NextPlay Technologies, Inc. (NXTP) is a digital native ecosystem that offers a diverse range of products and services catering to the finance, digital advertising, and video gaming industries. The company’s strategic vision is to leverage innovative technologies, including advertising technology (AdTech), artificial intelligence (AI), and financial technology (FinTech), to create a comprehensive platform that caters to the evolving needs of its target markets.
Company Background
Founded in 2020 through a reverse acquisition with HotPlay Enterprise Limited, NextPlay has undergone a remarkable transformation, evolving from a travel and media company into a multi-faceted technology conglomerate. The company’s journey has been marked by a series of strategic acquisitions and partnerships that have strengthened its position in the digital landscape. Prior to the acquisition, the company was known as Monaker Group, Inc. The reverse acquisition between HotPlay and Monaker was completed on June 30, 2021, at which point the company changed its name to NextPlay Technologies, Inc.
In July 2020, NextPlay entered into a Share Exchange Agreement with HotPlay and the stockholders of HotPlay. Pursuant to this agreement, NextPlay exchanged 52 million shares of its common stock for 100% of the issued and outstanding capital of HotPlay, with HotPlay continuing as a wholly owned subsidiary of NextPlay. This acquisition was accounted for as a reverse acquisition with HotPlay being deemed the acquiring company for accounting purposes.
Business Segments
NextPlay Technologies, Inc. is organized into two main divisions: NextMedia and NextFinTech.
The NextMedia division includes the wholly-owned subsidiary HotPlay Enterprise Limited. HotPlay is an in-game advertising (IGA) platform that delivers promotional content to video game players without disrupting the gameplay experience. By integrating with game developers, HotPlay enables advertisers and merchants to hyper-locally target gamers with personalized offers and virtual rewards, ultimately driving engagement and revenue. The HotPlay platform allows gamers to access these rewards through the HotPlay redemption mobile application. To increase HotPlay IGA adoption, the company has established an in-house game development studio to create casual and hyper-casual games that showcase the capabilities of the technology.
The company’s NextFinTech division is another crucial component of its digital ecosystem. This division includes NextBank International, a Puerto Rico-based international financial entity (IFE) licensed under Act 273-2012. NextBank offers concierge services to high-net-worth individuals and entrepreneurs, as well as loan products. In April 2021, NextPlay entered into a Bill of Sale for Common Stock to acquire 57.16% of the outstanding Class A Common Stock of International Financial Enterprise Bank, Inc., a Puerto Rico corporation licensed as an international financial entity. The company renamed this subsidiary NextBank International. In July 2021, NextPlay acquired the remaining 42.94% of NextBank through a Share Exchange Agreement.
Additionally, the NextFinTech division includes Next Fintech Holdings, Inc. (formerly Longroot, Inc.), which is wholly owned by NextPlay. Next Fintech Holdings owns 75% of Longroot Limited, a Cayman Islands company. Longroot Limited, in turn, owns 49% of the outstanding ordinary shares of Longroot Holding Thailand Company Limited (Longroot Thailand), with the remaining 51% of the preferred shares owned by two Thai citizen nominee shareholders. However, Longroot Limited controls 90% of Longroot Thailand’s voting shares and therefore effectively controls Longroot Thailand. Longroot Thailand is an Initial Coin Offering (ICO) portal that provides digital asset financing and investment services regulated by the Thai Securities and Exchange Commission. It is focused on creating Thai-regulated cryptocurrencies backed by high-quality assets designed to be more resistant to market declines.
Financials
NextPlay’s financial performance has shown mixed results in recent quarters. For the nine-month period ended November 30, 2022, the company reported total revenues of $1.55 million, up from $0.71 million in the same period a year earlier. This increase was primarily driven by the growth in interest income and financial services from NextBank. However, the company also incurred a net loss of $14.85 million from continuing operations during this period, compared to a net loss of $16.88 million in the prior-year period.
