The accompanying notes are an integral part of these
consolidated financial statements.
The accompanying notes are an integral part of these
consolidated financial statements.
The accompanying notes are an integral part of these
consolidated financial statements.
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Nature of Operations and Business Organization
Monaker Group, Inc. and its subsidiaries (“Monaker“,
“we“, “our“, “us“, or “Company“) operate an online marketplace for the alternative
lodging rental industry. Alternative lodging rentals (ALRs) are whole unit vacation homes or timeshare resort units that are fully
furnished, privately owned residential properties, including homes, condominiums, villas and cabins, that property owners and managers
rent to the public on a nightly, weekly or monthly basis. Our marketplace, NextTrip.com, unites millions of travelers seeking ALR
online with property owners and managers of over one million vacation rental properties located in over 120 countries around the
world. As of May 31, 2016, we operated our online marketplace through 115 websites in 16 languages, with leading websites in Europe,
Asia, South America and the United States. As of May 31, 2016, our global marketplace included approximately 100,000 paid listings
on subscriptions and contracted with over 1.1 million listings under the performance based listing arrangement ALRs (described
in greater detail below). As an added feature to our ALR offering, we also provide activities and tours at the destinations that
are catered to the traveler through our Maupintour products.
Our vacation rental platform includes auxiliary
services so travelers can purchase vacations through one site; NextTrip.com (or through other online distributors sourced by NextTrip.com),
and provides qualified inquiries and bookings to property owners and managers. NextTrip serves three major constituents: property
owners and managers, travelers and other distributors. Property owners and managers pay to provide detailed listings of their properties
on our websites with the goal of reaching a broad audience of travelers seeking ALRs. Listing fees paid by property owners and
managers are paid either in the form of subscriptions that are generally for an annual period, or in the form of performance-based
fees that allow for owners and managers to list their properties for free and pay us a commission for successful bookings; this
allows owners and managers to list their property on NextTrip and pay a commission per booking in lieu of a pre-paid subscription
fee. Currently we are working to convert owners and managers away from the subscription format into the performance-based format.
This is transparent to the traveler yet more beneficial to the owners and managers as they accept a larger performance-based fee
in return for relief from the up-front subscription fee and lower booking fee. Travelers visit NextTrip and are able to search
and compare our large and detailed inventory of listings to find ALRs meeting their needs.
Monaker is a technology driven travel and logistics
company with ALR inventory. Monaker’s inventory consists of ALRs owned and leased by third parties which are available to
rent through Monaker’s websites. Core to the Company’s services are key elements including technology, an extensive
film library, media distribution, trusted brands and established partnerships that enhance product offerings and reach. We believe
that consumers are quickly adopting video for researching and educating themselves prior to purchases, and Monaker has carefully
amassed video content, media distribution, key industry relationships and a prestigious Travel Brand as cornerstones for the development
and planned deployment of core-technology on both proprietary and partnership platforms.
Monaker sells travel services to leisure and
corporate customers around the world. The primary focus is on providing ALR options as well as providing schedule, pricing and
availability information for booking reservations for airlines, hotels, rental cars, cruises and other travel products such as
sightseeing tours, show and event tickets and theme park passes. The Company sells these travel services both individually and
as components of dynamically-assembled packaged travel vacations and trips. In addition, the Company provides content that presents
travelers with information about travel destinations, maps and other travel details; this content information is the product of
proprietary video-centered technology that allows the Company to create targeted travel videos from its film libraries. In January
2016, the Company introduced a beta of its new Travel Platform under the NextTrip brand. This platform is still under development
and continues to be improved with a focus on maximizing the consumer’s experience and assisting them in the decision and
purchasing process.
The platform is a combination of proprietary
and licensed technology that connects and searches large travel suppliers as well as perishing and alternative lodging inventories
to present to consumers comprehensive and optimal alternatives at the most inexpensive rates to choose from.
The Company sells its travel services through
various distribution channels. The primary distribution channel is through its own websites at Nexttrip.com and Maupintour.com.
The second distribution channel is selling travel services to customers through a toll-free telephone number designed to assist
customers with complex or high-priced offerings. The remaining distribution channels are in the final stages of deployment and
include sales on other travel companies’ websites and sales through networks of third-party travel agents and travel portals.
Monaker’s core holdings include Nexttrip.com,
and Maupintour.com along with platforms for vacation home rentals, timeshare rentals and discount travel. Nexttrip.com is the primary
website, where travel services are booked. The travel services include, but are not limited to: ALR, tours, activities/attractions,
air, hotel and car rentals. Maupintour feeds into Nextrip.com by providing high-end tour packages and activities/attractions.
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 and with the instructions to Form 10-Q and Regulation S-X. 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 financial statements for the fiscal year ended February 29, 2016 and notes thereto and other pertinent information contained
in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC“).
The results of operations for the three months
ended May 31, 2016, are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2017.
Principles
of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All material inter-company transactions and accounts have
been eliminated in consolidation.
Noncontrolling Interest and Investment in Unconsolidated Affiliates
The Company accounts for its less than 100%
interest in consolidated subsidiaries in accordance with ASC Topic 810, Consolidation, and accordingly the Company presents noncontrolling
interests as a component of equity on its consolidated balance sheets and reports noncontrolling interest net loss under the heading
“Net loss attributable to noncontrolling interest“ in the consolidated statements of operations.. Investments in unconsolidated
affiliates are accounted for by either the equity or cost methods, generally depending upon ownership levels. The equity method
of accounting is used when the Company’s investment in voting stock of an entity gives it the ability to exercise significant
influence over the operating and financial policies of the investee, which is presumed to be the case when the Company holds 20%
to 50% of the voting stock of, or can otherwise demonstrate significant influence over, the investee. Unconsolidated affiliate
companies in which the Company does not have significant influence and owns less than 20% of the voting stock are accounted for
using the cost method. These investments in unconsolidated affiliates are assessed periodically for impairment and are written
down if and when the carrying amount is considered to be permanently impaired.
Use of Estimates
The Company’s significant estimates include
allowance for doubtful accounts, valuation of intangible assets, stock based compensation, accrued expenses and derivative liabilities.
These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such
estimates are fair when considered in conjunction with the consolidated financial statements taken as a whole, the actual amounts
of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s
estimates, the Company’s financial condition and results of operations could be materially impacted.
Cash and Cash Equivalents
For purposes of balance sheet presentation
and reporting of cash flows, the Company considers all unrestricted demand deposits, money market funds and highly liquid debt
instruments with an original maturity of less than 90 days to be cash and cash equivalents. The Company had no cash equivalents
at May 31, 2016 and February 29, 2016.
Accounts Receivable
The Company extends credit to its customers
in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides for estimated losses
through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding
its customers’ ability to make required payments, economic events and other factors. As the financial condition of these
parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts
may be required. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its
expectations. The Company’s allowance for doubtful accounts was $-0- and $-0- at May 31, 2016 and February 29, 2016, respectively.
Website Development Costs
The Company accounts for website development
costs in accordance with Accounting Standards Codification 350-50 “Website Development Costs“. Accordingly, all costs
incurred in the planning stage are expensed as incurred, costs incurred in the website application and infrastructure development
stage that meet specific criteria are capitalized and costs incurred in the day to day operation of the website are expensed as
incurred. All costs associated with the websites are subject to straight-line amortization over a three-year period. For the three
months ended May 31, 2016 and the year ended February 29, 2016, the Company has capitalized costs associated with website development
of $89,269 and $1,817,945, respectively, and accumulated amortization of $9,452 and $780,860, respectively.
Software Development Costs
The Company capitalizes internal software development
costs subsequent to establishing technological feasibility of a software application in accordance with guidelines established
by “ASC 985-20-25“ Accounting for the Costs of Software to Be Sold, Leased, or Otherwise Marketed, requiring certain
software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect
to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies.
Amortization of the capitalized software development costs begins when the product is available for general release to customers.
Capitalized costs are amortized based on the greater of (a) the ratio of current gross revenues to the total current and anticipated
future gross revenues, or (b) the straight-line method over the remaining estimated economic life of the product. For the three
months ended May 31, 2016 and the year ended February 29, 2016, all software has been placed in service and all costs associated
with the software development have been expensed.
Impairment of Intangible Assets
The Company acquired contracts, website platforms
and domains during the three months ended May 31, 2016 and the year ended February 29, 2016 in the amount of $0 and $1,588,000,
respectively.
In accordance with ASC 350-30-65 “Goodwill
and Other Intangible Assets“, the Company assesses the impairment of identifiable intangible assets whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could
trigger an impairment review include the following:
1.
|
Significant underperformance compared to
historical or projected future operating results;
|
2.
|
Significant changes in the manner or use
of the acquired assets or the strategy for the overall business; and
|
3.
|
Significant negative industry or economic
trends.
|
When the Company determines that the carrying
value of an intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment
and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment
charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by
management to be commensurate with the risk inherent to the current business model. Significant management judgment is required
in determining whether an indicator of impairment exists and in projecting cash flows. The Company did not record an impairment
charge on its intangible assets during the three months ended May 31, 2016 and 2015, respectively. Intellectual properties that
have finite useful lives are amortized over their useful lives. The Company incurred amortization expense of $150,014 and $18,282
for the three months ended May 31, 2016 and 2015, respectively.
Convertible Debt Instruments
The Company records debt net of debt discount
for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant
to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and
beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest
expense over the life of the debt.
Derivative Instruments
The Company enters into financing arrangements
that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments
and Hedging Activities (“ASC 815“) as well as related interpretations of this standard. In accordance with this standard,
derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with
gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are
bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company
determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation
models, considering all of the rights and obligations of each instrument.
