800,019)   (1,597,436)   (15,270)   9,987,275    (595,577)   9,391,698 

 

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

 

F-4

 

 

HOTPLAY ENTERPRISE LIMITED

Consolidated Statement of Cash Flow

For the three months ended May 31, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

 

   May 31, 2021   May 31, 2020 
CASH FLOWS USED IN OPERATING ACTIVITIES:          
Net loss  $(575,895)  $(118,410)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   1,681     
Amortization of intangible assets   133,077    63,332 
Changes in operating assets and liabilities:          
Amounts due from related parties   (25,037)    
Advance payment to a related party   (149,533)    
Prepaid expense and other current assets   (28,350)   (40,371)
Account Payable and accrued expenses   (40,863)   111,058 
    Amounts due to related parties   58,764    8,027 
    Deferred revenues, a related party   2,000,000     
Other current liabilities   (190)   7,118 
Net cash used in operating activities   1,373,654    30,754 
           
CASH FLOWS USED IN INVESTING ACTIVITIES:          
Convertible notes receivable – related party   (12,000,000)    
Additions of intangible assets – related party   (479,865)   (575,579)
Additions of intangible assets   (21,930)    
Purchases of property and equipment   (14,019)   (9,309)
Net cash used in investing activities   (12,515,814)   (584,888)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from convertible notes payable – related party   12,000,000     
Proceeds from notes payable – related parties       570,666 
Repayment of notes payable – related party   (223,937)    
Net cash generated from financing activities   11,776,063    570,666 
           
Net Increase in cash and cash equivalents   633,903    16,532 
      Foreign currency translation adjustments   (8,967)   (804)
Cash and cash equivalents brought forward   444,920     
Cash and cash equivalents at the end of the period  $1,069,856    15,728 
           
Supplemental disclosures of cash flow information:          
Interest paid  $23,286   $ 
           
Supplemental disclosures of non-cash activities:          
Addition of intangible assets through stock issuance      $(5,599,981)

 

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

 

F-5

 

 

HOTPLAY ENTERPRISE LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Three months ended May 31, 2021 and 2020

 

(Unaudited)

 

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

 

Hotplay Enterprise Limited (“HotPlay”), a British Virgin Islands corporation formed on April 14, 2020, is under the common control of Red Anchor Trading Corp. (“RATC”), a British Virgin Island Company by 58% of share. RATC is dominance of Nithinan Boonyawattanapisut and John Todd Bonner (“Bonner family”). The three other Thai shareholders are Tree Roots Entertainment Group Company Limited (“TREG”), T&B Media Global (Thailand) Company Limited (“T&B”) and Dees Supreme Company Limited (“DS”).

 

Hotplay (Thailand) Company Limited (“HP Thailand”), was established in Thailand on March 6, 2020 by RATC, TREG, T&B, DS and Nithinan Boonyawattanapisut (the CEO of Hotplay and HP Thailand). HP Thailand is structured as an operating affiliate of HotPlay, to create a collaboration between the partners to expand the HotPlay Platform, an In-Game Advertising (IGA) platform which was originated and built by RATC. HotPlay and HP Thailand (collectively “the Company”) believes that the functionality of IGA platform will bridge the gap between advertisers and gamer populations.

 

The accompanying consolidated financial statements as of May 31, 2021, include the accounts of the Hotplay and , HP Thailand. Prior to the acquisition of HP Thailand, 49% or 49,000 shares of HP Thailand’s common stock had been held by RATC on behalf of HotPlay since March 6, 2020. After incorporation and pursuant to the Share Exchange Agreement, HotPlay received 49% shares transfer of HP Thailand’s from RATC on September 17, 2020. As a result, HP Thailand was consolidated HP Thailand as the entity was under common control. All significant transactions and balances among the Company and its subsidiary have been eliminated upon consolidation.

 

On July 21, 2020, HotPlay and HP Thailand entered into binding definitive Share Exchange Agreements with NextPlay Technologies, Inc. formerly Monaker Group, Inc. (“MKGI”), a technology leader in the travel and vacation rental markets, and shareholders of HotPlay (RATC, T&B, TREG and DS) relating to the proposed acquisition of 100% of the outstanding shares of HotPlay from the shareholders of HotPlay in exchange of a majority stake in MKGI. Under the terms of the Agreements, upon the closing thereof, the shareholders of HotPlay will become the majority shareholders of MKGI and HotPlay will become a wholly-owned subsidiary of MKGI following the closings.

 

Going Concern

 

The company was incorporated in 2020, and has had losses since inception. As of May 31, 2021 ,the Company has positive equity of $9,391,698, current assets of $16,508,522 and total assets of $24,602,057, where as total liabilities were $15,210,359 and accumulated deficit of $1,597,436. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

 

Management’s plans with regard to this going concern are as follows: the Company will continue to raise funds through MKGI by way of public offerings of equity pursuant to the Share Exchange Agreeement, develop an IGA Platform to serve all aspects of commercial requirements, the HotPlay’s management is working aggressively to increase market penetration of IGA platform and continuously driving the activities to create brand awareness and connect with new customers and the strong partnerships which we anticipate will result in generating revenues. Subsequent to the period, the Company entered into software development and licensing agreement with MKGI to develop online travel platform and applications. In addition, the Company has engaged partnership agreements with media advertising exchanges to expand the future collaboration. 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.

 

F-6

 

 

Basis of Presentation

 

The Consolidated financial statements  have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and present the Consolidated balance sheets of HotPlay and HP Thailand as of May 31, 2021 and the Consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for the three months ended May 31, 2021 and 2020. All significant intercompany balances and transactions among the legal entities were eliminated upon the combining of the financial statements .

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Interim Financial Statements

 

These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) for interim financial information. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the period from March 6, 2020 (date of inception) to February 28, 2021 and notes thereto and other pertinent information contained therein.

 

Cash and Cash Equivalents

 

Cash and cash equivalents represent cash on hand and deposits with banks. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

 

Intangible Assets

 

The Company recognizes internal use software in accordance with ASC 350-40, Intangibles - Goodwill and Other - Internal Use Software (“ASC 350-40”). Thus, the Company capitalizes software development costs, including Payroll and payroll-related costs, external direct costs of services consumed in developing or obtaining internal-use computer software, beginning when it determines certain factors are present including, among others, that technology exists to achieve the performance requirements and/or buy versus internal development decisions have been made. The Company has capitalized certain internal use software costs totaling approximately $3,045,531 from inception through May 31, 2021. And capitalized costs are amortized based on the straight-line method over the remaining estimated economic life of the product.

 

Other intangible assets are acquired through the investments of shareholders, and mainly consist of In-Game-advertising application and copyright license. The Company records other intangible assets acquired at historical cost on the date invested. Other Intangible assets are carried at cost less accumulated amortization and impairment loss, if any, and amortized using the straight-line method over their estimated useful life.

