PR Newswire | Oct 25, 2021 09:01AM EDT

Highlighted by 269.6% Increase in Revenues to $17.9 Million for First Half 2021

10/25 08:00 CDT

Blue Hat Announces Financial Results for Second Quarter and First Half of 2021, Highlighted by 269.6% Increase in Revenues to $17.9 Million for First Half 2021 XIAMEN, China, Oct. 25, 2021

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 TechnologyPhone: +86 (592) 228-0010Email: ir@bluehatgroup.net

Investor Relations:

The Equity Group Inc. In China

Carolyne Sohn, Vice President Lucy Ma, Associate

(415) 568-2255 +86 10 5661 7012

csohn@equityny.com lma@equityny.com

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIESUNAUDITED 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 221,402 -interests

Comprehensive income attributable to Blue Hat Interactive 1,606,175 526,358Entertainment shareholders

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 SUBSIDIARIESUNAUDITED 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 748,596interests

Comprehensive income attributable to Blue Hat Interactive 1,943,303 680,371Entertainment shareholders

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 SUBSIDIARIESUNAUDITED 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 sharesauthorized, 53,417,200 shares issued and outstanding as of 53,417 38,554June 30, 2021, and 38,553,694 shares issued and outstandingas of December 31, 2020

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 73,023,317 58,838,304shareholders' equity

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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SOURCE Blue Hat Interactive Entertainment Technology