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 countries around the world. As of November 30, 2016, our global marketplace includes approximately 100,000
paid listings on subscriptions and contracted with over 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 to choose from, 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 nine months ended November 30, 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 November 30, 2016 and February 29, 2016.
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.
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. As of November 30, 2016 and February 29, 2016, the Company's software development costs are as follows:
Software Development Costs -
Place In Service
|
|
Balance
February 29, 2016
|
|
Additions
|
|
Disposals
|
|
Balance
November 30, 2016
|
Cost
|
|
S
|
3,405,946
|
|
|
$
|
630,864
|
|
|
$
|
(915,392
|
)
|
|
$
|
3,121,418
|
|
Less: Amortization
|
|
|
(780,860
|
)
|
|
|
(835,698
|
)
|
|
|
141,383
|
|
|
|
(1,475,175
|
)
|
Net
|
|
$
|
2,625,086
|
|
|
$
|
(204,834
|
)
|
|
$
|
(774,009
|
)
|
|
$
|
1,646,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the above software development costs, $1,105,932
is not yet placed in service as of November 30, 2016. In addition during the nine months ended November 30, 2016 there was a disposal
of $915,392 assets in relation to the sale of the 51% membership interest of Name Your Fee (see note 4).
Impairment
of Intangible Assets
In
accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable
intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors
the Company considers important, which could trigger an impairment review include the following:
1.
|
Significant
underperformance compared to historical or projected future operating results;
|
2.
|
Significant
changes in the manner or use of the acquired assets or the strategy for the overall business; and
|
3.
|
Significant
negative industry or economic trends.
|
When
the Company determines that the carrying value of an intangible asset may not be recoverable based upon the existence of one or
more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted
cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash
flow method using a discount rate determined by management to be commensurate with the risk inherent to the current business model.
Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
The Company did not record an impairment charge on its intangible assets during the nine months ended November 30, 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 November 30, 2016, and February 29, 2016, the Company had an accumulated deficit of $97,841,318 and $93,562,357,
respectively. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a
going concern. As of November 30, 2016, the Company had a working capital deficit of $1,952,570, and for the nine months
ended November 30, 2016, had a net loss of $4,278,961 and cash used in operations of $2,870,269.
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 November
30, 2016 and February 29, 2016, we had $2,847,484 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
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 was rolled into and became part of the consideration
paid 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 (see also Note 4).
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 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. All Series D Preferred Stock
shares of the Company have been converted as of August 26, 2016.
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 November 30, 2016, Monaker owned 44,470,101 shares of RealBiz Series A Preferred
Stock and 8,126,630 shares of RealBiz common stock, representing 27% ownership of RealBiz. This interest, along with a net receivable
balance due, has been written down to zero ($0) as of November 30, 2016 and February 29, 2016, to reflect the realizable value
of this investment and asset. As discussed below under “Note 8 – Stockholders’ Deficit”, RealBiz has attempted
to unilaterally cancel the common stock and Series A Preferred Stock which we hold in RealBiz and we have filed a lawsuit in connection
therewith arguing such cancellation or attempted cancellation violated applicable law.
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).
On August 31, 2016, the Company entered into a Marketing and Stock Exchange Agreement with Recruiter.com,
Inc. whereby the Company issued to Recruiter.com, Inc., 75,000 shares of the Company’s restricted common stock valued at
$1.50 per share, for a total of $112,500, in exchange for 2,220 shares of common stock of Recruiter.com, Inc. The acquisition
of the 2,200 shares of common stock of Recruiter.com, Inc. was written off to its realizable value of $0 as of November 30, 2016.
Also, an additional 75,000 shares of the Company’s restricted common stock valued at $1.50 per share, for a total of $112,500,
were issued for advertising and marketing services to be performed by Recruiter.com, Inc. over the next 12 months, pursuant to
the terms of the agreement.
Note
5 – Notes Payable
The
following table sets forth the notes payable as of November 30, 2016 and February 29, 2016:
|
|
Principal
|
|
|
|
November
30,
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 settled the outstanding debt on November 16, 2016, through the issuance of 255,041 shares of the Company’s
common stock at $2.25 per share for the principal plus 680 shares of the Company’s common stock at $2.25 per share for
the accrued interest.
|
|
$
|
—
|
|
|
$
|
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
|
|
|
|
$
|
—
|
|
|
$
|
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. This loan was repaid in cash on November 4, 2016.
|
|
$
|
—
|
|
|
$
|
$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.
|
|
|
993,000
|
|
|
|
—
|
|
|
|
$
|
$993,000
|
|
|
$
|
$15,919
|
|
Interest
charged to operations relating to the above notes was $39,678 and $24,142, respectively, for the nine months ended November 30,
2016 and 2015, and $14,242 for the year ended February 29, 2016.