 

F-7

 

 

Impairment of Intangible Assets

 

In accordance with Accounting Standards Update No. 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived 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.

 

Foreign Currency Transactions

 

Foreign currency transactions during the year are translated into US dollars at the rates prevailing at the date of transactions. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated into US dollars at the prevailing bank rates at that date. Gains or losses on translation are credited or charged to current operations in Consolidated statement of comprehensive loss.

 

Foreign Currency Matters — Translation of Financial Statements

 

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the period. Any translation adjustments are reflected as a separate component of stockholders’ equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations. During the three months ended May 31, 2021, the Company had aggregate foreign currency translation losses of $52,023.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740, the Company determines deferred tax assets and liabilities based on the temporary difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which it expects the differences to reverse. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely that the net deferred asset will not be realized.

 

Uncertain tax positions

 

In order to assess uncertain tax positions, the Company applies a more-likely-than-not threshold and a two step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more-likely-than-not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties, if any, under accrued expenses and other current liabilities on its Consolidated balance sheets and under income tax expenses in its Consolidated statements of operations and comprehensive loss

 

F-8

 

 

Earnings per Share

 

The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during the period. Basic earnings per share are computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing the net income or loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. There are no such common stock equivalents outstanding and no other dilutive securities outstanding as of May 31, 2021.

 

Comprehensive Loss

 

Comprehensive loss is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from shareholders and distributions to shareholders. Accumulated other comprehensive loss, as presented on the accompanying Consolidated statement of financial position are the cumulative foreign currency translation adjustments.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

 

The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

 

Level 1— Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access.

Level 2 — Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. 

Level 3 — Inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

 

 The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

F-9

 

 

 

The Company has various financial instruments, including cash and cash equivalents, and other current assets, payables, amount due to related parties, notes payable and certain other current liabilities. The carrying value of such financial instruments in the accompanying consolidation as of the balance sheet approximate their fair values due to their 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 Not Yet Adopted

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis. That model replaces the probable, incurred loss model for those assets and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Through the amendments in this Update, the FASB added Topic 326, Financial Instruments-Credit Losses, and made several consequential amendments to the standard. For public business entities, the amendments in this Update will be effective for fiscal years beginning after December 15, 2020. The Company is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance. 

 

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company will adopt the new standard effective March 1, 2021 and do not expect the adoption of this guidance to have a material impact on our Consolidated financial statements.

 

In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. This guidance will be effective for entities for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 on a prospective basis, with early adoption permitted. The Company currently has no security investment, thus, the Company is anticipating that the there is no material impact from adoption of the new guidance.

 

NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

  

May 31, 

2021 

   February 28,
2021
 
         
Input Value-Added Taxes  $255,317   $209,305 
Other current assets   8,779    26,441 
Total  $264,096   $235,746 

 

NOTE 4. PROPERTY AND EQUIPMENT, NET

 

The Company depreciates its property and equipment on a straight-line basis over the assets’ useful lives, which range from 5 to 10 years.

 

F-10

 

 

 

  

May 31, 

2021 

   February 28,
2021
   Average useful lives 
             
Furniture and fixtures  $480   $494    5-10 years 
Office Equipment   496    510    5 years 
Computers   39,504    26,170    5 years 
Total   40,480    27,174      
Less: Accumulated depreciation   (3,057)   (1,381)     
Net  $37,423   $25,793      

 

Depreciation expense was $3,057 and $0 for the period for the three months ended May 31, 2021 and 2020, respectively.

 

NOTE 5. INTANGIBLE ASSETS

 

The Company amortizes its intangible assets on a straight-line basis over the estimated useful lives, which range from 5 to 20 years. No amortization is provided on software under development.

 

Intangible assets as of May 31 , 2021 and February 28, 2021 consisted of the following:

 

  

May 31, 

2021 

   February 28,
2021
   Average useful lives 
             
In-game-advertising application and platform  $2,126,064   $2,126,064     6-10 years 
Copyright licensing – animated characters   3,473,917    3,473,917    10-20 years 
Software under development   3,045,531    2,619,047     
Computer Software   3,892    790    5 years 
Total  $8,649,404   $8,219,818      
Less: Accumulated amortization   (593,292)   (460,215)     
Net  $8,056,112   $7,759,603      

 

Amortization expense for the intangible assets was $133,077 and $63,332 for the three months ended May 31, 2021 and 2020, respectively.

 

Based on the carrying value of definite-lived intangible assets as of May 31, 2021, we estimate our amortization expense for the next five years will be as follows:

 

 

Amortization Expense

 
As of May 31, 2021   
2022  532,409 
2023  532,409 
2024  532,409 
2025  532,409 
2026 onwards  5,926,476 
Total $8,056,112 

 

F-11

 

 

NOTE 6. ACCOUNT PAYABLE AND ACCRUED EXPENSES

 

  

May 31, 

2021 

   February 28,
2021
 
         
Accounts Payable - Professional fee   3,304    72,667 
Accounts Payable - Other   25,384    9,112 
Accrued expenses - Software development   183,728    176,062 
Accrued expenses   90,662    86,100 
Total  $303,078   $343,941 
           

 

NOTE 7. RELATED PARTIES TRANSACTIONS

 

a)Related parties

 

Name of related parties Relationship with the Company
Red Anchor Trading Corporation (“RATC”) A shareholder of the Company and controlled by CEO of the Company and a director of the Company
Tree Roots Entertainment Group Company Limited (“TREG”) A shareholder of the Company
T&B Media Global (Thailand) Company Limited (“T&B”) A shareholder of the Company
Dees Supreme Company Limited A shareholder of the Company
Hotnow (Thailand) Company Limited (“Hotnow”) An entity controlled by the CEO of the Company
True Axion Interactive Company Limited (“TAI”) An entity controlled by the CEO of the Company
Magnolia Quality Development Corporation Limited (“MQDC”) A shareholder of TREG which is a shareholder of the Company
Longroot (Thailand) Limited An entity controlled by a director of the Company
Longroot Holding (Thailand) Limited An entity controlled by a director of the Company
Nithinan Boonyawattanapisut CEO of the Company, A shareholder of the Company, RATC, Hotnow and TAI
NextPlay Technologies, Inc [formerly Monaker Group, Inc. (“MKGI”)] An entity that the Company entered into binding definitive share exchange agreement

 

Other than disclosed elsewhere, the Company had the following significant related party transactions for the three months ended May, 31, 2021.

