XIAMEN, China, Oct. 25, 2021 /PRNewswire/ — Blue Hat Interactive Entertainment Technology (“Blue Hat” or the “Company”) (NASDAQ: BHAT), a leading communication services and Internet Data Center (“IDC”) business provider and developer, and an operator of mobile games and augmented reality (“AR”) education curricula and products in China, today announced its unaudited  financial results for the three months ended June 30, 2021 (“Second Quarter 2021”) and six months ended June 30, 2021 (“First Half 2021”).

Second Quarter 2021 and First Half 2021 Financial Highlights

  • Second Quarter 2021 total revenues of US $8.0 million, compared to US $2.6 million in the prior-year period, driven by increased sales across all major business lines, particularly mobile games and communication services.
  • Second Quarter 2021 gross profit of US $4.7 million, up 138.4% from US $2.0 million in the prior-year period
  • Second Quarter 2021 income from operations of US $1.9 million, up 159.0% from US $0.7 million in the prior-year period
  • Second Quarter 2021 net income of US $0.2 million, compared to US $0.5 million in the prior-year period, as a result of increased expenses related to bad debt provision.
  • First Half 2021 total revenues of US $17.9 million, compared to US $4.9 million in the prior-year period
  • First Half 2021 gross profit of US $8.8 million, up 140.9% from US $3.7 million in the prior-year period
  • First Half 2021 income from operations of US $3.6 million, up 124.9% from US $1.6 million in the prior-year period
  • First Half 2021 net income of US $1.4 million, up 9.6% from US $1.3 million in the prior-year period
  • US $11.5 million in cash and cash equivalents at June 30, 2021

Management Commentary

Mr. Xiaodong Chen, CEO of Blue Hat, stated, “We continued to see strong growth across all our lines of business in Second Quarter 2021, which resulted in strong top line growth during the Second Quarter 2021 and First Half 2021. We more than tripled growth on the top line in First Half 2021, achieving US $17.9 million in total revenues, largely driven by US $7.1 million in contributions from our new IDC business and an additional US $4.7 million in contributions from mobile games following the integration of recent acquisitions and ongoing development of these businesses in First Half 2021. We remain optimistic about the ongoing growth potential of all of our business segments and were pleased to announce earlier this month that our operating subsidiary Xunpusen Technology Co., Ltd. (“Xunpusen”) was engaged as the provider of SMS channel services for JD Cloud, a leading cloud computing brand under tech company JD Technology Group. We believe this new client win further solidifies our position as a leader in communication services and look forward to building upon the positive momentum the Company has established with these results in First Half 2021.”

Recent Operating Highlights

  • In October 2021, Blue Hat announced that Xunpusen signed an agreement to provide SMS channel services for JD Cloud. Xunpusen has been engaged as the channel and port provider for JD Cloud’s SMS channels services. The agreement is in effect through May 25, 2022.

Second Quarter 2021 Results

Total revenues were US $8.0 million for the Second Quarter 2021, an increase of US $5.4 million, or 206.4%, compared to US $2.6 million in the prior-year period. While COVID-19 posed negative impact on revenues in the prior-year period, the significant revenue growth was primarily attributable to increased contributions from the mobile games and communication services businesses, as well as the acquisitions of Xunpusen and Fuzhou Csfctech Co., Ltd. And its two subsidiaries (“Csfctech”) in the Second Quarter 2021.

Revenues from sales of interactive toys (animation series) were US $0.4 million for the Second Quarter 2021, compared to US $148 in the prior-year period.

Revenues from sales of interactive toys (game series) were US $2.4 million for the Second Quarter 2021, up 17.8% from US $2.0 million in the prior-year period.

Revenues from mobile games increased to US $3.4 million for the Second Quarter 2021, from US $0.6 million in the prior-year period, following the acquisition of Csfctech in January 2021.

Revenues from AR education, previously included under interactive toys (animation series), were US $850 in Second Quarter 2021. Growth in the AR education business has been primarily driven by the roll-out and implementation of Blue Hat’s ARIC system to various schools. This business may be subject to seasonality as the Company anticipates higher revenues from AR education in the first and third quarters of a year, coinciding with the beginning of school terms in February and September.

Revenues from communication services were US $1.8 million for the Second Quarter 2021, compared to nil in the prior-year period. The gain was due to the acquisition of Xunpusen in the second half of 2020.

Gross profit increased 138.4% to US $4.7 million for the Second Quarter 2021 from US $2.0 million in the prior-year period. Gross margin was 58.9% for the Second Quarter 2021compared to 75.7% in the prior-year period. The decrease was due to higher initial costs associated with establishing the new businesses and integrating acquisitions into the Company’s operations.