The Company estimates fair values of derivative
financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring
fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument,
the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding
warrants, the Company generally uses the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of
the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value
these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective
estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external
market factors. In addition, option-based techniques (such as Black- Scholes model) are highly volatile and sensitive to changes
in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried
at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under
the terms of this accounting standard, increases in the trading price of the Company’s common stock and increases in fair
value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the
trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result
in the application of non-cash derivative income.
Based upon ASC 815-25 the Company has adopted
a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible debentures. Pursuant to the sequencing
approach, the Company evaluates its contracts based upon earliest issuance date.
Earnings per Share
Basic earnings per share are computed by dividing
net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per
share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and
potentially dilutive securities outstanding during each period. On June 25, 2015, we effected a 1:50 reverse stock-split of all
of our outstanding shares of common stock.
Fair Value of Financial Instruments
The Company has adopted the provisions of ASC
Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how
to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy
distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable
inputs). The hierarchy consists of three levels:
Level 1: Observable inputs that reflect unadjusted quoted prices
for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs that are generally unobservable. These inputs may
be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial instruments consist principally
of cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities and other current liabilities. The carrying
amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively
short-term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar
remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed
to any significant currency or credit risks arising from these financial instruments.
Going Concern
As of May 31, 2016, and February 29, 2016,
the Company had an accumulated deficit of $94,688,981 and $93,562,357, respectively. The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern. As of May 31, 2016, the Company had a working capital
deficit of $2,881,819, and for the three months ended May 31, 2015, a net loss of $1,126,624 and cash used in operations of $898,700.
We have very limited financial resources. We
currently have a monthly cash requirement of approximately $300,000, exclusive of capital expenditures. We will need to raise substantial
additional capital to support the on-going operation and increased market penetration of our products including the development
of national advertising relationships, increases in operating costs resulting from additional staff and office space until such
time as we generate revenues sufficient to support our operations. We believe that in the aggregate, we could require several millions
of dollars to support and expand the marketing and development of our travel products, repay debt obligations, provide capital
expenditures for additional equipment and development costs, payment obligations, office space and systems for managing the business,
and cover other operating costs until our planned revenue streams from travel products are fully-implemented and begin to offset
our operating costs. Our failure to obtain additional capital to finance our working capital needs on acceptable terms, or at all,
will negatively impact our business, financial condition and liquidity. As of May 31, 2016 and February 29, 2016, we had $3,050,638
and $3,035,694, respectively, of current liabilities. These conditions raise substantial doubt of our ability to continue as a
going concern. We currently do not have the resources to satisfy these obligations, and our inability to do so could have a material
adverse effect on our business and ability to continue as a going concern.
Management’s plans with regard to this
going concern are as follows: the Company will continue to raise funds with third parties by way of a public or private offering;
and management and members of the Board are working aggressively to increase the viewership of our products by promoting it across
other mediums which will result in higher revenues. The ability of the Company to continue as a going concern is dependent on the
Company’s ability to further implement its business plan and generate greater revenues. Management believes that the actions
presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company
to continue as a going concern.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled
for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition
guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition
method. Early adoption is not permitted. The updated standard is effective for fiscal years, and interim reporting periods within
those years, beginning after December 15, 2016. The Company has not yet selected a transition method and is currently evaluating
the effect that the updated standard will have on its consolidated financial statements and related disclosures.
In June 2014, the FASB issued ASU No. 2014-10,
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation. The amendments in this Update simplify accounting guidance by removing
all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and,
for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date
information in the statements of income, cash flows, and shareholder equity. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The adoption of this
standard is not expected to have a material impact on the Company’s financial statements.
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements – Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern, related to the disclosures on going concern. The new standard provides guidance around management’s responsibility
to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related
footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on
the Company’s financial statements.
We have implemented all new relevant accounting
pronouncements that are in effect through the date of these financial statements.
Note 2 – Note Receivable
On December 22, 2014, the Company
advanced $15,000 to a non-related third party debtor and signed a one year, six percent (6%) promissory note in the amount of
$15,000. The entire principal balance of this note, together with all accrued and unpaid interest, is due and payable on
December 31, 2016. This note receivable was part of the consideration for the purchase of the Company’s 51% membership
interest in Name Your Fee, LLC, including approximately $1,000,000 in intangible assets which was sold on May 16, 2016, to
the same non-related third party for cancellation of $45,000 in notes and a promissory note in the amount of $750,000.
Note 3 – Investment in Equity Instruments and Deconsolidation
On February 2, 2015, the Company entered
into a joint venture agreement with Jasper Group Holdings, Inc. (“Jasper“) and created a Florida limited liability
company named Name Your Fee, LLC. On April 20, 2015, the Company entered into a Joint Venture Agreement with Jasper to leverage
its existing technology and develop www.NameYourFee.com which provides tools for employment agencies to market their services.
The Company’s ownership in the Joint Venture was 51% and Jasper’s was 49%. The Company and Jasper shared in capital
contributions as well as participated in the net profits of Name Your Fee, LLC while Jasper operated and ran the NameYourFee.com
website. On May 15, 2015, the Company issued 100,000 shares of Series D Preferred Stock to Jasper at a stated value of $5 per share
for a total value of $500,000. As stated in the agreement, Monaker received a 51% capital interest and Jasper received a 49% capital
interest of the outstanding equity of Name Your Fee, LLC. Additionally, Jasper contributed $75,000 in proceeds as part of the agreement.
For the year ended February 29, 2016, the Company properly eliminated the value of the investment in accordance with ASC Topic
810, Consolidation. On May 16, 2016, the Company sold its 51% membership interest in Name Your Fee, LLC to a non-related third
party for cancellation of $45,000 in notes due to the Company and a promissory note in the amount of $750,000. The Promissory Note
does not accrue interest, is secured by the 51% membership interest in Name Your Fee, LLC and will be repaid through 20% of the
net earnings received in NameYourFee.com through maturity. The Note contains standard and customary events of default. The principal
amount of the note is due on June 15, 2018, provided that it will not be an event of default under the note unless the note is
not repaid within 60 days after such maturity date (i.e., by August 14, 2018).
On October 31, 2014 (the “Deconsolidation
Date“), Monaker and RealBiz deconsolidated their financial statements since Monaker’s investment in RealBiz went below
50% majority ownership and Monaker was deemed to no longer have control over RealBiz. Monaker’s proportional financial interest
in RealBiz is reduced when shares of Monaker Dual convertible preferred stock and Monaker convertible debt are exchanged for RealBiz
shares of common stock. Since July 14, 2014, the holders of Series D Preferred Stock shares of the Company may elect to convert
all or any part of such holder’s shares into common stock of the Company at the stated value of $12.50 per share on a one-for-one
basis, or they may elect to convert the Series D Preferred Stock shares into shares of common stock of RealBiz stock at $0.15
per share. To honor the conversion of the Company’s Series D Preferred Stock shares into RealBiz shares of common stock,
the Company identifies, one-for-one, shares of RealBiz Series A Preferred Stock shares held as investment and presents them to
RealBiz for conversion into RealBiz common stock (on a one-for-one basis). When the converted RealBiz common stock shares are
received by the Company, they are forwarded to the individual/entity requesting the conversion into shares of RealBiz restricted
common stock.
Monaker continues to own RealBiz Preferred
Series A and common stock and although the two Companies shared similar Board of Directors until April 2016, as discussed in the
following sentence, the companies are operating independently. As of April 11, 2016, the Monaker Directors that were on the RealBiz
Board, resigned as Board of Directors of RealBiz.
After November 1, 2014, we use the equity method
to account for our investment in this entity because we do not control it, but have the ability to exercise significant influence
over it. Equity method investments are recorded at original cost and adjusted periodically to recognize (1) our proportionate share
of the investees’ net income or losses after the date of investment, (2) additional contributions made and dividends or distributions
received, and (3) impairment losses resulting from permanent adjustments to net estimated realizable value. Accordingly, we recorded
our proportionate share of the investee’s net income or loss as “Loss on equity method investment“ on the consolidated
statements of operations.
At February 29, 2016, Monaker owned 44,470,101 shares of RealBiz Series A Preferred
Stock and 10,359,890 shares of RealBiz common stock, representing 28% ownership of RealBiz. This interest, along with a net receivable
balance due, has been written down to zero ($0) as of May 31, 2016 and February 29, 2016, to reflect the realizable value of this
investment and asset.
Note 4 – Acquisitions and Dispositions
On October 26, 2015, the Company entered into
a Plan of Merger Agreement with Always on Vacation, Inc. involving a merger of the Company’s then wholly-owned subsidiary
AOV Holding, Inc. (“AOV“) and Always On Vacation, Inc. which involved issuing 383,230 shares of AOV common stock to
the stockholders of Always On Vacation, Inc., effectively cancelling each share of capital stock of Always On Vacation, Inc. As
part of the sale of businesses and assets unrelated to the core travel sector, on January 22, 2016, the intellectual property related
to the travel sector (i.e. contracts, domains, trademark and platform) owned by Always On Vacation, Inc. were assigned to Monaker.
On January 23, 2016, the interest in Always On Vacation, Inc. (a media company) was sold through a Stock Purchase Agreement to
an unrelated third party for $10 plus their assumption of liabilities of Always On Vacation, Inc.
On November 25, 2015, the Company entered into
an Intellectual Property License to Corporation by Licensor Agreement with CJ Software, Inc. for an internet-based, real-time specialty
booking engine developed to consolidate unused timeshare, fractional, and other specialty lodging rooms to be booked for nightly
stays. Once this software/platform is fully operational, the Company will pay CJ Software, Inc. the sum of $180,000 by way of the
issuance of 45,000 shares of the Company’s common stock valued at $4.00 per share as a one-time lease payment for a perpetual,
unrestricted, non-exclusive, worldwide, royalty free license to use the software. In addition, the Company will employ both Curtis
Krauskopf as an employee and James Marmorstone as a consultant.
