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NextPlay Technologies (NXTP)
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Risk Overview Q4, 2022
Risk Distribution
36% Finance & Corporate
19% Legal & Regulatory
18% Tech & Innovation
11% Macro & Political
8% Production
8% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
NextPlay Technologies Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q4, 2022
Main Risk Category
Finance & Corporate
With 27 Risks
Finance & Corporate
With 27 Risks
Number of Disclosed Risks
74
No changes from last report
S&P 500 Average: 31
74
No changes from last report
S&P 500 Average: 31
Recent Changes
1Risks added
0Risks removed
1Risks changed
Since Nov 2022
1Risks added
0Risks removed
1Risks changed
Since Nov 2022
Number of Risk Changed
1
No changes from last report
S&P 500 Average: 3
1
No changes from last report
S&P 500 Average: 3
See the risk highlights of NextPlay Technologies in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 74
Finance & Corporate
Total Risks: 27/74 (36%)Below Sector Average
Share Price & Shareholder Rights12 | 16.2%
Share Price & Shareholder Rights - Risk 1
Nevada law and our Articles of Incorporation authorize us to issue shares of stock, which shares may cause substantial dilution to our existing stockholders.Share Price & Shareholder Rights - Risk 2
The ownership of our capital stock is highly concentrated, which may prevent other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.As of May 30, 2022, Nithinan Boonyawattanapisut (our Co-Chief Executive Officer and a director) and her spouse, J. Todd Bonner (Chairman of our board of directors) beneficially own, together with entities controlled by them, approximately 26% of our issued and outstanding shares of common stock. In addition, Tree Roots Entertainment Group Co Ltd. ("Tree Roots"), and entity controlled by Jwanwat Ahriyavraromp and Pornsinee Chalermrattawongz, beneficially owns approximately 25% of our outstanding common stock as of May 30, 2022. Accordingly, Ms. Boonyawattanapisut and Mr. Bonner (together), and Mr. Ahriyavraromp and Mrs. Chalermrattawongz (through their control of Tree Roots), exert substantial influence over the Company and the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company's assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the Company, even if such a change of control would benefit other stockholders of the Company. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise.
Share Price & Shareholder Rights - Risk 3
Stockholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock or securities convertible into, or exercisable for, shares of our common stock.Our board of directors has authority, without action or vote of our stockholders, to issue all or part of our authorized but unissued shares of common stock. In the past we have, and in the future we may, raise additional capital by selling shares of our common stock or securities convertible into, or exercisable for, shares of our common stock, possibly at a discount to the market price of such securities. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management's ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.
Share Price & Shareholder Rights - Risk 4
The price of our common stock may fluctuate significantly, and investors could lose all or part of their investments.The market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described herein and other factors beyond our control. Factors affecting the trading price of our common stock could include, without limitation:
- variations in our operating results and/or those of similar companies and our competitors; - changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; - announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors; - marketing and advertising initiatives by us or our competitors; - threatened or actual litigation; - changes in our management; - market conditions in the industries in which we operate and the economy as a whole; - the overall performance of the equity markets; - sales of shares of our common stock by us or by existing stockholders; - global pandemics and epidemics, such as COVID-19; and - adoption or modification of regulations, policies, procedures or programs applicable to our business.
Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could harm the value of our common stock.
In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation; and we have previously been the target of this type of litigation. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert our management's attention from other business concerns, which could materially harm our business.
Share Price & Shareholder Rights - Risk 5
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.Future sales of substantial amounts of our common stock (including in this offering), or securities convertible or exchangeable into shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options and warrants, or the perception that those sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital in the future. Additionally, the market price of our common stock could decline as a result of sales by, or the perceived possibility of sales by, our existing stockholders of shares of our common stock in the market after this offering. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.
Share Price & Shareholder Rights - Risk 6
You will experience further dilution if we issue additional equity securities in the future.In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exercisable or exchangeable for our common stock. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. To the extent that outstanding warrants are exercised, investors purchasing our common stock in this offering will experience further dilution.
Share Price & Shareholder Rights - Risk 7
Certain of our outstanding warrants include anti-dilutive rights.Certain of our outstanding warrants include anti-dilution rights, which provide that if at any time while such warrants are outstanding, we issue or enter into an agreement to issue, or are deemed to have issued or entered into an agreement to issue (which includes the issuance of securities convertible or exercisable for shares of our common stock), securities for consideration less than the then current exercise price of such warrants, the exercise price of such warrants shall be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities. As of May 31, 2022, there were warrants to purchase an aggregate of 14,430,908 shares of our common stock that include the foregoing anti-dilution provisions outstanding, consisting of (i) 2021 Warrants to purchase 14,240,508 shares of common stock, which 2021 Warrants currently have an exercise price of $1.97 per share (the "Floor Price"), and (ii) warrants to purchase 190,400 shares of common stock that we issued to certain institutional investors on October 2, 2018 (the "2018 Warrants"), which 2018 Warrants currently have an exercise price of $2.00 per share. Unless and until we received shareholder approval to reduce the exercise price of the 2021 Warrants below the Floor Price, no such adjustment to the exercise price of the 2021 Warrants may be made. Although we have not received stockholder approval to remove the Floor Price of the 2021 Warrants to date, we have agreed to hold special meetings of our stockholders every three months, for so long as the 2021 Warrants remain outstanding, to obtain such stockholder approval. Pursuant to the terms of the 2018 Warrants, the exercise price thereof may not be reduced below $0.57 per share. Adjustments to the exercise price of the 2018 Warrants are not subject to approval by our stockholders.
In the event that shareholder approval of removal of the Floor Price is obtained during the term of the 2021 Warrants, the subsequent sale of any shares in this offering at a price below $1.97 per share will result in an automatic reduction of the exercise price of the 2021 Warrants to a price equal to the lowest price at which such shares are sold. In the event that any such sale occurs prior to shareholder approval of removal of the Floor Price, the exercise price of the 2021 Warrants will be reduced to the lowest price of any such prior sales effective immediately upon receipt of shareholder approval. Additionally, the sale of any shares in this offering at a price below $2.00 per share will result in an automatic reduction of the exercise price of the 2018 Warrants to a price equal to the lowest price at which such shares are sold, subject to a floor of $0.57 per share.
