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    Blue Hat Announces Financial Results for Second Quarter and First Half of 2022, Highlighted by 78.2% Decrease in Revenues to $2.0 Million for First Half 2022

    12/30/22 9:00:00 AM ET
    $BHAT
    Recreational Games/Products/Toys
    Consumer Discretionary
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    XIAMEN, China, Dec. 30, 2022 (GLOBE NEWSWIRE) -- 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, 2022 ("Second Quarter 2022") and six months ended June 30, 2022 ("First Half 2022").

    Second Quarter 2022 and First Half 2022 Financial Highlights

    • Second Quarter 2022 total revenues of US $1.7 million, compared to US $5.9 million in the prior-year period, decreased due to that overall economic environment has worsened in China with Covid-19 outbreak and related lockdown in various cities in China in 2022.



    • Second Quarter 2022 gross profit of US $1.0 million, a decrease of 76.5% from US $4.3 million in the prior-year period.



    • Second Quarter 2022 loss from operations of US $3.3 million, a decrease of 295.0% from income from operations of US $1.7 million in the prior-year period.



    • Second Quarter 2022 net loss from continuing operations of US $3.4 million, compared to net income from continuing operations of US $0.7 million in the prior-year period, as a result of increased expenses and decreased revenue.



    • First Half 2022 total revenues of US $2.0 million, compared to US $9.2 million in the prior-year period.



    • First Half 2022 gross profit of US $1.2 million, a decrease of 81.4% from US $6.3 million in the prior-year period.



    • First Half 2022 loss from operations of US $6.0 million, a decrease of 483.3% from income from operations of US $1.6 million in the prior-year period.



    • First Half 2022 net loss from continuing operations of US $6.2 million, a decrease of US $6.24 million from net income from continuing operations of US $0.04 million in the prior-year period.



    • US $0.3 million in cash and cash equivalents as of June 30, 2022.

    Management Commentary

    The COVID-19 outbreak since early 2020 has had a negative impact on the global economy and our financial performance has been negatively impacted. In particular, the impact on the Company's operations in first half of fiscal year 2022 has been considerable. Mr. Xiaodong Chen, CEO of Blue Hat, stated, "In order to cope with the current situation of the economy environment, some adjustments have been made to the Company's business, and the Company has suspended or reduced the AR Immersive Course (ARIC), game and communication business, which were severely affected by the COVID-19 pandemic. The Company has increased the commodity supply chain commodity trading platform project and increased the breadth of the Company's business. At the same time, the Company has increased the investment and development of some new projects such as new energy graphene, which will provide some foundation for the future development of the Company, to grow the Company steadily and maximize shareholder value."

    Recent Operating Highlights

    • On July 12, 2022, Blue Hat was offering 1,000,000 ordinary shares, par value $0.01 per share (referred to hereinafter as the "ordinary shares") in this offering at a price of $3.60 per share directly to certain investors, under the Company's effective shelf registration statement. Blue Hat has not retained a broker, dealer, underwriter or placement agent with respect to this offering and therefore are not paying any underwriting discounts or commissions. The total expenses of this offering is approximately $3.6 million.



    • On August 30, 2022, Fujian Blue Hat Interactive Entertainment Technology Ltd. ("Fujian Blue Hat"), a wholly-owned subsidiary of the Company, entered into an agreement with Xiamen Traveler Network Technology Co., LTD. ("Traveler Network"), a leading game distributor, to distribute the Company's proprietary games "Cute Monopoly" and "Cute Game Box" worldwide. Fujian Blue Hat. signed a joint operating agreement with the Travelers Network.



    • On September 20, 2022, Fujian Blue Hat signed a Memorandum of Understanding with Bigg World Pet Ltd. ("Bigg"), a Singapore company, on September 20, 2022. It reached an agreement on becoming the general agent for the development and operation of business strategy games such as Monopoly and Game Box in Southeast Asia.



    • On November 25, 2022, Blue Hat acquired 100% equity interest of Xiamen Shengruihao Technology Co., Ltd which mainly provides product supply chain services and integrated enterprise services.

