Item
1.01 Entry into a Material Definitive Agreement
On
August 22, 2022, NextPlay Technologies, Inc. (the “Company”), through its wholly owned subsidiary, NextBank International,
Inc., a Puerto Rico corporation licensed as an Act 273-2012 international financial entity (“NextBank”), entered into a Collaboration
Agreement (the “Agreement”) with Alphabit Consulting Pte. Ltd. (“ABCC”), a leading Singapore-based cryptocurrency
exchange operator. The Agreement sets forth the terms and conditions of a partnership between NextBank and ABCC pursuant to which, in
the initial phase of the partnership, NextBank will provide bank accounts to the users of ABCC’s cryptocurrency exchange for the
deposit of fiat currency and will offer prepaid cards to such users, subject to certain limitations, as more particularly discussed below.
The
Agreement has a term of seven years, subject to earlier termination in accordance with the Agreement. Additionally, subject to certain
limitations, for a period of three years from August 22, 2022, neither party may enter into any discussion or collaborate with any third
party in relation to the provision of payment cards to users of the ABCC Exchange or other similar offerings in the Singapore Market
without the consent of the other party.
Any
revenues generated in accordance with the Agreement will be split between NextBank and ABCC in a 70%:30% ratio; provided, however, that
in the event that NextBank partners with any other cryptocurrency exchange in the Singapore market in relation to the provision of payment
cards to users of such other exchange, all revenue arising from such other partnership and received by NextBank shall be shared with
ABCC as follows: (i) if the partner was sourced by ABCC and referred to NextBank by ABCC, then revenues will be split between NextBank
and ABCC in a 80%/20% ratio, and (ii) if the partner was sourced directly by NextBank, then revenues will be split between NextBank and
ABCC in a 90%/10% ratio. NextBank and ABCC shall enter into a separate written agreement setting forth the terms and revenue splitting
ratio in the event that NextBank enters into a partnership with any other exchange.
Initial
Phase
Pursuant
to the Agreement, during the initial phase, ABCC customers who satisfy NextBank’s KYC requirements will have the ability to open
a bank account with NextBank for the deposit of fiat currency. Once customers have opened an account with NextBank, they will be able
to exchange cryptocurrencies they hold with the ABCC Exchange for fiat currencies held in their NextBank account (and vice versa). All
of the customers’ cryptocurrency balances will be held in their accounts with ABCC, and all fiat currency balances will be held
in their accounts with NextBank.
In
addition, during the initial phase, ABCC shall purchase Porta, a closed loop stable coin developed by NextBank, from NextBank from time
to time using fiat currency, which amounts shall be held in a separate reserve account by NextBank (the “ABCC Porta Reserve”).
The value of the ABCC Porta Reserve shall at all times meet or exceed a minimum value, as shall be determined by mutual agreement of
the parties (such minimum amount, the “Minimum Prepaid Card Reserve”). During the term of the Agreement, ABCC customers that
have opened NextBank accounts will have the ability to apply for and obtain a prepaid card from NextBank. Approved customers will be
provided with a NextBank Exchange Account at ABCC, to which they may send any Porta that they have purchased on the ABCC Exchange. Once
the transfer has been completed, NextBank will transfer that amount of fiat currency equal to the amount of Porta sent by the relevant
customer to such customer’s prepaid bank card. Once the fiat currency has been loaded to a customer’s prepaid bank card,
they may use the card to make purchases, similar to a debit card.
Porta
may not be transferred by ABCC or any of its customers to any person, address or wallet outside of ABCC, except as permitted by NextBank.
Second
Phase
At
such time, if ever, that ABCC and NextBank obtain necessary regulatory approvals, the Agreement provides that ABCC customers will also
have the opportunity to apply for a payment card, under which approved customers will have the ability to borrow funds from NextBank
up to a maximum amount, as determined based upon the value of the cryptocurrency balance (the “Staked Cryptocurrency”) held
by the relevant customer in a separate, segregated account (a “Staking Account”) at ABCC. Any credit available under such
a payment card will be secured by and limited by the value of the Staked Cryptocurrency held in a customer’s Staking Account, as
calculated in accordance with the terms of the Agreement. In the event that the value of the amount borrowed under a payment card exceeds
the Available Credit (as defined in the Agreement) due to a decrease in value of the Staked Cryptocurrency or for any other reason, the
customer will have 24 hours to increase the amounts held in his or her Staking Account to cover the difference. In the event that a customer
fails to do so, NextBank or ABCC, as applicable, will have the right to sell or otherwise liquidate part or all of the Staked Cryptocurrency
to cover any difference.
Customers
will be required to settle all credit extended under the payment cards within 30 days. In the event a customer fails to timely make any
required payments, NextBank shall be entitled to charge interest on all outstanding amounts at the rate of 5% per annum, calculated on
a daily basis until the outstanding balance is repaid in full.
Unless
and until NextBank obtains all necessary regulatory approvals from the Commissioner of the Office of Financial Institutions of Puerto
Rico or other relevant regulatory authority to be a custodian of cryptocurrency assets, the Staking Accounts shall be wholly controlled
and operated by ABCC. If and when NextBank obtains such necessary regulatory approvals, the Staking Accounts shall be jointly controlled
and operated by NextBank and ABCC.
No
assurances can be provided that NextBank or ABCC will obtain the necessary regulatory approvals to proceed with the Second Phase of the
Agreement. If such approvals are not obtained by both parties, then the Second Phase will not be implemented.
The
foregoing description of the material terms of the Agreement is qualified in its entirety by the full text of the Agreement, a copy of
which is attached as Exhibit 10.1 to this Report, and is incorporated herein by reference.