Share Price & Shareholder Rights - Risk 8
Provisions in our amended and restated articles of incorporation limiting the liability of management to stockholders.We have adopted provisions, and will maintain provisions, to our amended and restated articles of incorporation that limit the liability of our directors, and provide for indemnification by us of our directors and officers to the fullest extent permitted by Nevada law. Our amended and restated articles of incorporation and Nevada law provide that directors have no personal liability to third parties for monetary damages for actions taken as a director, except for breach of duty of loyalty, acts or omissions not in good faith involving intentional misconduct or knowing violation of law, unlawful payment of dividends or unlawful stock repurchases, or transactions from which the director derived improper personal benefit. Such provisions limit the stockholders' ability to hold directors liable for breaches of fiduciary duty and reduce the likelihood of derivative litigation against directors and officers.
Share Price & Shareholder Rights - Risk 9
If securities analysts and other industry experts do not publish research or publish negative research about our business, our stock price and trading volume could decline.The trading market for our common stock depends in part on the research, reports and other media that securities analysts and other industry experts publish about us or our business. If security analysts do not cover our stock, downgrade our stock or publish negative research about our business, our stock price could decline. If analysts do not cover us in the future or fail to publish reports on us regularly, we could lose visibility in the stock market and demand for our stock could decrease, which could cause our stock price or trading volume to decline. If one or more industry analysts publish negative statements about our business, our stock price could decline.
Share Price & Shareholder Rights - Risk 10
Our common stock may be delisted from the Nasdaq Capital Market if we cannot satisfy Nasdaq's continued listing requirements.On January 26, 2022, the Company received a notification letter (the "Notice") from the Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that, because the closing bid price for the Company's common stock was below $1.00 per share for 30 consecutive trading days, the Company is not currently in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the "Minimum Bid Price Requirement"). The notification has no immediate effect on the listing of the Company's common stock on the Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
In accordance with Nasdaq Marketplace Rule 58I0(c)(3)(A), the Company has a period of 180 calendar days from January 26, 2022, or until July 25, 2022, to regain compliance with the Minimum Bid Price Requirement. If at any time before July 25, 2022, the closing bid price of the Company's common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending on July 25, 2022, then Nasdaq may grant the Company a second 180 calendar day grace period to regain compliance, provided the Company (i) meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for the Nasdaq Capital Market, other than the minimum closing bid price requirement, and (ii) the Company notifies Nasdaq of its intent to cure the deficiency.
The Company intends to continue actively monitoring the closing bid price for the Company's common stock between now and July 25, 2022 and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance within the allotted compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company's common stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the Minimum Bid Price Requirement during the 180 days compliance period, secure a second period of 180 calendar days to regain compliance, or maintain compliance with the other Nasdaq listing requirements.
If our common stock is delisted from Nasdaq, it could come within the definition of "penny stock" as defined in the Exchange Act and would then be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
Share Price & Shareholder Rights - Risk 11
Our failure to be current in our filings with the SEC could pose significant risks to our business, which could, individually or in the aggregate, materially and adversely affect our financial condition and results of operations.Despite our efforts, we were unable to file this Report with the SEC on or before the applicable filing deadline. We may face various consequences as a result, as further discussed below, which could, individually or in the aggregate have a material adverse affect on our financial condition and results of operations.
Under the Exchange Act, the Company (as a reporting company) is required to file certain periodic and current reports with the SEC in order to provide investors important financial and business information related to the Company. Examples of these reports include the annually filed Form 10-K and the quarterly filed Form 10-Q. Periodic reports help investors to make informed investment decisions about the purchase or sale of a reporting company's securities. The timely and complete submission of periodic reports provides investors with information to help them make informed investment decisions. The SEC's Divisions of Enforcement and Corporation Finance jointly established the Delinquent Filings Program in 2004 to encourage reporting companies that are delinquent in filing their periodic reports to submit their periodic reports or rectify deficient periodic reports. If a reporting company identified as a delinquent filer fails to submit its periodic reports, Section 12(k) of the Exchange Act gives the SEC the authority to suspend trading in a security for up to 10 trading days if the SEC believes that a suspension is required to protect investors and the public interest. A trading suspension by the SEC halts the trading in a security on all trading platforms. In addition, Section 12(j) gives the SEC the authority to revoke, or suspend for up to twelve months, an issuer's securities registration if, after an administrative hearing, the SEC finds that an issuer violated the Exchange Act by failing to file its periodic reports.
Additionally, issuers who have not timely filed their periodic reports lose their eligibility to offer and sell their securities under a Form S-3 Registration statement, which can make it more difficult for companies to raise funds in a timely and cost effective manner, or at all. Pursuant to Form S-3, unless relief is provided by the SEC, the loss of eligibility to use Form S-3 extends for a period of 12 months from the delinquent filing. As a result, unless we are able to obtain relief from the SEC, we will not be able to register any new securities on certain registration statements under the Securities Act, such as Forms S-3, until we have filed all reports required under the Exchange Act for a continuous period of 12 months. Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our financial condition.
Our failure to timely file this Report SEC could have additional adverse impacts on our ability to, among other things, (i) access our ATM Offering facility; (ii) continue to have our common stock listed for quotation on the Nasdaq Capital Market; (iii) consummate certain strategic transactions; (iv) attract and retain key employees, or (v) raise funds in the public markets, and any of these events could materially and adversely affect our financial condition and results of operations.
Share Price & Shareholder Rights - Risk 12
We have agreed to hold meetings of our stockholders every 90 days for purposes of removing the Floor Price of certain Warrants, which may be time consuming and expensive.On November 3, 2021, we sold Warrants (the "2021 Warrants") to purchase an aggregate of 14,240,508 shares of common stock, together with 18,987,342 shares of our common stock, to certain accredited investors in a registered direct offering. Each 2021 Warrant has an initial exercise price of $1.97 per share (the Floor Price), and may be exercised commencing six months after the issuance date and terminating on the fifth anniversary thereof. The 2021 Warrants provide that if at any time the 2021 Warrants are outstanding, we issue or enter into any agreement to issue, or are deemed to have issued or entered into an agreement to issue, certain securities for consideration less than the then current exercise price of the 2021 Warrants, the exercise price of such 2021 Warrants will be automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities; provided, however, that unless and until we have received stockholder approval to reduce the exercise price of the 2021 Warrants below the Floor Price, no such adjustment to the exercise price may be made.