As part of the sale of businesses and assets
unrelated to the core travel sector, on January 22, 2016, the intellectual property related to the travel sector (i.e., the Nexttrip.com
platform, Maupintour.com platform and Home & Away Club portal) owned by the Company’s television media entity (Next 1
Network, Inc.) were assigned to Monaker. The television media entity (Next 1 Network, Inc.) was sold pursuant to a Stock Purchase
Agreement dated January 23, 2016, to an unrelated third party for $10 plus their assumption of liabilities of Next 1 Network, Inc.
On May 16, 2016, the Company entered in to a Membership Interest
Purchase Agreement for the sale of its 51% membership interest in Name Your Fee, LLC in exchange for a Promissory Note, maturing
on June 15, 2018, in the amount of $750,000 plus the cancellation of $45,000 in existing promissory notes due from the purchaser.
The Promissory Note does not accrue interest, is secured by the 51% membership interest in Name Your Fee, LLC and will be repaid
through 20% of the net earnings received in NameYourFee.com through maturity. The Note contains standard and customary events of
default. The principal amount of the note is due on June 15, 2018, provided that it will not be an event of default under the note
unless the note is not repaid within 60 days after such maturity date (i.e., by August 14, 2018).
N
o
te 5
–
N
o
t
es
P
a
yable
The following table sets forth
the notes payable as of May 31, 2016 and February 29, 2016:
|
|
Principal
|
|
|
May 31,
2016
|
|
February 29,
2016
|
On September 6, 2011, the Company extended a note in the amount of $785,000, then in default, until February 1, 2013. Beginning on October 1, 2011, the Company was obligated to make payments of $50,000 due on the first day of each month. The first $185,000 in payments was to be in cash and the remaining $600,000 was to be made in cash or common stock. On February 15, 2012, the note-holder assigned $225,000 of its $785,000 outstanding promissory note to a non-related third party investor and the Company issued a new convertible promissory note for the same value. As part of the sale of businesses and assets unrelated to the core travel sector, the television media entity (Next 1 Network, Inc.) was sold and this promissory note was not assumed by the purchaser as part of the Stock Purchase Agreement dated January 23, 2016. The Company has assumed this note related to the sold entity and is attempting to negotiate a settlement of the assumed above-noted notes.
|
|
$
|
573,842
|
|
|
$
|
573,842
|
|
|
|
|
|
|
|
|
|
|
On August 16, 2004, the Company entered into a promissory note with an unrelated third party in the amount of $500,000. The note bears interest at 7% per year, matured in March 2011 and was payable in quarterly installments of $25,000. As part of the sale of businesses and assets unrelated to the core travel sector, the television media entity (Next 1 Network, Inc.) was sold and this promissory note was not assumed by purchaser as part of the Stock Purchase Agreement dated January 23, 2016. The Company assumed this note related to the sold entity on June 24, 2016 and this promissory note was settled with full release for the amount of $40,000.
|
|
|
40,000
|
|
|
|
137,942
|
|
|
|
$
|
613,842
|
|
|
|
711,784
|
|
Note 6 – Other Notes Payable
The Company has a demand loan with a stated interest rate of 6% per annum, due for funds received from In Room Retail, Inc. which is owned by William Kerby, CEO and Chairman of the Company.
|
|
|
$35,919
|
|
|
|
$15,919
|
|
|
|
$
|
$35,919
|
|
|
|
$15,919
|
|
Interest
charged to operations relating to the above notes was $11,396 and $2,550, respectively, for the three months ended May 31, 2016
and 2015 and $14,242 for the year ended February 29, 2016.
A
ccrued
interest as of May 31, 2016 and February 29, 2016 is $163,591 and $163,257, respectively.
Note 7 – Convertible Promissory Notes
The Company
has convertible promissory notes with interest rates ranging from 6% to 12% per annum, maturity dates ranging from September
30, 2012 to December 1,
2016, and with a range of fixed and variable conversion
features. Fixed conversion rates range from $5.00 to $5,000 per share. Variable conversion rates range from 50% of two
(2)
to ten (10) days of the average closing price of our common stock and all have been settled as of May 31, 2016. During the
three months ended May 31, 2016 and 2015, the Company recognized interest expense of $48,520 and $437,607, respectively. The
table below summarizes the convertible promissory notes as of May 31, 2016.
|
|
May 31, 2016
|
|
|
Non Related
Party
|
|
Related
Party
|
|
Total
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance February 29, 2016
|
|
$
|
1,658,908
|
|
|
$
|
-0-
|
|
|
$
|
1,658,908
|
|
Additions:
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
$
|
1,658,908
|
|
|
$
|
-0-
|
|
|
$
|
1,658,908
|
|
Subtractions:
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Ending balance
|
|
$
|
1,658,908
|
|
|
$
|
-0-
|
|
|
$
|
1,658,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Additions:
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Incurred during the year
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Subtractions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized during the year
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Ending balance
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible promissory notes
|
|
$
|
1,658,908
|
|
|
$
|
-0-
|
|
|
$
|
1,658,908
|
|
Adjustments
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Carrying value
|
|
$
|
1,658,908
|
|
|
$
|
-0-
|
|
|
$
|
1,658,908
|
|
Principal past due and in default
|
|
$
|
249,582
|
|
|
$
|
-0-
|
|
|
$
|
249,582
|
|
During the three months ended May 31,
2016 and 2015, the Company recorded debt amortization expense in the amount of $-0- and $-0-, respectively.
Note 8 – Stockholders’ Deficit
Preferred stock
The aggregate number of shares of preferred
stock that the Company is authorized to issue is up to One Hundred Million (100,000,000), with a par value of $0.00001 per share
(“the Preferred Stock“) with the exception of Series A Preferred Stock shares having a $0.01 par value. The Preferred
Stock may be divided into and issued in series. The Board of Directors of the Company is authorized to divide the authorized shares
of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the
shares of all other series and classes. The Board of Directors of the Company is authorized, within any limitations prescribed
by law and the articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations
and terms of the shares of any series of Preferred Stock.
Series A Preferred Stock
The Company has authorized and designated
3,000,000 shares of Preferred Stock as Series A 10% Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series
A Preferred Stock“). The holders of record of shares of Series A Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the shareholders of the Company and shall be entitled to one hundred (100) votes for each share of Series
A Preferred Stock.
Per the terms of the Amended and Restated
Certificate of Designations, subject to the availability of authorized and unissued shares of Series A Preferred Stock, the holders
of Series A Preferred Stock may, by written notice to the Company:
|
·
|
elect to convert all or any part of such holder’s shares of Series A Preferred Stock into
common stock at a conversion rate of the lower of:
|
|
|
(a) $25.00
per share; or
|
|
|
(b) at the lowest price the
Company has issued stock as part of a financing.
|
|
·
|
convert all or part of such holder’s shares (excluding any shares issued pursuant to conversion
of unpaid dividends) into debt obligations of the Company, secured by a security interest in all of the assets of the Company and
its subsidiaries, at a rate of $25.00 of debt for each share of Series A Preferred Stock.
|
On July 9, 2013, the Company amended
the Certificate of Designations for the Company’s Series A Preferred Stock to grant to a holder of the Series A Preferred
Stock the option to:
|
·
|
elect to convert all or any part of such holder’s shares of Series A Preferred Stock into
shares of the Company’s Series C Convertible Preferred Stock, par value $0.00001 per share (“Series C Preferred Stock“),
at a conversion rate of five (5) shares of Series A Preferred Stock for every one (1) share of Series C Preferred Stock; or to
allow
|
|
·
|
conversion into common stock at the lowest price the Company has issued stock as part of a financing
to include all financings such as new debt and equity financing and stock issuances as well as existing debt conversions into stock.
|
On February 28, 2014, the Company’s
Series A Preferred Stock shareholders agreed to authorize a change to the Certificate of Designations of the Series A Preferred
Stock in Nevada to lock the conversion price into common stock at a fixed price of $0.50.
Accounting Standards Codification subtopic
815-40, Derivatives and Hedging; Contracts in Entity’s own Equity (“ASC 815-40“) became effective for us on March
1, 2010. The Company’s Series A (convertible) Preferred Stock had certain reset provisions that require the Company to reduce
the conversion price of the Series A (convertible) Preferred Stock if we issue equity at a price less than the conversion price.
Upon the effective date, the provisions of ASC 815-40 required a reclassification to liability based on the reset feature of the
agreements if the Company sells equity at a price below the conversion price of the Series A Preferred Stock. However, the reset
provision was removed thereby eliminating the derivative liability as of February 28, 2014. In accordance with ASC 815-40, the
Company records the changes in the fair value of the derivative liability as non-operating, non-cash income or expense. The change
in fair value of the Series A Preferred Stock derivative liability as of February 29, 2016 and February 28, 2015 resulted in non-operating
income of $-0- and $-0-, respectively.
In the event of any liquidation, dissolution
or winding up of the Company, either voluntary or involuntary (any of the foregoing, a “liquidation“), holders of Series
A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company
to the holders of the common Stock or any other series of Preferred Stock by reason of their ownership thereof an amount per share
equal to $1.00 for each share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series
A Preferred Stock held by each such holder, plus the amount of accrued and unpaid dividends thereon (whether or not declared) from
the beginning of the dividend period in which the liquidation occurred to the date of liquidation.
During the three months ended May 31,
2016, there were no transactions with regards to Series A Preferred Stock shares.
Dividends in arrears on the outstanding
Series A Preferred Stock shares total $799,644 and $838,275 as of May 31, 2016 and February 29, 2016, respectively. The Company
had 1,869,611 shares of Series A Preferred Stock issued and outstanding as of May 31, 2016 and February 29, 2016.
