Blue Hat Announces Financial Results for Third Quarter of 2021, Highlighted by a 235.6% Increase in Total Revenues to US $13.3 Million

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XIAMEN, China, Dec. 7, 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 and nine months ended September 30, 2021 (“Third Quarter 2021” and “Nine Months 2021”, respectively).

Third Quarter 2021 and Nine Months 2021 Financial Highlights

  • Total revenues of US $13.3 million, up 235.6% from US $4.0 million in the prior-year period, driven primarily by increased sales from the IDC business with support from the mobile gaming and information technology services businesses
  • Gross profit of US $5.4 million, up 94.3% from US $2.8 million in the prior-year period
  • Income from operations of US $2.0 million, unchanged from US $2.0 million in the prior-year period
  • Net income of US $2.0 million, up 21.5% from US $1.7 million in the prior-year period
  • Nine Months 2021 total revenues of US $31.3 million, up 254.3% from US $8.8 million in the prior-year period
  • Nine Months 2021 gross profit of US $14.2 million, up 120.7% from US $6.4 million in the prior-year period
  • Nine Months 2021 income from operations of US $5.6 million, up 55.3% from US $3.6 million in the prior-year period
  • Nine Months 2021 net income of US $3.4 million, up 16.4% from US $2.9 million in the prior-year period
  • US $11.9 million in cash and cash equivalents at September 30, 2021

Management Commentary

Mr. Xiaodong Chen, CEO of Blue Hat, stated, “2021 has been a monumental year for Blue Hat, with significant gains generated due to a proactive acquisition strategy across our integrated businesses. The Company achieved record revenues of US $31.3 million in the first nine months of 2021, more than tripling our top line from the prior-year period with the launch of our communication services/IDC business with the acquisition of Xunpusen Technology Co., Ltd. (“Xunpusen”) in late 2020. In addition, we continue to build an interactive entertainment platform including mobile games, augmented reality toys, and a fully immersive education curriculum. We are pleased with the improved results on the bottom line during Third Quarter 2021 as we have continued to integrate these businesses into Blue Hat’s operations, and we remain confident in our ability to continue executing on our growth strategy to conclude the year on a strong note. We look forward to making continued investments in our various lines of business, including technology development and partnership expansions, which we believe will establish a firm foundation for long-term growth.”

Third Quarter 2021 Results

Total revenues were US $13.3 million for Third Quarter 2021, an increase of US $9.3 million, or 235.6%, compared to US $4.0 million in the prior-year period. The revenue growth was primarily attributable to increased sales from the mobile games and communication services businesses, as well as contributions from the information technology services business, which launched in the fourth quarter of 2020.

Revenues from communication services were US $5.8 million for Third 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.

Revenues from mobile games increased to US $3.4 million for Third Quarter 2021, from US $0.6 million in the prior-year period, following the acquisition of Fuzhou Csfctech Co., Ltd. (“Csfctech”) in January 2021.

Revenues from information technology services were US $1.6 million for Third Quarter 2021, compared to nil in the prior-year period. This is a new line of business that the Company launched in late 2020, whereby Blue Hat provides products and technical services that enable users to access technical service platforms to utilize products and services from third-party platforms and medial channels (such as WeChat Official Account, Mini Program, APP, Tik Tok, Toutiao, Quick Worker, etc.).

Revenues from sales of interactive toys (game series) were US $1.5 million for the Third Quarter 2021, compared to US $3.3 million in the prior-year period.  The decrease was due to the Company’s focus on developing other areas of business during the period.

Revenues from sales of interactive toys (animation series) were US $1.0 million for Third Quarter 2021, compared to US $0.02 million in the prior-year period.

Revenues from AR education, previously included under interactive toys (animation series), were US $0.04 million for Third 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.

Gross profit increased 94.3% to US $5.4 million for Third Quarter 2021, from US $2.8 million in the prior-year period. Gross margin was 40.7% for Third Quarter 2021, compared to 70.2% in the prior-year period. The decrease in gross margin 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 $3.4 million for Third Quarter 2021, from US $0.8 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 was US $2.0 million for Third Quarter 2021, unchanged from US $2.0 million in the prior-year period.

