| Subsequent Events | Note 14– Subsequent Events Sales plan - Reinhart Digital TV (Zappware) and NextTrip to
TGS Esports, Inc On June 28, 2022, the Company entered into a
series of agreements, including a Securities Exchange Agreement, with William Kerby, the Company’s co-Chief Executive Officer
and director, Donald P. Monaco, a director of the Company, and British Columbia-based TGS E-Sports Inc. (TSX-V: TGS, OTC:
TGSEF), a public company whose securities are listed for trading on the Canadian TSX Venture Exchange, pursuant to which the Company
has agreed to sell the Company’s travel business, NextTrip Group, LLC, and its 51% ownership of Reinhart Digital TV (the 100%
owner of Zappware) to TGS in exchange for securities of TGS , as discussed in further detail below. TGS is a leading esports
tournament solutions provider. Prior to the execution of the securities exchange
agreement, NextTrip issued an aggregate of 915,000 units in NextTrip to Messrs. Kerby and Monaco to resolve certain management unit issuances
provided for in NextTrip’s Operating Agreement as consideration for services rendered. As consideration for the sale, upon closing of the transaction, (i) the
Company will receive 232,380,952 shares of newly created TGS Preferred stock, valued at $12.2 million, and (ii) Messrs. Kerby and Monaco,
both of whom hold certain equity interests in NextTrip (discussed above), will receive an aggregate of 69,714,286 TGS common shares, valued
at $3.66 million, of which 11,619,048 TGS common shares will be held in escrow for a period of time. The TGS Preferred shares will
be redeemable in certain situations, can be sold subject to certain transfer restrictions (including a right of first refusal in favor
of TGS), and may be converted into shares of TGS common shares in certain limited circumstances, including mandatory conversion upon the
occurrence of certain events. In the event that the TGS Preferred shares are converted into shares of TGS common shares by the Company
at any time, the Company is obligated to distributed all such shares of TGS common shares in a stock dividend to its shareholders. Concurrently
with a determination to convert the TGS Preferred shares into shares of TGS common shares, if ever, the Company will set a shareholder
record date for a special dividend to distribute all of the common shares of TGS held by the Company to the Company’s shareholders,
on a pro-rata basis. Concurrently with the execution of the Securities
Exchange Agreement, the Company, NextTrip, Reinhart and TGS entered into a separation agreement (the “Separation Agreement”)
to further document the separation of NextTrip and Reinhart from the Company and to assign, transfer and convey certain assets and liabilities
held in NextTrip or the Company’s name, respectively, to NextTrip or the Company, respectively, to allow for the separation of
the businesses in the Securities Exchange Agreement at closing of the transaction. Further, the Separation Agreement terminates
certain intercompany agreements and accounts by and between the parties at closing of the transaction, sets rights related to confidentiality,
non-disclosure and maintenance of attorney-client privilege matters and also provides for a mutual release by and among the Company,
NextTrip and Reinhart for all pre-closing claims between themselves and their officers, directors, affiliates, successors and assigns. In addition, the Separation Agreement provides
for the contribution of (i) $1.5 million to NextTrip and (ii) an additional $1.5 million in ten (10) equal monthly installments beginning
July 1, 2022, in exchange for NextTrip, as of May 1, agreeing to assume the ongoing operating expenses of NextTrip and Reinhart. NextTrip
has also agreed to assume payments under that certain payment obligation of the Company pursuant an Amendment to Intellectual Property
Purchase Agreement effective May 18, 2021 by and between the Company, IDS Inc., TD Assets Holding LLC, and Ari Daniels in the approximate
amount of $2,500,000, provided, however, that, if the Company fails to make any of the above installment payments within five (5) business
days of being due, that such IDS payment obligation reverts back to the Company. Closing of the transaction remains subject to
various conditions, including (without limitation) regulatory approvals and consummation of a financing by TGS, and is expected to occur
in the second half of 2022. Additionally, as a further condition of closing the transaction, TGS shall hold a shareholder meeting
as soon as reasonably practicable to approve the transaction, an amendment to the articles of incorporation of TGS to create the TGS
Preferred, a 40:1 share consolidation (reverse stock split) and related matters (collectively, the “Transaction Proposals”).