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.
Note
7 – Convertible Promissory Notes
The
Company has outstanding 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. During the nine months ended November 30, 2016 and 2015, the Company recognized interest expense of
$150,000 and $7,380, respectively. The table below summarizes the convertible promissory notes as of November 30, 2016.
|
|
November
30, 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 nine months ended November 30, 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.
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 designation of the RealBiz preferred stock. 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. . On November 16, 2016, RealBiz notified Monaker that the Board of
Directors of RealBiz voted to cancel and retire all issued and outstanding shares of RealBiz Preferred Stock and all but 1,341,533
shares of common stock of RealBiz held by Monaker. RealBiz’s announced cancellation and retirement was without Monaker’s
consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred and common stock. The Complaint
was filed on November 30, 2016 (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. (“Monaker”) v. RealBiz Media Group,
Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: 1:16-cv-24978-DLG, seeking damages and
injunctive and declaratory relief, arising from RealBiz’s declared cancellation and retirement of certain securities.
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; and
|
|
●
|
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. 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. However, the reset provision was removed thereby eliminating the derivative liability
as of February 28, 2014; therefore the change in fair value of the Series A Preferred Stock derivative liability as of November
30, 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 nine months ended November 30, 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 $893,380 and $838,275 as of November 30, 2016 and February
29, 2016, respectively. The Company had 1,869,611 shares of Series A Preferred Stock issued and outstanding as of November 30,
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 nine months ended November 30, 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 November 30, 2016 and February 29, 2016, respectively.
The Company had 0 and 125,200 shares of Series B Preferred Stock issued and outstanding as of November 30, 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 nine months ended November 30, 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 November 30, 2016 and February 29, 2016,
respectively. The Company had 0 and 13,100 Series C Preferred Stock shares issued and outstanding as of November 30, 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 to $12.50 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.
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 nine months ended November 30, 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 November 30, 2016 and February 29, 2016,
respectively. The Company had 0 and 132,156 Series D Preferred Stock shares issued and outstanding as of November 30, 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 1 Interactive, 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 nine months ended November 30, 2016 the Company:
|
●
|
Sold
1,927,085 shares of restricted common stock for $2,703,342 in proceeds in private transactions.
|
|
●
|
Issued
489,428 shares of restricted common stock valued at $997,923 for stock compensation.
|
|
|
Issued
255,721 shares of restricted common stock valued at $575,372 for conversion of notes payable and accrued interest thereon.
|
|
●
|
Issued
60,000 shares of restricted common stock for conversion of accrued interest of $89,000.
|
|
●
|
On
September 19, 2016 Recruiter.com was issued 75,000 shares of restricted common stock valued at $112,500 for the acquisition
of 1.5% of Recruiter.com. As of November 30, 2016, the value of this investment was written down to $0 to reflect
the market value of the investment.
|
|
●
|
On
September 19, 2016 Recruiter.com was issued 75,000 shares of restricted common stock valued at $112,500 in connection with
our entry into a marketing agreement related to a one year marketing promotion to all of the Recruiter.com members by Monaker,
NextTrip and the related entities.
|
The
Company had 9,913,663 and 6,686,540 shares of common stock issued and outstanding as of November 30, 2016 and February 29, 2016,
respectively.
Common
Stock Warrants
The
following table sets forth common stock purchase warrants outstanding as of November 30, 2016 and February 29, 2016, and changes
in such warrants outstanding for the nine months ended November 30, 2016:
|
|
Warrants
|
|
|
Weighted
Average Exercise
|
|
Outstanding, February 29, 2016
|
|
|
1,456,052
|
|
|
$
|
1.56
|
|
Warrants granted
|
|
|
1,626,547
|
|
|
$
|
0.83
|
|
Warrants exercised/forfeited/expired
|
|
|
(1,520,687
|
)
|
|
$
|
(1.00
|
)
|
Outstanding, November 30, 2016
|
|
|
1,561,912
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
Common stock issuable upon exercise of warrants
|
|
|
1,561,912
|
|
|
$
|
1.42
|
|
At
November 30, 2016, there were 1,561,912 warrants outstanding with a weighted average exercise price of $1.42 and a weighted average
life of 2.55 years. During the nine months ended November 30, 2016, the Company granted 1,626,547 warrants – 757,347 warrants
for consulting fees and 869,200 warrants in connection with common stock subscriptions.
As
of November 30, 2016, 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 nine months ended November 30, 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 nine months ended November 30, 2016 and 2015 was $59,262 and $109,024, respectively.
Our
future minimum rental payments through February 28, 2017 amount to $19,890.