 

F-12

 

 

     
Payment for convertible notes receivable from:     
      NextPlay Technologies, Inc [formerly Monaker Group, Inc.]  $12,000,000 
Cash receipt for convertible Notes Payable from:     
      Tree Roots Entertainment Group Co., Ltd   12,000,000 
Advance payment for asset acquisition to:     
      Hotnow (Thailand) Company Limited   149,533 
Interest income of convertible notes receivable:     
      NextPlay Technologies, Inc [formerly Monaker Group, Inc.]   13,644 
Repayment of Short-term Loan:     
      Tree Roots Entertainment Group Co., Ltd   223,937 
Cash recepit for deferred revenues from:     
      NextPlay Technologies, Inc. [formerly Monaker Group, Inc.]   2,000,000 
Interest expense of loan from:     
      Magnolia Quality Development Corporation Limited   10,886 
      Tree Roots Entertainment Group Company Limited   43,716 
Rental expense:     
      Tree Roots Entertainment Group Co., Ltd   27,449 
Payment of loan interest:     
      Magnolia Quality Development Corporation Limited   10,531 
      Tree Roots Entertainment Group Co., Ltd   12,755 
Payment of contract cost:     
      Hotnow (Thailand) Company Limited   489,147 
      

 

b) The Company had the following related party balances as of May 31, 2021:

 

   Nature  May 31 , 2021 
Convertible notes receivable:        
NextPlay Technologies, Inc.     $15,000,000 
Amounts due to related parties:        
      NextPlay Technologies, Inc.  Accrued Interest income   25,037 
Advance payment to a related party        
      Hotnow (Thailand) Company Limited      149,533 
Amounts due to related parties:        
Magnolia Quality Development Corporation Limited  Accrued Interest expense   3,669 
NextPlay Technologies, Inc.  Advance   7,500 
Tree Roots Entertainment Group  Other payable   4,523 
   Accrued Interest expense   34,856 
   Accrued rental expense   45,760 
Total     $96,308 
Convertible Notes Payable, related party        
Tree Roots Entertainment Group      12,000,000 
Notes payable:        
Magnolia Quality Development Corporation Limited     $480,000 
Tree Roots Entertainment Group      320,000 
Total     $800,000 
Deferred revenue, related party        
NextPlay Technologies, Inc. [formerly Monaker Group, Inc.]      2,000,000 

 

F-13

 

 

The Company entered into a convertible promissory note agreements with MKGI. The notes were issued pursuant to the terms of the Share Exchange Agreement dated July 21, 2020 (Note 1). Conditions of the promissory notes includes (a) total $15,000,000 with an interest rate of 1% per annum; (b) a provision providing for the forgiveness in the event that the share exchange agreement is terminated under certain circumstances and (c) an automatic conversion into restricted MKGI. Common Stock under certain circumstances subject in all cases to the rules and requirements of the Principal Market.

 

Upon the condition set forth in Note purchase agreement with TREG dated October 8, 2020, HotPlay received transfers of loan in amount of $9,000,000, $1,000,000, and $2,000,000, on March 16, 2021, March 24, 2021, and April 15, 2021 respectively. With the April 15, 2021, HotPlay has loaned from TREG all $12,000,000. Conditions of the promissory notes includes (a) the Note shall be solely used for the satisfying the funding obligations of HotPlay to MKGI set forth in the Share Exchange Agreement (b) upon the closing of the Share Exchange Agreement, the outstanding principal amount of the Note shall automatically convert into fully paid in exchange for shares of common stock of MKGI at a price per share equal to the conversion price (c) total principal amount with an interest rate of 5% per annum shall accrued and repaid upon the conversion of the Note.

 


Pursuant to the terms of Share Exchange Agreement, HotPlay loaned to MKGI in amount of $3,000,000, $9,000,000, $1,000,000, and $2,000,000, respectively and were evidenced by Convertible Promissory Notes dated effective September 1, 2020 ,March 16, 2021, March 19, 2021, and April 15, 2021 respectively. With the April 15, 2021, HotPlay has loaned to MKGI all $15 million of the funds required to be funded.

 

On March 31, 2021, HP Thailand entered into Asset purchase agreement with Hotnow, a related party, which is also under the same common control of HotPlay to purchase some of the assets, all software used in the business including all rights under licenses and other agreements and employees with the aggregate price of 19,500,000 Thai Baht (approximately $624,000). On April 7, 2021, HP Thailand made an advanced payment to HotNow in amount of 5,000,000 Thai Baht (approximately $149,533) pursuant to the terms of the Asset purchase agreement.

 

The Company entered into a short term loan with MQDC for $480,000 (15,000,000 Thai Baht) with an accrued interest rate of 9% per annum which is payable on demand and unsecured. Accured interest on this loan was $3,669 as of May 31, 2021.

 

The Company entered into a short term loan with TREG for $543,000 (17,000,000 Thai Baht) with an accrued interest rate of 9.7% per annum which is payable on demand and unsecured. Accured interest on this loan was $4,445 as of May 31, 2021. On May 31, 2021, HP Thailand repaid 7,000,000 Thai Baht (approximately $223,000) short-term loan from TREG.

 

On March 17, 2021 HotPlay entered into Development and Licensing agreement with MKGI to license software frameworks “HotNow Platform” using the Platform as the foundation, to develop MKGI online traval platform and applications. The service fee and upfront fee are in total of $1,100,000. In addition, on May 20, 2021 HotPlay entered into Development and Licensing agreement with MKGI to expand services in the business of developing traval platform, Game publishing platform and solutions. The upfront retainer fee amounted to $900,000. The payment was made in full by MKGI on March 26, 2021 and May 24, 2021 respectively.

 

F-14

 

 

NOTE 8. SHARE CAPITAL

 

As of April 14, 2020, Hotplay Enterprise Limited (“HotPlay”) was authorized to issue 120,000 shares with US$100 par value per share of a single class of Common stock.

 

On February 9, 2021, HotPlay registered an additional 24,000 shares of common stock for cash $3,000,000 with the Registrar of Corporate Affairs, Territory of the British Virgin Islands for a total of 144,000 shares at a par value of $100 per share to facilitate the business operations of the Company.

 

As of May 31 , 2021, Hotplay has 144,000 shares issued and outstanding.

 

NOTE 9. LOSS PER SHARE

 

The calculation of basic and diluted loss per share is based on the following data:

 

         
   For the three months ended May 31, 2021   For the three months ended May 31, 2020 
Numerator          
Loss for the period and loss used in basic and diluted EPS (US$)  $(397,127)  $ 
           
Denominator          
Weighted average number of ordinary shares used in basic and diluted loss per share   144,000    120,000 
           
Basic and diluted loss per share (US$)  $(2.7578)  $ 

 

Basic net loss per share is computed using the weighted average number of the ordinary shares outstanding during the period. Net loss per share is computed using the weighted average number of ordinary shares and ordinary equivalent shares outstanding during the period.

 

NOTE 10. LEASE

 

During the period, the Company entered into a lease agreement with a related party effective from January 1, 2021 to September 30, 2021, for the monthly fee of 286,002 Thai Baht (approximately $9,000).