In connection with the shareholder meeting, TGS is also obligated to file a circular with the Canadian securities authorities in accordance
with Canadian law and the policies of the TSXV. No assurances can be provided that the closing conditions will be satisfied, or that
the transaction will be consummated on the anticipated timeline, or at all. In addition, in order to induce the Company to
enter into the Securities Exchange Agreement, certain TGS shareholders agreed to enter into a voting support agreement pursuant to which
they agreed to vote their TGS common shares in favor of the Transaction Proposals. At closing of the transaction, the Company shall
enter into (i) a right of first refusal and distribution agreement that governs certain rights between the parties with respect to the
subsequent disposition of the TGS Preferred Shares, and (ii) a stock escrow agreement, pursuant to which a portion of the TGS common
shares issued to Messrs. Kerby and Monaco will be held in escrow for a period of up to four (4) years (the “Escrow Period”)
at which point, if the following conditions have not been met, such Escrow Shares will be canceled and returned to TGS’ treasury:
(x) the TGS common share trading price at the time of a conversion of Preferred Shares by the Company occurs is at or above $0.06375
(a 115% premium on the closing price), or (y) the Preferred Shares are sold or redeemed by the Company at or above a price of $14,030,000
(a 115% premium). At the closing of the transaction, the board
of directors of TGS will consist of seven members, five of whom will be designated by Messrs. Kerby and Monaco and two of which will
be designated by Mr. Spiro Khouri of TGS. The transaction, once consummated, is expected
to streamline the Company’s business operations and management, improve capital allocation, and is expected to unlock shareholder
value by offering investors a pure-play investment in the Digital Media and Financial Technology sectors. As a result of the foregoing, as of May 31, 2022,
Reinhart/Zappware and NextTrip were no longer consolidated nor treated as a division of the Company; accordingly, for the three-month
period ended May 31, 2022, the Company had two remaining reportable business segments: NextFinTech and NextMedia. In connection with the sale plan, the Company
has reclassified certain assets and liabilities to present as held for sale. As of May 31, 2022, the Company has classified goodwill
and intangible assets as held for sale in current assets as follows:
As of May 31, 2022
Reinhart NextTrip Total
Goodwill
Carrying amount $ 16,818,456 $ 5,191,082 22,009,538
Accumulated translation adjustment (983,733 ) — (983,733 )
Allowance for impairment loss (5,040,460 ) (5,191,082 ) (10,231,542 )
Goodwill, net $ 10,794,263 $ — $ 10,794,263
Intangible assets
Net book value $ 7,525,588 $ 3,965,122 11,490,710
Allowance for impairment loss — (1,681,874 ) (1,681,874 )
Intangible assets, net $ 7,525,588 $ 2,283,248 $ 9,808,836 During the three-month period
ended May 31, 2022, the Company performed the impairment assessment and recognized the impairment loss in operation loss from discontinued
operations to reflect the expected recoverable amount, comprised of impairment loss on intangible assets of NextTrip amounting to $0.5
million, and impairment loss on goodwill of Reinhart/Zappware, amounting to $0.1 million. As of February 28, 2022, the Company has classified
goodwill and intangible assets as held for sale in non-current assets as follows:
As of February 28, 2022
Reinhart NextTrip Total
Goodwill
Carrying amount $ 16,818,456 $ 5,191,082 $ 22,009,538
Accumulated translation adjustment (844,568 ) — (844,568 )
Allowance for impairment loss (4,977,023 ) (5,191,082 ) (10,168,105 )
Goodwill, net $ 10,996,865 $ — $ 10,996,865
Intangible assets
Net book value $ 6,468,491 $ 2,525,142 8,993,633
Allowance for impairment loss — (1,215,746 ) (1,215,746 )
Intangible assets, net $ 6,468,491 $ 1,309,396 $ 7,777,887 During the year ended February 28, 2022, the
Company performed the impairment assessment and recognized the impairment loss for goodwill and intangible assets of Reinhart/Zappware