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
|
|
$
|
20,233
|
|
|
$
|
82,349
|
|
|
$
|
68,959
|
|
|
$
|
171,541
|
|
Other
|
|
|
58,414
|
|
|
|
247
|
|
|
|
–
|
|
|
|
58,661
|
|
Totals
|
|
$
|
78,647
|
|
|
$
|
82,596
|
|
|
$
|
68,959
|
|
|
$
|
230,202
|
|
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 if there was any amount owed, RealBiz’s obligation to us far exceeded the $1.2
million amount that RealBiz alleges is due to it), ‘mistake or error’, ‘unclean hands’, ‘waiver’,
‘release’, ‘breach of contract’ (we allege there was an oral agreement that all intercompany balances
would be written–off) 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
against RealBiz alleges causes of action including ‘unjust enrichment’ (we allege that the net amount due to us from
RealBiz is in excess of $10 million dollars if there is no oral agreement), ‘money had and received’, ‘business
disparagement’, and ‘breach of contract’ (we allege there was an oral agreement that all intercompany balances
would be written–off), 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. 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 damages against RealBiz. 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.
On
November 30, 2016, the Company filed a Complaint (Monaker Group, Inc., f/k/a Next 1 Interactive, Inc. (“Monaker”)
v. RealBiz Media Group, Inc., f/k/a Webdigs, Inc. and American Stock Transfer & Trust Company, LLC Case No.: CACE-16-019818)
for damages and injunctive and declaratory relief, arising from RealBiz’s declared cancellation, retirement, and/or termination
of certain securities. RealBiz notified Monaker of its intent to unilaterally cancel, retire, and/or terminate its preferred and
common stock held by Monaker. RealBiz’s announced cancellation, retirement, and termination was without Monaker’s
consent, and done in violation of Delaware law, federal law and the terms of RealBiz’s preferred and common stock.
A
class action lawsuit has been filed against us, William Kerby, our Chief Executive Officer and Chairman, Donald Monaco, our director,
and D’Arelli Pruzansky, P.A., our former auditor, in the U.S. District Court for the Southern District of Florida on behalf
of persons who purchased our common stock and options between April 6, 2012 and June 23, 2016 (the “Class Period”).
The case, McCleod v. Monaker Group, Inc. et al, No. 16-cv-62902 was filed on December 9, 2016. The lawsuit focuses on whether
the Company and its executives violated federal securities laws and whether the Company’s former auditor was negligent and
makes allegations regarding the activities of certain Company executives. The lawsuit alleges and estimates total shareholders
losses totaling approximately $20,000,000. The lawsuit stems from the Company’s announcement in June 2016 that it would
have to restate its financial statements due to issues related to the Company’s investment in RealBiz. The lawsuit asks
the court to confirm the action is a proper class action. We believe the claims asserted in the lawsuit are without merit and
intend to vigorously defend ourselves against the claims made in the lawsuit 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.
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 – Consulting Agreements
On March 18, 2016 the company entered into a consulting agreement
for compensation of 15,000 common stock shares.
On April 27, 2016 the company entered into a consulting agreement
with term of five years from the effective date, unless sooner terminated as provided herein. Agreement shall automatically renew,
on each renewal anniversary, for one (1) year periods. Compensation will be initial cash payment of $65,000 and common shares of
30,374.
On June 30, 2016 the company entered into a consulting agreement
with a term of initial three-month period beginning July 1, 2016 and ending on September 30, 2016. Subject to both parties’
satisfaction with the results of this initial three-month consulting period, the consultant shall be retained by Monaker for a
second three-month engagement under these same terms if agreed to extend consulting agreement. The compensation is 10,000 restricted
common shares issued each month. Monaker retains the right to cancel at any time after the first 30 days of engagement. In the
event of cancellation, shares earned by consultant for a partial month of services will be pro-rated based on a 30-day cycle.
On August 1, 2016 the company entered into a consulting agreement
which continues through July 31, 2017. For compensation the company is to issue 10,000 restricted common shares fully vested every
three months for a total of 40,000 restricted common shares.
On September 1, 2016 the company entered into a consulting
agreement for term of 12 months. For each successfully introduced executed subscription agreement in the year 2016, the company
agrees to issue to consultant an 8% cash payment and 8% common shares plus warrants based on the dollar value of the subscription
agreement, in exchange for services rendered.
On September 1, 2016 the Company engaged a consultant for
investor relations services through August 31, 2017. For compensation the consultant received 150,000 restricted common shares
vesting immediately and 150,000 cashless warrants with exercise price of $3.00 and term of 2 years. The stock and warrants have
“piggyback” registration rights.
On September 8, 2016 the company entered into a media relations
program agreement with a term ending on May 5, 2017. Compensation of 10,000 restricted shares, with registration rights after six
months, which shall cover the first 60-day period of services. Contingent upon Monaker’s satisfaction with services during
this initial 60-day period there is a monthly fee of $6,000 per month for a period of six months, payable within five days of the
beginning of each monthly billing period.
