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NEW YORK–(BUSINESS WIRE)–Allied Esports Entertainment, Inc. (NASDAQ: AESE) (the “Company” or “AESE”), a global esports entertainment company, today announced financial results for the third quarter ended September 30, 2022. This release refers to “continuing” and “discontinued” operations due to the sale of the Company’s subsidiaries owning and operating its poker-related business, the World Poker Tour® (“World Poker Tour,” or “WPT®”) on July 12, 2021. Unless otherwise noted, results presented in this release relate to the continuing operations of the Company and its Allied Esports business, and excludes the operations of the World Poker Tour, which are classified as discontinued operations of the Company.

Commenting on the third quarter 2022 results and strategic process, the Company’s Chief Executive Officer, Yinghua Chen, said, “As the recovery of our Esports operations continues to gain momentum, we delivered strong sequential quarter revenue growth of 35%. With a robust slate of Esports events scheduled for the fourth quarter, we expect a strong finish to the year. I am also very pleased with our continued progress in evaluating strategic alternatives for our business, including investing the cash on our balance sheet for M&A opportunities to generate profitable growth and drive shareholder value. We intend to provide the market with an update on these activities at the appropriate time.”

Third Quarter 2022 Financial Results

Revenues: Total revenues of $1.6 million decreased 7% for the third quarter of 2022 compared to the third quarter of 2021, but were up 35% from the second quarter of 2022. The decline from the third quarter of 2021 was driven by a year-over-year reduction in our multi-platform content revenues, most notably from live streaming events with Trovo. The sequential improvement was primarily driven by an increase in proprietary and third-party production events at our Esports arena.

Costs and expenses: Total costs and expenses for the third quarter of 2022 were $3.3 million, a decrease of 42% compared to the third quarter of 2021. The net decrease in costs and expenses is primarily due to a $1.0 million, or 29%, reduction in general and administrative expenses, consisting primarily of severance payments to a former executive and professional fees related to the sale of WPT as well as a $1.1 million reduction in non-cash depreciation and amortization expense.

Net loss for the third quarter of 2022 was $1.6 million compared to net income of $74.3 million in the prior year period. The 2021 net income includes an $80.4 million gain on the sale of WPT partially offset by a $3.2 million loss from discontinued operations prior to the sale of WPT.

Adjusted EBITDA loss was $1.8 million for the third quarter of 2022 compared to a loss of $3.0 million in the third quarter of 2021. A reconciliation of the GAAP-basis net loss to adjusted EBITDA is provided in the table at the end of this press release.

Balance Sheet

As of September 30, 2022, the Company had a cash position of $89.2 million, including $5.0 million of restricted cash compared to $97.9 million at December 31, 2021, which also included $5.0 million of restricted cash. At September 30, 2022, the Company had a working capital position of $81.6 million compared to $89.0 million at December 31, 2021. As of September 30, 2022, the Company had approximately 39.1 million shares of outstanding common stock.

Operational Update

Allied Esports produced 93 events in the third quarter of 2022, with 61 proprietary events and 32 third party events. Third party events were up 23% over the second quarter of 2022 and were highlighted by HackerOne, Universal Domino League, the Rainbow Six North America League and The Ultimate Crown: The Ultimate Battle featuring MrBeast, Ninja, Voyboy, Mizkif, Tyler1, Doublelift and Ludwig among other top influencers.

Live event and production business continued to grow stronger with the Company’s HyperX Arena Las Vegas posting its best quarter year to date while growing revenues by 51% and improving adjusted EBITDA by 32% over the second quarter.

