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BHAT Blue Hat Interactive Entertainment Technology

Filed: 5 May 21, 9:02am

Exhibit 99.1

 

 

 

 

Blue Hat Announces First Quarter 2021 Financial Results,

Highlighted by 343% Increase in Revenues to $9.9 Million and 62% Increase in Net Income to $1.2 Million

 

Xiamen, China – May 5, 2021: Blue Hat Interactive Entertainment Technology ("Blue Hat" or the "Company") (NASDAQ: BHAT), a leading producer, developer and operator of augmented reality ("AR") interactive entertainment games, toys and educational materials in China, today announced its unaudited financial results for the quarter ended March 31, 2021.

 

First Quarter 2021 Financial Highlights

·     Total revenues of US$9.9 million, compared to US$2.2 million in the first quarter of 2020, driven by increased sales across all lines of business particularly the mobiles games and communication services businesses, which saw strong growth following the strategic acquisitions of Xunpusen Technology Co., Ltd. (“Xunpusen”) in late 2020 and Fuzhou Csfctech Co., Ltd. (“Csfctech”) and its two subsidiaries in January 2021

·      Gross profit of US$4.1 million, up 143.8% from US$1.7 million in the first quarter of 2020

·      Income from operations of US$1.7 million, up 96.7% from US$0.9 million in the first quarter of 2020

·      Net income of US$1.2 million, up 62.0% from US$0.8 million in the first quarter of 2020

·      US$14.7 million in cash and cash equivalents at March 31, 2021

 

Management Commentary

Mr. Xiaodong Chen, CEO of Blue Hat, stated, “We were pleased with the strong performance across all of our business segments, which resulted in phenomenal top line growth driven by US$5.3 million in contributions from our new IDC business and by a US$2.4 million increase in contributions from mobile games following our acquisition of 51% of Csfctech and its two subsidiaries in January 2021. We achieved 62.0% growth on the bottom line to US$1.2 million during the period and anticipate margins will improve over the course of 2021 as our businesses continue to grow and the expenses normalize from initial highs. We recently announced the official launch of our new AR+ series curriculum, which is an upgrade from our original Augmented Reality Immersive Classes (“ARIC”) and has been developed and tested over the past six months. We expect the five urban partnerships that we have signed for the AR+ series curriculum will accelerate the future growth of our AR education business. We are beginning to see tangible results from this development that has strengthened the foundation of our business over the course of the past year, and we anticipate it will provide us with significant long-term growth potential for our product and service offerings.”

 

Recent Operating Highlights

·      In April 2021, Blue Hat signed a two-year licensing agreement with Tencent QQ (“QQ”) to use its intellectual property, specifically, the QQ penguin logo and QQ emoji, on Blue Hat’s toy products and related marketing materials, effective March 1, 2021. QQ launched in 1999 and has become one of the most commonly used instant messenger applications in China. According to QQ’s self-disclosed report, there were approximately 617 million active monthly users on their messenger application in 2020. The QQ penguin logo and QQ emoji are dominantly recognizable in Chinese pop culture.

·      In April 2021, Blue Hat announced that its subsidiary company, Fujian Zhongqing Hand in Hand Education Technology Co., Ltd. (“Zhongqing”) signed a three-year cooperation agreement of “Augmented Reality Plus”, or “AR+” series curriculum with five partners in different cities: Quanzhou in Fujian Province, Huizhou in Guangdong Province, Danzhou in Hainan Province, Fuzhou in Jiangxi Province, and Yinchuan in the Ningxia Hui Autonomous Region. We anticipate rolling out this new curriculum to approximately 150 schools in these five regions as part of this partnership.

 

First Quarter 2021 Results

 

Total revenues were US$9.9 million for the quarter ended March 31, 2021, an increase of US$7.7 million, or 343.1%, compared to US$2.2 million in the first quarter of 2020. The significant revenue growth was primarily attributable to increased contributions from Blue Hat’s two recently acquired subsidiaries, Xunpusen in late 2020 and Csfctech in early 2021.

 

Revenues from sales of interactive toys (game series) were US$1.9 million for the quarter ended March 31, 2021, compared to US$1.7 million in the first quarter of 2020.

 

Revenues from sales of interactive toys (animation series) were US$0.09 million for the quarter ended March 31, 2021, a significant increase from zero in the first quarer of 2020.

 

Revenues from mobile games were US$2.4 million for the quarter ended March 31, 2021, an increase of US$1.9 million, or 315.2%, following the closing of the Csfctech acquisition during the period.

 

Revenues from AR education, previously included under interactive toys (animation series), were US$0.2 million for the quarter ended March 31, 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 through 2020 and into 2021.

 

Revenues from communication services were US$5.37 million for the quarter ended March 31, 2021. The gain was due to the acquisition of Xunpusen in the second half of 2020.

 

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Gross profit was US$4.1 million for the quarter ended March 31, 2021, an increase of 143.8% from US$1.7 million in the first quarter of 2020. Gross margin for the five different business lines were as follows:

 

·Interactive toys (animation series): 65.6%, or US$0.06 million
·Interactive toys (game series): 53.6%, or US$1.0 million
·Mobile games: 84.5%, or US$2.1 million
·AR education: 97.2%, or US$0.2 million
·Communication services: 13.9%, or US$0.7 million

 

Total gross margin was 41.1% for the quarter ended March 31, 2021, compared to 74.6% in the same period last year. The decrease was due to higher initial costs associated with establishing new business lines, such as licensing costs and copyright costs, among others.

