Blue Hat Interactive Entertainment Technology Announces Fourth Quarter 2019 and Fiscal Year 2019 Financial Results

XIAMEN, China, March 23, 2020 /PRNewswire/ -- Blue Hat Interactive Entertainment Technology ("Blue Hat" or the "Company") (NASDAQ: BHAT), a 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 fourth quarter and fiscal year ended December 31, 2019.

Fourth Quarter 2019 Financial Highlights(1)

    --  Total revenues increased by 18.3% year-over-year to US$11.8 million.
    --  Gross profit increased by 15.2% year-over-year to US$7.9 million.
    --  Income from operations increased by 24.4% year-over-year to US$6.2
        million.
    --  Net income increased by 26.2% year-over-year to US$6.2 million.

Fiscal Year 2019 Financial Highlights

    --  Total revenues increased by 28.6% year-over-year to US$23.8 million.
    --  Gross profit increased by 31.2% year-over-year to US$16.3 million.
    --  Income from operations increased by 14.8% year-over-year to US$9.5
        million.
    --  Net income increased by 14.9% year-over-year to US$9.1 million.

"We are pleased to report another quarter of healthy revenue growth and increased profitability in the fourth quarter, concluding a strong 2019 that saw Blue Hat become a U.S. listed public company while making progress in sales, business development and research and development," said Mr. Xiaodong Chen, Chief Executive Officer of Blue Hat. "A particular highlight during the fourth quarter of 2019 was our thriving smart education business line which launched a range of exciting new AR immersive educational products for children between the ages of three and six years old. Our products are being embraced by consumers both in China and international markets, demonstrated by the popularity of 'AR Dinosaur' which helped Blue Hat attract a large number of visitors to our booth at the China Toy Expo in October 2019, as well as the buzz generated by our 'AR Glow' Interactive Glowstick product among international buyers at the 126th China Import and Export Fair. Looking forward, we intend to continue to explore both in-house development and strategic investment opportunities to strengthen our pipeline of toy and game content and maximize shareholder value, although no definitive agreements have been executed."

Recent Developments

    --  In July 2019, the Company closed its initial public offering ("IPO") of
        ordinary shares, resulting in net proceeds to the Company of
        approximately US$6.4 million. In connection with the IPO, the Company's
        ordinary shares began trading on The Nasdaq Capital Market on July 26,
        2019 under the symbol "BHAT".
    --  In October 2019, Blue Hat launched its new AR Dinosaur toy at the 18th
        China International Toy Fair in Shanghai, China. Along with the AR
        Dinosaur, a range of Blue Hat's popular products were also on display at
        the Fair, including the AR Racer, AR Need a Spanking, Bouncing Bubble,
        and AR Construction Truck products.
    --  Blue Hat opened its first play-based learning center in Xiamen, China in
        October 2019, featuring the Company's AR games and educational content,
        aiming at providing an immersive learning experience for children ages
        one through seven across health, language, social and emotional,
        science, and art subjects.
    --  Blue Hat announced in November 2019 that its "AR Glow" product was met
        with an enthusiastic reception from international buyers at the 126th
        China Import and Export Fair held in Guangzhou, China.
    --  In November 2019, Blue Hat partnered with award-winning media franchise
        "Talking Tom and Friends", launching a new collection of its popular
        "Bouncing Bubble" range of toys in China.
    --  During the fourth quarter of 2019, Blue Hat launched a range of
        immersive educational products that utilize AR technology to create a
        dynamic and engaging model for teaching in China's preschools.
    --  Blue Hat announced in January 2020 that its AR child abuse prevention
        course would be introduced in 25 preschools in Tong'an District, Xiamen
        City as a compulsory part of the curriculum for children before they
        leave kindergarten.
    --  In March 2020, Blue Hat's "Interactive System Based on Light Intensity
        Recognition" received U.S. patent number US 10,512,836 B2 from the
        United States Patent and Trademark Office.

