Gaxos / The NFT Gaming Company, Inc. — Q1 2023 Form 10-Q
Entity note: The supplied filing is for The NFT Gaming Company, Inc. (Nasdaq: NFTG), which describes its planned gaming platform as “Gaxos.” It does not identify the registrant as GAXOS.AI Inc.; verify the entity and ticker before relying on this summary. Reporting period: three months ended March 31, 2023; statements are unaudited.
Business context and financial results
The company is developing a gaming platform combining conventional games with in-game NFTs and tools for third-party publishers. It remained in the development stage and reported no revenue in either Q1 2023 or Q1 2022.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $104,551 | $150,495 |
| General and administrative | $1,437,781 | $157,714 |
| Operating loss | $(1,542,332) | $(308,209) |
| Interest income | $6,301 | $371 |
| Net loss | $(1,536,031) | $(307,838) |
| Basic and diluted loss per share | $(0.14) | $(0.03) |
| Net cash used in operations | $(933,858) | $(185,406) |
Margins are not meaningful with no revenue. Q1 2023 comprehensive loss was $1,517,875, including an $18,156 unrealized gain on short-term investments.
Liquidity, capital and material changes
- At March 31, 2023, cash was $2,213,151 and short-term investments were $3,509,398, consisting of U.S. Treasury bills. Working capital was $5,738,796; total assets were $5,943,577.
- Total liabilities were $149,276, comprising accounts payable and accrued expenses; the balance sheet reports no debt. The company reported stockholders’ equity of $5,794,301.
- Cash increased by $1,533,370 during the quarter. Investing activities used $3,491,242 to purchase short-term investments; financing activities provided $5,958,470, primarily from the February IPO.
- The IPO sold 1,686,747 shares at $4.15 for $7.0 million gross proceeds. The filing reports $5,958,470 net proceeds before the reclassification of deferred offering costs; stockholders’ equity reflects $5,755,871 after equity issuance costs.
- Operating expenses rose substantially year over year, mainly from compensation and professional fees, including stock-based compensation and investor-relations, advisory and legal costs. Stock-based compensation expense was $870,572 in Q1 2023.
- Common shares outstanding increased from 10,417,846 at December 31, 2022 to 12,104,601 at March 31, 2023. IPO-related placement-agent warrants cover 1,686,747 shares at $4.565 per share, exercisable through February 2028; 460,000 stock options were also outstanding at quarter-end.
Outlook, risks and contingencies
Management expects operating losses to continue while the company implements its growth strategy and stated that cash and liquid investments should fund operations and obligations for at least 12 months from the filing date. It also says additional capital may be needed to execute longer-term plans; future financing may not be available on favorable terms, or at all. Management does not anticipate revenue in the foreseeable future and expects research and development spending to increase as game development accelerates.
Key risks include the ability to obtain financing, attract and retain users and advertisers, compete, develop and commercialize the platform, manage costs, and protect intellectual property. Approximately $1,556,000 of cash exceeded FDIC insurance limits at March 31, 2023. The Columbia University license carries royalties and potential milestone and transaction-based payments; minimum annual royalties begin in the year of a first commercial launch. The company reported no material legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts to verify
- Confirm the registrant and security: the filing identifies The NFT Gaming Company, Inc. and ticker NFTG, despite the GAXOS.AI metadata.
- Reconcile IPO proceeds and offering costs: the filing gives differing offering-expense figures in different passages and describes both $5,958,470 net proceeds and $5,755,871 after equity issuance costs.
- Reconcile share issuance figures: the equity statement shows 1,686,755 shares issued for cash, while the IPO disclosure says 1,686,747 shares sold.
- Assess the pre-revenue business’s cash burn, financing needs, and ability to launch products and build users; the stated 12-month liquidity view is management’s estimate, not a guarantee.
- Review dilution from the placement-agent warrants and options, and the economic terms of the Columbia license.