We have agreed to hold a special meeting of our stockholders every 90 days for the life of the 2021 Warrants to obtain stockholder approval of the removal of the Floor Price, which stockholder approval may never be obtained. Holding stockholder meetings is expensive and requires significant time and efforts of our management. If stockholder approval is not obtained during the life of the 2021 Warrants, such expenses and diversion of management's time and efforts could have a material adverse effect on our financial condition, business, and operations.
Accounting & Financial Operations4 | 5.4%
Accounting & Financial Operations - Risk 1
We have a limited operating history in certain of the industries that we currently operate in and have incurred significant operating losses since inception. We may never become profitable or, if achieved, be able to sustain profitability.Accounting & Financial Operations - Risk 2
Acceptance and/or widespread use of digital assets is uncertain.Currently, there is a relatively small use of digital assets in the retail and commercial marketplace for goods or services. In comparison, there is a relatively large use by speculators contributing to price volatility. Furthermore, although security tokens are increasingly being adopted by institutions, these are still at a nascent stage. There is no guarantee that digital assets will gain widespread adoption and a lack of acceptance or decline in acceptances could have a material adverse effect on our NextFinTech business, prospects or operations.
Accounting & Financial Operations - Risk 3
If we fail to maintain effective internal controls, it could adversely affect our financial position and lower our stock price.We are subject to reporting and other obligations under the Exchange Act, including the requirements of the Sarbanes-Oxley Act. These provisions require annual management assessments of the effectiveness of our internal controls over financial reporting. We also operate in a complex environment and expect these obligations, together with our rapid growth and expansion through acquisitions, to place significant demands on our management and administrative resources, including accounting and tax resources. If we are unable to conclude that our internal control over financial reporting is effective, our investors could lose confidence in the accuracy and completeness of our financial reports.
Accounting & Financial Operations - Risk 4
We do not intend to pay dividends on our common stock for the foreseeable future.We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future. Investors should not rely on an investment in us if they require income generated from dividends paid on our capital stock. Because we do not intend to pay dividends on our common stock, any income derived from our common stock would only come from a rise in the market price of our common stock, which is uncertain and unpredictable.
Debt & Financing6 | 8.1%
Debt & Financing - Risk 1
NextBank uses correspondent banks and is subject to risk associated with termination of such relationships, which may negatively impact its operations.Debt & Financing - Risk 2
We need additional capital which may not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.Changed
As of November 30, 2022, the Company had an accumulated deficit of $57.17 million. Net loss after tax from continuing operation and from discontinued operations for the nine months ended November 30, 2022, amounted to $14.85 million and $5.69 million, respectively. Our FinTech Division generated gross profits of $0.44 million for the nine months ended November 30, 2022, and as of November 30, 2022, we had working capital of $3.53 million. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven. We may never ever achieve profitable operations or generate significant revenues. Our future operating results depend on many factors, including demand for our products, the level of competition, and the ability of our officers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively impact the ability of the Company to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, achieve, or sustain profitability, or continue as a going concern. Furthermore, due to our relatively small size and market footprint, we may be more susceptible to issues affecting cryptocurrency, gaming and banking industries in general as compared to larger competitors.
We currently have a monthly cash requirement of approximately $1.4 million. We believe that in the aggregate, we could require several millions of dollars to support and expand the marketing and development of our 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 all products are fully implemented and begin to offset our operating costs. We require additional funding in the future and if we are unable to obtain additional funding on acceptable terms, or at all, it will negatively impact our business, financial condition, and liquidity. As of November 30, 2022 and February 28, 2022, we had $57.67 million and $27.50 million of current liabilities, respectively.
We have derived our funding of operations mainly with equity transactions and with the proceeds from debt offerings.
We have experienced liquidity issues due to, among other reasons, our limited ability to raise adequate capital on acceptable terms. We have historically relied upon the sale of common stock and other equity securities and the issuance of promissory notes to fund our operations and have devoted significant efforts to reduce that exposure. We anticipate that we will need to issue equity to fund our operations and continue to repay our outstanding debt for the foreseeable future. If we are unable to achieve operational profitability or are not successful in securing other forms of financing, we will have to evaluate alternative actions to reduce our operating expenses and conserve cash.
These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The financial statements included herein also include a going concern footnote from our auditors.
In the event we are unable to raise adequate funding in the future for our operations and to pay our outstanding debt obligations, we may be forced to scale back our business plan and/or liquidate some or all of our assets or may be forced to seek bankruptcy protection, which could result in the value of our outstanding securities declining in value or becoming worthless.
Debt & Financing - Risk 3
Our tokens might be used for illegal or improper purposes, which could expose us to additional liability and harm our business.Our tokens remain susceptible to potentially illegal or improper uses, as criminals are using increasingly sophisticated methods to engage in illegal activities involving internet services, such as money laundering, terrorist financing, drug trafficking, human trafficking, illegal online gaming, romance and other online scams, prohibited sales of pharmaceuticals, fraudulent sale of goods or services, piracy of software, movies, music and other copyrighted or trademarked goods, unauthorized uses of credit and debit cards or bank accounts and similar misconduct. Tokenholders may also encourage, promote, facilitate or instruct others to engage in illegal activities. If the measures we have taken are too restrictive and inadvertently screen proper transactions, this could diminish customer experience which could harm our business.
Debt & Financing - Risk 4
Our ability to service our indebtedness will depend on our ability to generate cash and/or raise additional capital in the future.Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future and/or raise additional capital. Our ability to generate cash is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. We may continue to not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service and other liquidity needs, and we may not be able to obtain additional financing on terms favorable to us (if at all), either of which could result in our inability to comply with financial and other covenants contained in our debt agreements, our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable to service our debt obligations, fund our other liquidity needs, and maintain compliance with our financial and other covenants, we could be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such alternatives may not be feasible or adequate.
Debt & Financing - Risk 5
Our obligations under the October 2021 and May 2022 Streeterville Notes are secured by a first priority security interest in substantially all of our assets.On October 22, 2021 and May 5, 2022, we entered into Note Purchase Agreements with Streeterville, pursuant to which we sold Streeterville the October 2021 and May 2022 Streeterville Notes, in the aggregate principal amount of $2,765,000. The October 2021 and May 2022 Streeterville Notes all bear interest at a rate of 10% per annum and mature 12 months from their date of issuance. For so long as any of the notes remain outstanding, we have agreed to pay to Streeterville 20% of the gross proceeds that we receive from the sale of our common stock or preferred stock within ten days of receiving such amount, which payments will be applied towards and will reduce the outstanding balance of the notes, which percentage increases to 30% upon the occurrence of, and continuance of, an event of default under the Streeterville Note.