Total operating expenses increased to US $2.8 million for the Second Quarter 2021, from US $1.2 million in the prior-year period, as a result of increased selling expenses related to marketing the Company’s new businesses and promoting newly launched mobile games following the acquisition of Csfctech, as well as increased R&D expenses related to the development of new mobile games.

Income from operations increased 159.0% to US $1.9 million for the Second Quarter 2021, from US $0.7 million in the prior-year period.

Net income was US $0.2 million for the Second Quarter 2021, compared to US $0.5 million in the prior-year period. The decrease was primarily driven by the increase in operating expenses described above and an increase in other expenses related to bad debt provision in the Company’s AR toys business.  The Company counts accounts receivable within 3 to 12 months as bad debt, and currently expects to collect such debts. 

Basic and diluted earnings per share were US $0.003 for the Second Quarter 2021, compared to US $0.014 for the prior-year period.

First Half 2021 Results

Total revenues were US $17.9 million for the First Half 2021, an increase of US $13.1 million, or 269.6%, compared to US $4.9 million in the prior-year period. While COVID-19 had a negative impact on revenues in the prior-year period, revenue growth was primarily attributable to increased contributions from the Csfctech mobile games business acquired in the First Half 2021 and the Xunpusen communication services business acquired in the First Half 2021.

Revenues from sales of interactive toys (animation series) were US $0.5 million for the six months ended June 30, 2021, compared to US $54 in the prior-year period.

Revenues from sales of interactive toys (game series) were US $4.3 million for the First Half 2021, compared to US $3.7 million in the prior-year period.

Revenues from mobile games were US $5.8 million for the First Half 2021, compared to US $1.2 million in the prior-year period.

Revenues from AR education, previously included under interactive toys (animation series), were US $0.2 million for the First Half 2021.

Revenues from communication services were US $7.1 million for the First Half 2021, compared to nil in the prior-year period.

Gross profit increased 140.9% to US $8.8 million for the First Half 2021, from US $3.7 million in the prior-year period.

  • Interactive toys (animation series): 10.7%, or US $0.05 million
  • Interactive toys (game series): 57.6%, or US $2.5 million
  • Mobile games: 83.5%, or US $4.9 million
  • AR education: 93.8%, or US $0.2 million
  • Communication services: 16.5%, or US $1.2 million

Total gross margin was 49.0% for the First Half 2021, compared to 75.2% in the prior-year period.

Total operating expenses increased to US $5.2 million for the First Half 2021, from US $2.0 million in the prior-year period, primarily as a result of increased expenses as described above in the Second Quarter 2021 Results.

Income from operations increased 124.9% to US $3.6 million for the First Half 2021, from US $1.6 million in the prior-year period.

Net income increased 9.6% to US $1.4 million for the First Half 2021, from US $1.3 million in the prior-year period. 

Basic and diluted earnings per share were US $0.03 for the First Half 2021, compared to US $0.04 in the prior-year period.

Balance Sheet Highlights

As of June 30, 2021, Blue Hat had cash and cash equivalents of US $11.5 million, working capital of US $35.9 million and total shareholders’ equity of US $81.6 million, compared to cash and cash equivalents of US $15.8 million, working capital of US $34.0 million and total shareholders’ equity of US $58.9 million, respectively, at December 31, 2020.

During the Second Quarter 2021, the Company completed a registered direct offering with two institutional investors for the purchase and sale of 6.29 million ordinary shares at a price of $0.90 per share, resulting in total gross proceeds of approximately $5.66 million before deducting the placement agent’s fees and other offering expenses. The net proceeds were approximately $5.23 million.

About Blue Hat

Blue Hat is a leading communication services and IDC business provider as well as a producer, developer and operator of AR interactive entertainment games, toys and educational materials in China. Distinguished by its own proprietary technology, Blue Hat aims to create an engaging, interactive and immersive community for its users. For more information, please visit the Company’s investor relations website at http://ir.bluehatgroup.com. The Company routinely provides important information on its website.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. In evaluating such statements, prospective investors should review carefully various risks and uncertainties identified in this release and matters set in the Company’s SEC filings. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in its forward-looking statements.