 

Total operating expenses were US$2.3 million for the quarter ended March 31, 2021, which includes expenses from Csfctech and its two subsidiaries, compared to US$0.8 million in the first quarter of 2020.

 

Income from operations was US$1.7 million for the quarter ended March 31, 2021, compared to US$0.9 million in the first quarter of 2020.

 

Net income was US$1.2 million, up US$0.57 million, or 62.0%, from US$0.85 million in the first quarter of 2020. The increase was primarily driven by strong revenue growth, which more than offset an increase in operating expenses.

 

Diluted earnings per share were US$0.024 for the quarter ended March 31, 2021, compared to US$0.022 for the first quarter of 2020. During the first quarter of 2021, the Company completed a registered direct offering with two institutional investors for the purchase and sale of 7.16 million ordinary shares at a price of $1.06 per share, resulting in total gross proceeds of approximately $7.59 million before deducting the placement agent’s fees and other offering expenses. The net proceeds is approximately $6.8 million.

 

Balance Sheet Highlights

As of March 31 2021, Blue Hat had cash and cash equivalents of US$14.7 million, working capital of US$34.6 million and total shareholders’ equity of US$75.5 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.

 

About Blue Hat

Blue Hat Interactive Entertainment Technology is a producer, developer and operator of AR interactive entertainment games and toys in China, including interactive educational materials, mobile games, and toys with mobile game features. 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 the forward-looking statements.

 

 

Contacts:

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

 

Investor Relations:

The Equity Group Inc. In China

Carolyne Y. Sohn, Vice President Lucy Ma, Associate

(415) 568-2255 +86 10 5661 7012

csohn@equityny.com lma@equityny.com

 

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BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
  For the Three Months Ended March 31,
  2021 2020
Revenues $9,941,407  $2,243,658 
Cost of revenue  5,859,847   569,489 
Gross profit  4,081,560   1,674,169 
         
Operating expenses:        
Selling  580,046   173,150 
General and administrative  1,315,777   539,710 
Research and development  444,211   76,051 
Total operating expenses  2,340,034   788,911 
         
Income from operations  1,741,526   885,258 
         
Other income (expense)        
Interest income  194   377 
Interest expense  (137,615)  (72,607)
Other finance expenses  (40,970)  (57,749)
Other income, net  30,509   18,534 
Total other (expense) income, net  (147,882)  (111,445)
         
Income before income taxes  1,593,644   773,813 
Provision for income taxes  363,146   14,440 
Net income  1,230,498   759,373 
         
Other comprehensive income (loss)        
Foreign currency translation adjustment  (366,176)  (605,360)
Comprehensive income $864,322  $154,013 
Less: Comprehensive income attributable to non-controlling interests  527,194   —   
Comprehensive income attributable to Blue Hat Interactive Entertainment shareholders  337,128   154,013 
         
Weighted average number of ordinary shares        
Basic  47,127,200   35,141,114 
Diluted  52,012,580   35,141,114 
         
Earnings per share        
Basic $0.026  $0.022 
Diluted $0.024  $0.022 

 

 

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BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
 
   March 31,   December 31, 
ASSETS  2021   2020 
Current assets:        
Cash and cash equivalents $14,674,783  $15,800,563 
Restricted cash  —     —   
Short-term investments  —     —   
Accounts receivable, net  28,535,745   16,594,533 
Accounts receivable - related party  —     1,906,101 
Other receivables, net  21,181,096   14,350,223 
Other receivables - related party  —     —   
Inventories  168,346   117,075 
Prepayments, net  5,238,393   1,917,780 
Total current assets  69,798,363   50,686,275 
         
Property and equipment, net  4,342,565   4,258,121 
         
Other assets:        
Prepayments  7,205,230   4,164,274 
Operating lease, right-of-use asset  355,805   290,410 
Intangible assets, net  26,784,385   14,252,575 
Long-term investments  1,826,123   1,914,668 
Deferred tax assets  252,564   119,127 
Goodwill accounting  213,688   —   
Total other assets  36,637,795   20,741,054 
Total assets $110,778,723  $75,685,450 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Short-term loans - banks $4,338,151  $5,129,295 
Current maturities of long-term loans - third party  —     14,117 
Accounts payable  3,110,529   935,588 
Convertible bonds payable  54,150   739,189 
Other payables and accrued liabilities  16,470,149   1,846,917 
Other payables - related party  25,677   25,837 
Operating lease liabilities - current  283,352   300,468 
Customer deposits  756,945   941,877 
Accrual interest payable  751,641   —   
Taxes payable  9,394,094   6,802,454 
Total current liabilities  35,184,688   16,735,742 
         
Other liabilities:        
Operating lease liability  85,493   —   
Long-term loans - third party  —     —   
Total other liabilities  85,493   —   
Total liabilities  35,270,181   16,735,742 
         
COMMITMENTS AND CONTINGENCIES        
Shareholders' equity        
Ordinary shares, $0.001 par value, 100,000,000 shares authorized, 47,127,200 shares issued and outstanding as of March 31, 2021, and 38,553,694 shares issued and outstanding as of December 31, 2020  47,127   38,554 
         
Stock subscription receivable        
Additional paid-in capital  31,453,071   23,466,482 
Statutory reserves  2,204,174   2,204,174 
Retained earnings  32,090,702   31,387,398 
Accumulated other comprehensive income (loss)  1,375,520   1,741,696 
Total Blue Hat Interactive Entertainment Technology shareholders' equity  67,170,594   58,838,304 
Non-controlling interests  8,337,948   111,404 
Total equity  75,508,542   58,949,708 
Total liabilities and shareholders' equity $110,778,723  $75,685,450 

 

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