Business context and reporting period
The filing is The NFT Gaming Company, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023. The company describes its planned gaming platform as “Gaxos”; the filing identifies the registrant as The NFT Gaming Company, Inc. (Nasdaq: NFTG). It is developing games and a platform intended to support in-game NFTs and third-party publishers. The company was still in development and had not generated operating revenue.
Financial performance and position
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 | Comparison with 2022 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 in both comparable 2022 periods |
| Research and development | $267,618 | $372,169 | Quarter up 12.7%; six months down 4.1% |
| General and administrative | $448,620 | $1,886,401 | Quarter up 97.4%; six months up about 390% |
| Operating loss | $768,601 | $2,310,933 | Up 65.4% and 199.0%, respectively |
| Net loss | $754,044 | $2,290,075 | Up 62.5% and 196.7%, respectively |
| Basic and diluted loss per share | $0.06 | $0.20 | 2022: $0.04 and $0.07 |
Operating and gross margins are not meaningful because the company reported no revenue or cost of revenue. Six-month other income was $20,858, primarily interest income. Comprehensive loss for the six months was $2,252,270, including $37,805 of unrealized gains on short-term investments.
At June 30, 2023, cash was $1,688,910 and short-term U.S. Treasury investments were $3,529,047; working capital was $5,057,592. Total assets were $5,334,569, total liabilities $276,977, and stockholders’ equity $5,057,592. The balance sheet shows no debt. Cash used in operating activities for the first half was $1,433,858; investing activities used $3,491,242 for short-term investments; financing activities provided $5,934,229. Cash increased by $1,009,129 from year-end.
Material changes and notable items
- The February 2023 IPO raised $7.0 million gross and $5,958,470 net of offering expenses. The company issued 1,686,755 shares and 1,686,747 placement-agent warrants exercisable at $4.565 per share through February 2028.
- General and administrative expense increased substantially year over year, reflecting stock-based compensation, executive and employee compensation, investor relations, professional and advisory fees, and public-company costs. Six-month stock-based compensation was $892,499.
- The company recorded a $52,363 impairment charge on its Columbia University software and patent license. The license was terminated by mutual agreement on August 9, 2023, effective August 1.
- Under a repurchase program authorized for up to $500,000, the company repurchased and cancelled 32,048 shares for $24,241 during the first half.
- As of August 14, 2023, 12,072,553 common shares were outstanding. At June 30, 2,146,747 warrants and options were excluded from diluted loss per share as anti-dilutive.
Outlook, risks and contingencies
Management expects operating losses to continue for the foreseeable future and does not anticipate revenue in the near term. It says cash and liquid investments should cover operating needs for at least 12 months from the filing date, while also noting that longer-term plans require significant capital and future financing may not be available on favorable terms, or at all. Management expects research and development spending to rise as game development accelerates.
On July 10, 2023, Nasdaq notified the company that its share price had been below the $1 minimum bid for 30 consecutive business days. The stated initial compliance deadline was January 6, 2024; failure to regain compliance could lead to delisting, subject to potential additional time and appeal procedures. The company also disclosed that approximately $1.171 million of its cash exceeded the FDIC insurance limit. It reported no material legal proceedings and no material changes to previously disclosed risk factors apart from the Nasdaq listing issue. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the platform and games launch, attract users and publishers, and generate revenue; the filing reports no revenue to date.
- Actual cash burn and financing needs relative to management’s 12-month liquidity estimate.
- Progress toward Nasdaq’s minimum-bid compliance requirement and any resulting listing action.
- The effects of terminating the Columbia license on the company’s product plans and intellectual property strategy.
- Potential dilution from outstanding warrants and options, and the terms and remaining capacity of the stock repurchase program.