For the most recent fiscal year ended February 28, 2022, NextPlay reported revenue of $8.20 million and a net loss of $37.97 million. The company’s operating cash flow for the fiscal year was negative $22.03 million, while free cash flow was negative $26.36 million.
In the most recent quarter ended November 30, 2022, NextPlay reported revenue of $628.67 thousand, representing a year-over-year growth of 49.5% from $420.52 thousand in Q3 2021. This increase was primarily driven by growth in the company’s FinTech division, specifically from increased interest income and financial services at NextBank. However, the company continued to report net losses, with a net loss of $3.11 million for the quarter.
NextPlay’s gross profit for the nine-month period ended November 30, 2022, was $0.44 million, compared to $0.42 million in the prior-year period. Operating expenses for the same period were $2.46 million, down significantly from $11.87 million in the same period of 2021. This decrease was primarily due to lower general and administrative, salaries and benefits, and depreciation and amortization expenses.
Liquidity
The company’s liquidity position has been a concern, with working capital of $3.53 million as of November 30, 2022. NextPlay has relied on equity and debt financing to fund its operations, and it has stated that it will need to raise additional capital or secure loans to support its ongoing operations, product development, and expansion plans.
As of November 30, 2022, NextPlay had $2.56 million in cash and cash equivalents and total assets of $103.98 million, with $57.90 million in total liabilities. The company’s debt-to-equity ratio stood at 0.49, while its current ratio was 1.06 and quick ratio was 1.02. NextPlay has a line of credit with Streeterville Capital, LLC, with details disclosed in the financial statements.
Recent Developments
In June 2022, NextPlay announced that it had entered into a series of agreements to sell its travel and media businesses, including NextTrip and Reinhart Digital TV, to TGS Esports Inc. (TGS). The transaction, which is expected to close in the second half of 2023, is intended to streamline the company’s operations and focus on its core FinTech and digital media segments.
In November 2022, Kent Taepakdee resigned as the company’s Chief Financial Officer. His resignation was not due to any disagreement with the company.
Challenges and Legal Issues
Notably, NextPlay has faced several challenges in recent years, including the impact of the COVID-19 pandemic on the travel industry, as well as legal disputes and regulatory hurdles. In January 2021, Axion Ventures, Inc., a company in which NextPlay owns a 33.85% stake, filed a civil claim against certain NextPlay officers and directors, alleging they unlawfully took ownership of Axion’s subsidiaries and assets. NextPlay disputed these claims and continues to vigorously defend itself against the allegations. The lawsuit remains ongoing. The company has also been the subject of short reports, which have raised concerns about its business practices and financial reporting.
Historical Challenges
Throughout its history, NextPlay has faced several challenges, including limited financial resources, operating losses since inception, and significant indebtedness. The company has relied on equity and debt financing to fund its operations, which has exposed it to risks associated with these funding sources. Additionally, the COVID-19 pandemic negatively impacted the company’s travel-related business, which was subsequently divested.
Outlook and Conclusion
Despite these challenges, NextPlay remains committed to its vision of creating a comprehensive digital ecosystem that caters to the evolving needs of its target markets. The company’s recent acquisitions and partnerships, along with its focus on innovative technologies, position it to potentially capitalize on growth opportunities in the finance, advertising, and gaming industries.
NextPlay primarily operates in the United States and Puerto Rico, as well as Thailand. As a small cap company, its operations are largely focused on its home market in the United States.
Investors should closely monitor NextPlay’s progress in executing its strategic initiatives, addressing its liquidity concerns, and navigating the various regulatory and legal challenges it faces. The company’s ability to successfully integrate its acquisitions, drive revenue growth, and maintain a healthy financial position will be critical factors in determining its long-term success. The recent revenue growth of 49.5% in Q3 2022 compared to Q3 2021 is a positive sign, but the company still needs to address its ongoing net losses and improve its overall financial performance to achieve sustainable growth.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.