 

NOTE 11. COMMITMENTS AND CONTINGENCIES

 

The Company is subject to certain claims and lawsuits typically filed against personal computer and mobiles games companies, alleging primarily professional errors or omissions. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters. As of May 31, 2021, the Company did not have any other significant indemnification claims that were probable or reasonably possible, except the following.

 

As described in note 1, pursuant to the Share Exchange Agreement, until the earlier of the (a) the termination of the Share Exchange; and (b) the Closing, MKGI and the Company (both for itself and HP Thailand) have agreed to only operate in the ordinary course of business, including: to not enter into any material agreements (other than in the ordinary course of business); to not issue any securities other than securities issued in connection with raising funding which is required as a condition to closing, or increase any compensation payable to any employees; to not amend their organizational documents or amend or terminate any material agreements; to not incur any indebtedness, or pay or settle any claims; to not change any reporting methods, or declare any dividends; to not make any capital expenditures over $100,000, or take certain other actions, with any of the foregoing permitted with written approval as to HotPlay and HP Thailand, and HotPlay as to MKGI, subject to certain exceptions relating to MKGI which have previously been agreed to by HotPlay and the HotPlay Stockholders.

 

F-15

 

 

In addition to Share Exchange Agreement, the obligations of HotPlay and the stockholders to close the transaction contemplated therein and perform obligation under the agreement, (a) Immediately prior to Closing, HotPlay shall have available cash of at lease $15,000,000, less any funds advanced to MKGI (b) HotPlay shall have timely loaned all of the funds required to MKGI $1,000,000 (“Initial Bridge Loan”) with the conditions described in note 7(c) and an additional $1,000,000 (each a “Subsquent Loan”, and together with the initial Bridge Loan, the “HotPlay Loans”) to provide funding to support any fees of transactions in connection with the agreement, each on substantially similar terms as the initial Bridge Loan and to be evidenced by promissory notes, (c) HotPlay shall have acquired 49% of HP Thailand’s shares prior to HotPlay obtains grant of a Foreign Business Certificate by Ministry of Commerce (MOC). Accordingly, until such time, HotPlay shall take action for HP Thailand to file an application to the BOI for grant of Investment Promotion, which shall entitle HP Thailand to certain benefits and privileges, including 99.8% foreign ownership of HP Thailand.

 

On January 8, 2021 and February 1, 2021 HotPlay entered into Note purchase agreement with TREG to loan convertible promissory note in the total of $12,000,000. Conditions of the promissory notes includes (a) the Note shall be solely used for the satisfying the funding obligations of HotPlay to MKGI set forth in the Share Exchange Agreement (b) upon the closing of the Share Exchange Agreement, the outstanding principal amount of the Note shall automatically convert into fully paid in exchange for shares of common stock of MKGI at a price per share equal to the conversion price (c) total principal amount with an interest rate of 5% per annum shall accrued and repaid upon the conversion of the Note.

 

On January 15, 2021, Axion Ventures, Inc., filed a civil claim in the Supreme Court of British Columbia, against John Todd Bonner, Nithinan Boonyawattanapisut, HotPlay, MKGI, Cern One Limited, RATC, CC Asia Pacific Ventures 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 MGKI, 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.

 

According to the lawsuit, the plaintiff intentionally aims to prosecute an individual, not HotPlay directly, and all defendants filed a jurisdictional response to dispute Axion’s claims. The Company therefore believes that this litigation is without merit.

 

F-16

 

 

NOTE 12. SUBSEQUENT EVENTS

 

In accordance with ASC 855-10, “Subsequent Events”, the Company has analyzed its operations subsequent to May 31, 2021 to September 8, 2021, the date when the financial statements were issued. The Management of the Company determined that there were no reportable events that occurred during that subsequent period that have not been disclosed.

 

Related party Transactions

 

On June 30, 2021, MKGI was able to close the transaction contemplated by the Share Exchange Agreement by issuing 52,000,000 shares of MKGI’s common stock to HotPlay stockholders in exchange for 100% of the outstanding capital shares of HotPlay, making HotPlay a wholly-owned subsidiary of MKGI. Subsequently, MKGI completely changed its name to NextPlay Technologies (“NXTP”).

 

Currently, HP Thailand is in process of filing an application to obtain grant of a Foreign Business Certificate by MOC allowing HotPlay hold 99.8% of HP Thailand and HotPlay is in preparation of delivering NextPlay a share certificates of HotPlay.

 

According to the Asset purchase agreement described in Note 7, on June 7, 2021 HP Thailand paid the remaining cost of asset purchase to HotNow in amount of 14,5000,000 Thai Baht (approximately $474,467) pursuant to the terms of the Asset purchase agreement.

 

On July 27, 2021, the Company received loan from NXPT in amount of $700,000 without interest, which is payable on demand and unsecured.

 

On Aug 13, 2021, the Company paid TREG for rental and service expenses during January – March 2021 in amount of 858,006 Thai Baht (approximately $26,000).

 

Lease

 

On September 1, 2021, HP Thailand entered into a lease agreement with a third party effective from September 1, 2021 to October 31, 2024, for the monthly fee of 450,000 Thai Baht (approximately $14,400) on August 19, 2021, HP Thailand paid deposit pursuant to the terms of rental agreement in total amount of 2,700,000 Thai Baht (approximately $86,400).

 

F-17

 


 

NextPlay Technologies, Inc. 8-K/A

 

Exhibit 99.3 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

On July 23, 2020, NextPlay Technologies, Inc., formerly Monaker Group, Inc. (the “Company” or “NextPlay”) entered into (a) a Share Exchange Agreement (as amended to date, the “HotPlay Exchange Agreement”) with HotPlay Enterprise Limited (“HotPlay Enterprise”) and the stockholders of HotPlay (the “HotPlay Stockholders”); and (b) a Share Exchange Agreement (as amended and restated to date, 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”)(as amended to date, the “Axion Share Exchange”, and collectively with the HotPlay Exchange Agreement, the “Exchange Agreements” and the transactions contemplated therein, the “Share Exchanges”), each dated as of July 21, 2020. Pursuant to the Exchange Agreements, HotPlay Enterprise was to become a direct, wholly-owned subsidiary of the Company (the “merger”). The Exchange Agreements are each discussed in greater detail under Note 1 “Description of the Merger”. HotPlay Enterprise controls Hotplay (Thailand) Company Limited, a Thailand company (“HotPlay Thailand”) and references below to “HotPlay” include HotPlay Thailand.

 

Effective on November 16, 2020, NextPlay closed the transactions contemplated by the Axion Share Exchange and effective on June 30, 2021, NextPlay closed the acquisition of HotPlay Enterprise.

 

The unaudited pro forma condensed consolidated financial information is presented to illustrate the estimated effects of the merger between HotPlay and NextPlay based on the historical financial position and results of operations of HotPlay and NextPlay. It is presented as follows:

 

  The unaudited pro forma condensed consolidated balance sheet as of May 31, 2021 was prepared based on (i) the historical unaudited consolidated balance sheet of NextPlay as of May 31, 2021 and (ii) the historical unaudited consolidated balance sheet of HotPlay as of May 31, 2021.
     