In connection with issuance of the October 2021 and May 2022 Streeterville Notes, we entered into Security Agreements with Streeterville, pursuant to which our obligations to Streeterville under the notes are secured by substantially all of our assets. As such, Streeterville may enforce its security interests over our assets and/or our subsidiaries that secure the repayment of such obligations, take control of our assets and operations, force us to seek bankruptcy protection or force us to curtail or abandon our current business plans and operations. If that were to happen, any investment in the Company could become worthless.
Debt & Financing - Risk 6
We have significant indebtedness, which could adversely affect our business and financial condition.We currently have significant indebtedness. As of February 28, 2022, we had total current liabilities of $27.5 million. Risks relating to our indebtedness include, without limitation:
- increasing our vulnerability to general adverse economic and industry conditions; - requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; - making it more difficult for us to optimally capitalize and manage the cash flow for our businesses; - limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate; - possibly placing us at a competitive disadvantage compared to our competitors that have less debt; and - limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we find acceptable.
Corporate Activity and Growth5 | 6.8%
Corporate Activity and Growth - Risk 1
If we do not successfully implement our acquisition strategies, the businesses and/or assets that we have acquired or invested in do not perform as expected, or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed.Corporate Activity and Growth - Risk 2
HotPlay's Go-to-market ("GTM") strategy and timeline dependent on ability to recruit key development roles in FY23.The current timeline for commercial launch of the HotPlay IGA product is dependent on us filling several open senior positions within the HotPlay development team by the end of FY23, within the budget allocated to do so. Given the current global competitive climate for software developers and the rising costs associated with hiring these resources, amongst other things, there is a risk that we may not be able to recruit the necessary resources in the required timeframe to be able to deliver on the HotPlay revenue forecasts for FY23. If we are unable to do so, our operating results may suffer.
Corporate Activity and Growth - Risk 3
The sale of the Company's travel and media businesses is contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.Added
On June 29, 2022, we announced that we had entered into a series of agreements with TGS, pursuant to which the Company agreed to sell TGS its travel and media businesses, subject to satisfaction of various closing conditions. The transaction may not be completed as currently contemplated, or at all, and may not provide the benefits that we intend. Completion of the proposed sale is subject to certain closing conditions, including, without limitation, TSXV's consent and approval of the transaction, approval of the transaction and certain related matters by TGS' shareholders and consummation of a financing by TGS. The proposed transaction is complex in nature, and may be affected by unanticipated developments, disruptions in the credit or equity markets, or changes in general economic conditions. These or other unanticipated developments could delay or prevent the transaction from closing or cause it to occur on terms or conditions that are less favorable than anticipated.
Even if the transaction is completed, it may not be successful in accomplishing our objectives. Additionally, even if completed, no assurances can be provided that the TGS Preferred shares will ever be converted into shares of TGS common stock and distributed to our stockholders through a special dividend, sold by the Company or redeemed by TGS at any point. Additionally, there is the potential for business disruption to each company and significant separation costs. Planning and executing the transaction will require significant additional time, effort and expense, and may divert the attention of our management and employees, and those of TGS from other aspects of the business operations, and any delays in the completion of the transaction may increase the amount of time, effort, and expense that is devoted to the transaction. The sale of our travel and media businesses to TGS could cause our customers or customers of TGS to delay or defer decisions to purchase products or renew contracts, or to end their relationships. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows or the price of shares of our common stock.
Corporate Activity and Growth - Risk 4
Developing NextBank into a comprehensive FinTech solution provider involves a high risk of complexity, may require substantial resources and costs, and is subject to obtaining regulatory approval.NextBank is in the process of developing a range of products and technologies to support the digital asset industry, and aims to become a comprehensive FinTech solution provider. The development of such technologies involves a high level of complexity, requires sophisticated security implementations, and integration with third-party tools. Furthermore, the implementation and launch of certain products may be subject to regulatory approvals from the Office of the Commission of Financial Institutions ("OCIF") or regulators in other jurisdictions. We may not be able to successfully develop and/or implement the products, which may negatively affect our ability to generate revenue and could have a material adverse effect on our results of operations.
Corporate Activity and Growth - Risk 5
Our revenues and results of operations are subject to the ability of our distributors and partners to integrate our ALRs with their websites, and the timing of such integrations.The integration of our ALRs with our distributors' and partners' websites is complicated and may involve various software components and application program interfaces ("APIs"). The timing of the integration of our distributors' ability to access our ALR offerings stored in our Booking Engine is significantly dependent on the ability of such distributors to implement processes, procedures and in some cases, software or systems to integrate with our API, which will enable them to list our ALRs on their websites. We have little to no control over those processes, or the timing of such integrations.
Our NextTrip division's future revenues and results of operations are substantially dependent on the timing of those integrations and in some cases the willingness of our distributors and partners to undertake additional steps and processes in order to provide us what we need, and in the form that we need, to implement such integrations. The failure of our partners and/or distributors to undertake the actions required so that we can successfully integrate our offerings, and/or any delay in such integrations, may have a negative effect on our revenues and results of operations. The actions of our partners and distributors, and/or their ability to undertake such actions, may further be limited by the effects of COVID-19.
Legal & Regulatory
Total Risks: 14/74 (19%)Below Sector Average
Regulation7 | 9.5%
Regulation - Risk 1
We are subject to anti-bribery, anti-corruption and similar laws and non-compliance with such laws could subject us to criminal penalties or significant fines and harm our business and reputation.Regulation - Risk 2
NextBank faces risk of non-compliance and enforcement actions related to Bank Secrecy Act and other anti-money laundering, customer due diligence, and combating the financing of terrorism statues and regulations.NextBank is regulated by OCIF and has to comply with strict regulations including Bank Secrecy Act, and anti-money laundering ("AML"), customer due diligence ("CDD"), and combating the financing of terrorism ("CTF"). Although NextBank uses its best efforts to keep up to date with regulatory requirements and implements strict internal policies to maintain compliance, there is a risk of non-compliance. If NextBank fails to comply with such regulations, it may face enforcement actions from one or more of the regulators that enforce such regulations, which may result in fines, penalties, or even the revocation of our license, and could have a material negative impact on our results of operations.
Regulation - Risk 3
Next Bank is subject to various regulatory capital requirements. Regulatory changes or actions may alter the requirement of the capital.Under capital adequacy guidelines, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of common equity; (i) Tier 1 capital to risk-weighted assets, and (ii) Tier 1 capital to average assets.