Net income increased 21.5% to US $2.0 million for Third Quarter 2021, from US $1.7 million in the prior-year period. The increase in net income is mainly attributable to the increase in total revenues.  

Basic and diluted earnings per share were US $0.04 for Third Quarter 2021, compared to US $0.05 for the prior-year period.

Nine Months 2021 Results

Total revenues were US $31.3 million for Nine Months 2021, an increase of US $22.4 million, or 254.3%, compared to US $8.8 million in the prior-year period. The revenue growth was largely attributable to increased revenue contributions from the Company’s IDC and mobile games businesses, following the acquisitions of Xunpusen in late 2020 and Csfctech in January 2021.

Revenues from communication services were US $12.9 million for Nine Months 2021, compared to nil in the prior-year period.

Revenues from mobile games increased to US $9.2 million for Nine Months 2021, from US $1.8 million in the prior-year period.

Revenues from information technology services were US $1.6 million for Nine Months 2021, compared to nil in the prior-year period.

Revenues from sales of interactive toys (game series) were US $5.9 million for Nine Months 2021, compared to US $7.0 million in the prior-year period.

Revenues from sales of interactive toys (animation series) were US $1.4 million for Nine Months 2021, compared to US $0.02 million in the prior-year period.

Revenues from AR education, previously included under interactive toys (animation series), were US $0.2 million for Nine Months 2021.

Gross profit increased 120.7% to US $14.2 million for Nine Months 2021, from US $6.4 million in the prior-year period.

  • Interactive toys (animation series): 3.2%, or US $0.05 million
  • Interactive toys (game series): 58.3%, or US $3.4 million
  • Mobile games: 82.6%, or US $7.6 million
  • AR education: 88.5%, or US $0.2 million
  • Communication services: 20.3%, or US $2.6 million
  • Information technology services: 18.8%, or US $0.3 million

Total gross margin was 45.5% for Nine Months 2021, compared to 73.0% in the prior-year period.

Total operating expenses increased to US $8.6 million for Nine Months 2021, from US $2.8 million in the prior-year period, primarily as a result of increased expenses as described above under “Third Quarter 2021 Results.”

Income from operations increased 55.3% to US $5.6 million for Nine Months 2021, from US $3.6 million in the prior-year period.

Net income increased 16.4% to US $3.4 million for Nine Months 2021, from US $2.9 million in the prior-year period. 

Basic and diluted earnings per share were US $0.07 and US $0.06, respectively, for Nine Months 2021, compared to US $0.08 in the prior-year period.

Balance Sheet Highlights

As of September 30, 2021, Blue Hat had cash and cash equivalents of US $11.9 million, working capital of US $37.4 million and total shareholders’ equity of US $83.5 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 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: ir@bluehatgroup.net

Investor Relations:

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Three Months Ended September 30,

2021

2020

Revenues

$                      13,316,780

$                   3,967,824

Cost of revenue

7,903,014

1,181,586

Gross profit

5,413,766

2,786,238

Operating expenses:

Selling

1,432,284

120,574

General and administrative

898,529

593,077

Research and development

1,077,914

55,097

Total operating expenses

3,408,727

768,748

Income from operations

2,005,039

2,017,490

Other income (expense)

Interest income

16,770

38,937

Interest expense

(28,026)

(31,615)

Other finance expenses

(3,109)

(5,227)

Other (expense) income, net

894,465

(41,628)

Total other (expense) income, net

870,100

(39,533)

Income before income taxes

2,875,139

1,977,957

Provision for income taxes

859,354

319,285

Net income

2,015,785

1,658,672

Other comprehensive income (loss)

Foreign currency translation adjustment

(315,989)

1,467,387

Comprehensive income

$                        1,699,796

$                   3,126,059

Less: Comprehensive income attributable to non-controlling
interests

735,923

Comprehensive income attributable to Blue Hat Interactive
Entertainment shareholders