  The unaudited pro forma condensed consolidated statement of operations for the three months ended May 31, 2021 was prepared based on (i) the historical unaudited consolidated statement of operations of NextPlay for the three months ended May 31, 2021 and (ii) the historical unaudited consolidated statement of operations of HotPlay for the three months ended May 31, 2021.
     
  The unaudited pro forma condensed consolidated statement of operations for the year ended February 28, 2021 was prepared based on (i) the historical audited consolidated statement of operations of NextPlay for the year ended February 28, 2021 and (ii) the historical audited consolidated statement of operations of HotPlay for the period between inception (March 6, 2020) and February 28, 2021.

 

While NextPlay is the legal acquirer, the merger will be accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations” (“ASC 805”). HotPlay will be deemed to be the acquirer for financial accounting purposes. The unaudited pro forma condensed consolidated financial information set forth below primarily gives effect to the following:

 

  the consummation of the merger;
     
  the application of the acquisition method of accounting in connection with the merger;
     
  the acquisition of capital contribution from HotPlay Stockholders to meet a condition to closing pursuant to the HotPlay Exchange Agreement that HotPlay shall have available cash of at least $15 million (less advances previously made to NextPlay) immediately prior to the closing;
     
  the acquisition of certain outstanding common shares of Axion from the Axion Stockholders and the note receivable from Axion Creditors; and
     
  transaction costs incurred in connection with the exchange.

 

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated balance sheet data gives effect to the merger as if it had occurred on May 31, 2021. The unaudited pro forma condensed consolidated statements of operations data for the three months ended May 31, 2021 and the year ended February 28, 2021, gives effect to the merger as if it had occurred on March 1, 2020.

 

 

The unaudited pro forma condensed consolidated financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the merger been completed as of the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of the combined company. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed consolidated financial information to give effect to unaudited pro forma events that are directly attributable to the merger, factually supportable and, with respect to the unaudited pro forma condensed consolidated statement of operations, expected to have a continuing impact on the results of operations of the combined company. The accompanying unaudited pro forma condensed consolidated statement of operations does not include any pro forma adjustments to reflect certain expected financial benefits of the merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve those benefits, including the cost of integration activities, or restructuring actions which may be achievable or the impact of any non-recurring activity and one-time transaction related costs.

 

The unaudited pro forma condensed consolidated financial information has been prepared using the acquisition method of accounting under existing GAAP, which is subject to change. HotPlay is deemed the accounting acquirer in the merger for accounting purposes and NextPlay is treated as the acquiree, based on a number of factors considered at the time of preparation, including control over the post-merger company as evidenced by the composition of executive management and the board of directors as well as the relative equity ownership after the closing of the merger. The application of acquisition accounting of NextPlay is dependent upon the working capital positions at the closing of the merger, is dependent on other factors such as the share price of NextPlay and is dependent on certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. The combined company will complete the valuations and other studies following the merger and will finalize the purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the closing date of the merger. The assets and liabilities of NextPlay and other pro forma adjustments have been measured based on various preliminary estimates using assumptions that NextPlay and HotPlay believe are reasonable, based on information that is currently available. Accordingly, the pro forma adjustments are preliminary. Differences between these preliminary estimates and the final acquisition accounting could be significant, and these differences could have a material impact on the accompanying unaudited pro forma condensed consolidated financial information and the combined company’s future results of operation and financial position.

 

The unaudited pro forma condensed consolidated financial information has been compiled in a manner consistent with the accounting policies adopted by HotPlay. Following the completion of the merger, the combined company will perform a detailed review of NextPlay’s accounting policies and will conform the combined company policies. The combined company may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements of the combined company. Transactions between HotPlay and NextPlay during the periods presented in the unaudited pro forma condensed consolidated financial information were not significant.

 

This unaudited pro forma condensed consolidated financial information was derived from and should be read in conjunction with the accompanying notes, as well as the following historical financial statements and the related notes of HotPlay and NextPlay:

 

  Separate historical unaudited consolidated financial statements of HotPlay as of and for the three months ended May 31, 2021; and
     
  Separate historical audited consolidated financial statements of HotPlay as of February 28, 2021 and for the period between inception (March 6, 2020) and February 28, 2021; and
     
  Separate historical unaudited consolidated financial statements of NextPlay as of and for the three months ended May 31, 2021 and the related notes included in NextPlay’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 14, 2021; and
     
  Separate historical audited consolidated financial statements of NextPlay as of and for the year ended February 28, 2021 and the related notes included in NextPlay’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 8, 2021.

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET 

AS OF MAY 31, 2021

  

                     
   Historical as of May 31, 2021   Merger       Combined 
   HotPlay   NextPlay   Adjustments       as of May 31, 2021 
Assets                    
Current Assets                         
Cash  $1,069,856   $7,525,898   $    (6)  $8,595,754 
Accounts receivable                     
Prepaid expenses and other current assets   264,096    2,036,918             2,301,014 
Advance for investment       17,147,856             17,147,856 
Investment in unconsolidated affiliate - Short-term       42,227             42,227 
Convertible Notes Receivable, related party       7,657,024             7,657,024 
Security deposits       238,704             238,704 
Notes receivable, net   15,000,000        (15,000,000)   (3)    
Other receivable, related parties   174,570    165,613    -         340,183 
Total current assets   16,508,522    34,814,240    (15,000,000)        36,322,762 
                          
Investment in unconsolidated affiliate – long term       3,016,143             3,016,143 
Website development costs and intangible assets, net   8,056,112    10,571,306             18,627,418 
Fixed assets, net   37,423    121,568             158,991 
Operating lease right-of-use asset       1,257,820             1,257,820 
Goodwill       -    37,053,469    (1)   37,053,469 
Total assets  $24,602,057   $49,781,077   $22,053,469        $96,436,603 
                          
Liabilities and Stockholders’ Deficit                         
Current Liabilities                         
Line of credit & notes payable  $   $9,096,237   $    (3)  $9,096,237 
Accounts payable and accrued expenses   303,078    1,732,719    138,329    (2)   2,174,126 
Accounts payable and accrued expenses, related parties   96,308                 96,308 
Convertible Notes Payable, related parties       16,016,314    (15,000,000)   (3)   1,016,314 
Deferred revenue, related parties   2,000,000                 2,000,000 
Other Payable, related party   800,000                 800,000 
Other current liabilities   10,973    95,948             106,921 
Operating lease liability - Current       1,257,820             1,257,820 
Revolving promissory notes - related party   12,000,000        (12,000,000)         
Total current liabilities   15,210,359    28,199,038    (26,861,671)        16,547,726 
                          