Regulation - Risk 4
Regulatory changes or actions may alter the nature of the Company's ownership of Longroot Thailand or restrict the use of cryptocurrencies in a manner that adversely affects Longroot Thailand's business, prospects or operations.As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies, with certain governments deeming them illegal while others have allowed their use and trade. Thailand, where Longroot Thailand is regulated, is the first country to approve a legal ICO portal for issuers. Under Thai SEC regulation, all crypto token issuances in Thailand must be approved by the Thai SEC and carried out via an approved ICO Portal such as Longroot Thailand. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency. Similar actions by governments or regulatory bodies could impact the ability of Longroot Thailand to continue to operate and such actions could affect the ability of Longroot Thailand to continue as a going concern, which could have a material adverse effect on the business, prospects or operations of the Company.
Furthermore, tokens issued by Longroot Thailand may be classified as securities depending on the nature of the token and the regulatory frameworks of the respective jurisdictions. Longroot Thailand's activities may be subject to securities regulations in different jurisdictions, which could limit its business activity, such as limits on the personnel it can issue tokens to, and this may negatively impact Longroot Thailand's profitability. In addition, compliance with existing laws and regulations, will involve significant amounts of time, including that of Longroot Thailand's senior leaders and that of dedicated compliance personnel, all of which might negatively impact Longroot Thailand's results of operations.
Regulation - Risk 5
Regulatory changes or actions may restrict the use of digital assets in a manner that adversely affects our business, prospects or operations.As digital assets have grown in both popularity and market size, governments around the world have reacted differently, with certain governments deeming them illegal while others have allowed their use and trade. Thailand, where our subsidiary Longroot Thailand is regulated, is the first country to approve a legal ICO portal for issuers. Under Thai SEC regulation, all digital asset issuance in Thailand must be approved by the Thai SEC and carried out via an approved ICO Portal such as ours. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade digital assets or to exchange digital assets for fiat currency. Similar actions by governments or regulatory bodies could impact our ability to continue to operate in the digital asset space and such actions could affect Longroot Thailand's ability to continue as a going concern, which could have a material adverse effect on our business, prospects or operations.
In addition, the Thai SEC is authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of digital assets both inside and outside Thailand is a rapidly changing area of law and is subject to modification by government and judicial action. Digital assets also currently face an uncertain regulatory landscape in various jurisdictions. Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect digital assets and its users, particularly digital asset operators and service providers that fall within such jurisdictions' regulatory scope. Such laws, regulations or directives may conflict with those of Thailand and may negatively impact the acceptance of digital assets by users, merchants and service providers outside of Thailand. The effect of any future domestic or foreign regulatory change on our digital assets related activities is unable to be predicted.
Furthermore, a large proportion of the digital assets we plan to issue are likely to be classified as securities. This will subject our digital asset activities to securities regulations in different jurisdictions, which could limit our business activities, such as restricting issuances to non-retail investors only. This may negatively impact our profitability. Furthermore, compliance with existing laws and regulations will involve significant amounts of time, including that of our management and dedicated compliance personnel, all of which might negatively impact our results of operations.
Regulation - Risk 6
Change in government regulations relating to the Internet could negatively impact our business.We rely on consumers' access to significant levels of Internet bandwidth for the digital delivery of our content and the functionality of our games with online features. Changes in laws or regulations that adversely affect the growth, popularity or use of the Internet, including laws impacting net neutrality, could impair our consumers' online experiences, decrease the demand for our products and services or increase their cost of doing business. Given uncertainty around these rules relating to the Internet, including changing interpretations, amendments, or repeal of those rules, coupled with the potentially significant political and economic power of local Internet service providers and the level of Internet bandwidth access our products and services require, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expenses, or otherwise negatively impact our business.
Regulation - Risk 7
Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully respond to these regulations, our business could be negatively impacted.The video game industry continues to evolve, and new and innovative business opportunities are often subject to new attempts at regulation. As such, legislation is continually being introduced, and litigation and regulatory enforcement actions are taking place, which may affect the way in which we, and other industry participants, may offer our content and features, and distribute and advertise products. These laws, regulations, and investigations are related to protection of minors, gambling, consumer privacy, accessibility, advertising, taxation, payments, intellectual property, distribution, and antitrust, among others.
For example, many foreign countries have laws that permit governmental entities to restrict or prohibit marketing or distribution of interactive entertainment software products because of the content therein (and similar legislation has been introduced from time to time at the federal and state levels in the United States, including legislation that attempts to impose additional taxes based on content). In addition, certain jurisdictions have laws that restrict or prohibit marketing or distribution of interactive entertainment software products with random digital item mechanics, or subject such products to additional regulation and oversight, such as reporting to regulators. Also, our games could in the future become subject to gambling-related rules and regulations and expose us to civil and criminal penalties. Further, the growth and development of electronic commerce and virtual items and currency may prompt calls for more stringent consumer protection laws that may impose additional burdens or limitations on operations of companies conducting business through the Internet and mobile devices. Also, existing laws or new laws regarding the marketing of in-app purchases, regulation of currency, banking institutions, unclaimed property, and money laundering may be interpreted to cover virtual currency or goods.
The adoption and enforcement of legislation that restricts the marketing, content, business model, or sales of our products in countries in which we do business may harm our sales, as the products they we offer to customers and the size of the potential audience for such products may be limited. We may be required to modify certain product development processes or products or alter marketing strategies to comply with regulations, which could be costly or delay the release of products. In addition, the laws and regulations affecting our products vary by territory and may be inconsistent with one another, imposing conflicting or uncertain restrictions. Failure to comply with any applicable legislation may also result in government-imposed fines or other penalties, as well as harm to our reputation.
Litigation & Legal Liabilities2 | 2.7%
Litigation & Legal Liabilities - Risk 1
We may be subject to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating costs.Litigation & Legal Liabilities - Risk 2
Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.From time to time, we are involved in lawsuits, regulatory inquiries, and may be involved in governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our results of operations and liquidity.