The Allied Esports Trucks were active with five eNASCAR Arcade events taking place in the third quarter of 2022 at the Richmond FireKeepers Casino 400 at Michigan International Speedway in Brooklyn, Michigan, the NASCAR Cup Series Race at Richmond Raceway in Richmond, Virginia, Go Bowling at The Glen at Watkins Glen International in Watkins Glen, New York, the Coke Zero Sugar 400 at Daytona International Speedway in Daytona Beach, Florida, and the Cook Out Southern 500 at Darlington Raceway in Darlington, South Carolina. In addition, the company executed pop-up gaming exhibition events for Boys and Girls Club at the Keystone Conference in Anaheim, California, for NASCAR at Bubba’s Block Party featuring Bubba Wallace in Richmond, Virginia, for NASCAR and the Coca-Cola iRacing Series at University of Central Florida in Orange County, Florida and for NASCAR in partnership with Southern Computer Warehouse at Kansas Speedway in Kansas City, Kansas.

Corporate Developments

During the third quarter of 2022, the Company’s Board of Directors (the “Board”) appointed Yinghua Chen as Chief Executive Officer. Ms. Chen had previously served as the Company’s President, Chief Investment Officer and Board Secretary. Given Ms. Chen’s additional responsibilities as Chief Executive Officer, Ms. Chen no longer serves the Company as Chief Investment Officer or Board Secretary, but continues to serve as President. Ms. Chen assumed the Chief Executive Officer position from Lyle Berman, who served as Interim Chief Executive Officer since February 2022. Mr. Berman retained his position as Co-Chairman of the Board, and has been appointed as Vice President, Mergers & Acquisitions, where he will be more focused on the Company’s M&A activities.

Subsequent to the end of the third quarter of 2022, the Company announced Judson Hannigan resigned as Chief Executive Officer of Allied Esports International, Inc., the Company’s wholly owned subsidiary that operates the Allied Esports business. In addition, due to increased global economic uncertainty and in an effort to improve the Company’s cash flow and financial flexibility, the Company is in the process of closing Allied Esports’ European office and will manage its operations through Allied Esports’ facilities in the U.S.

As previously announced, late in 2021, the Company engaged The Benchmark Company, LLC to serve as the Company’s exclusive financial advisor in connection with a potential business combination transaction. The Company has reviewed a number of potential target investment opportunities over the past several months, and due diligence, as well as the continued sourcing of other opportunities, remains ongoing. The Company intends to provide further updates at the appropriate time.

Additionally, as previously announced, the Company remains in the process of exploring strategic options for the Esports business and intends to provide further updates at the appropriate time.

About Allied Esports Entertainment

Allied Esports Entertainment, Inc. (NASDAQ: AESE) is a global esports entertainment venture dedicated to providing transformative live experiences, multiplatform content and interactive services to audiences worldwide. For more information, visit alliedesports.gg.

Non-GAAP Financial Measures

As a supplement to our financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the company’s results of operations as determined in accordance with GAAP.

The Company provides net income (loss) and earnings (loss) per share in accordance with GAAP. In addition, the Company provides EBITDA (defined as GAAP net income (loss) from continuing operations before interest (income) expense, income taxes, depreciation, and amortization). The Company defines “Adjusted EBITDA” as EBITDA excluding certain non-cash charges, such as stock-based compensation, inducement expense, extinguishment losses and impairment losses.

In the future, the Company may also consider whether other items should also be excluded in calculating the non-GAAP financial measures used by the Company. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure the Company’s financial and operating performance. In particular, these measures facilitate comparison of our operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company’s core business, operating results, or future outlook. Additionally, we consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Internally, management uses these non-GAAP financial measures, along with others, in assessing the Company’s operating results, measuring compliance with any applicable requirements of the Company’s debt financing agreements in place at such time, as well as in planning and forecasting.

The Company’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and our non-GAAP definitions of the “EBITDA” and “Adjusted EBITDA” do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but include or exclude different items, which may not provide investors a comparable view of the Company’s performance in relation to other companies.

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering the Company’s GAAP, as well as non-GAAP, financial results and outlook, and by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

Forward-Looking Statements

This communication contains certain forward-looking statements under federal securities laws. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of such terms, or other comparable terminology. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in these forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: the ability to meet Nasdaq’s continued listing standards; our ability to execute on our business plan; the ability to retain key personnel; potential litigation; general economic and market conditions impacting demand for our services; a change in our plans to retain or invest the net cash proceeds from the WPT sale transaction; our inability to enter into one or more future acquisition or strategic transactions using the net proceeds from the WPT sale transaction; and our ability, or a decision not to pursue strategic options for the esports business. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of AESE are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this communication. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business and results is described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on May 26, 2022, as well as subsequent reports we file with the SEC. Readers are also urged to carefully review and consider the various disclosures we made in such Annual Report on Form 10-K and in subsequent reports with the SEC.