and NextTrip units, as we assessed that the fair value from expected recoverable selling price was lower than the book value, therefore
recorded impairment on goodwill amounted to $10.2 million, comprised Reinhart/Zappware in amount $5.0 million and NextTrip in amount
$5.2 million and impairment loss on intangible assets of NextTrip amounting to $1.2 million. The business of NextTrip represented the
entirety of the NextTrip operating segment and Reinhart Digital TV was a part of NextMedia operating segment until February 28,
2022. Comparative figures included in the accompanying condensed consolidated financial statements have been reclassified to conform
with current period presentation. The detail of assets and liabilities classified
as held for sale as of May 31, 2022 and February 28, 2022 were as follows:
Reinhart/Zappware
May 31, February 28,
Assets
Cash and cash equivalent $ 1,194,230 2,185,719
Accounts receivable, net 1,073,312 839,612
Unbilled receivables 1,819,470 3,275,229
Other receivable — 3,251
Work in progress 647,743 691,863
Prepaid expenses and other current assets 194,514 123,084
Intangible assets, net 7,525,588 —
Goodwill, net 10,794,263 —
Computers, furniture and equipment, net 131,766 —
Operating lease right-of-use asset 1,935,764 —
Security deposits 59,105 —
Total current assets held for sale 25,375,755 7,118,758
Intangible assets, net — 6,468,491
Goodwill, net — 10,996,865
Computers, furniture and equipment, net — 149,791
Operating lease right-of-use asset — 2,067,942
Security deposits — 71,401
Total non current assets held for sale — 19,754,490
Total assets $ 25,375,755 26,873,248
Liabilities
Line of credit and notes payable, net $ 3,030,849 2,878,274
Accounts payable and accrued expenses 3,138,538 3,557,080
Other current liabilities 264,906 264,905
Deferred revenue 1,007,698 2,040,787
Current portion of operating lease liability 1,935,765 493,622
Total current liabilities held for sale 9,377,755 9,234,668
Line of Credit and Notes Payable Long Term, net — 270,808
Operating lease liability, net of current portion — 1,574,320
Other long term liability — 28,761
Total non current liabilities held for sale — 1,873,889
Total liabilities $ 9,377,755 11,108,557
Net asset $ 15,998,000 15,764,691
NextTrip
May 31, February 28,
Assets
Cash and cash equivalent $ 536,429 151,122
Accounts receivable, net 3,856 1,056
Other receivable 204,891 1,197
Prepaid expenses and other current assets 66,227 60,861
Intangible assets, net 2,283,248 —
Computers, furniture and equipment, net 28,730 —
Security deposits 15,000 —
Total current assets held for sale 3,138,381 214,236
Intangible assets, net — 1,309,396
Computers, furniture and equipment, net — 41,671
Security deposits — 15,000
Total non current assets held for sale — 1,366,067
Total assets $ 3,138,381 1,580,303
Liabilities
Accounts payable and accrued expenses 449,837 315,595
Deferred revenue 147,544 157,790
Total current liabilities held for sale 597,381 473,385
Total liabilities $ 597,381 473,385
Net asset 2,541,000 1,106,918
Total assets and
May 31, February 28,
Assets
Cash and cash equivalent 1,730,659 2,336,841
Accounts receivable, net 1,077,168 840,668
Unbilled receivables 1,819,470 3,275,229
Other receivable 204,891 4,448
Work in progress 647,743 691,863
Prepaid expenses and other current assets 260,741 183,945
Intangible assets, net 9,808,836 —
Goodwill, net 10,794,263 —
Computers, furniture and equipment, net 160,496 —
Operating lease right-of-use asset 1,935,764 —
Security deposits 74,105 —
Total current assets held for sale 28,514,136 7,332,994
Intangible assets, net — 7,777,887
Goodwill, net — 10,996,865
Computers, furniture and equipment, net — 191,462
Operating lease right-of-use asset — 2,067,942
Security deposits — 86,401
Total non current assets held for sale — 21,120,557
Total assets 28,514,136 28,453,551
Liabilities
Line of credit and notes payable, net 3,030,849 2,878,274
Accounts payable and accrued expenses 3,588,375 3,872,675
Other current liabilities 264,906 264,905
Deferred revenue 1,155,242 2,198,577