Taxation & Government Incentives2 | 2.7%
Taxation & Government Incentives - Risk 1
Changes in our effective tax rate could harm our future operating results.Taxation & Government Incentives - Risk 2
Unfavorable changes in, or interpretations of, government regulations or taxation of the evolving alternative ALRs, Internet and e-commerce industries could harm our operating results.We have contracted for ALRs in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our operations or regulate the rental activity of property owners and managers. Compliance with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region has different regulations with respect to licensing and other requirements for ALRs. Our online marketplaces are accessible by property owners, managers and travelers in many states and foreign jurisdictions. Our efficiencies and economies of scale depend on generally uniform treatment of property owners, managers and travelers across all jurisdictions. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose added costs and increased liabilities for compliance deficiencies. In addition, laws or regulations that may harm our business could be adopted, or interpreted in a manner that affects our activities, including but not limited to the regulation of personal and consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage our reputation and business.
In addition, regulatory developments may affect the ALR industry and the ability of companies like us to list those vacation rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners and managers to rent certain properties for fewer than 30 consecutive days and other cities may introduce similar regulations. Some cities also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to ALR. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were established before the growth of the Internet and e-commerce, which creates a risk of these laws being used in ways not originally intended, that could burden property owners and managers or otherwise harm our business. These and other similar new and newly interpreted regulations could increase costs for, or otherwise discourage, owners and managers from listing their property with us, which could harm our business and operating results.
Environmental / Social3 | 4.1%
Environmental / Social - Risk 1
Our processing, storage, use and disclosure of personal data will expose us to risks of internal or external security breaches and could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.Environmental / Social - Risk 2
Compliance with the E.U. General Data Protection Regulation ("GDPR"), Thailand's Personal Data Protection Act ("PDPA"), the California Consumer Privacy Act ("CCPA"), and other regulatory and legislative privacy requirements will require significant operational resources and modifications to our business practices, and any compliance failures may have a material adverse effect on our business, reputation, and financial results.We are engaged in ongoing privacy compliance and oversight efforts, including efforts to comply with the GDPR, the PDPA and other regulatory and legislative requirements around the world, including the CCPA. These compliance and oversight efforts will increase demand on our systems and resources, and will require significant investments, including investments in compliance processes, personnel, and technical infrastructure. Our privacy compliance and oversight efforts will require significant time and attention from management and our board of directors. In addition, regulatory and legislative privacy requirements are constantly evolving and can be subject to significant change and uncertain interpretation. If we are unable to successfully implement and comply with the mandates of the GDPR, the PDPA, CCPA, or other applicable regulatory or legislative requirements, or if we are found to be in violation of such requirements, we may be subject to regulatory or governmental investigations or lawsuits, which may result in significant monetary fines, judgments, or other penalties, and we may also be required to make additional changes to our business practices. Any of these events could have a material adverse effect on our business, reputation, and financial results.
Environmental / Social - Risk 3
Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, and consumer protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, electronic contracts and other communications, competition, consumer protection, product liability, telecommunications, e-commerce, taxation, economic or other trade prohibitions or sanctions, anti-corruption and political law compliance, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.
These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industries in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. Proposed or new legislation and regulations could also significantly affect our business. These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions, may in the future lead to unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity and reputational harm, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices.
Tech & Innovation
Total Risks: 13/74 (18%)Below Sector Average
Innovation / R&D2 | 2.7%
Innovation / R&D - Risk 1
If we are unable to introduce new or upgraded products, services or features that distributors, travelers or property owners and managers recognize as valuable, we may fail to drive additional travelers to the websites of our distributors, drive additional travelers to our websites, retain existing property owners and managers, attract new property owners and managers, retain existing distributors, and/or attract new distributors. Our efforts to develop new and upgraded services and products could require us to incur significant costs.Innovation / R&D - Risk 2
Failure to launch a product for a major client, may adversely affect our growth.We have an agreement in place with one of Southeast Asia's largest retailers to develop a gamified virtual store for their e-commerce business. The virtual store is planned to be integrated with a casual game owned by us, and we intend to deliver native ads and coupons to both the virtual store and the integrated casual game. We believe that the launch of this product is critical, and such launch is expected to lead to significant growth of the Company, given the retailer's reputation and existing large customer base. However, the virtual store may fail to launch due to our failure to deliver or the retailer prematurely terminating the agreement. We believe that any such failure to launch could have an adverse impact on our near-term growth prospects.
Trade Secrets5 | 6.8%
Trade Secrets - Risk 1
We use open-source software in connection with certain of our games and services, which may pose particular risks to our proprietary software, products, and services, and which could have a negative impact on our business.Trade Secrets - Risk 2
Our ability to acquire and maintain licenses to intellectual property may affect our revenue and profitability.While most of the intellectual property we use in our games is created by us, we also acquire rights to third-party intellectual property. Proprietary licenses typically limit our use of intellectual property to specific uses and for specific time periods, and include other contractual obligations with which we must comply. Competition for these licenses is intense. If we were unable to obtain and remain in compliance with the terms of these licenses or obtain additional licenses on reasonable economic terms, our revenue and profitability may be adversely impacted. In addition, use of these intellectual properties generally requires that we pay a royalty to the licensor, which decreases our profitability.
Trade Secrets - Risk 3
We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or business methods. Any intellectual property claims against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management's attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, content, branding or business methods found to be in violation of another party's rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and be inferior. Any of these results could harm our operating results.
Trade Secrets - Risk 4
Certain of our products, and particularly those offered by our NextMedia division, are subject to the threat of piracy and unauthorized copying, and inadequate intellectual property laws and other protections could prevent us from enforcing or defending our proprietary technologies. Further, the use of unauthorized "cheat" programs or the use of other unauthorized software modifications by users could impact multiplayer gameplay or lead to reductions in microtransactions in our games.Piracy is a persistent problem for us, and policing the unauthorized sale, distribution and use of products is difficult, expensive, and time-consuming. Further, the laws of some countries in which our products are, or may be, distributed either do not protect products and intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. In addition, although we take steps to make the unauthorized sale, distribution and use of our products more difficult and to enforce and police our rights, as do the operators of other platforms on which many of their games are played, these efforts may not be successful in controlling the piracy of products in all instances.
In addition, "cheating" programs or other unauthorized software tools and modifications that enable consumers to cheat in games could negatively impact the volume of microtransactions or purchases of downloadable content. In addition, vulnerabilities in the design of our products or the platforms upon which they run could be discovered after their release, which may result in lost revenues from paying consumers or increased cost of developing technological measures to respond to these, either of which could negatively impact our business.
