NextPlay Technologies, Inc. (NASDAQ: NXTP) is a technology solutions company that offers games, in-game advertising, digital asset products and services, and connected TV to consumers and corporations within a growing worldwide digital ecosystem. The company is organized into two main divisions: NextMedia, the Interactive Digital Media Division, and NextFinTech, the Finance and Technology Division.

Business Overview

In the NextMedia Division, NextPlay's wholly-owned subsidiary, HotPlay Enterprise Limited, operates an in-game advertising (IGA) platform that delivers advertisements into video games without disrupting gameplay, enabling video games to monetize without compromising the integrity of the game. The platform allows advertisers and merchants to hyper-locally deliver promotional coupons to gamers, offering them real-world rewards for playing video games. Gamers can access these rewards through the HotPlay redemption mobile application.

The NextFinTech Division includes Next Fintech Holdings, Inc. (formerly Longroot, Inc.), which owns 75% of Longroot Limited, a Cayman Islands company. Longroot Limited, in turn, owns 49% of the outstanding ordinary shares (with 51% of the preferred shares owned by two Thai citizen nominee shareholders) of Longroot Holding (Thailand) Company Limited. Longroot Holding (Thailand) Company Limited is an Initial Coin Offering (ICO) Portal that provides digital asset financing and investment services that are fully regulated and licensed by the Securities and Exchange Commission of Thailand (the "Thai SEC"). It is focused on creating Thai-regulated cryptocurrencies backed by high-quality assets designed to be more resistant to market declines.

NextPlay also owns 100% of NextBank International (previously International Financial Enterprise Bank), an International Financial Entity (IFE) operating under the laws of the Commonwealth of Puerto Rico. NextBank currently offers concierge services to high-net-worth individuals and entrepreneurs, as well as loan products. NextPlay plans to create a diversified FinTech solution company that offers asset banking, asset management, and mobile payment and banking services.

Financials

In the nine months ended November 30, 2022, NextPlay reported total revenues of $1.55 million, compared to $0.71 million in the same period of the prior year. The increase was primarily driven by growth in the loan portfolio and financial services at NextBank. Cost of revenues increased to $1.11 million from $0.30 million, resulting in a gross profit of $0.44 million, compared to $0.42 million in the prior-year period.

Operating expenses for the nine-month period decreased to $2.46 million, compared to $11.87 million in the same period of the prior year. The decrease was mainly due to lower general and administrative expenses, salaries and benefits, technology and development costs, and stock-based compensation, as well as a decrease in depreciation and amortization.

NextPlay reported a net loss attributable to the company of $14.62 million for the nine months ended November 30, 2022, compared to a net loss of $16.12 million in the same period of the prior year. The decrease in net loss was primarily due to a reduction in operating expenses and other expenses.

In the third quarter of fiscal 2023, NextPlay reported total revenues of $0.63 million, compared to $0.42 million in the same quarter of the prior year. Gross profit for the quarter was $0.18 million, compared to $0.21 million in the prior-year quarter. Operating expenses for the quarter decreased to $1.32 million, compared to $1.63 million in the same quarter of the prior year.

Liquidity

As of November 30, 2022, NextPlay had $2.56 million in cash and cash equivalents, compared to $4.28 million as of February 28, 2022. The company had total current liabilities of $57.90 million, including $5.33 million in line of credit and notes payable, $9.74 million in accounts payable and accrued expenses, $27.28 million in customer deposits from NextBank, and $13.76 million in liabilities classified as held for sale.

NextPlay's liquidity position remains a concern, as the company had an accumulated deficit of $57.17 million as of November 30, 2022, and reported a net loss from continuing operations of $14.85 million and a net loss from discontinued operations of $5.69 million for the nine months ended November 30, 2022. The company's monthly cash requirement is approximately $1.4 million, and it will need to raise additional capital or secure loans to support its ongoing operations, product development, and debt obligations.

Recent Developments

The company's strategic sale of its travel business, NextTrip Group, LLC, and its 51% ownership of Reinhart Digital TV (the 100% owner of Zappware) to TGS Esports Inc. (TSX-V: TGS, OTC: TGSEF) is expected to streamline its business operations and management, improve capital allocation, and unlock shareholder value by offering investors a pure-play investment in the Digital Media and Financial Technology sectors. However, the closing of this transaction remains subject to various conditions, including regulatory approvals and the consummation of a financing by TGS, and there is no assurance that the transaction will be completed on the anticipated timeline, or at all.

Risks and Challenges

NextPlay's business model is still evolving, and the company faces significant risks and uncertainties, including the need for additional capital, the ability to achieve profitability, and the competitive landscape in the industries it operates in. The company's success will depend on its ability to execute its strategic initiatives, expand its product offerings, and navigate the regulatory environment in the financial technology and digital asset sectors.

Outlook

Despite the challenges, NextPlay's diversified technology solutions and focus on innovative financial technology and digital asset products could provide opportunities for growth if the company can successfully implement its business plan and address its liquidity concerns. Investors should closely monitor the company's progress, the outcome of the proposed sale of its travel and media businesses, and its ability to secure additional funding to support its operations and growth initiatives.