    Second Quarter 2022 Results

    Total revenues were US $1.7 million for the Second Quarter of 2022, a decrease of US $4.2 million, or 71.1%, compared to US $5.9 million in the prior-year period. It was due to the worsened overall economic environment in China with Covid-19 outbreak and related lockdown in various cities in China in 2022.

    Revenues from sales of interactive toys (animation series) were nil for the Second Quarter of 2022, compared to US $16,061 in the prior-year period.

    Revenues from sales of interactive toys (game series) were US $18,283 for the Second Quarter of 2022, a decrease of 99.2% from US $2.4 million in the prior-year period.

    Revenues from mobile games decreased to US $1.0 million for the Second Quarter of 2022, from US $3.4 million in the prior-year period.

    Revenues from AR education, previously included under interactive toys (animation series), were nil in Second Quarter of 2022, which was due to Covid-19 outbreak.

    Revenues from information service were US $0.7 million for the Second Quarter of 2022, compared to nil in the prior-year period. This is new business in the Third Quarter of 2021.

    Gross profit decreased 76.5% to US $1.0 million for the Second Quarter of 2022 from US $4.3 million in the prior-year period. Gross margin was 59.1% for the Second Quarter of 2022 compared to 72.7% in the prior-year period. The decrease was due to the fact that promotion reduced product price and reduced mobile game revenue.

    Total operating expenses increased by US $1.7 million for the Second Quarter of 2022, from US $2.6 million in the prior-year period, to US $4.3 million, as a result of increased expenses related to bad debt provision, rental fee and increased R&D expenses related to the development of new mobile games.

    Loss/Income from operations decreased 295.0% to loss from operations of US $3.3 million for the Second Quarter of 2022, from income from operations of US $1.7 million in the prior-year period.

    Net loss/income was US $3.4 million for the Second Quarter of 2022, compared to net income US $0.7 million in the prior-year period. The decrease was primarily driven by the increase in operating expenses described above and a decrease in revenue.

    Basic loss per share from continuing operations were US $0.51 for the Second Quarter of 2022, compared to basic earnings per share from continuing operations of US $0.01 for the prior-year period.

    Diluted loss per share from continuing operations were US $0.44 for the Second Quarter of 2022, compared to diluted earnings per share from continuing operations of US $0.01 for the prior-year period.

    First Half 2022 Results

    Total revenues were US $2.0 million for the First Half of 2022, a decrease of US $7.2 million, or 78.2%, compared to US $9.2 million in the prior-year period. It was due to the worsened overall economic environment in China with Covid-19 outbreak and related lockdown in various cities in China in 2022.

    Revenues from sales of interactive toys (animation series) were US $7,146 for the First Half of 2022, compared to US $16,441 in the prior-year period.

    Revenues from sales of interactive toys (game series) were US $0.1 million for the First Half of 2022, compared to US $3.1 million in the prior-year period.

    Revenues from mobile games were US $1.2 million for the First Half of 2022, compared to US $5.8 million in the prior-year period.

    Revenues from AR education, were US $498 for the First Half of 2022, compared to US $0.2 million in the prior-year period.

    Gross profit decreased 81.4% to US $1.2 million for the First Half of 2022, from US $6.3 million in the prior-year period.

    Total gross margin was 58.9% for the First Half of 2022, compared to 69.1% in the prior-year period.

    Total operating expenses increased to US $7.2 million for the First Half of 2022, from US $4.8 million in the prior-year period, primarily as a result of increased expenses as described above in the Second Quarter 2022 Results.

    Loss/Income from operations decreased 483.3% to loss from operations US $7.6 million for the First Half of 2022, from income from operations US $1.6 million in the prior-year period.

    Net loss/income decreased US $6.24 million to net loss US $6.2 million for the First Half of 2022, from US $43,382 in the prior-year period.

    Basic loss per share from continuing operation were US $0.87 for the First Half of 2022, compared to Basic earnings per share from continuing operations of US $0.01 in the prior-year period.

    Diluted loss per share from continuing operations were US $0.75 for the First Half of 2022, compared to diluted earnings per share from continuing operations of US $0.01 in the prior-year period.