Operating lease liability 1,935,765 493,622
Total current liabilities held for sale 9,975,136 9,708,053
Line of Credit and Notes Payable Long Term, net — 270,808
Operating lease liability, net of current portion — 1,574,320
Other long term liability — 28,761
Total non current liabilities held for sale — 1,873,889
Total liabilities 9,975,136 11,581,942
Net asset 18,539,000 16,871,609 The Consideration expected to be received by the Company upon closing of the transaction
– Nonvoting convertible preferred shares of TGS compared with net book value of selling assets as of May 31, 2022 were as
follows:
Net asset of Reinhart/Zappware as of May 31, 2022 15,998,000
Net asset of NextTrip as of May 31, 2022 2,541,000
Total net asset 18,539,000
Additional cash contribution to TGS per agreement 3,000,000
Cash transferred to NextTrip in May 2022 (1,500,000 )
1,500,000
Less: Fair value of Reinhart/Zappware – non-controlling
interest (7,839,000 )
Consideration expected to receive – Nonvoting convertible
preferred shares of TGS 12,200,000 The operating results of held-for-sale
entities included in the Company’s Statement of Comprehensive Income for the three-month period ended May 31, 2022 were as
follows:
For the three months ended May 31, 2022 Reinhart/ NextTrip Total
Revenue $ 4,027,662 $ 171,751 $ 4,199,413
Cost of Revenue 1,315,768 135,885 1,451,653
Gross Profit $ 2,711,894 $ 35,866 $ 2,747,760
Operating expenses 1,741,033 1,171,260 2,912,293
Other Expense 117,216 526,497 643,713
Net profit (loss) before tax for the period from discontinued operations $ 853,645 $ (1,661,891 ) $ (808,246 )
Estimated corporate taxes $ — $ — $ —
Net profit (loss) after tax for the period from discontinued operations $ 853,645 $ (1,661,891 ) $ (808,246 )
Share profit of non-controlling interest 418,286 — 418,286
Net profit (loss) from discontinued operation attributable to parent 435,359 (1,661,891 ) (1,226,532 )
Other Comprehensive (loss) income:
Currency Translation from discontinued operation $ (746,581 ) $ — $ (746,581 )
Comprehensive (loss) income $ 107,064 $ (1,661,891 ) $ (1,554,827 )
Currency translation allocated to:
Equity holders of the Company $ (380,756 ) $ — $ (380,756 )
Non-controlling interests of the subsidiaries (365,825 ) — (365,825 )
$ (746,581 ) $ — $ (746,581 )
Total comprehensive (loss) income attributable to:
Equity holders of the Company $ 54,603 $ (1,661,891 ) $ (1,607,288 )
Non-controlling interests of the subsidiaries 52,461 — 52,461
$ 107,064 $ (1,661,891 ) $ (1,554,827 ) The operating result included in the Company’s
Statement of Comprehensive income for the three-month period ended May 31, 2021 represented HotPlay only. The net cashflow of held-for-sale entities
are included in the Company’s cash flow statement for the three-month period ended May 31, 2022 were as follows:
Reinhart/ NextTrip Total
Net cash flows from (used in) operating activities $ (312,682 ) $ 1,584,429 $ 1,271,747
Net cash flows used in investing activities (550,517 ) (2,699,122 ) (3,249,639 )
Net cash flows from (used in) financing activities (128,290 ) 1,500,000 1,371,710
Net increase (decrease) in cash and cash equivalent $ (991,489 ) $ 385,307 $ (606,182 ) No cashflow of held-for-sale entities are
included in the Company’s cash flow statement for the three-month period ended May 31, 2021, as it represented HotPlay
only. June 2022 Promissory Notes On June 13, 2022, the Company entered into
two promissory notes, each in the principal amount of approximately CAD $231,121 (USD $178,234), with its former legal counsel, which
notes were issued, along with a CAD $10,000 (USD $7,712) in lieu of immediate payment of outstanding amounts payable to such counsel
for legal services previously rendered to the Company. The first note will mature on July 31, 2022, and the second note will mature on
September 1, 2022; provided, however, that if the Company fails to repay the first note in full on or before its maturity date, then
the second note will automatically become immediately due and payable. Both notes are unsecured and accrue interest at a rate of 18%
per annum. |