Fourth Quarter 2019 Results
Comparison of Three Months Ended December 31, 2019 and December 31, 2018


                                          For the 
       Three
            Months Ended 
     December 31
                                                                 ,



                                                                                                                                                     Percentage


                                                 2019                                  2018                             Change                Change



                                          (Unaudited)                                       (Unaudited)




     Revenues                                               $
         11,773,962                          $
        9,952,293        $
       1,821,669                18.3%



     Cost of revenues                                             (3,826,027)                             (3,051,651)            (774,376)               25.4%




     Gross profit                                                   7,947,935                                6,900,642             1,047,293                15.2%



     Selling expenses                                               (263,611)                               (198,979)             (64,632)               32.5%



     General and administrative expenses                          (1,323,190)                             (1,566,451)              243,261              (15.5)%



     Research and development                                       (127,457)                               (125,245)              (2,212)                1.8%




     Income from operations                                         6,233,677                                5,009,967             1,223,710                24.4%



     Other (expense) income, net                                      145,450                                  148,454               (3,004)              (2.0)%



     Provision for income taxes                                     (189,997)                               (254,578)               64,581              (25.4)%




     Net income                                              $
         6,189,130                                4,903,843             1,285,287                26.2%

Fiscal Year 2019 Results

Total revenues were US$23.8 million for the fiscal year 2019, an increase of US$5.3 million, or 28.6%, from US$18.5 million for the same period ended December 31, 2018. The overall increase was primarily attributable to the increased sales of interactive toys (game series) and mobile games.

Revenues from sales of interactive toys (game series) were US$21.2 million for the fiscal year 2019, an increase of US$4.3 million, or 25.2%, from US$16.9 million for the same period ended December 31, 2018. Interactive toys (game series) are a range of toys enhanced with AR technology, which we believe make them easier to play, more interactive and more instructive than traditional toys. The increase was primarily the result of the improvement of market recognition.

Revenues from sales of interactive toys (animation series) were US$160,672 for the fiscal year 2019, a decrease of US$361,966, or 69.3% from US$522,638 for the same period ended December 31, 2018. This decrease was a result of our business strategy to shift away from interactive toys (animation series) and towards interactive toys (games series).

Revenues from mobile games were US$2.5 million for the fiscal year 2019, an increase of US$1.4 million, or 126.8%, from US$1.1 million for the same period ended December 31, 2018. This increase was a result of the popularity of our first mobile game "Quan Min Dou Yu", which was launched in the fourth quarter of 2018 and received positive feedback from the market.

Gross profit was US$16.3 million for the fiscal year 2019, an increase of US$3.9 million, or 31.2%, from US$12.4 million for the same period ended December 31, 2018. Gross margin of the three different segments were as follows: interactive toys (game series) increased 24%, amounting to US$2.7 million; interactive toys (animation series) decreased 43.7%, amounting to US$62,805; and mobile games increased 124.3%, amounting to US$1.2 million.

Gross profit margin was 68.4% for the fiscal year 2019, compared to 67% for the same period of 2018.

Total operating expenses were US$6.8 million for the fiscal year 2019, an increase of US$2.7 million, or 64.6%, from US$4.1 million for the same period ended December 31, 2018. This increase was mainly attributable to the US$162,549 increase in selling expenses, the US$1.7 million increase in general and administrative expenses, and the US$743,657 increase in research and development expenses for the fiscal year 2019, compared to the same period of 2018.

Research and development expenses were US$1,030,499 for the fiscal year 2019, an increase of US$743,657, or 259.3%, from US$286,842 for the same period ended December 31, 2018. This increase was primarily a result of research and development to develop a smart preschool platform, including a range of immersive educational products and AR interactive toys (game series).

Income from operations was US$9.5 million for the fiscal year 2019, an increase of US$1.2 million, or 14.8%, from US$8.3 million for the same period ended December 31, 2018.

Total other income, net was US$45,422 for the fiscal year 2019, compared to total other income, net of US$207,371 for the same period ended December 31, 2018. The decrease in total other income, net was due to the decrease in interest income from short term deposits.

Income taxes were US$488,710 for the fiscal year 2019, compared to provision for income taxes of US$605,428 for the same period ended December 31, 2018. The decrease was due to tax deduction provided by the local government.

Net income was US$9.1 million for the fiscal year 2019, an increase of US$1.2 million, or 14.9%, from US$7.9 million for the same period ended December 31, 2018.