Contacts:

Blue Hat Interactive Entertainment Technology
Phone: +86 (592) 228-0010
Email: ir@bluehatgroup.net

Investor Relations:

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Three Months Ended June 30,

2021

2020

Revenues

$                        8,001,157

$                   2,611,204

Cost of revenue

3,289,079

634,473

Gross profit

4,712,078

1,976,731

Operating expenses:

Selling

1,068,702

117,549

General and administrative

812,223

1,057,108

Research and development

933,106

69,128

Total operating expenses

2,814,031

1,243,785

Income from operations

1,898,047

732,946

Other income (expense)

Interest income

134,691

107,507

Interest expense

(97,786)

(51,053)

Other finance expenses

(40,693)

47,581

Other (expense) income, net

(1,113,075)

2,328

Total other (expense) income, net

(1,116,863)

106,363

Income before income taxes

781,184

839,309

Provision for income taxes

630,566

338,919

Net income

150,618

500,390

Other comprehensive income (loss)

Foreign currency translation adjustment

1,676,959

25,968

Comprehensive income

$                        1,827,577

$                      526,358

Less: Comprehensive income attributable to non-controlling
interests

221,402

Comprehensive income attributable to Blue Hat Interactive
Entertainment shareholders

1,606,175

526,358

Weighted average number of ordinary shares

Basic

47,384,286

35,141,114

Diluted

52,628,146

35,141,114

Earnings per share

Basic

$0.003

$0.014

Diluted

$0.003

$0.014

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Six Months Ended June 30,

2021

2020

Revenues

$                      17,942,564

$                   4,854,862

Cost of revenue

9,148,926

1,203,962

Gross profit

8,793,638

3,650,900

Operating expenses:

Selling

1,648,748

290,699

General and administrative

2,128,000

1,596,818

Research and development

1,377,317

145,179

Total operating expenses

5,154,065

2,032,696

Income from operations

3,639,573

1,618,204

Other income (expense)

Interest income

134,885

107,884

Interest expense

(235,401)

(123,660)

Other finance expenses

(81,663)

(10,168)

Other (expense) income, net

(1,082,566)

20,862

Total other (expense) income, net

(1,264,745)

(5,082)

Income before income taxes

2,374,828

1,613,122

Provision for income taxes

993,712

353,359

Net income

1,381,116

1,259,763

Other comprehensive income (loss)

Foreign currency translation adjustment

1,310,783

(579,392)

Comprehensive income

$                        2,691,899

$                      680,371

Less: Comprehensive income attributable to non-controlling
interests

748,596

Comprehensive income attributable to Blue Hat Interactive
Entertainment shareholders

1,943,303

680,371

Weighted average number of ordinary shares

Basic

47,384,286

35,141,114

Diluted

52,628,146

35,141,114

Earnings per share

Basic

$0.03

$0.04

Diluted

$0.03

$0.04

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

ASSETS

2021

2020

Current assets:

Cash and cash equivalents

$                      11,503,578

$                 15,800,563

Restricted cash

Short-term investments

Accounts receivable, net

31,165,800

16,594,533

Accounts receivable – related party

1,906,101

Other receivables, net

14,733,377

14,350,223

Other receivables – related party

33,512

Inventories

200,279

117,075

Prepayments, net

2,403,234

1,917,780

Total current assets

60,039,780

50,686,275

Property and equipment, net

4,261,011

4,258,121

Other assets:

Prepayments

12,544,199

4,164,274

Operating lease, right-of-use asset

278,528

290,410

Intangible assets, net

25,849,682

14,252,575

Long-term investments

1,857,556

1,914,668

Deferred tax assets

256,460

119,127

Goodwill accounting

787,047

Total other assets

41,573,472

20,741,054

Total assets

$                 105,874,263

$             75,685,450

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term loans – banks

$                        1,360,495

$                   5,129,295

Current maturities of long-term loans – third party

14,117

Accounts payable

3,571,783

935,588

Convertible bonds payable

57,336

739,189

Other payables and accrued liabilities

11,179,429

1,846,917

Other payables – related party

211,818

25,837

Operating lease liabilities – current

229,521

300,468

Customer deposits

789,117

941,877

Accrual interest payable

Taxes payable

6,786,743

6,802,454

Total current liabilities

24,186,242

16,735,742

Other liabilities:

Operating lease liability

59,965

Long-term loans – third party

Total other liabilities

59,965

Total liabilities

24,246,207

16,735,742

COMMITMENTS AND CONTINGENCIES

Shareholders’ equity

Ordinary shares, $0.001 par value, 100,000,000 shares
authorized, 53,417,200 shares issued and outstanding as of
June 30, 2021, and 38,553,694 shares issued and outstanding
as of December 31, 2020

53,417

38,554

Additional paid-in capital

35,693,329

23,466,482

Statutory reserves

2,204,174

2,204,174

Retained earnings

32,019,919

31,387,398

Accumulated other comprehensive income (loss)

3,052,478

1,741,696

Total Blue Hat Interactive Entertainment Technology
shareholders’ equity

73,023,317

58,838,304

Non-controlling interests

8,604,739

111,404

Total equity

81,628,056

58,949,708

Total liabilities and shareholders’ equity

$             105,874,263

$             75,685,450

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