Trade Secrets - Risk 5
If we do not adequately protect our intellectual property, our ability to compete could be impaired.Our success is heavily dependent upon our intellectual property and other proprietary rights. To protect our intellectual property and other proprietary rights, we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action we deem appropriate to protect our rights. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites and products without authorization. We may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive, distracting and result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete.
Effective trademark, copyright and trade secret protection may not be available in every country in which our products and services are offered, either in person or over the Internet. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, including in certain of the countries that we operate in, we may be unable to protect their proprietary technology adequately against unauthorized third-party copying, infringement or use, which could adversely affect our competitive position. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving.
Cyber Security1 | 1.4%
Cyber Security - Risk 1
There are cyber security risks related to digital asset trading.Technology5 | 6.8%
Technology - Risk 1
We depend on third party cryptographic and algorithmic protocols governing the issuance of and transactions in digital assets.Technology - Risk 2
The NextBank mobile application development has, to date, been partially developed by Ukrainian developers, which has been impacted by the ongoing conflict between Ukraine and Russia.The NextBank mobile application development has, to date, been partially developed by Ukrainian developers. Since the beginning of the ongoing conflict between Ukraine and Russia, the rate of development by the affected developers has slowed down. We have since increased our development capacity by hiring developers in other countries in order to mitigate this concern. However, no assurances can be provided that we will be able to hire enough developers elsewhere to complete the development of our mobile application in accordance with our timeline, and given the uncertainty surrounding the ongoing conflict, there is still a risk that our development capacity may continue to be negatively affected while the conflict is ongoing.
Technology - Risk 3
Zappware's TVaaS service dependency on encoding hardware availabilityZappware's TvaaS media platform is dependent on our ability to source the necessary encoding hardware for each new Telco Operator onboarded. The current global shortage of microchips is impacting the manufacturing, and as a result, the availability of this type of hardware for both PaaS and TVaaS providers globally. This could result in delays to the commercial launch of the TVaaS platform for each new client included in our revenue forecast, which in turn could negatively impact the revenues returned for the Zappware portion of the NextMedia business unit in FY23.
Technology - Risk 4
Our products and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures to address or mitigate technical limitations in such systems, could adversely affect our business.Our products and internal systems rely on software and hardware that is highly technical and complex. Additionally, our products and internal systems depend on the ability of such software and hardware to store, retrieve, process, and manage immense amounts of data. The software and hardware on which we rely may contain errors, bugs, or vulnerabilities, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives. Some errors, bugs, or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use. Errors, bugs, vulnerabilities, design defects, or technical limitations within the software and hardware on which we rely have in the past led to, and may in the future lead to, outcomes including a negative experience for users and marketers who use such products; compromised ability of such products to perform in a manner consistent with our terms, contracts, or policies; delayed product introductions or enhancements; targeting, measurement, or billing errors; compromised ability to protect user data and/or our intellectual property; or reductions in our ability to provide some or all of our related services. In addition, any errors, bugs, vulnerabilities, or defects in our systems or the software and hardware on which we rely, failures to properly address or mitigate the technical limitations in our systems, or associated degradations or interruptions of service or failures to fulfill commitments to our users, have in the past led to, and may in the future lead to, outcomes including damage to our reputation, loss of users, loss of marketers, loss of revenue, regulatory inquiries, litigation, or liability for fines, damages, or other remedies, any of which could adversely affect our business and financial results.
Technology - Risk 5
We depend on servers and networks to operate our games and advertising. If we were to lose functionality in any of these areas for any reason, our businesses may be negatively impacted.We rely on the continuous operation of servers, some of which are owned and operated by third parties. Although we strive to maintain more than sufficient server capacity, and provide for active redundancy in the event of limited hardware failure, any broad-based catastrophic server malfunction, a significant service-disrupting attack or intrusion by hackers that circumvents security measures, a failure of disaster recovery service or the failure of a company on which we are relying for server capacity to provide that capacity for whatever reason would likely degrade or interrupt the functionality of our software and products with online features, and could prevent the operation of such software and products altogether, any of which could result in the loss of sales.
We also rely on platforms and networks operated by third parties, such as the Apple Appstore and Google Play store, for the sale and digital delivery of downloadable games. An extended interruption to any of these services could adversely affect our ability to operate our NextMedia business, which could result in a loss of revenue and otherwise negatively impact our business.
Macro & Political
Total Risks: 8/74 (11%)Below Sector Average
Economy & Political Environment4 | 5.4%
Economy & Political Environment - Risk 1
NextBank's ability to originate loans in subject to risk associated with economic and market conditions.Economy & Political Environment - Risk 2
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.
Additionally, the recent military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Report.
Economy & Political Environment - Risk 3
We may be adversely affected by the effects of inflation.Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.
Economy & Political Environment - Risk 4
Economic downturns and market conditions beyond our control could adversely affect our business, financial condition and results of operations.Our business depends on the overall demand for advertising, video games, financial services, travel and other technology offerings. Economic downturns or unstable market conditions may cause advertisers to decrease or pause their advertising budgets, which could reduce spend though our IGA and real-time rewards platform. Similarly, economic downturns could also decrease the amount of disposable income gamers have available for the purchase of our video game offerings, customers have to invest in cryptocurrencies, and/or that our customers have to travel. Additionally, as described above, public health crises may disrupt the operations of our customers and partners for an unknown period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact their business and results of operations, including cash flows. Economic downturns and less than optimal market conditions could adversely affect our business, financial condition and results of operations.
International Operations1 | 1.4%
International Operations - Risk 1
Our long-term success depends, in part, on our ability to continue to expand our operations outside of the United States and, as a result, our business is susceptible to risks associated with international operations.Natural and Human Disruptions1 | 1.4%
Natural and Human Disruptions - Risk 1
Global pandemics, such as COVID-19 have had, and could in the future have, a material adverse impact our business, operating results, and liquidity.Capital Markets2 | 2.7%
Capital Markets - Risk 1
We are exposed to fluctuations in currency exchange rates.Capital Markets - Risk 2
Digital Asset exchanges and other trading venues are relatively new.Digital asset market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, commodities or currencies. When digital asset exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, such events could result in a reduction in digital asset prices, impact the success of our NextFinTech business, and have a material adverse effect on our business, prospects and operations.
