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 /PRNewswire/ — 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 mobile 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.

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.                                 
Carolyne Y. Sohn, Vice President              
(415) 568-2255                                             
csohn@equityny.com                                   

In China
Lucy Ma, Associate
+86 10 5661 7012
lma@equityny.com

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

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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