Allied Esports Entertainment, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 
September 30, December 31,

2022

2021

(unaudited)
Assets
Current Assets
Cash

$

84,225,000

 

$

92,887,030

 

Accounts receivable

 

121,394

 

 

389,040

 

Prepaid expenses and other current assets

 

1,214,231

 

 

984,777

 

Total Current Assets

 

85,560,625

 

 

94,260,847

 

Restricted cash

 

5,000,000

 

 

5,000,000

 

Property and equipment, net

 

4,831,180

 

 

6,136,893

 

Digital assets

 

56,970

 

 

 

Intangible assets, net

 

23,833

 

 

26,827

 

Deposits

 

379,105

 

 

379,105

 

Total Assets

$

95,851,713

 

$

105,803,672

 

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable

$

745,584

 

$

341,161

 

Accrued expenses and other current liabilities

 

2,768,895

 

 

2,966,245

 

Accrued expenses – related party

 

 

 

1,800,000

 

Deferred revenue

 

411,510

 

 

141,825

 

Total Current Liabilities

 

3,925,989

 

 

5,249,231

 

Deferred rent

 

1,708,115

 

 

1,907,634

 

Total Liabilities

 

5,634,104

 

 

7,156,865

 

Commitments and Contingencies
Stockholders’ Equity
Preferred stock, $0.0001 par value, 1,000,000 shares authorized,
none issued and outstanding

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized,
39,085,470 shares issued and outstanding at September 30, 2022
39,116,907 shares issued and outstanding at December 31, 2021

 

3,909

 

 

3,912

 

Additional paid in capital

 

198,528,534

 

 

197,784,972

 

Accumulated deficit

 

(108,494,062

)

 

(99,411,683

)

Accumulated other comprehensive income

 

179,228

 

 

269,606

 

Total Stockholders’ Equity

 

90,217,609

 

 

98,646,807

 

Total Liabilities and Stockholders’ Equity

$

95,851,713

 

$

105,803,672

 

Allied Esports Entertainment, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 
For the Three Months Ended For the Nine Months Ended
September 30, September 30,

2022

2021

2022

2021

 
Revenues:
In-person

$

1,551,963

 

$

1,455,867

 

$

4,884,400

 

$

2,627,781

 

Multiplatform content

 

13,679

 

 

229,961

 

 

251,130

 

 

383,684

 

Total Revenues

 

1,565,642

 

 

1,685,828

 

 

5,135,530

 

 

3,011,465

 

Costs and Expenses:
In-person (exclusive of depreciation and amortization)

 

1,112,645

 

 

1,249,640

 

 

4,002,312

 

 

2,442,750

 

Multiplatform content (exclusive of depreciation and amortization)

 

31,010

 

 

87,373

 

 

95,507

 

 

214,258

 

Selling and marketing expenses

 

54,445

 

 

87,755

 

 

185,614

 

 

216,428

 

General and administrative expenses

 

2,397,901

 

 

3,385,418

 

 

8,470,193

 

 

9,659,425

 

Depreciation and amortization

 

(328,739

)

 

806,137

 

 

1,288,106

 

 

2,495,939

 

Impairment of digital assets

 

 

 

 

 

164,411

 

 

 

Total Costs and Expenses

 

3,267,262

 

 

5,616,323

 

 

14,206,143

 

 

15,028,800

 

Loss From Operations

 

(1,701,620

)

 

(3,930,495

)

 

(9,070,613

)

 

(12,017,335

)

Other Expense:
Gain on forgiveness of PPP loans and interest

 

 

 

912,475

 

 

 

 

912,475

 

Other (expense) income, net

 

