PR Newswire | Aug 14, 2020 05:00PM EDT

Unaudited Financial Results

08/14 16:00 CDT

Blue Hat Interactive Entertainment Technology Announces First Half Year of 2020 Unaudited Financial Results XIAMEN, China, Aug. 14, 2020

XIAMEN, China, Aug. 14, 2020 /PRNewswire/ -- Blue Hat Interactive Entertainment Technology ("Blue Hat" or the "Company") (NASDAQ: BHAT), a 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 six months ended June 30, 2020.

First Half Year of 2020 Financial Highlights

* Total revenues decreased by 34.9% for the six months ended June 30, 2020 to US$4.9 million. * Gross profit decreased by 30.8% for the six months ended June 30, 2020 to US$3.7 million. * Income from operations decreased by 50.8% for the six months ended June 30, 2020 to US$1.6 million. * Net income decreased by 58.8% for the six months ended June 30, 2020 to US$1.3 million.

"The outbreak of COVID-19 since the beginning of 2020 has adversely impacted the global economy and our financial performance in the first half year was negatively affected as a result of the suspension of the entire industry. With daily life in China gradually returning to normal since April, our business related to education industry ramped up during the period," said Mr. Xiaodong Chen, Chief Executive Officer of Blue Hat, "I'm pleased that our thriving smart education business line made a significant addition to our portfolio. 'AR Immersive Classes' ('ARIC'), integrated with physical exercises in terms of AR-based educational content and products, targets children between three and six years old. Interactive education combines teaching with entertainment, inspiring kids with imagination and critical thinking. We build Direct-to-Consumer social content marketing channels via short videos and live streaming to increase our brand awareness, and broaden our market reach. Looking forward, we intend to continue to explore both in-house development and strategic investment opportunities to strengthen our pipeline of toy and game content and maximize shareholder value."

Recent Developments

* Blue Hat announced in January 2020 that its AR child abuse prevention course would be introduced in 25 preschools in Tong'an District, Xiamen City as a compulsory part of the curriculum for children before they graduate from kindergarten. * In February 2020, Blue Hat announced a new suite of smart educational products "AR Immersive Classes" ("ARIC"), which includes "Smart Screen Immersive Education Classes", "Smart Immersive Cognitive Education Classes" and "Smart Immersive Physical Education Classes.", and upgrades System for Evaluating Developmental Progress of Preschool Students in China. * In March 2020, Blue Hat's "Interactive System Based on Light Intensity Recognition" received U.S. patent with the number US 10,512,836 B2 from the United States Patent and Trademark Office. * In May 2020, Blue Hat announced that it has signed a three-year partnership with smart education service provider, Sutesen Information Technology Ltd., to expand Blue Hat's Smart Immersive Education Classes, or ARIC, in Guangxi province, China. The partnership aims to commercially launch ARIC in up to 1,000 Guangxi preschools in three years. * In June 2020, Blue Hat announced that it has partnered with Xiamen Xing Meng Wei Lai Culture Media Co. LTD, a leading Chinese multi-channel network and internet content development agency, to build Direct-to-Consumer social content marketing channels via short videos and live streaming. * In July 2020, Blue Hat entered into a Securities Purchase Agreement with two accredited institutional investors to sell senior secured convertible notes of the Company in a private placement to the investors, in the aggregate principal amount of $3,262,000, together with the issuance of warrants to acquire up to 784,000 ordinary shares of the Company for an aggregate cash purchase price of $2,800,000 (reflecting an original issue discount of $462,000).

First Half 2020 Results

Total revenues were $4.9 million for the six months ended June 30, 2020, a decrease of $2.6 million, or 34.9%, from $7.5 million for the same period ended June 30, 2019. The overall decrease was primarily attributed to the fewer sales of interactive toys (game series) during the period, partially offset by revenue from ARIC, which was launched to the market this year.

Gross profit was $3.7 million for the six months ended June 30, 2020, a decline of $1.6 million, or 30.8%, from $5.3 million for the same period ended June 30, 2019. Gross profit margin was 75.2% for the six months ended June 30, 2020, compared to 70.8% for the same period of 2019. Research and development expenses of mobile games recorded in Cost of Sales are fully amortized this February, consequently, gross profit ratio increased by 4.4%.

Operating expenses were $ 2,032,696 for the six months ended June 30, 2020, an increase of $47,752, or 2.4%, from $1,984,944 for the same period ended June 30, 2019. This increase was mainly due to the increase of general and administrative expenses amounted to $221,638, offset by the decrease of selling expense of around $119,705. Fixed cost increased during the first half of 2020 mainly due to the amortization of newly incurred rental cost and software patents. Legal expenses accounted for an obvious growth of general and administrative expenses in connection with our recent financing.

Income from operations was $1.6 million for the six months ended June 30, 2020, a decrease of $1.7 million, or 50.8%, from $3.3 million for the same period ended June 30, 2019.

Net income attributable to ordinary shareholderswas $1.3 million for the six months ended June 30, 2020, compared with $3.1 million for the same period ended June 30, 2019. or $0.04 and $0.09 per basic and diluted share respectively.

Cash and Cash Equivalents

As of June 30, 2020, BHAT maintained strong cash resources of cash and cash equivalents totaling $11.4 million, compared with $10.5 million by the ended of December 31, 2019.