Stockholders’ equity                         
Series B preferred stock, $.00001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at November 30, 2020       100    (100)   (5)    
Series C preferred stock, $.00001 par value; 3,828,500 shares authorized; 0 shares issued and outstanding at November 30, 2020       38    (38)   (5)    
Common stock, $.00001 par value; 500,000,000 shares authorized; 14,461,839 shares issued and outstanding at November 30, 2020       234    520    (4)   866 
              112    (5)     
Common stock - HotPlay   14,400,000        (14,400,000)   (4)    
Additional paid-in-capital   (2,800,019)   162,387,810    37,053,469    (1)   82,129,804 
              (126,511,481)   (4)     
              26    (5)     
              12,000,000    (6)     
                          
Cumulative translated adjustment   (15,270)   48,831             33,561 
Accumulated deficit   (1,597,436)   (140,910,961)   (138,329)   (2)   (1,735,765)
              140,910,961    (4)     
Stockholders’ Equity attributable to parent   9,987,275    21,582,039    48,915,139         80,428,466 
Non-Controlling Interest in consolidated affiliates   (595,577)   55,987             (539,590)
                          
Total stockholders’ equity   9,391,698    21,582,039    48,915,139         79,888,876 
Total liabilities and stockholders’ equity  $24,602,057   $49,781,077   $22,053,469        $96,436,603 

 

See accompanying notes to the unaudited pro forma condensed consolidated financial information.

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MAY 31, 2021

 

           Pro Forma         
   Historical for the three months ended May 31, 2021   Merger       Pro Forma 
   HotPlay   NextPlay   Adjustments       Combined 
                     
Revenues                         
Gaming Services Revenue  $   $   $        $ 
Travel and Commission revenues       10,734             10,734 
Gross revenues       10,734             10,734 
Cost of revenues       (9,828)            (9,828)
Gross profit       906             906 
                          
Operating Expenses                         
General and administrative   137,909    2,265,484    (233,461)   (1)   2,169,932 
Salaries and benefits   178,126    918,302             1,096,428 
Technology and development   55,794    217,490             273,284 
Stock-based compensation       107,238             107,238 
Selling and promotions expense   27,138    356,216             383,354 
Depreciation and Amortization   134,758    591,663             726,421 
Total operating expenses   533,725    4,456,393    (233,461)        4,756,657 
                          
Operating Income/(Loss)   (533,725)   (4,455,487)   233,461         (4,755,751)
                          
Other Income/(Expense)                         
Valuation loss, net   (1,289)   (2,841,871)            (2,843,160)
Interest expense   (40,958)   (272,589)   48,220    (2)   (265,327)
Realized loss on sale of marketable securities       18,897             18,897 
Other Income   77    49,314             49,391 
Total other income/(expense)   (42,170)   (3,046,249)   48,220         (3,040,199)
                          
Net Income/(Loss)   (575,895)   (7,501,736)   281,681         (7,795,950)
                          
Noncontrolling interest   178,768    33,822             212,590 
                          
Net Income/(Loss) attributable to parent  $(397,127)  $(7,467,914)  $281,681        $(7,583,360)
                          
Weighted average number of common shares outstanding                         
Basic   144,000    19,986,671              83,232,871 
Diluted   144,000    19,986,671              83,232,871 
                          
Basic net loss per share  $(2.76)  $(0.37)            $(0.09)
Diluted net loss per share  $(2.76)  $(0.37)            $(0.09)

 

See accompanying notes to the unaudited pro forma condensed consolidated financial information. 

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED FEBRUARY 28, 2021

 

           Pro Forma         
   Historical for the year ended February 28, 2021   Merger       Pro Forma 
   HotPlay   NextPlay   Adjustments       Combined 
                     
Revenues                         
Travel and Commission revenues  $   $48,338   $        $48,338 
Gross revenues       48,338             48,338 
Cost of revenues       (43,204)            (43,204)
Gross profit       5,134             5,134 
                          
Operating Expenses                         
General and administrative   784,945    2,939,655    (763,000)   (1)   2,961,600 
Salaries and benefits   325,473    2,776,748             3,102,221 
Technology and development   3,180    655,667             658,847 
Stock-based compensation       633,713             633,713 
Selling and promotions expense   4,702    461,606             466,308 
Depreciation and Amortization   461,596    506,995             976,578 
Total operating expenses   1,579,896    7,974,384    (763,000)        8,791,279 
                          
Operating Income/(Loss)   (1,579,896)   (7,969,250)   763,000         (8,768,145)
                          
Other Income/(Expense)                         
Valuation loss, net   (2,110)   (5,851,149)            (5,853,259)
Interest expense   (51,827)   (392,749)   159,028    (2)   (297,039)
Realized loss on sale of marketable securities       (551,763)            (551,763)
Other Income   425    326,256             326,681 
Impairment of Intangible assets       (2,070,000)             (2,070,000)
Total other income/( expense)   (53,512)   (8,539,405)   159,028         (8,433,464)
                          
Net Income/(Loss)   (1,633,408)   (16,508,655)  $922,029        $(17,219,609)
                          
Noncontrolling interest   433,099    4,616             437,715 
                          
Net Income/(Loss) attributable to parent  $(1,200,309)  $(16,504,039)  $922,029        $(16,781,894)
                          
Weighted average number of common shares outstanding  
Basic   120,667    14,728,741              77,974,941 
Diluted   120,667    14,728,741              77,974,941 
                          
Basic net loss per share  $(9.81)  $(1.12)            $(0.22)
Diluted net loss per share  $(9.81)  $(1.12)            $(0.22)

 

See accompanying notes to the unaudited pro forma condensed consolidated financial information.

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

1. Description of the Merger

 

On July 23, 2020, the Company entered into the HotPlay Exchange Agreement with HotPlay Enterprise and the HotPlay Stockholders and the Axion Exchange Agreement with the Axion Stockholders and the Axion Creditors, each dated as of July 21, 2020. Pursuant to the Exchange Agreements, HotPlay Enterprise was to become a direct, wholly-owned subsidiary of the Company. HotPlay Enterprise, a private company organized under the laws of the British Virgin Islands, has rights to certain intellectual property relating to in-game (mobile gaming) advertising technology that enables brands to insert seamless non-intrusive and even interactive advertising content into online games. The technology also enables advertisers to deliver special privileges in the form of non-intrusive and interactive digital coupons, redeemable both online and offline.

 

Pursuant to the HotPlay Exchange Agreement, the HotPlay Stockholders agreed to exchange 100% of the outstanding capital shares of HotPlay Enterprise for 67.8% of the Company’s Post-Closing Capitalization (defined below). The Company’s “Post-Closing Capitalization” was equal to the total number of shares of common stock issued and outstanding following the completion of the Exchange Agreements, and calculated by dividing (A) the total number of shares of the Company’s common stock outstanding immediately prior to the closing of the Exchange Agreements, by (B) 17.4%, and rounding such number up to the nearest whole share.