Series B Preferred Stock
The Company has authorized and designated
3,000,000 shares of Preferred Stock as Non-Voting Series B 10% Cumulative Convertible Preferred Stock with a par value of $0.00001
per share (the “Series B Preferred Stock“). The holders of Series B Preferred Stock may elect to convert all or any
part of such holder’s shares into:
|
·
|
the Company’s
common stock at the stated value of $250.00 per share on a one for one basis, or
|
|
·
|
shares of RealBiz’s
common stock at $0.05 per share.
|
Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a “liquidation“), the holders are entitled to receive
out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value, plus any accrued and
unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding Preferred Stock
before any distribution or payment shall be made to the holders of any junior securities (common stock), and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders shall be ratably
distributed among the holders of all preferred stock in accordance with the respective amounts that would be payable on such shares
if all amounts payable thereon were paid in full.
During the three months ended May 31,
2016:
|
·
|
35,000 shares of Series
B Preferred Stock were converted into 70,000 shares of common stock of Monaker at $2.50 per share, based on the $5 per share stated
value of the Series B Preferred Stock.
|
Dividends in arrears on the outstanding
Series B Preferred Stock total $144,946 and $182,782 as of May 31, 2016 and February 29, 2016, respectively. The Company had 90,200
and 125,200 shares of Series B Preferred Stock issued and outstanding as of May 31, 2016 and February 29, 2016, respectively.
Series C Preferred Stock
The Company has authorized and designated
3,000,000 shares of Preferred Stock as Non-Voting Series C 10% Cumulative Convertible Preferred Stock with a par value of $0.00001
per share (the “Series C Preferred Stock“). The holders of Series C preferred stock may elect to convert all or any
part of such holder’s shares into:
|
·
|
common stock at the
stated value of $250.00 per share on a one for one basis, or
|
|
·
|
shares of RealBiz’s
common stock at $0.10 per share.
|
On July 9, 2014, the Company filed an
Amendment to its Series C Certificate of Designation with the Secretary of State of the State of Nevada to change the conversion
price from $250 to a new conversion price for Company common stock of $12.50 on the Company’s common stock.
Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a “liquidation“), the holders are entitled to receive
out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value of $5 per share, plus
any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding
Preferred Stock before any distribution or payment is to be made to the holders of any junior securities (common stock), and if
the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders
are to be ratably distributed among the holders of all preferred stock in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full.
During the year ended May 31, 2016,
there were no transactions of Series C Preferred Stock shares.
Dividends in arrears on the outstanding
Series C Preferred Stock shares total $10,554 and $8,915 as of May 31, 2016 and February 29, 2016, respectively. The Company had
13,100 and 13,100 Series C Preferred Stock shares issued and outstanding as of May 31, 2016 and February 29, 2016, respectively.
Series D Preferred Stock
The Company has authorized and designated
3,000,000 shares of Preferred Stock as Non-Voting Series D 10% Cumulative Convertible Preferred Stock with a par value of $0.00001
per share (the “Series D Preferred Stock“). The holders of Series D preferred stock may elect to convert all or any
part of such holder’s shares into:
·
|
common stock at the stated value
of $250.00 per share on a one for one basis, or
|
|
|
·
|
shares of RealBiz common stock
at $0.15 per share.
|
On July 9, 2014, the Company filed an
Amendment to its Series D Certificate of Designation with the Secretary of State of the State of Nevada to change the conversion
price from $250.00 to a new conversion price of $12.50.
Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a “liquidation“), the holders are entitled to receive
out of the assets, whether capital or surplus, of the Company an amount equal to 100% of the stated value of $5 per share, plus
any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of then outstanding
Preferred Stock before any distribution or payment is to be made to the holders of any junior securities (common stock), and if
the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders
are to be ratably distributed among the holders of all preferred stock in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full.
On October 2, 2012, the Company issued
380,000 shares of Series D Preferred stock as part of the October 2, 2012 exchange of securities agreement between the Company
and Acknew Investments, Inc. (“Acknew“), for the acquisition of the entity that eventually became RealBiz Media Group,
Inc. (RealBiz) and then and now constitutes significant operations of RealBiz, a holder of Class A common shares of RealBiz Holdings,
Inc., which contained a “ratchet provision“: If, at any time while Acknew is a holder of Series D Preferred Stock and
the Retirement Obligation (requiring the Company to pay out of 50% of all net profits from the Company or 50% of any new funding
received by the Company from September 21, 2012, until such time as the $700,000 of the Company’s Series D Preferred Stock
shares owned by Acknew are redeemed by the Company) remains not fully satisfied, the Company sells or issues any common stock of
the Company at an effective price per share that is lower than the then-effective conversion price (any such issuance being referred
to as a “Dilutive Issuance“), then the conversion prices for the Series D Preferred Stock held by Acknew is reduced
to equal the product obtained by multiplying (1) the then effective conversion price by (2) a fraction, the numerator of which
is the sum of the number of total shares of common stock outstanding immediately prior to the Dilutive Issuance plus the number
of shares of common stock which the aggregate consideration received by the Company in the Dilutive Issuance would purchase at
the then-effective conversion price; and the denominator of which is the number of shares of common stock outstanding immediately
after the Dilutive Issuance.
During the three months ended May 31,
2016:
|
·
|
15,000 shares of Series
D Preferred Stock were converted into 30,000 shares of common stock of Monaker at $2.50 per share, based on the $5 per share stated
value of the Series D Preferred Stock.
|
Dividends in arrears on the outstanding
Series D Preferred Stock shares total $147,094 and $138,188 as of May 31, 2016 and February 29, 2016, respectively. The Company
had 117,146 and 132,156 Series D Preferred Stock shares issued and outstanding as of May 31, 2016 and February 29, 2016, respectively.
Common Stock
On October 28, 2011, the Board and the
holders of a majority of the voting power of our shareholders approved an amendment to our Articles of Incorporation to increase
our authorized shares of common stock from 200,000,000 to 500,000,000. On February 13, 2012, the Board and the holders of a majority
of the voting power of our shareholders approved an amendment to our Articles of Incorporation to increase our authorized shares
of common stock from 500,000,000 to 2,500,000,000. The increase in our authorized shares of common stock became effective upon
the filing of the amendment(s) to our Articles of Incorporation with the Secretary of State of the State of Nevada.
On May 2, 2012, the Board consented
to (i) effect a 1-to-500 reverse split of the Company’s common stock and (ii) reduce the number of authorized shares from
2,500,000,000 to 5,000,000. Such actions became effective upon the filing of the amendment to our Articles of Incorporation with
the Secretary of State of the State of Nevada. The consolidated financial statements have been retroactively adjusted to reflect
this reverse stock split.
On June 26, 2012, the Board and the
holders of a majority of the voting power of our shareholders approved an amendment to our Articles of Incorporation to increase
our authorized shares of common stock from 5,000,000 shares to 500,000,000 shares.
On June 25, 2015, the Board consented
to (i) effect a 1-to-50 reverse split of the Company’s common stock and (ii) change the name of the Company from Next 1Interactive,
Inc. to Monaker Group, Inc. Such actions became effective upon the filing of the amendment to our Articles of Incorporation with
the Secretary of State of the State of Nevada. The unaudited consolidated financial statements have been retroactively adjusted
to reflect this reverse stock split.
During the three months ended May 31,
2016, the Company:
|
·
|
Sold 509,000 shares
of common stock for $840,720 in proceeds in private transactions.
|
|
·
|
Issued 116,755 shares
values at $196,239 for stock compensation.
|
|
·
|
Issued 30,000 shares
for conversion of accrued interest of $14,000.
|
The Company had 7,327,553 and 6,686,540
shares of common stock issued and outstanding as of May 31, 2016 and February 29, 2016, respectively.
Common Stock Warrants
The following table sets forth common
stock purchase warrants outstanding as of May 31, 2016 and February 29, 2016, and changes in such warrants outstanding for the
three months ended May 31, 2016:
|
|
W
a
r
r
a
n
ts
|
|
Weighted
Average Exercise
|
Outstanding,
February 29, 2016
|
|
|
1,456,052
|
|
|
$
|
1.56
|
|
Warrants
granted
|
|
|
427,616
|
|
|
$
|
0.18
|
|
Warrants
exercised/forfeited/expired
|
|
|
(696,293
|
)
|
|
$
|
(0.53
|
)
|
Outstanding,
May 31, 2016
|
|
|
1,187,375
|
|
|
$
|
1.67
|
|
|
|
|
|
|
|
|
|
|
C
o
mmon
stock
iss
u
a
b
le
u
pon
exerci
s
e
of
war
r
a
n
ts
|
|
|
1,187,375
|
|
|
$
|
1.67
|
|
At May 31, 2016, there were
1,187,375
warrants outstanding with a weighted average exercise price of $
1.67
and weighted average life of
3.31
years. During
the three months ended May 31, 2016, the Company granted
427,616
warrants –
12,416
warrants for consulting
fees and
415,200
warrants with common stock subscriptions.
As of February 29, 2016 and February 28, 2015,
the warrants have an intrinsic value of $-0-.
Common Stock Options
On October 28, 2009, the shareholders approved
the Monaker Group, Inc. (formerly known as Next 1 Interactive, Inc.) 2009 Long-Term Incentive Plan (the “2009 Plan“)
at the annual shareholders meeting. Under the 2009 Plan, 9,000 shares of common stock are reserved for issuance on the effective
date of the 2009 Plan. In the fiscal year ending February 29, 2016 this plan was eliminated and the 4,050 ten (10) year stock options
previously issued were cancelled. The options had an exercise price of $7.25 per share and an intrinsic value of $-0-.
Compensation expense relating to stock options
granted during the three months ended May 31, 2016 and 2015, was $-0- .
Note 9 - Commitments and Contingencies
The Company leases its office space and certain
office equipment under non-cancellable operating leases. In accordance with the terms of the office space lease agreement, the
Company is renting the commercial office space, for a term of three years from January 1, 2016 through December 31, 2018. The rent
for the three months ended May 31, 2016 and 2015 was $19,500 and $36,341, respectively.
Our future minimum rental payments through
February 28, 2017 amount to $52,390.
The following schedule represents obligations
under written commitments on the part of the Company that are not included in liabilities:
|
|
Current
|
|
Long Term
|
|
|
|
|
February 28,
2017
|
|
February 28,
2018
|
|
February
28, 2019
and
thereafter
|
|
Totals
|
Leases
|
|
$
|
54,451
|
|
|
$
|
101,796
|
|
|
$
|
88,159
|
|
|
$
|
244,406
|
|
Other
|
|
|
40,640
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
40,640
|
|
Totals
|
|
$
|
95,091
|
|
|
$
|
101,796
|
|
|
$
|
88,159
|
|
|
$
|
285,046
|
|
Legal Matters
The Company is involved, from time to time,
in litigation, other legal claims and proceedings involving matters associated with or incidental to our business, including, among
other things, matters involving breach of contract claims, intellectual property and other related claims employment issues, and
vendor matters. The Company believes that the resolution of currently pending matters will not individually or in the aggregate
have a material adverse effect on our financial condition or results of operations. However, assessment of the current litigation
or other legal claims could change in light of the discovery of facts not presently known to the Company or by judges, juries or
other finders of fact, which are not in accord with management’s evaluation of the possible liability or outcome of such
litigation or claims.
On March 28, 2016, the Company was presented
with a Demand for Arbitration, pursuant to Rule 4(a) of the American Arbitration Association Commercial Rules of Arbitration,
whereby Acknew Investments, Inc. and Vice Regal Developments Inc. (Claimants) are arguing that $700,000 is due to them, even though
they have already been paid said amounts through preferred shares that were issued as a guarantee and which Claimants converted
into shares of common stock. In connection with the purchase of the stock of the entity that eventually became RealBiz Media Group,
Inc. (RealBiz) that then and now constitutes significant operations of RealBiz, the Company issued 380,000 shares of Monaker Series
D Preferred Stock shares with a value of $1,900,000, which was considered the $1,200,000 value of the stock portion of the purchase
price, and was also meant to guaranty the payment of the balance of $700,000. The Company contends that the obligation to pay
the $700,000 was extinguished with the conversion of the Monaker Series D Preferred Stock shares into shares of common stock.
The date for arbitration has not been set and the Company will vehemently defend its position.
On May 11, 2016, RealBiz filed a Complaint
against us in the United States District Court for the Southern District of Florida (Case Number 1:16-cv-61017-FAM)(the “Complaint“).
The Complaint alleges $1,287,517 is due from us to RealBiz, and seeks the recovery of such amount, plus pre-judgment interest from
October 31, 2015 and costs. The Complaint alleges causes of action including ‘account stated’ and ‘unjust enrichment’.
In June 2016, we filed an Answer and Counterclaim to the Complaint (the “Counterclaim“) denying RealBiz’s allegations
and claims and pleading affirmative defenses including ‘failure to state a claim for which relief can be granted’,
‘set-off’ rights (including that the amount owed by RealBiz to us far exceeds the $1.2 million amount that RealBiz
alleges is due to it), ‘mistake or error’, ‘unclean hands’, ‘failure to state a claim’, ‘waiver’,
‘release’, ‘breach of contract’ and ‘rescission of letter addressing partial balance due’ (confirming
that a letter upon which RealBiz’s case is predicated was rescinded shortly after its issuance and is of no force or effect).
The Counterclaim seeks attorney’s fees and costs. The Counterclaim also alleges counterclaims against RealBiz for causes
of action including ‘unjust enrichment’ (we allege that the net amount due to us from RealBiz is in excess of $9.5
million dollars), ‘money had and received’, ‘business disparagement’, and ‘breach of contract’,
and seeks recovery of all actual damages, consequential damages and incidental damages, if any, including but not limited to attorney’s
fees and costs, plus-prejudgment and post-judgment interest as well as the full amount owed by RealBiz. On July 7, 2016, RealBiz
amended its Complaint to include a cause of action for tortious interference with contract relating to alleged actions undertaken
by us in connection with an investor relations firm which RealBiz alleges they intended to retain. We believe the claims asserted
in the Complaint, as amended, are without merit and intend to vigorously defend ourselves against the lawsuit while simultaneously
seeking to recover amounts we are owed. The Company has no basis for determining whether there is any likelihood of material loss
associated with the claims and/or the potential and/or the outcome of the litigation.
On June 2, 2016, the Company paid an arbitration
award of $81,572 ($73,959 plus interest of $7,613) to Twelfth Child Entertainment, LLC for a License Agreement settlement for rights
to air programs regarding “Foreclosure to Fabulous“ television programming on the Company’s previously owned
media business that was sold on January 21, 2016. The Company absorbed this settlement as part of its partnership commitment with
Launch Media 360 which is an investment of the Company.
The Company is unable to determine the estimate
of the probable or reasonably possible loss or range of losses arising from the above legal proceedings.
Note 10 – Business Segment Reporting
Accounting Standards Codification 280-16 “Segment
Reporting“, established standards for reporting information about operating segments in annual consolidated financial statements
and required selected information about operating segments in interim financial reports issued to stockholders. It also established
standards for related disclosures about products, services, and geographic areas. Operating segments are defined as components
of the enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing performance.
The Company has one operating segment consisting
of various products and services related to its online marketplace of travel and related logistics including destination tours
/ activities, accommodation rental listings, hotel listings, air and car rental. The Company’s chief operating decision
maker is considered to be the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance
of the business and other activities at the single operating segment level.
N
ot
e
11
–
S
u
b
s
e
qu
e
nt
E
v
e
n
t
s
The Company has evaluated subsequent events
occurring after the balance sheet date and has identified the following:
On June 1, 2016, Monaker converted 5,000 shares
of Series B Preferred Stock and 4,000 Series C Preferred Stock into common stock in connection with a special exchange conversion
whereby Series B Preferred Stock shareholders and Series D Preferred Stock shareholders were offered a special conversion rate
of $2.50 per share of the Company’s common stock provided accrued dividends were waived (instead of the Series B Preferred
stock stated $250.00 conversion price and the Series D Preferred stock stated $12.50 conversion price), into 18,000 shares of common
stock at $2.50 per share, valued at $45,000.
On June 2, 2016, the Company paid an arbitration
award of $81,572 ($73,959 plus interest of $7,613) to Twelfth Child Entertainment, LLC for a License Agreement.
On June 2, 2016, we borrowed three hundred
thousand dollars ($300,000) from the Donald P. Monaco Insurance Trust (“Trust“), which was evidenced by a Promissory
Note (“Note“) in the principal amount of three hundred thousand dollars ($300,000), which accrues interest at the rate
of 6% per annum (12% upon the occurrence of an event of default). All principal, interest and other sums due under the Note is
due and payable on the earlier of (a) the date the operations of NextTrip.com generate net revenues equal to $300,000; (b) the
date the Company enters into an alternate financing in excess of $300,000; or (c) August 1, 2016. The Note contains standard and
customary events of default. Donald P. Monaco, a member of our Board of Directors, is the trustee of the Trust. This Note may be
prepaid in whole or in part at any time, without penalty or premium. On June 24, 2016, we repaid this note.
On June 7, 2016, the Company repaid $20,000
owed under a Promissory Note dated April 27, 2017 with In Room Retail, Inc. William Kerby, (CEO and Chairman of the Company), is
the managing member of In Room Retail, Inc.
On June 15, 2016, we entered into a revolving
line of credit agreement with Republic Bank, Inc. of Duluth, Minnesota, in the maximum amount of $1,000,000. Amounts borrowed under
the line of credit accrue interest at the Wall Street Journal U.S. Prime Rate plus 1% (updated daily until maturity), payable monthly
in arrears beginning on July 15, 2016. Any amounts borrowed under the line of credit are due on June 15, 2017. Amounts borrowed
under the line of credit are planned to be used for marketing initiatives, working capital and to repay $300,000 previously borrowed
from the Donald P. Monaco Insurance Trust, of which Donald Monaco, a Director of the Company, is the Trustee. The loan contains
standard and customary events of default. On June 16, 2016, we borrowed $450,000 under the line of credit.
On June 24, 2016, the Company entered into
a Settlement And Mutual Release Agreement to settle an August 16, 2004 promissory note with an unrelated party with a principal
balance of $137,942 for $40,000.
Other transactions
|
·
|
On June 1, 2016, we received
$90,000 in proceeds from the Donald P Monaco Insurance Trust (whose trustee is Donald Monaco a director of the Company) and issued
60,000 shares of common stock in connection with a partial warrant exercise for $1.50 per share.
|
|
·
|
On June 1, 2016, we issued
30,374 shares of common stock in connection with the acquisition of a platform asset valued at $65,000.
|
|
·
|
On
June 1, 2016, a shareholder converted 5,000 shares of Series B Preferred Stock and 4,000
shares of Series C Preferred Stock into shares of common stock in connection with a special
exchange conversion whereby Series B Preferred shareholders and Series C Preferred Stock
shareholders were offered a special conversion rate of $2.50 per share of the Company’s
common stock provided accrued dividends were waived (instead of the Series B Preferred
stock stated $250.00 conversion price and the Series C Preferred stock stated $12.50
conversion price), into 18,000 shares of common stock at $2.50 per share, valued at $45,000.
|
|
·
|
On June 2, 2016, we issued
2,667 shares of common stock and warrants to purchase 3,200 shares of common stock with cashless exercise rights, expiring July
1, 2016, with an exercise price of $0.01 per share.
|
|
·
|
On June 3, 2016, we received
$10,000 in proceeds and issued 4,000 shares of common stock and 8,000 cashless common stock warrants expiring July 2, 2016, with
an exercise price of $0.25.
|
|
·
|
On June 7, 2016, we issued
4,305 shares of common stock in connection with a cashless warrant exercise.
|
|
·
|
On June 8, 2016, we received
$120 in proceeds and issued 12,000 shares of common stock in connection with a warrant exercise for $.01 per share.
|
|
·
|
On June 10, 2016, we
received $7,500 in proceeds and issued 6,000 shares of common stock in connection with a warrant exercise for $1.25 per share.
|
|
·
|
On June 13, 2016, a shareholder
converted $75,000 owed on a promissory note into 30,000 shares of common stock at $2.50 per share.
|
|
·
|
On June 15, 2016, we
received $187,500 in proceeds and issued 75,000 shares of common stock and 75,000 cashless common stock warrants expiring June
14, 2017 with an exercise price of $1.50.
|
|
·
|
On June 23, 2016, we
received $2,000 in proceeds and issued 8,000 common shares in connection with a warrant exercise for $0.25 per share.
|
|
·
|
On July 8, 2016, Monaker received
$24,000 in proceeds and issued 96,000 shares of common stock in connection with a warrant exercise at an exercise price of
$0.25 per share.
|
|
·
|
On July 15, 2016, Monaker issued 3,810 shares of common stock in connection with a cashless warrant exercise.
|
|
·
|
On July 1, 2016, Monaker issued 10,000
shares of common stock in connection with an agreement for Investor Relation Services valued at $20,000.
|
I
tem
2. Management’s
Di
s
cu
s
s
ion
and
A
n
a
ly
s
is
of
Fi
n
a
n
ci
a
l
C
o
n
dition
a
n
d
Re
s
ults
of
Operation
s
.
Forward Looking Statements
The following discussion
should be read in conjunction with the attached consolidated unaudited financial statements and notes thereto, and our consolidated
audited financial statements and related notes for our fiscal year ended February 29, 2016 found in our Annual Report on Form 10-K.
In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties
and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as “anticipate,“
“believe,“ “intends,“ or similar expressions. Our actual results could differ materially from those anticipated
by the forward-looking statements due to important factors and risks including, but not limited to, those set forth in our Annual
Report on Form 10-K.
This
Re
p
o
r
t
c
o
ntains
s
t
a
te
m
e
n
ts
th
a
t
w
e
believe
a
r
e,
or
m
a
y
be
co
n
s
ide
r
ed
to
b
e,
“
fo
rw
a
r
d
-lo
o
k
i
n
g
s
t
a
te
m
e
n
t
s
“.
All
s
tatements
other
than
s
t
a
te
m
e
n
ts
of
h
i
s
to
r
ical
f
a
ct
inclu
d
ed
in
this
Re
p
o
r
t
r
ega
r
ding the
p
r
o
s
pects
of our
i
n
du
s
t
r
y
or
o
ur
p
r
o
s
pect
s
,
p
lan
s
,
f
i
n
ancial
po
s
ition or b
u
s
ine
s
s
s
t
r
ategy,
may
co
n
s
titute
fo
r
w
a
r
d
-
l
o
oking
s
tatement
s
.
In
a
ddition,
f
o
r
w
a
r
d-lo
o
king
s
tatements
g
ene
r
a
lly
c
a
n
be
ide
n
t
i
fied
b
y
t
h
e
u
s
e
o
f
fo
r
w
a
r
d
-
looking
w
o
r
ds
s
u
ch
as
“
may,“
“
w
ill,“
“expec
t
,“
“intend,“
“e
s
timate,“
“
f
o
r
e
s
ee,“
“
p
r
o
j
ec
t
,“
“anticip
a
te,“
“believe,“
“
p
lan
s
,“
“fo
r
ec
a
s
t
s
,“
“contin
u
e“ or
“co
u
l
d
“
or
the
ne
g
atives
of
the
s
e
t
e
r
ms
or
v
a
r
iatio
n
s
of
them
or
s
i
m
ilar
te
r
m
s
.
Fu
r
the
r
mo
r
e,
s
uch
fo
r
w
a
r
d
-
l
o
oking
s
t
a
te
m
e
n
ts
m
a
y
be
incl
u
ded in va
r
ious
fil
i
n
gs that
w
e
make
w
ith
the
S
ecurities and Exchange Commission
or
p
r
e
s
s
r
ele
a
s
es
or
o
r
al
s
tatements
made by
or
w
i
th
the
a
pp
r
oval
o
f o
n
e
o
f
o
ur
a
utho
r
i
z
ed
executive
o
f
f
ice
r
s
.
Alt
h
ou
g
h
w
e
believe
t
h
at the expectatio
n
s
r
eflected in
the
s
e
f
o
r
w
a
r
d-lo
o
king
s
tatements a
r
e
r
e
a
s
o
na
b
l
e,
w
e
ca
n
not
a
s
s
u
r
e
y
o
u
t
h
at
the
s
e
ex
p
ectations
w
i
l
l
p
r
ove
t
o
be
co
r
r
ect.
The
s
e fo
r
w
a
r
d
-
looking
s
tatements
a
r
e
s
u
b
j
ect
to ce
r
tain kno
w
n
and u
n
kno
w
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r
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s
ks
a
n
d unce
r
taintie
s
,
a
s
w
e
l
l
as
a
s
s
umpti
o
ns
th
a
t co
u
ld
cau
s
e actual
r
e
s
ults
to
d
i
f
fer
m
a
t
e
r
ially
f
r
om
tho
s
e
r
eflected
in the
s
e
fo
r
w
a
r
d
-
looking
s
t
a
te
m
e
n
t
s
.
R
eade
r
s
a
r
e cautio
n
ed
n
o
t
to
p
l
a
ce
u
n
due
r
eliance
on
a
ny
f
o
r
w
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r
d
-lo
o
k
i
n
g
s
tatements
cont
a
i
n
ed
h
e
r
ein,
w
hich
r
e
f
lect
man
a
gement’s
o
pinio
n
s
only as
o
f the
date he
r
eof.
Except
a
s
r
equi
r
ed
by
l
a
w
,
w
e
u
n
de
r
t
a
ke
n
o
o
blig
a
t
i
o
n
to
r
evi
s
e or
p
ublicly
r
elea
s
e t
h
e
r
e
s
u
l
ts
of
a
ny
r
evi
s
ion to a
n
y
fo
r
w
a
r
d
-
looking
s
t
a
t
eme
n
t
s
.
You
a
r
e
a
d
v
i
s
ed,
ho
w
eve
r
,
to co
n
s
u
lt
any
a
dditio
n
al
di
s
clo
s
u
r
es
w
e
make
in
o
ur
r
epo
r
ts
to t
h
e
SE
C
.
All
s
u
b
s
e
q
uent
w
r
itten
a
n
d
o
r
al
fo
r
w
a
r
d
-
looking
s
t
a
t
eme
n
t
s
att
r
ibuta
b
le
t
o
us
or
pe
r
s
o
n
s
a
ct
i
n
g
on
our
be
h
alf
a
r
e
exp
r
e
s
s
ly
q
u
alif
i
ed in their enti
r
ety
by
the cautio
n
a
r
y
s
tateme
n
t
s
co
n
tained
i
n this Rep
o
r
t.
Critical Accounting Policies
and Estimates
The discussion
and analysis of the Company’s financial condition and results of operations are based upon its consolidated unaudited financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these unaudited financial statements requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis,
management evaluates past judgments and estimates, including those related to bad debts, accrued liabilities, convertible promissory
notes and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. The accounting policies and related risks described in the Company’s annual report on Form 10-K
as filed with the Securities and Exchange Commission on June 23, 2016 are those that depend most heavily on these judgments and
estimates. As of May 31, 2016, there had been no material changes to any of the critical accounting policies contained therein.
Definitions:
Unless the
context requires otherwise, references to the “Company,“ “we,“ “us,“ “our,“ “Monaker“
and “Monaker Group, Inc.“ refer specifically to Monaker Group, Inc. and its consolidated subsidiaries including Extraordinary
Vacations USA, Inc. (100% interest), NextTrip Holdings, Inc. (100% interest), Voyages North America, LLC (72.5% interest) and
Name Your Fee, LLC (51% interest) (which was sold in May 2016).
In
addition, unless the context otherwise requires and for the purposes of this report only:
|
·
|
“Exchange Act“ refers to the Securities Exchange Act of 1934, as amended;
|
|
·
|
“SEC“ or the “Commission“ refers to the United States Securities and Exchange Commission; and
|
|
·
|
“Securities Act“ refers to the Securities Act of 1933, as amended.
|
This information should be read in conjunction with the
interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited
financial statements and notes thereto and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations contained in our Annual Report on Form 10-K for the year ended February 29, 2016.
Certain capitalized terms used below and otherwise defined
below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “
Part
I - Financial Information
“ - “
Item 1. Financial Statements
“.
O
v
erview
Monaker
Group, Inc. and its subsidiaries have been amassing vacation home inventory in efforts to become one of the world’s
largest online marketplaces for the alternative lodging rental industry. Alternative lodging rentals (ALRs) are whole unit
vacation homes or timeshare resort units that are fully furnished, privately owned residential properties, including homes,
condominiums, villas and cabins, that property owners and managers rent to the public on a nightly, weekly or monthly basis.
Our marketplace, NextTrip.com, has the capacity of uniting millions of travelers seeking ALR online with property owners and
managers of over one million vacation rental properties located in over 120 countries around the world. As of May 31, 2016,
we operated our online marketplace through 115 websites in 16 languages, with leading websites in Europe, Asia, South America
and the United States. As of May 31, 2016, our global marketplace included approximately 100,000 paid listings on
subscriptions and we contracted with over 1.1 million listings under the performance based listing arrangement ALRs
(described in greater detail below). As an added feature to our ALR offering, we also provide activities and tours at the
destinations that are catered to the traveler through our Maupintour products.