    Balance Sheet Highlights

    As of June 30, 2022, Blue Hat had cash and cash equivalents of US $0.3 million, working capital of negative US $0.63 million and total shareholders' equity (excluding the non controlling interest) of US $10.2 million, compared to cash and cash equivalents of US $0.14 million, working capital of US $3.4 million and total shareholders' equity (excluding the non controlling interest) of US $15.2 million, respectively, as of December 31, 2021. It was due to decreased revenues.

    During the First Half of 2022, the Company completed private placements primarily with five companies to pay for technical and consulting services by 21.4 million restrictive ordinary shares.

    The Company announced effect its 1-for-10 Reverse Stock Split on May 26, 2022.

    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: [email protected]



    BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES



    UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

      For the Three Months Ended June 30,
      2022 2021
    Revenues $1,690,838  $5,855,329 
    Cost of revenue  690,962   1,597,044 
    Gross profit  999,876   4,258,285 
             
    Operating expenses:        
    Selling  303,969   910,382 
    General and administrative  2,287,602   724,439 
    Research and development  1,701,532   934,412 
    Total operating expenses  4,293,103   2,569,233 
             
    (Loss) Income from operations  (3,293,227)  1,689,052 
             
    Other income (expense)        
    Interest income  191   134,612 
    Interest expense  (92,005)  (97,799)
    Other finance expenses  (1,306)  (38,061)
    Other expense, net  (6,763)  (585,768)
    Total other (expense), net  (99,883)  (587,016)
             
    Income (loss) before from Continuing Operations before income taxes  (3,393,110)  1,102,036 
    Provision for income taxes  45,289   412,349 
    Net (loss) income from Continuing Operations  (3,438,399)  689,687 
             
    Discontinued Operations        
    Loss from discontinued operations  —   (539,069)
             
    NET (LOSS) INCOME  (3,438,399)  150,618 
             
    Other comprehensive income (loss)        
    Net (loss) income from continued operations  (3,438,399)  689,687 
    Foreign currency translation adjustment - continued operations  (1,077,468)  1,667,618 
    Comprehensive (loss) income - continued operations $(4,515,867) $2,357,305 
             
    Net (loss) from discontinued operations  —   (539,069)
    Foreign currency translation adjustment - discontinued operations  —   9,341 
    Comprehensive (loss) income - discontinued operations  —   (529,728)
    Comprehensive (Loss) Income  (4,515,867)  1,827,577 
    Less: Comprehensive (loss) income attributable to non-controlling interests  (372,736)  221,402 
    Comprehensive (loss) income attributable to Blue Hat Interactive Entertainment shareholders  (4,143,131)  1,606,175 
             
    Weighted average number of ordinary shares        
    Basic  6,021,612   47,384,286 
    Diluted  6,947,050   52,628,146 
             
    Basic (Loss) Earnings per share        
    Basic (loss) earnings per share from continuing operation $(0.51) $0.01 
    Basic loss per share from discontinued operation  —  $(0.01)
    Diluted (Loss) Earnings per share        
    Diluted (loss) earnings per share from continuing operation $(0.44) $0.01 
    Diluted loss per share from discontinued operation  —  $(0.01)

                                                                                                   

    BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

    UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

      For the Six Months Ended June 30,
      2022 2021
    Revenues $1,992,950  $9,150,319 
    Cost of revenue  818,444   2,826,266 
    Gross profit  1,174,506   6,324,053 
             
    Operating expenses:        
    Selling  441,198   1,422,075 
    General and administrative  4,393,581   1,965,577 
    Research and development  2,342,426   1,370,358 
    Total operating expenses  7,177,205   4,758,010 
             
    (Loss) Income from operations  (6,002,699)  1,566,043 
             
    Other income (expense)        
    Interest income  200   134,703 
    Interest expense  (116,989)  (235,416)
    Other finance expenses  (6,409)  (70,828)
    Other income (expense), net  5,723   (604,562)
    Total other (expense), net  (117,475)  (776,103)
             
    Income before (loss) income taxes  (6,120,174)  789,940 
    Provision for income taxes  45,289   746,558 
    Net (loss) income from Continuing Operations  (6,165,463)  43,382 
             