Production
Total Risks: 6/74 (8%)Below Sector Average
Manufacturing1 | 1.4%
Manufacturing - Risk 1
The products or services we release may contain defects, bugs or errors.Employment / Personnel2 | 2.7%
Employment / Personnel - Risk 1
Our future success depends on the continuing efforts of our key employees and our ability to attract, hire, retain and motivate highly skilled employees in the future.Employment / Personnel - Risk 2
Some members of our senior management team have limited experience in the day-to-day operations of the industries in which our businesses operate.Some members of our senior management team have limited experience with respect to certain of the industries in which we operate, including commercial banking (NextBank) and ICOs (Longroot), and may have limited experience in other industries and markets which we may choose to enter. Our management team relies on the knowledge and talent of the employees in our operating subsidiaries to successfully operate these businesses on a day-to-day basis. We may not be able to retain, hire or train personnel as quickly or efficiently as we need or on terms that are acceptable to us. An inability to efficiently operate our businesses would have a material adverse effect on our business, financial conditions, results of operations, and prospects.
Supply Chain3 | 4.1%
Supply Chain - Risk 1
We rely on relationships with developers to provide an extensive game portfolio and sufficient advertising spaces.Supply Chain - Risk 2
Our business partners may be unable to honor their obligations to us, or their actions may put us at risk.We rely on various business partners, including third-party service providers, vendors, licensing partners, development partners, and licensees in many areas of our business. Their actions may put our business, reputation and brand at risk. In many cases, our business partners may be given access to sensitive and proprietary information in order to provide services and support to their teams, and they may misappropriate such information and engage in unauthorized use of it. In addition, the failure of these third parties to provide adequate services and technologies, or their failure to adequately maintain or update their services and technologies, could result in a disruption to our business operations. Further, disruptions in the financial markets, economic downturns including related to the COVID-19 pandemic, poor business decisions, or reputational harm may adversely affect our partners and they may not be able to continue honoring their obligations to us or could cease their arrangements with us. Alternative arrangements and services may not be available to us on commercially reasonable terms, if it all, or we may experience business interruptions upon a transition to an alternative partner or vendor. If we lose one or more significant business partners, our business could be harmed and our financial results could be materially affected.
Supply Chain - Risk 3
We currently rely on a small number of third-party service providers to host and deliver a significant portion of our products and services, and any interruptions or delays in services from these third parties could impair the delivery of our products and services and harm our business.We rely on third-party service providers for numerous products and services, including payment processing services, data center services, web hosting services, online gaming platforms, insurance products for customers and travelers and some customer service functions. We rely on these companies to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.
We use a combination of third-party data centers to host our websites and core services. We do not control the operation of any of the third-party data center facilities we use. These facilities may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place. As a result, the occurrence of any of these events, a decision by our third-party service providers to close their data center facilities or to terminate their contracts with us without adequate notice or other unanticipated problems could result in loss of data as well as a significant interruption in our products and services and harm to our reputation and brand.
Furthermore, we depend on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason, or if their services are disrupted, we could experience disruption in our products and services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business and reputation.
If these companies experience difficulties and are not able to provide services in a reliable and secure manner, if they do not operate in compliance with applicable laws, rules and regulations and, with respect to payment and card processing companies, if they are unable to effectively combat the use of fraudulent payments on our websites or games, our results of operations and financial positions could be materially and adversely affected. In addition, if such third-party service providers were to cease operations or face other business disruption either temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs and delays until we find or develop an equivalent replacement, any of which could have an adverse impact on our business and financial performance.
Ability to Sell
Total Risks: 6/74 (8%)Below Sector Average
Competition1 | 1.4%
Competition - Risk 1
The industries in which we participate are highly competitive, and we may be unable to compete successfully with our current or future competitors.Sales & Marketing4 | 5.4%
Sales & Marketing - Risk 1
We derive a significant portion of our revenues from advertisements, and if any events occur that negatively impact our relationships with advertisers, our advertising revenues and operating results would be negatively impacted.Sales & Marketing - Risk 2
Although Longroot is a licensed ICO Portal in Thailand, it has not yet closed any offerings, and there can be no assurances that it will.Longroot recently received its license to serve as an ICO Portal in Thailand, and has not yet closed any offerings. There can be no assurances that Longroot will close any offerings in the near future, if ever, or if it does, that any such offerings will be profitable. If Longroot is engaged to provide any such services, it could face claims from any dissatisfied clients and could incur liabilities in rendering any such services, which could damage our reputation and adversely affect other parts of our business. This risk is exacerbated by the fact that our management has limited ICO, and may not successfully or efficiently manage Longroot, which is subject to significant regulatory oversight and reporting obligations under Thai securities laws.
Sales & Marketing - Risk 3
If we are unable to attract and maintain a critical mass of ALR listings and travelers, whether due to competition or other factors, our marketplace will become less valuable to property owners and managers and to travelers, and it could decrease our ability to generate revenue and net income in the future.We anticipate that moving forward, most of our NextTrip division revenue will be generated when ALRs are booked by either customers to our website or by customers to distributors we provide ALRs to. Our revenue will be the difference between the funds received from our customers and distributors versus the net amount owed to the property owner/manager at the time of booking. Accordingly, our success primarily depends on our ability to attract owners, managers and travelers to NextTrip.com, NextTripVacations.com, Maupintour.com and to distributors. If property owners and managers choose not to market their ALRs through our websites, or instead list them with a competitor, we may be unable to offer a sufficient supply and variety of ALRs to attract travelers to our websites. Similarly, our volume of new and renewal listings may suffer if we are unable to attract travelers to our websites or, to the distributors. As a result of any of these events, the perceived usefulness of our online marketplace and the relationships with distributors may decline, and, consequently, it could significantly decrease our ability to generate revenue and net income in the future.
Sales & Marketing - Risk 4
The performance of digital assets is dependent on the performance of the issuer and underlying asset, which is inherently unpredictable and may result in reputational damage should they underperform.Longroot helps raise capital for issuers primarily via the sale of digital assets backed by an underlying business or asset. Prior to conducting the actual fund raise, Longroot conducts extensive due diligence on the issuer and underlying business or asset to determine the feasibility of the project. However, there can be no assurances that the digital asset will perform well, regardless of the amount of due diligence and other actions taken by Longroot. The performance of the digital asset after issuance depends on various factors, such as market conditions, management and performance of the business or asset, and market acceptance. Many of these factors are beyond our control, and may result in the digital asset underperforming, leading to reputational damage, which may negatively impact our ability to gain clients.
Brand / Reputation1 | 1.4%
Brand / Reputation - Risk 1
If we are not able to maintain and enhance our NextTrip brand and the brands associated with our websites, our reputation and business may suffer.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.