 

Pursuant to the Axion Exchange Agreement, (a) the Axion Stockholders agreed to exchange common shares of Axion equal to approximately 33.9% of the then outstanding common shares of Axion; and (b) the Axion Creditors agreed to exchange $7,757,024 in promissory notes issued by, or other debt owed by, Axion to such Axion Creditors, with the Company, in consideration for an aggregate of 14.8% of the Company’s Post-Closing Capitalization (as defined above)(the “Axion Percentage”), and warrants. Specifically, (1) the Axion Creditors were to receive one share of Company common stock for each $2.00 of debt exchanged, anticipated to total an aggregate of 3,878,512 shares (based on $7,757,024 of debt to be exchanged)(the “Debt Shares”), (2) one of the Axion Creditors was to receive a warrant to purchase that number of shares of Company common stock as equals the total of the debt exchanged, divided by $4.00, which was anticipated to total warrants to purchase 1,939,256 shares of common stock (the “Creditor Warrant Shares”), and (3) the Axion Shareholders were to receive that number of shares of common stock as equals the Axion Percentage of the Post-Closing Capitalization, less the Debt Shares and shares of common stock issuable upon exercise of the warrants, such that the total number of shares issuable to the Axion Stockholders and Axion Creditors (when taking into account any shares issuable upon exercise of the above warrants), would total the Axion Percentage following the Closing.

 

On October 28, 2020, the Company, HotPlay Enterprise, and the HotPlay Stockholders entered into a First Amendment to the HotPlay Exchange Agreement dated and effective October 23, 2020 (the “HotPlay Exchange Agreement Amendment”) to extend the date the transactions contemplated by the HotPlay Exchange Agreement were required to be completed by from October 30, 2020 to November 30, 2020. Also on October 28, 2020, the Company, the Axion Stockholders, and Axion Creditors entered into a First Amendment to the Axion Exchange Agreement dated and effective October 23, 2020 (the “Axion Exchange Agreement Amendment”) to extend the date the transactions contemplated by the Axion Exchange Agreement were required to be completed by from October 30, 2020, to November 30, 2020.

 

On November 12, 2020, the Company, the Axion Stockholders and the Axion Creditors entered into an Amended and Restated Share Exchange Agreement (the “A&R Axion Exchange Agreement”), which mainly updated the Axion Exchange Agreement to: (a) update the percentage of Axion being exchanged by such Axion Stockholders to 33.85% of Axion (or 71,993,358 common shares) and reduce the amount of Axion debt being exchanged by the Axion Creditors to a total of $7,657,024 of debt; and (b) remove the prior requirements and concepts from the Axion Exchange Agreement which required the Company to issue shares of common stock in exchange for the Axion Shares and Axion Debt, and instead provide for such Axion Shares to be exchanged for 10,000,000 shares of Series B Preferred Stock, and to exchange such Axion Debt for 3,828,500 shares of Series C Preferred Stock. The Series B Preferred Stock was automatically convertible into 14.68% of the Post-Closing Capitalization, minus the Series C Conversion Shares and Creditor Warrants Shares at the closing. Series C Preferred Stock were automatically convertible into common shares of the Company at the closing on a one-for-one basis (the “Series C Conversion Shares”). On November 16, 2020, the transactions contemplated by the A&R Axion Exchange Agreement closed, and the Company acquired the Axion shares and issued the Series B and Series C Preferred Stock.

 

On November 16, 2020, the Company, HotPlay Enterprise and the HotPlay Stockholders entered into a Second Amendment to Share Exchange Agreement (“2nd Amendment to HotPlay Exchange Agreement”), which mainly amended the HotPlay Exchange agreement to: (a) update the percentage ownership which the HotPlay Stockholders will receive upon closing of the HotPlay Exchange Agreement to 67.87%; and (b) extend the date by which the HotPlay Exchange Agreement was required to be completed until December 31, 2020.

 

 

On January 6, 2021, the Company, HotPlay Enterprise and the HotPlay Stockholders entered into a Third Amendment to Share Exchange Agreement (“3rd Amendment to HotPlay Exchange Agreement”), which mainly amended the HotPlay Exchange agreement to: (a) fix the number of shares of the Company issuable to the HotPlay Stockholders at the closing at 52,000,000 shares of common stock; and (b) extend the date by which the HotPlay Exchange Agreement was required to be completed until February 28, 2021.

 

Also on January 6, 2020, the Company, the Axion Stockholders, and Axion Creditors entered into a First Amendment to the A&R Axion Exchange Agreement, which mainly corrected the allocation of the Series B Preferred Stock shares. Also on January 6, 2021, stockholders holding a majority of the outstanding shares of Series B Preferred Stock of the Company approved an amendment and restatement of the designation of the Series B Preferred Stock to fix the number of shares of common stock issuable upon conversion of the Series B Preferred Stock at 7,417,700 shares of the Company’s common stock.

 

On June 30, 2021, the transactions contemplated by the HotPlay Share Exchange Agreement closed, the Company issued 52,000,000 shares of common stock to the HotPlay Stockholders, and the shares of outstanding Series B Preferred Stock and shares of outstanding Series C Preferred Stock automatically converted into 7,417,700 and 3,828,500 shares of common stock of the Company, respectively, in accordance with the terms of such preferred stock.

 

2. Basis of Presentation

 

The unaudited pro forma condensed consolidated financial information is prepared in accordance with Article 11 of SEC Regulation S-X. The historical financial information has been adjusted in the accompanying unaudited pro forma condensed consolidated financial information to give effect to unaudited pro forma events that are:

 

  directly attributable to the merger;
     
  factually supportable; and
     
  with respect to the unaudited pro forma condensed consolidated statement of operations, expected to have a continuing impact on the results of operations of the combined company.

 

The merger will be treated as a business combination for accounting purposes, with HotPlay Enterprise as the deemed accounting acquirer and NextPlay as the deemed accounting acquiree. Therefore, the historical basis of HotPlay Enterprise’s assets and liabilities will not be remeasured as a result of the merger. In identifying HotPlay Enterprise as the acquiring entity, the companies considered the structure of the merger, relative outstanding share ownership at closing and the composition of the combined company’s board of directors and senior management.

 

The unaudited pro forma condensed consolidated financial information was prepared using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The acquisition method of accounting uses the fair value concepts defined in ASC Topic 820, “Fair Value Measurement” (“ASC 820”). Fair value is defined in ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants.

 

Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

 

Fair value estimates were determined based on preliminary discussions between HotPlay Enterprise and NextPlay management, and a preliminary valuation of NextPlay’s assets and liabilities using February 28, 2021 as the measurement date. The allocation of the aggregate merger consideration used in the preliminary unaudited pro forma condensed consolidated financial information is based on preliminary estimates. The estimates and assumptions are subject to change as of the effective time of the merger. The final determination of the allocation of the aggregate merger consideration will be based on the actual tangible and intangible assets and the liabilities of NextPlay at the effective time of the merger. Refer to Note 5 for additional information.