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. The Company's interactive entertainment platform creates unique user experiences by connecting physical items to mobile devices, which creates a rich visual and interactive environment for users through the integration of real objects and virtual scenery. 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:

Lexie ZhangBlue Hat Interactive Entertainment TechnologyPhone: +86 (592) 228-0010Email: ir@bluehatgroup.net

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

June 30, December 31,

ASSETS 2020 2019

CURRENT ASSETS

Cash and cash equivalents US$ 11,372,626 US$ 10,478,587

Accounts receivable, net 14,420,292 13,631,359

Other receivables, net 12,972,825 13,182,529

Prepayments, net 277,376 299,577

Inventories 249,563 125,264

Restricted cash - 5,000,000

Total current assets 39,292,682 42,717,316

PROPERTY AND EQUIPMENT, NET 4,417,195 2,324,823

OTHER ASSETS

Prepayments 4,660,489 4,425,849

Operating lease, right-of-use asset 501,136 679,850

Intangible assets, net 6,423,487 6,758,316

Long-term investments 1,702,098 1,727,301

Deferred tax assets 188,872 182,234

Total other assets 13,476,082 13,773,550

Total assets US$ 57,185,959 US$ 58,815,689

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Short-term loans - banks 1,963,415 5,819,787

Current maturities of long-term loans -third 51,915 77,493party

Accounts payable 1,420,706 293,985

Other payables and accrued liabilities 3,278,340 3,628,809

Other payables - related party 252,989 21,341

Operating lease liabilities-current 264,903 313,460

Customer deposits 3,573 -

Taxes payable 4,264,275 3,525,153

Total current liabilities 11,500,116 13,680,028

OTHER LIABILITIES

Operating lease liability 255,190 372,051

Long-term loans - third party - 13,328

Total other liabilities 255,190 385,379

Total liabilities 11,755,306 14,065,407

COMMITMENTS AND CONTINGENCIES

Total shareholders' equity

Ordinary shares, US$0.001 par value,50,000,000shares authorized, 35,141,114 shares issued and 35,141outstanding as of June 30, 2020, 35,141,114 35,141sharesissued and outstanding as of December 31,2019

Additional paid-in capital 20,771,849 20,771,849

Statutory reserves 1,289,765 1,289,765

Retained earnings 25,391,957 24,132,194

Accumulated other comprehensive income (2,058,059) (1,478,667)(loss)

Total shareholders' equity 45,430,653 44,750,282

Total liabilities and shareholders' equity US$ 57,185,959 US$ 58,815,689

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Three Months ended June 30,

2020 2019

REVENUES US$ 2,611,204 US$ 3,176,566

Interactive toys - animation series (148) 11,248

Interactive toys - game series 2,046,625 2,251,849

Mobile games 564,727 913,469

COST OF REVENUES (634,473) (953,732)

GROSS PROFIT 1,976,731 2,222,834

OPERATING EXPENSES

Selling (117,549) (207,263)

General and administrative (1,057,108) (650,605)

Research and development (69,128) (96,148)

Total operating expenses (1,243,785) (954,016)

INCOME FROM OPERATIONS 732,946 1,268,818

OTHER INCOME (EXPENSE)

Interest income 107,507 32

Interest expense (51,053) (18,759)

Other finance expenses 47,581 (724)

Other (expense) income, net 2,328 (105,621)

Total other income, net 106,363 (125,072)

INCOME BEFORE INCOME TAXES 839,309 1,143,746

PROVISION FOR INCOME TAXES (338,919) (55,447)

NET INCOME 500,390 1,088,299

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment 25,968 31,760

COMPREHENSIVE INCOME US$ 526,358 US$ 1,120,059

WEIGHTED AVERAGE NUMBER OFORDINARY SHARES

Basic and diluted 35,141,114 33,000,000

EARNINGS PER SHARE

Basic and diluted US$ 0.01 US$ 0.03

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Six Months ended June 30,

2020 2019

REVENUES US$ 4,854,862 US$ 7,453,379

Interactive toys - animation series 54 89,391

Interactive toys - game series 3,701,861 6,116,883

Mobile games 1,152,947 1,247,105

COST OF REVENUES (1,203,962) (2,176,756)

GROSS PROFIT 3,650,900 5,276,623

OPERATING EXPENSES

Selling (290,699) (410,404)

General and administrative (1,596,818) (1,375,180)

Research and development (145,179) (199,360)

Total operating expenses (2,032,696) (1,984,944)

INCOME FROM OPERATIONS 1,618,204 3,291,679

OTHER INCOME (EXPENSE)

Interest income 107,884 502

Interest expense (123,660) (65,507)

Other finance expenses (10,168) (1,881)

Other (expense) income, net 20,862 (3,230)

Total other income, net (5,082) (70,116)

INCOME BEFORE INCOME TAXES 1,613,122 3,221,563

PROVISION FOR INCOME TAXES (353,359) (161,346)

NET INCOME 1,259,763 3,060,217

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment (579,392) 12,269

COMPREHENSIVE INCOME US$ 680,371 US$ 3,072,486

WEIGHTED AVERAGE NUMBER OFORDINARY SHARES

Basic and diluted 35,141,114 33,000,000

EARNINGS PER SHARE

Basic and diluted US$ 0.04 US$ 0.09

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SOURCE Blue Hat Interactive Entertainment Technology