On September 8, 2016 the Company entered into a consulting
agreement for 12 months. If the consultant successfully aids in the closing a private placement funding of $750,000 the consultant
gets cash of $50,000 USD, 20,000 warrants with exercise price of $2.50 per share and term of 1 year, and 20,000 common shares.
On October 5, 2016 the Company engaged a consultant for advisory
services for a term of six months.
For compensation the consultant received 150,000 restricted
common shares vesting immediately and 500,000 warrants with exercise price of $2 per share, and one year term. In the event the
consultant successfully closes on a $3 million financing deal the consultant will received an additional 150,000 restricted common
shares.
Note
12 – Subsequent Events
The
Company has evaluated subsequent events occurring after the balance sheet date and has identified the following:
Subscriptions
|
●
|
On
December 6, 2016 Monaker received $50,000 in proceeds and issued 25,000 shares of common stock and common stock warrants exercisable
on a cashless basis to purchase 25,000 shares of common stock, expiring on April 30, 2017, with an exercise price of $1.50 per
shares in connection with a private placement investment by an accredited investor evidenced by a subscription agreement.
|
Warrant
Exercise
|
●
|
On
December 1, 2016, we received $10,000 in proceeds and issued 20,000 shares of common stock in connection with a cashless warrant
exercise for $0.50 per share.
|
|
|
|
|
●
|
On
December 6, 2016, we received $42,500 in proceeds and issued 85,000 shares of common stock in connection with a cashless warrant
exercise for $0.50 per share.
|
|
|
|
|
●
|
On
January 11, 2017, we issued 256 common stock, in connection with a warrant exercise for consulting services valued at $320.
|
|
|
|
|
●
|
On
January 16, 2017, we received $4,100 in proceeds and issued 3,280 shares of common stock in connection with a warrant exercise
for $1.25 per share.
|
Consulting
Agreements
|
●
|
On
December 7, 2016, Monaker issued 20,000 shares of common stock, valued at $40,000, for payment due pursuant to the terms of a
consulting agreement.
|
|
|
|
|
●
|
On
December 14, 2016, Monaker issued 4,160 shares of common stock, valued at $10,400 and common stock warrants exercisable on a cashless
basis to purchase 4,160 shares of common stock, expiring on December 12, 2017 with an exercise price of $1.50 per shares pursuant
to a consulting agreement.
|
|
|
|
|
●
|
As of December 31,
2016, Monaker entered into an Investor Relations and Financial Consulting Services Agreement with Capital Market Access
(CMA)
for a term of 90 days at $2,500 per month for the first three months and it automatically renews for an additional 90 days
thereafter, at a rate of $5,300 per month thereafter. In addition Monaker agreed to issue CMA 150,000 shares of its common
stock which will vest to CMA at a rate of 3,000 shares of common stock of Monaker per month plus (i) a
performance-based
compensation that amounts to 15,000 common shares for introductions that result in the purchase of 2.5% of Monaker’s
outstanding shares, (ii) research coverage that amounts to 15,000 common shares for initiation of non-paid equity research
coverage of Monaker, (iii) 15,000 common shares for achieving a three month average trading volume of $50,000 and $100,000
of
Monaker’s common stock and (iv) 150,000 warrants to purchase 150,000 shares of Monaker’s common stock (50,000
warrants with a $3.00 strike price vesting in 90 days from the effective date of the agreement, 50,000 warrants with a $4.00
strike price vesting the next 90 days, then 50,000 warrants with a $5.00 strike price vesting in the following 90 days). The
warrants have a 3 year term and cashless option adjustable for stock splits.
|
|
|
|
|
●
|
On
January 3, 2017, Monaker issued 150,000 shares of common stock, valued at $300,000 and
50,000 warrants to purchase 50,000 shares of Monaker’s common stock with a $3.00 strike price expiring on December 30, 2019,
for payment due pursuant to the terms of the Capital Market Access (CMA) Investor Relations and Financial Consulting Services
Agreement.
|
|
|
|
|
●
|
On January 3, 2017,
in connection with the CMA agreement discussed above, Monaker issued 10,000 shares of common stock, valued at $20,000, for
payment due pursuant to the terms of a consulting agreement.
|
|
|
|
|
●
|
On
January 16, 2017, we issued 10,000 shares of common stock, valued at $20,000, for payment due pursuant to the terms of a consulting
agreement.
|
Promissory
Note
|
●
|
On
December 20, 2016, we borrowed $37,500 from In Room Retail, which was evidenced by a Promissory Note (“Note”) in the
principal amount of $37,500, which accrued interest at the rate of 6% per annum. William Kerby, a member of the Board of Directors
and executive of the Company, is the managing member of In Room Retail.
|