    Discontinued Operations        
    Income from discontinued operations      1,337,734 
             
    NET (LOSS) INCOME  (6,165,463)  1,381,116 
             
    Other comprehensive income (loss)        
    Net (loss) income from continued operations  (6,165,463)  43,382 
    Foreign currency translation adjustment - continued operations  (967,968)  1,562,700 
    Comprehensive (loss) income - continued operations $(7,133,431) $1,606,082 
             
    Net income from discontinued operations  —   1,337,734 
    Foreign currency translation adjustment - discontinued operations  —   (251,917)
    Comprehensive income - discontinued operations  —   1,085,817 
    Comprehensive (Loss) Income  (7,133,431)  2,691,899 
    Less: Comprehensive (loss) income attributable to non-controlling interests  (922,670)  748,596 
    Comprehensive (loss) income attributable to Blue Hat Interactive Entertainment shareholders  (6,210,761)  1,943,303 
             
    Weighted average number of ordinary shares        
    Basic  6,021,612   47,384,286 
    Diluted  6,947,050   52,628,146 
             
    Basic (Loss) Earnings per share        
    Basic loss per share from continuing operation $(0.87) $(0.01)
    Basic earnings per share from discontinued operation  —  $0.03 
    Diluted Earnings (Loss) per share        
    Diluted loss per share from continuing operation $(0.75) $(0.01)
    Diluted earnings per share from discontinued operation  —  $0.03 



    BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

    UNAUDITED CONSOLIDATED BALANCE SHEETS

      June 30, December 31,
    ASSETS 2022 2021
    Current assets:        
    Cash and cash equivalents $343,832  $135,562 
    Accounts receivable, net  13,943,929   16,679,694 
    Other receivables, net  1,233,575   2,976,482 
    Other receivables - related party  1,484,039   — 
    Inventories  25,441   108,623 
    Prepayments, net  1,267,261   1,803,783 
    Total current assets  18,298,077   21,704,144 
             
    Property and equipment, net  4,001,152   4,149,145 
             
    Other assets:        
    Prepayments  1,723,221   1,704,812 
    Operating lease, right-of-use asset  89,930   155,223 
    Intangible assets, net  5,698,303   6,916,107 
    Long-term investments  1,788,003   1,882,146 
    Total other assets  9,299,457   10,658,288 
    Total assets $31,598,686  $36,511,577 
             
    LIABILITIES AND SHAREHOLDERS' EQUITY        
    Current liabilities:        
    Short-term loans - banks $1,309,553  $860,915 
    Accounts payable  1,153,160   959,198 
    Other payables and accrued liabilities  11,759,511   11,389,737 
    Other payables - related party  172,239   186,503 
    Operating lease liabilities - current  50,316   97,054 
    Customer deposits  2,691,914   1,500,677 
    Taxes payable  1,789,883   3,287,640 
    Total current liabilities  18,926,576   18,281,724 
             
    Other liabilities:        
    Operating lease liability  42,040   62,057 
    Long term payable -related party  857,788   — 
    Long-term loans - third party  —   517,590 
    Total other liabilities  899,828   579,647 
    Total liabilities  19,826,404   18,861,371 
             
    COMMITMENTS AND CONTINGENCIES        
    Shareholders' equity        
    Ordinary shares, $0.01 par value, 500,000,000 shares

    authorized, 7,570,256 shares issued and outstanding as of June30, 2022, and 5,382,383 shares issued and outstanding as of December 31, 2021
      75,703   53,824 
    Additional paid-in capital  37,515,619   36,281,992 
    Statutory reserves  2,143,252   2,143,252 
    Retained earnings  (30,991,334)  (25,748,542)
    Accumulated other comprehensive income  1,491,288   2,459,256 
    Total Blue Hat Interactive Entertainment Technology shareholders' equity  10,234,528   15,189,782 
    Non-controlling interests  1,537,754   2,460,424 
    Total equity  11,772,282   17,650,206 
    Total liabilities and shareholders' equity $31,598,686  $36,511,577 


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