963,873

3,126,059

Weighted average number of ordinary shares

Basic

49,432,007

35,141,114

Diluted

56,159,502

35,141,114

Earnings per share

Basic

$0.04

$0.05

Diluted

$0.04

$0.05

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Nine Months Ended September 30,

2021

2020

Revenues

$                      31,259,344

$                   8,822,686

Cost of revenue

17,051,940

2,385,548

Gross profit

14,207,404

6,437,138

Operating expenses:

Selling

3,081,032

411,273

General and administrative

3,026,529

2,189,895

Research and development

2,455,231

200,276

Total operating expenses

8,562,792

2,801,444

Income from operations

5,644,612

3,635,694

Other income (expense)

Interest income

151,655

146,821

Interest expense

(263,427)

(155,275)

Other finance expenses

(84,772)

(15,395)

Other (expense) income, net

(198,101)

(20,766)

Total other (expense) income, net

(394,645)

(44,615)

Income before income taxes

5,249,967

3,591,079

Provision for income taxes

1,853,066

672,644

Net income

3,396,901

2,918,435

Other comprehensive income (loss)

Foreign currency translation adjustment

994,794

887,995

Comprehensive income

$                        4,391,695

$                   3,806,430

Less: Comprehensive income attributable to non-controlling
interests

1,484,518

Comprehensive income attributable to Blue Hat Interactive
Entertainment shareholders

2,907,177

3,806,430

Weighted average number of ordinary shares

Basic

49,432,007

35,141,114

Diluted

56,159,502

35,141,114

Earnings per share

Basic

$0.07

$0.08

Diluted

$0.06

$0.08

BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

ASSETS

2021

2020

Current assets:

Cash and cash equivalents

$                      11,887,108

$                 15,800,563

Restricted cash

Short-term investments

Accounts receivable, net

32,333,303

16,594,533

Accounts receivable – related party

1,906,101

Other receivables, net

16,225,702

14,350,223

Other receivables – related party

33,381

Inventories

244,302

117,075

Prepayments, net

3,134,782

1,917,780

Total current assets

63,858,858

50,686,275

Property and equipment, net

4,232,119

4,258,121

Other assets:

Prepayments

11,784,577

4,164,274

Operating lease, right-of-use asset

199,061

290,410

Intangible assets, net

27,089,943

14,252,575

Long-term investments

1,850,310

1,914,668

Deferred tax assets

255,335

119,127

Goodwill accounting

787,047

Total other assets

41,966,273

20,741,054

Total assets

$                 110,056,970

$             75,685,450

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term loans – banks

$                        1,355,188

$                   5,129,295

Current maturities of long-term loans – third party

0

14,117

Accounts payable

3,813,233

935,588

Convertible bonds payable

60,681

739,189

Other payables and accrued liabilities

11,202,630

1,846,917

Other payables – related party

216,885

25,837

Operating lease liabilities – current

146,693

300,468

Customer deposits

1,862,236

941,877

Accrual interest payable

Taxes payable

7,843,132

6,802,454

Total current liabilities

26,500,678

16,735,742

Other liabilities:

Operating lease liability

59,731

Long-term loans – third party

Total other liabilities

59,731

Total liabilities

26,560,409

16,735,742

COMMITMENTS AND CONTINGENCIES

Shareholders’ equity

Ordinary shares, $0.001 par value, 100,000,000 shares
authorized, 53,417,200 shares issued and outstanding as of June
30, 2021, and 38,553,694 shares issued and outstanding as of
December 31, 2020

53,667

38,554

Additional paid-in capital

35,861,782

23,466,482

Statutory reserves

2,204,174

2,204,174

Retained earnings

33,299,781

31,387,398

Accumulated other comprehensive income (loss)

2,736,490

1,741,696

Total Blue Hat Interactive Entertainment Technology
shareholders’ equity

74,155,894

58,838,304

Non-controlling interests

9,340,667

111,404

Total equity

83,496,561

58,949,708

Total liabilities and shareholders’ equity

$             110,056,970

$             75,685,450

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