 

For pro forma purposes, the valuation of consideration transferred is based on, among other things, the number of NextPlay common shares outstanding and price per share as of May 31, 2021. Refer to Note 4 for additional information. This is used for pro forma purposes only. The consideration transferred will ultimately be based on the number of NextPlay common shares outstanding and price per share as of immediately prior to the effective time of the merger, which could materially change from the assumptions included in this pro forma financial information.

 

 

The unaudited pro forma condensed consolidated balance sheet data gives effect to the merger as if it had occurred on February 28, 2021. The unaudited pro forma condensed consolidated statement of operations data gives effect to the merger as if it had occurred on March 1, 2020.

 

The unaudited pro forma condensed consolidated financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. The unaudited pro forma condensed consolidated financial information has not been adjusted to give effect to certain expected financial benefits of the merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve these benefits, including the cost of integration activities. The unaudited pro forma condensed consolidated financial information does not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the combination that are not expected to have a continuing impact on the business of the combined company. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, the closing of the merger are not included in the unaudited pro forma consolidated statement of operations. However, the impact of such transaction expenses is reflected in the unaudited pro forma consolidated balance sheet as a decrease to accumulated deficit and as an increase to accrued expenses.

 

3. Accounting Policies

 

The unaudited pro forma condensed consolidated financial information has been compiled in a manner consistent with the accounting policies of HotPlay. Following the merger, the combined company will conduct a review of accounting policies of NextPlay in an effort to determine if differences in accounting policies require further reclassification of results of operations or reclassification of assets or liabilities to conform to HotPlay’s accounting policies and classifications. As a result of that review, the combined company may identify differences among the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma condensed consolidated financial information.

 

4.   Reverse acquisition and purchase price allocation

 

Fair Value of Total Estimated Consideration Transferred

 

The fair value of the consideration transferred is determined based on the number of equity interests the accounting acquirer (legal acquiree) would have had to issue to the owners of the legal acquirer (accounting acquiree) in order to provide the same ratio of ownership of equity interests in the combined entity as a result of the reverse acquisition. The valuation of consideration transferred is based on, among other things, the number of NextPlay common shares outstanding and price per share as of May 31, 2021.

 

Purchase consideration  Amounts 
Number of NextPlay common shares outstanding as of May 31, 2021   23,454,203 
NextPlay share price as of May 31, 2021  $2.50 
Preliminary estimate of fair value of common shares  $58,635,508 
Fair value of total estimated purchase consideration transferred  $58,635,508 

 

Purchase Price Allocation

 

The following is a preliminary estimate of the allocation of the purchase price to acquired identifiable assets and assumed liabilities, which includes preliminary purchase accounting adjustments to reflect the fair value of intangible assets acquired at the time of the merger:

 

Book value of NextPlay net assets acquired as of May 31, 2021  $21,582,039 
Fair value of NextPlay net assets acquired as of May 31, 2021    
Goodwill   37,053,469 
Fair value of total estimated consideration transferred  $58,635,508 

 

 

 

The final purchase consideration will be based on the number of NextPlay common shares outstanding and price per share as of immediately prior to the effective time of the merger. Accordingly, the purchase consideration and goodwill may change significantly if the trading price of NextPlay’s common stock fluctuates materially from the May 31, 2021 value of $2.50 per share. A 10% increase or decrease in NextPlay’s share price would result in the following changes into purchase consideration and goodwill:

 

Share price sensitivity analysis 

10% increase in

NextPlay share price

  

10% decrease in

NextPlay share price

 
Preliminary fair value of purchase consideration  $64,499,058   $52,771,957 
Preliminary goodwill from the merger   42,917,019    31,189,918 

 

5. Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments

 

The following provides explanations of the various adjustments to the unaudited pro forma condensed consolidated balance sheet:

 

  1. Represents adjustment related to increase in historical NextPlay goodwill of $37,053,469 determined by the net acquired identifiable assets and assumed liabilities. Refer to Note 4 on discussion of this reverse merger and purchase price allocation.
     
  2. Represents $138,329 of transaction expenses expected to be incurred in connection with the merger, which will be recorded as an increase to Account Payable and Accumulated Deficit.

 

  3. Elimination of the $15,000,000 convertible notes issued by NextPlay for advances made by HotPlay through May 31, 2021 pursuant to the exchange agreement closing condition that HotPlay Enterprise have at least $15 million immediately prior to closing (less amounts loaned to NextPlay).
     
  4. Represents the recapitalization of HotPlay Enterprise through the contribution of the share capital in HotPlay Enterprise to NextPlay, and the issuance of 52,000,000 shares of common stock and the elimination of the historical accumulated deficit of NextPlay, the accounting acquiree.
     
  5. Represents the automatic conversion of NextPlay Series B and Series C Preferred Stock into common stock upon the closing of the merger.
     
  6. Represents the retirement of existing HotPlay Enterprise notes payable of $12,000,000 through NextPlay equity issuance.
     

6. Unaudited Pro Forma Condensed Consolidated Statement of Operations Adjustments

 

The following provides explanations of the various adjustments to the unaudited pro forma condensed consolidated statement of operations:

 

  1. Represents the removal of $233,461 for the three months ended May 31, 2021 and $763,000 for the year ended February 28, 2021, incurred by the combined companies in conjunction with the merger for transaction related fees and expenses that will not recur on an ongoing basis.
     
  2. Represents interest income of $48,220 for the three months ended May 31, 2021 and $159,028 for the year ended February 28, 2021, from the acquisition of $7,657,024 in promissory notes issued by, or other debt owned by, Axion.

 

 

7. Loss per Share

 

The unaudited pro forma weighted average number of basic and diluted shares outstanding for the three months ended May 31, 2021 and the year ended February 28, 2021, is calculated as follows:

 

   For the Three Months Ended
May 31, 2021
   For the Year Ended
February 28, 2021
 
Weighted average NextPlay shares outstanding at May 31, 2021 and February 28, 2021   19,986,671    14,728,741 
HotPlay weighted average shares outstanding as if the merger occurred on March 1, 2020   52,000,000    52,000,000 
Axion weighted average shares outstanding as if the merger occurred on March 1, 2020   11,246,200    11,246,200 
Adjusted weighted average shares outstanding as of May 31, 2021 and February 28, 2021  - basic and dilutive   83,232,871    77,974,941 
           
Net Loss attributable to common shareholders - basic and dilutive  $(7,779,301)  $(17,204,034)
           
Pro forma net loss per common share - basic and dilutive  $(0.09)  $(0.22)

 


nxtp-20210630.xsd
Attachment: XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT


nxtp-20210630_lab.xml
Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT


nxtp-20210630_pre.xml
Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT