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.
Note 1 - Summary of Business Operations and Significant
Accounting Policies
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 August 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 August 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 alternatives at the most inexpensive rates.
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 NextTrip.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 six months ended August 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 August 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 August 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 six months ended August 31, 2016 and the year ended February 29, 2016, the Company has capitalized costs associated with
website development of $1,179,009 and $1,817,945, respectively, and accumulated amortization of $199,731 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 six months ended August 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 six months ended August 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 six months ended August 31,
2016 and the year ended February 29, 2016, respectively. Intellectual properties that have finite useful lives are amortized over
their useful lives. The Company incurred amortization expense of $215,166 and $164,615 for the six months ended August 31,
2016 and the year ended February 29, 2016, 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 August 31, 2016, and February
29, 2016, the Company had an accumulated deficit of $95,595,324 and $93,562,357, respectively. The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As of August 31, 2016, the Company had a working
capital deficit of $2,305,474 and for the six months ended August 31, 2016, a net loss of $2,032,967 and cash used in operations
of $2,054,826.
We have very limited financial
resources. We currently have a monthly cash requirement of approximately $350,000, 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 would
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 August 31, 2016 and February 29,
2016, we had $3,433,580 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 $45,000 to a non-related third party debtor and signed a two year, six percent (6%) promissory note in the amount of $45,000.
The entire principal balance of this note, together with all accrued and unpaid interest, is due and payable on December 31, 2016.
The settlement of this note receivable was included in the disposal of Name Your Fee joint venture discussed more fully below.
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 required by the February 2, 2015 agreement. Additionally, Jasper contributed $75,000 in proceeds as part of the agreement.
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 receivable due to the Company and a promissory note from the purchaser 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 outstanding principal amount of the note is due on June 15, 2018, provided that it is not in default.
On October 31, 2014 (the
“Deconsolidation Date”), Monaker and RealBiz Media Group, Inc. (“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 redeems, 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. At August 31, 2016, Monaker owned 44,470,101
shares of RealBiz Series A Preferred Stock and 8,126,630 shares of RealBiz common stock, representing 26% ownership of RealBiz.
This interest, along with a net receivable balance due, has been written down to zero ($0) as of August 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, which it is not currently,
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 one of their employees as an employee of
Monaker and another 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
into 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).
Note 5 – Notes Payable
The following table sets forth
the notes payable as of August 31, 2016 and February 29, 2016:
|
|
|
Principal
|
|
|
|
|
August 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 at the Company’s discretion. 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.
|
|
|
—
|
|
|
|
137,942
|
|
|
|
$
|
573,842
|
|
|
|
711,784
|
|
Note 6 – Other Notes Payable
The Company has a
demand loan from In Room Retail, Inc. which is owned by William Kerby, CEO and Chairman of the Company with a stated
interest rate of 6% per annum.
|
|
$
|
12,359
|
|
|
$
|
15,919
|
|
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.
|
|
|
996,000
|
|
|
|
—
|
|
|
|
$
|
1,008,359
|
|
|
$
|
15,919
|
|
Interest charged to operations relating
to the above notes was $33,397 and $10,940, respectively, for the six months ended August 31, 2016 and 2015, and $14,242 for the
year ended February 29, 2016.
Accrued interest as of August
31, 2016 and February 29, 2016 is $1,338 and $197,439, 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 December 1, 2016 to September 30, 2017,
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 August 31, 2016. During the six months ended August 31, 2016 and 2015, the Company recognized interest expense of
$90,000 and $113,385, respectively. The table below summarizes the convertible promissory notes as of August 31, 2016.
|
|
August 31, 2016
|
|
|
|
Non Related
Party
|
|
|
|
Related
Party
|
|
|
|
Total
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance February 29, 2016
|
|
$
|
1,658,908
|
|
|
$
|
—
|
|
|
$
|
1,658,908
|
|
Additions:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
1,658,908
|
|
|
$
|
—
|
|
|
$
|
1,658,908
|
|
Subtractions:
|
|
|
(249,582
|
)
|
|
|
—
|
|
|
|
(249,582
|
|
Ending balance
|
|
$
|
1,409,326
|
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Additions:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Incurred during the year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Subtractions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized during the year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ending balance
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible promissory notes
|
|
$
|
1,409,326
|
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Carrying value
|
|
$
|
1,409,326
|
|
|
$
|
—
|
|
|
$
|
1,409,326
|
|
Principal past due and in default
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
During the six months ended
August 31, 2016 and 2015, the Company recorded debt amortization expense in the amount of $0 and $0, respectively.
Accrued interest as of August 31, 2016 and February
29, 2016 is $0 and $199,987, 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.
On August 26, 2016, we
converted all of our outstanding Series B (110,200 shares), Series C (13,100 shares) and Series D (110,156 shares) Preferred
Stock, into an aggregate of 444,712 shares of our common stock, pursuant to certain special conversion terms offered in
connection therewith and the mandatory conversion terms thereof.
Additionally,
stockholders holding 15,000 shares of our Series B Convertible Preferred Stock and 22,000 shares of our Series D Convertible
Preferred Stock requested the conversion of such shares into 2,233,260 shares of RealBiz common stock. Pursuant to the
customary practice of the Company and RealBiz, the Company first requested that RealBiz’s transfer agent, convert
shares of RealBiz Preferred A, owned by the Company, into RealBiz common stock as provided by the RealBiz preferred share
agreement. This request was denied by RealBiz and RealBiz’s transfer agent. The Company then requested that the
Company’s transfer agent cancel the converted shares and that RealBiz’s transfer agent which is also
Monaker’s transfer agent (American Stock Transfer) transfer shares of common stock of RealBiz held by the Company to
such shareholders to satisfy the conversion obligations. To date, RealBiz has refused to recognize or effect the transfers.
The Company has provided to RealBiz and American Stock Transfer all necessary documents and affidavits to execute the
transfer and we are currently discussing filing a lawsuit against RealBiz and American Stock Transfer in an effort to force
them to recognize and effect the requested transfers. The Preferred Stock Series B and D shares related to the conversion
into RealBiz common shares have been retired and the number of shares of investment in RealBiz common stock have been reduced
by 2,233,260 shares.
All Preferred Stock Series B,
C and D shares have been retired.
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 to the lower of (a) a fixed price of $0.50 per share; and (b) the lowest price the
Company has issued stock as part of a financing after January 1, 2006. 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 August 31, 2016 and February 29, 2016 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 six months ended August
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 $846,768 and $838,275 as of August 31, 2016 and February 29, 2016, respectively. The Company had
1,869,611 shares of Series A Preferred Stock issued and outstanding as of August 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:
|
•
|
common stock on a one for fifty 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 six months ended August 31,
2016:
|
•
|
110,200 shares of Series B Preferred Stock were converted into 220,400 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.
|
|
•
|
15,000 shares of Series B Preferred Stock were converted into 1,500,000 shares of common stock of RealBiz at $0.05 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 $0 and $182,782 as of August 31, 2016 and February 29, 2016, respectively. The Company had 0 and
125,200 shares of Series B Preferred Stock issued and outstanding as of August 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 on a 2.5 for one basis, or
|
|
•
|
shares of RealBiz’s common stock at $0.10 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 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 six months ended August 31,
2016:
|
•
|
13,100 shares of Series C Preferred Stock were converted into 26,000 shares of common stock of Monaker at $250.00 per share, based on the $5 per share stated value of the Series C Preferred Stock.
|
Dividends in arrears on the outstanding
Series C Preferred Stock shares total $0 and $8,915 as of August 31, 2016 and February 29, 2016, respectively. The Company had
0 and 13,100 Series C Preferred Stock shares issued and outstanding as of August 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 on a 2.5 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 six months ended August 31,
2016:
|
•
|
110,156 shares of Series D Preferred Stock were converted into 198,312 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.
|
|
•
|
22,000 shares of Series D Preferred Stock were converted into 733,260 shares of common stock of RealBiz at $0.15 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 $0 and $138,188 as of August 31, 2016 and February 29, 2016, respectively. The
Company had 0 and 132,156 Series D Preferred Stock shares issued and outstanding as of August 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 six months ended August 31,
2016 the Company:
|
•
|
Sold 1,268,262 shares of common stock for $1,717,481 in proceeds in private transactions.
|
|
•
|
Issued 149,428 shares values at $307,923 for stock compensation.
|
|
•
|
Issued
60,000 shares for conversion of note payable and accrued interest of $89,000.
|
The Company had 8,482,568 and
6,686,540 shares of common stock issued and outstanding as of August 31, 2016 and February 29, 2016, respectively.
Common Stock Warrants
The following table sets forth common
stock purchase warrants outstanding as of August 31, 2016 and February 29, 2016, and changes in such warrants outstanding for the
six months ended August 31, 2016:
|
|
Warrants
|
|
Weighted
Average Exercise
|
Outstanding, February 29, 2016
|
|
|
1,456,052
|
|
|
$
|
1.56
|
|
Warrants granted
|
|
|
754,942
|
|
|
$
|
0.46
|
|
Warrants exercised/forfeited/expired
|
|
|
(1,137,056
|
)
|
|
$
|
(0.66
|
)
|
Outstanding, August 31, 2016
|
|
|
1,073,938
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable upon exercise of warrants
|
|
|
1,073,938
|
|
|
$
|
1.78
|
|
At August 31, 2016, there were
1,073,938 warrants outstanding with a weighted average exercise price of $1.78 and weighted average life of 3.09 years. During
the six months ended August 31, 2016, the Company granted 754,942 warrants – 67,942 warrants for consulting fees and 687,000
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 six months ended August 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 six months ended August 31, 2016 and 2015 was $39,002 and $72,683, respectively.
Our future minimum rental payments
through February 28, 2017 amount to $39,390.
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
|
|
$
|
40,420
|
|
|
$
|
82,349
|
|
|
$
|
68,959
|
|
|
$
|
191,728
|
|
Other
|
|
|
641,355
|
|
|
|
180,247
|
|
|
|
360,000
|
|
|
|
1,181,602
|
|
Totals
|
|
$
|
681,775
|
|
|
$
|
262,596
|
|
|
$
|
428,959
|
|
|
$
|
1,373,330
|
|
Legal Matters
The Company is involved, from
time to time, in litigation, other legal claims and proceedings involving matters associated with or incidental to our business,
including, among other things, matters involving breach of contract claims, intellectual property, employment issues, and other
related claims and vendor matters. The Company believes that the resolution of currently pending matters will not individually
or in the aggregate have a material adverse effect on our financial condition or results of operations. However, assessment of
the current litigation or other legal claims could change 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 $10 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. On September 20, 2016, RealBiz again amended its
Complaint to voluntarily dismiss the cause of action for tortuous interference. 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.
Note 11 – Subsequent Events
The Company has evaluated subsequent
events occurring after the balance sheet date and has identified the following:
Subscriptions
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On September 8, 2016, we received $370,000 in proceeds and issued 148,000 shares of
common stock and common stock warrants to purchase 148,000 shares of common stock expiring on September 7, 2017, with an exercise
price of $2.50 per share.
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On September 14, 2016, we received $20,000 in proceeds and issued 8,000 shares of
common stock and common stock cashless warrants to purchase 24,000 shares of common stock expiring on February 20, 2017, with
an exercise price of $1.50 per share.
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Warrant Exercise
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On September 8, 2016, we issued 2,084 shares of common stock in connection with a
cashless warrant exercise.
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On September 12, 2016, we issued 1,877 shares of common stock, in connection with
a warrant exercise for consulting services valued at $2,016.
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On September 21, 2016, we received $2,000 in proceeds and issued 4,000 shares of common
stock in connection with a warrant exercise.
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Consulting Agreements
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On September 1, 2016, we issued 150,000 shares of common stock and common stock cashless
warrants to purchase 150,000 shares of common stock expiring on August 31, 2018, with an exercise price of $3.00 per share, in
connection with an agreement for IR Services valued at $300,000.
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On September 8, 2016, we issued 20,000 shares of common stock in connection with an
agreement for Investor Relations (IR) Services valued at $40,000.
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On September 14, 2016, we made a payment of $50,000 for services in connection with
an IR agreement and issued 20,000 shares of common stock and common stock warrants to purchase 20,000 shares of common stock expiring
on September 7, 2017, with an exercise price of $2.50 per share.
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On September 15, 2016, we entered into a Marketing and Stock
Exchange Agreement with Recruiter.com and in connection with this agreement, we issued 150,000 shares of common stock at a value
of $225,000. In exchange Recruiter.com will provide marketing services and issue us 2,220 shares of Recruiter common stock representing
a 1.5% ownership in Recruiter.com.
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On September 19, 2016, we issued 5,800 shares of common stock in connection with a
consulting agreement for IR Services valued at $116,000.
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