34,073

 

 

54,434

 

 

(45,859

)

 

69,413

 

Interest income (expense), net

 

25,316

 

 

(11,809

)

 

34,093

 

 

(269,411

)

Total Other Expense

 

59,389

 

 

955,100

 

 

(11,766

)

 

712,477

 

Loss from continuing operations

 

(1,642,231

)

 

(2,975,395

)

 

(9,082,379

)

 

(11,304,858

)

(Loss) income from discontinued operations, net of tax provision:
Loss from discontinued operations before the sale of WPT

 

 

 

(3,151,740

)

 

 

 

(1,099,033

)

Gain on sale of WPT

 

 

 

80,429,729

 

 

 

 

80,429,729

 

Income from discontinued operations

 

 

 

77,277,989

 

 

 

 

79,330,696

 

Net income (loss)

$

(1,642,231

)

$

74,302,594

 

$

(9,082,379

)

$

68,025,838

 

 
Basic and Diluted Net Loss (Income) per Common Share
Continuing operations

$

(0.04

)

$

(0.08

)

$

(0.23

)

$

(0.29

)

Discontinued operations, net of tax

$

 

$

1.98

 

$

 

$

2.03

 

 
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted

 

39,094,696

 

 

39,056,403

 

 

39,092,133

 

 

38,989,671

 

 
 
Comprehensive Loss
Net Loss

$

(1,642,231

)

$

74,302,594

 

$

(9,082,379

)

$

68,025,838

 

Other comprehensive (loss) income:
Foreign currency translation adjustments

 

(31,747

)

 

(22,031

)

 

(90,378

)

 

35,889

 

Total Comprehensive Loss

$

(1,673,978

)

$

74,280,563

 

$

(9,172,757

)

$

68,061,727

 

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with United States generally accepted accounting principles (“GAAP”) or as an alternative to net cash provided by operating activities as a measure of AESE’s profitability or liquidity. AESE’s management believes EBITDA and Adjusted EBITDA are useful because they allow external users of its financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance, compare the results of its operations from period to period and against AESE’s peers without regard to AESE’s financing methods, hedging positions or capital structure and because it highlights trends in AESE’s business that may not otherwise be apparent when relying solely on GAAP measures. AESE presents EBITDA and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA AESE presents may not be comparable to similarly titled measures of other companies. AESE defines “EBITDA” as earnings before interest, income taxes, depreciation and amortization of intangibles. AESE defines “Adjusted EBITDA” as EBITDA excluding stock-based compensation, gain on forgiveness of PPP loans, transaction costs and other charges related to the sale of WPT, impairment losses, conversion inducement expenses and extinguishment losses.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss from continuing operations, AESE’s most directly comparable financial measure calculated and presented in accordance with GAAP.

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

2022

2021

2022

2021

Continuing operations
Net loss from continuing operations

$

(1,642,231

)

$

(2,975,395

)

$

(9,082,379

)

$

(11,304,858

)

Interest (income) expense, net

 

(25,316

)

 

11,809

 

 

(34,093

)

 

269,411

 

Federal, state, and foreign taxes

 

 

 

(48,400

)

 

 

 

(48,400

)

Depreciation and amortization

 

(328,739

)

 

806,137

 

 

1,288,106

 

 

2,495,939

 

EBITDA

 

(1,996,286

)

 

(2,205,849

)

 

(7,828,366

)

 

(8,587,908

)

Stock compensation

 

238,840

 

 

151,220

 

 

793,229

 

 

1,081,362

 

PPP loan forgiveness

 

 

 

(912,475

)

 

 

 

(912,475

)

Impairment expense

 

 

 

 

 

164,411

 

 

 

Adjusted EBITDA

$

(1,757,446

)

$

(2,967,104

)

$

(6,870,726

)

$

(8,419,021

)

 

Contacts

Investor Contact:
Lasse Glassen

Addo Investor Relations

lglassen@addo.com
424-238-6249

Media Contact:
Brian Fisher

Allied Esports Entertainment

brian@alliedesports.com