Our ambition
is to become the largest vacation rental platform in the world with auxiliary services so travelers can purchase vacations through
one site; NextTrip.com (or through other online distributors sourced by NextTrip.com) and to provide the most qualified inquiries
and bookings to property owners and managers. NextTrip serves three major constituents: property owners and managers, travelers,
and other distributors. Property owners and managers pay to provide detailed listings of their properties on our websites with
the goal of reaching a broad audience of travelers seeking ALRs. Listing fees paid by property owners and managers are paid either
in the form of subscriptions that are generally for an annual period, or in the form of performance-based fees that allow for owners
and managers to list their properties for free and pay us a commission for successful bookings; this allows owners and managers
to list their property on NextTrip and pay a commission per booking in lieu of a pre-paid subscription fee. Currently we are converting
owners and managers away from the subscription format into the performance-based format. This is transparent to the traveler yet
more beneficial to the owners and managers as they accept a larger performance-based fee in return for relief from the up-front
subscription fee and lower booking fee. Travelers visit NextTrip and are able to search and compare our large and detailed inventory
of listings to find ALRs meeting their needs.
The global
vacation rental industry is large and growing, but also fragmented and inefficient. We believe we will benefit from having both
a broad selection of ALR listings and a large audience of travelers as well as distributors. We believe that the broad selection
of ALRs will attract more travelers and the large audience of travelers will in turn attract more ALRs from property owners and
managers.
Monaker is a technology driven travel and logistics company with alternative lodging rental inventory. Monaker’s
inventory consists of ALRs owned and leased by third parties which are available to rent through Monaker’s websites. Core
to the Company’s services are key elements including technology, an extensive film library, media distribution, trusted brands
and established partnerships that enhance product offerings and reach. We believe that consumers are quickly adopting video for
researching and educating themselves prior to purchases, and Monaker has carefully amassed video content, media distribution, key
industry relationships and a prestigious Travel Brand as cornerstones for the development and planned deployment of core-technology
on both proprietary and partnership platforms.
Summary
Monaker sells travel services to
leisure and corporate customers around the world. Our primary focus is on providing ALR options as well as providing schedule,
pricing and availability information for booking reservations for airlines, hotels, rental cars, cruises and other travel products
such as sightseeing tours, show and event tickets and theme park passes. The Company sells these travel services both individually
and as components of dynamically-assembled packaged travel vacations and trips. In addition, the Company provides content that
presents travelers with information about travel destinations, maps and other travel details; this content information is the product
of proprietary video-centered technology that allows the Company to create targeted travel videos from its film libraries. In January
2016, the Company introduced a beta version of its new Travel Platform under the NextTrip brand. This platform is still under development
and continues to be improved with a focus on maximizing the consumer’s experience and assisting them in the decision and
purchasing process.
The platform is a combination of
proprietary and licensed technology (described below) that connects and searches large travel suppliers as well as perishing and
alternative lodging inventories to present to consumers comprehensive and optimal alternatives at the most inexpensive rates to
choose from.
The Company sells its travel services
through various distribution channels. The primary distribution channel is through its own websites at Nexttrip.com and Maupintour.com.
The second distribution channel is selling travel services to customers through a toll-free telephone number designed to assist
customers with complex or high-priced offerings. The remaining distribution channels are in the final stages of deployment and
include sales on other travel companies’ websites and sales through networks of third-party travel agents and travel portals.
Monaker’s core holdings include
Nexttrip.com, and Maupintour.com along with platforms for vacation home rentals, timeshare rentals and discount travel. Nexttrip.com
is the primary website, where travel services are booked. The travel services include, but are not limited to: ALR, tours, activities/attractions,
air, hotel and car rentals. Maupintour feeds into Nextrip.com by providing high-end tour packages and activities/attractions.
Additional holdings include a social
media/discount travel platform and a 28% interest in RealBiz Media Group, Inc. (“RealBiz”) which was deconsolidated
on October 31, 2014 and written off as of February 29, 2016 and February 28, 2015 as an unrealizable investment.
The Company owned approximately 28%
of RealBiz Media Group, Inc. (“RealBiz”) as of May 31, 2016 which is represented by 44,470,101 shares of RealBiz Series
A Preferred Stock and 10,359,890 shares of RealBiz common stock. In addition, the Company is owed in excess of $9.5 million dollars
in funds as a net receivable balance due from RealBiz for amounts paid for the benefit of or on behalf of RealBiz. Both the shares
and the net receivable have been written down to zero ($0) to reflect the realizable value of this investment and asset. On May
11, 2016, RealBiz filed a Complaint against us in the United States District Court for the Southern District of Florida (Case Number
1:16-cv-61017-FAM)(the “Complaint”). The Complaint alleges $1,287,517 is due from us to RealBiz, and seeks the recovery
of such amount, plus pre-judgment interest from October 31, 2015 and costs. The Complaint alleges causes of action including ‘account
stated’ and ‘unjust enrichment’. In June 2016, we filed an Answer and Counterclaim to the Complaint (the “Counterclaim”)
denying RealBiz’s allegations and claims and pleading affirmative defenses including ‘failure to state a claim for
which relief can be granted’, ‘set-off rights (including that the amount owed by RealBiz to us far exceeds the $1.2
million amount that RealBiz alleges is due to it), ‘mistake or error’, ‘unclean hands’, ‘failure
to state a claim’, ‘waiver’, ‘release’, ‘breach of contract’ and ‘rescission of
letter addressing partial balance due’ (confirming that a letter upon which RealBiz’s case is predicated was rescinded
shortly after its issuance and is of no force or effect). The Counterclaim seeks attorney’s fees and costs. The Counterclaim
also alleges counterclaims against RealBiz for causes of action including ‘unjust enrichment’ (we allege that the net
amount due to us from RealBiz is in excess of $9.5 million dollars), ‘money had and received’, ‘business disparagement’,
and ‘breach of contract’, and seeks recovery of all actual damages, consequential damages and incidental damages, if
any, including but not limited to attorney’s fees and costs, plus-prejudgment and post-judgment interest as well as the full
amount owed by RealBiz. On July 7, 2016, RealBiz amended its Complaint to include a cause of action for tortious interference with
contract relating to alleged actions undertaken by us in connection with an investor relations firm which RealBiz alleges they
intended to retain. We believe the claims asserted in the Complaint, as amended, are without merit and intend to vigorously defend
ourselves against the lawsuit while simultaneously seeking to recover amounts we are owed. The Company has no basis for determining
whether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.
On February 2, 2015, the Company
entered into a joint venture agreement with Jasper Group Holdings, Inc. (“Jasper”) and created a Florida limited liability
company named Name Your Fee, LLC. On May 15, 2015, as required, the Company issued 100,000 shares of Series D Preferred Stock to
Jasper at a stated value of $5 per share for a total value of $500,000. As stated in the agreement, Monaker received a 51% capital
interest and Jasper received a 49% capital interest of the outstanding equity of Name Your Fee, LLC. Additionally, Jasper contributed
$75,000 in proceeds as part of the agreement. The Company properly eliminated the value of the investment in accordance with ASC
Topic 810, Consolidation. On May 16, 2016, the Company entered in to a Membership Interest Purchase Agreement for the sale of its
51% membership interest in Name Your Fee, LLC in exchange for a Promissory Note, maturing on June 15, 2018, in the amount of $750,000
plus the cancellation of $45,000 in existing promissory notes due from the purchaser. The Promissory Note does not accrue interest,
is secured by the 51% membership interest in Name Your Fee, LLC and will be repaid through 20% of the net earnings received in
NameYourFee.com through maturity. The Note contains standard and customary events of default. The principal amount of note is due
on June 15, 2018, provided that it will not be an event of default under the note unless the note is not repaid within 60 days
after such maturity date (i.e., by August 14, 2018).
Sufficiency of Cash Flows
Because current cash balances and
our projected cash generated from operations are not sufficient to meet our cash needs for working capital and capital expenditures,
management intends to seek additional equity or obtain additional credit facilities. However, there can be no assurance that we
will be able to issue additional capital upon terms acceptable to us. The sale of additional equity will result in additional dilution
to our shareholders. A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain
the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions
of such businesses, products or technologies.
R
E
SU
L
T
S
O
F
OP
E
R
A
T
I
O
N
S
For
the
Three
Mo
n
t
h
s
E
nded
May
31, 2016
C
omp
a
r
ed
t
o
the
Three
Mont
h
s
E
n
ded
May
31, 2015
R
evenues
Our
total
re
v
enues
decrea
s
ed
72
%
to $95,099 for the three months ended May 31, 2016 compared to
$336,093 f
o
r
the
three
m
o
nths
ended
May 31, 2015,
a
de
c
r
ea
s
e
of
$240,994
.
The decrease in sales is mainly due to a decrease in revenues of $335,313 that were attributable to a non-travel business
that was sold in January 2016 which was offset by an increase in revenues
of $87,434 for our
lu
x
ury
t
o
ur
o
peration w
h
i
ch
pr
o
vides e
s
c
o
rted
and in
d
epen
d
ent
tou
r
s
w
o
rldwide
to
u
p
s
cale traveler
s
.
The Company has focused its efforts and resources on completing its platforms for alternative lodging products and has not budgeted
marketing funds for revenue growth until such time as it launches the new NextTrip.com platform.
O
pe
r
a
ti
n
g
E
x
pe
n
s
e
s
O
u
r
o
pera
ti
n
g
ex
p
en
s
e
s
include
costs of revenue, technology and development,
salaries and benefits, selling
and promotions
and
gene
r
a
l
an
d
adm
i
n
i
s
t
ra
t
i
v
e
ex
p
en
s
e
s.
Our operating expenses increased 148% to $1,558,257
for the three months ended May 31,
2016, compared to
$627,319 for the three months ended May 31, 2015, an increase of $930,938.
This increase was mainly attributable to the amortization of website development costs and intangibles and the addition of third
party consultants working on the NextTrip.com platform.
Other Income (Expenses)
Interest expense
decreased
97% to $59,916
for the three months ended May 31, 2016, compared to
$2,014,373
for three months ended May 31, 2015, a decrease of $1,954,457, which is due primarily to the reduction of notes payables from the
sales of non-travel businesses as well as the conversion of promissory notes to equity during the period ended May 31, 2016.
Gain on sales of investment increased to $112,150
for
the three months ended May 31, 2016, compared to
$0 for three months ended May 31,
2015 due to the sale of Name Your Fee, Inc.
Gain on settlement of debt increased to $284,300
for
the three months ended May 31, 2016, compared to
$0 for three months ended May 31,
2015 due to the settlement of a disputed note payable.
Net Loss
W
e
h
a
d
a
ne
t
l
o
s
s
$1,126,624
for the three months ended May
31, 2016, compared to
a loss of
$2,563,677
f
o
r
t
h
e
three
mo
n
t
h
s
e
n
de
d
May 31, 2015
,
a
decrease of $1,437,053
.
T
h
e
de
crea
s
e
in l
o
s
s
w
a
s
p
r
i
mar
ily
d
ue to a decrease of $1,954,457 in interest expense.
C
o
nt
r
ac
tu
a
l
O
b
li
g
a
ti
o
ns
The following schedule represents obligations
under written commitments on the part of the Company that are not included in liabilities:
|
|
Current
|
|
Long Term
|
|
|
|
|
|
|
February
28, 2017
|
|
February
28, 2018
|
|
February
28, 2019
and
thereafter
|
|
Totals
|
Leases
|
|
$
|
70,508
|
|
|
$
|
101,796
|
|
|
$
|
88,159
|
|
|
$
|
260,463
|
|
Other
|
|
|
40,640
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
40,640
|
|
Totals
|
|
$
|
111,148
|
|
|
$
|
101,796
|
|
|
$
|
88,159
|
|
|
$
|
301,103
|
|
L
iqui
d
i
t
y
a
nd
C
a
p
i
t
a
l
R
e
s
o
u
rce
s
At
May 31, 2016
,
we
ha
d
$95,764
of
ca
s
h
o
n
-ha
n
d
,
a decrea
s
e
o
f
$42,180
fro
m
$137,944
a
t
t
h
e
s
t
ar
t
o
f
f
i
s
ca
l
20
17
.
The decrease in cash was due primarily to operating expenses and website development costs.
We had negative working capital of $2,881,819
as of May 31, 2016 and an accumulated deficit of $94,688,981.
N
e
t
ca
s
h
u
s
e
d
in
o
p
era
ti
n
g
ac
t
i
v
it
i
e
s
w
a
s
$898,700
for the three months ended May 31, 2016, compared to
$
384,134
fo
r
t
h
e
three months ended
May 31, 2015
,
an
in
crease
o
f
$514,566
.
Th
is
increase
was primarily due to an increase in the costs for third party consultants working on the NextTrip.com platform.
Net cash provided by (used in) investing
activities was ($4,200) and $75,000 for the three months ended
May 31, 2016 and 2015, respectively
.
Net
cash provided by financing activities in
creased $681,220 to $860,720
for
the three months ended May 31, 2016, compared to
$179,500, for the three months ended
May 31, 2015. This increase was primarily due to the net decrease of proceeds in the issuance of common stock and the exercise
of warrants of $840,720 and proceeds received in advances of $20,000
.
Th
e
g
ro
wth
a
n
d
de
v
e
l
opme
n
t
o
f
o
u
r
b
u
s
i
ne
s
s
w
ill
re
q
u
i
r
e
a
s
i
g
n
i
f
i
can
t
am
o
un
t
o
f
add
iti
o
n
a
l
w
o
rk
i
n
g
cap
it
a
l.
W
e
c
u
rren
tly
h
av
e
li
m
it
e
d
f
i
n
anc
i
a
l
re
s
ou
r
ce
s
an
d
ba
s
e
d
o
n
o
u
r
c
u
rre
n
t
o
p
era
ti
n
g
p
l
an
,
we
will
n
ee
d
to
ra
i
s
e
a
d
d
iti
ona
l
cap
it
a
l
in
o
r
de
r
to
c
o
n
ti
n
u
e
a
s
a
go
i
n
g
concer
n
. However, there can be
no assurance that we will be able to raise additional capital upon terms that are acceptable to us.
W
e
c
u
rre
n
t
ly
d
o
n
o
t
hav
e
adeq
u
a
t
e
ca
s
h to
m
ee
t
ou
r
s
h
or
t
o
r
l
o
ng-
t
e
r
m
o
b
j
ec
t
i
v
e
s
.
I
n
t
h
e
eve
n
t
ad
d
i
ti
o
n
a
l
cap
it
a
l is
ra
i
s
ed
,
it
m
a
y
h
a
v
e
a
d
i
l
u
ti
v
e
ef
f
ec
t
o
n
ou
r
ex
i
s
t
i
n
g
s
t
ock
h
o
l
de
r
s
.
Monaker
is a technology driven travel and logistics company with alternative lodging rental inventory. Monaker’s inventory consists
of ALRs owned and leased by third parties which are available to rent through Monaker’s websites. Core to the Company’s
services are key elements including technology, an extensive film library, media distribution, trusted brands and established partnerships
that enhance product offerings and reach. We believe that consumers are quickly adopting video for researching and educating themselves
prior to purchases, and Monaker has carefully amassed video content, media distribution, key industry relationships and a prestigious
Travel Brand as cornerstones for the development and planned deployment of core-technology on both proprietary and partnership
platforms.
We
are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive
industry. Due to the absence of a long standing operating history and the emerging nature of the markets in which we compete, we
anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams.
Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this
business model is unproven. We may never ever achieve profitable operations or generate significant revenues. Our future operating
results depend on many factors, including demand for our products, the level of competition, and the ability of our officers to
manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses
until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively
impact the ability of the Company to generate profits. Accordingly, we cannot assure you that our business model will be successful
or that we can sustain revenue growth, achieve or sustain profitability, or continue as a going concern.
We have very limited financial resources.
We currently have a monthly cash requirement of approximately $300,000, exclusive of capital expenditures. We will need to raise
substantial additional capital to support the on-going operation and increased market penetration of our products and services
including the development of national advertising relationships, increases in operating costs resulting from additional staff and
office space until such time as we generate revenues sufficient to support our operations, if ever. We believe that in the aggregate,
we could require several millions of dollars to support and expand the marketing and development of our travel products and services,
repay debt obligations, provide capital expenditures for additional equipment and development costs, payment obligations, office
space and systems for managing our business, and cover other operating costs until our planned revenue streams from travel products
are fully-implemented and begin to offset our operating costs. Our failure to obtain additional capital to finance our working
capital needs on acceptable terms, or at all, will negatively impact our business, financial condition and liquidity. As of May
31, 2016, we had approximately $3.1 million of current liabilities (an increase of $0.1 million from the $3.0 million of current
liabilities as of February 29, 2016). We currently do not have the resources to satisfy these obligations, and our inability to
do so could have a material adverse effect on our business, our ability to continue as a going concern, and the value of our securities.
Si
nc
e
o
u
r
i
ncep
ti
o
n
,
we
ha
v
e
fu
n
de
d
o
u
r
o
pera
ti
o
n
s
with
t
h
e
pr
o
ceed
s
fro
m
t
h
e
p
r
i
v
a
te
equ
ity
f
i
nanc
i
n
g
s
.
C
u
rre
n
t
ly,
r
even
u
e
s
pr
o
v
i
d
e
l
e
s
s
t
ha
n 10%
o
f
our
ca
sh
req
ui
remen
ts.
Th
e
rema
i
n
i
n
g
c
a
s
h
nee
d
is
der
i
ve
d
f
ro
m
ra
isi
n
g
ad
d
i
ti
o
n
a
l
cap
it
a
l.
I
tem
3. Quantit
a
tive
a
n
d
Qualit
a
tive
Di
s
c
l
o
s
ures
A
b
o
u
t
M
arket
Ri
s
k
.
Market Risk
This represents the risk of
loss that may result from the potential change in value of a financial instrument because of fluctuations in interest rates and
market prices. We do not currently have any trading derivatives nor do we expect to have any in the future. We have established
policies and internal processes related to the management of market risks, which we use in the normal course of our business operations.
I
tem
4. Contr
o
ls
a
n
d
Pr
o
ce
d
ure
s
.
Evaluation of Disclosure Controls
and Procedures
We have established and maintain a system
of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed
in our reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 , as amended,
is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and
that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.
Management, with the participation of
our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this
report. As of May 31, 2016, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses
we found in our internal controls over financial reporting as of February 29, 2016 (as described in greater detail in our annual
report on Form 10-K for the year ended February 29, 2016), our CEO and CFO have concluded that our disclosure controls and procedures
were not effective to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, is recorded properly, processed, summarized
and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated
and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
In light of the material weaknesses
described above, we have performed additional analysis and other post-quarter procedures to ensure our consolidated financial statements
are prepared in accordance with generally accepted accounting principles and we have contracted with experts, where necessary,
for assistance in analyzing and determining the proper accounting and financial reporting treatment for various of the Company’s
complicated business transactions. Accordingly, management has concluded that the financial statements fairly present in all material
respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this report.
Changes in Internal Control Over
Financial Reporting
We regularly review our system of internal
control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our
internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
P
ART
I
I
–
O
T
H
E
R
I
N
FO
R
M
A
T
I
O
N