Basic and diluted earnings per share were US$0.26 for the fiscal year 2019, compared to US$0.24 for the same period ended December 31, 2018.

Cash, Cash Equivalents and Restricted Cash

As of December 31, 2019, the Company's cash, cash equivalents and restricted cash totaled to US$15.5 million, including net proceeds of approximately US$6.4 million to the Company from the IPO, which closed in July 2019. In connection with the IPO, the Company's ordinary shares began trading on The Nasdaq Capital Market on July 26, 2019 under the symbol "BHAT".

Company Forecast

Blue Hat expects revenue in the first quarter of 2020 to decrease 20% to 25% due to the adverse impact of the COVID-19 outbreak on the Company's sales and operations.

The above outlook is based on information available as of the date of this press release and reflects the Company's current and preliminary expectations and estimates, which are all subject to change.

Unaudited Financial Information

The unaudited financial information disclosed in this press release is preliminary. The audit of the financial statements and related notes to be included in the Company's annual report on Form 20-F for the year ended December 31, 2019 is still in progress.

Conference Call

Blue Hat's management will host an earnings conference call on Monday, March 23, 2020 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

U.S./International: +1-845-675-0437

Hong Kong: +852-3018-6771

Mainland China: 400-620-8038

Passcode: 4375563

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone at the following number until Tuesday, March 31, 2020:

U.S./International: +1-855-452-5696

Hong Kong: 800-963-117

Mainland China: 400-632-2162

Passcode: 4375563

Additionally, a live and archived webcast will be available at http://ir.bluehatgroup.com.

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. The Company's interactive entertainment platform creates unique user experiences by connecting physical items to mobile devices, which creates a rich visual and interactive environment for users through the integration of real objects and virtual scenery. 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.

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:

Lexie Zhang
Blue Hat Interactive Entertainment Technology
Phone: +86 (592) 228-0010
Email: ir@bluehatgroup.net

Sam Martin
The Foote Group
Phone: +86 187-0160-0950
Email: sam@thefootegroup.com


                                                                       
     
       BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES


                                                                           
     
                UNAUDITED CONSOLIDATED BALANCE SHEETS




                                                                                                        December 31,                                    December 31,




              ASSETS                                                                                           2019                                             2018




              
                CURRENT ASSETS



              Cash and cash equivalents                                                                                            $
           10,478,587                   $
     11,829,509



              Restricted cash                                                                                                                5,000,000



              Accounts receivable, net                                                                                                      14,164,697                      11,890,146



              Other receivables, net                                                                                                        13,182,529                         232,318



              Other receivables - related party                                                                                                                                12,036



              Inventories                                                                                                                      125,264                         273,271



              Prepayments, net                                                                                                                 291,270                       1,332,532



              Prepaid IPO Costs                                                                                                                                                89,367




              
                Total current assets                                                                                             43,242,347                      25,659,179




              PROPERTY AND EQUIPMENT, NET                                                                                                    2,324,824                         208,869




              
                OTHER ASSETS



              Prepayments                                                                                                                    4,425,849                       3,449,445



              Operating lease, right-of-use asset                                                                                              734,885                       4,265,537



              Intangible assets, net                                                                                                         6,758,316                       1,751,835



              Long-term investments                                                                                                          1,727,301                         135,999



              Deferred tax assets                                                                                                              130,592




              
                Total other assets                                                                                               13,776,943                       9,602,816




              
                Total assets                                                                               $
              
             59,344,113               $
     
       35,470,864






              LIABILITIES AND SHAREHOLDERS' EQUITY



              CURRENT LIABILITIES



              Short-term loans - banks                                                                                                       5,819,787                       3,125,681



              Current maturities of long-term loans - third party                                                                               77,493                          75,469



              Accounts payable                                                                                                                 293,988                       1,402,972



              Other payables and accrued liabilities                                                                                         3,487,531                         438,299



              Other payables - related party                                                                                                    21,341                          62,368



              Customer deposits                                                                                                                                                76,274



              Taxes payable                                                                                                                  3,508,087                       1,941,770




              
                Total current liabilities                                                                                        13,208,227                       7,122,833






              OTHER LIABILITIES



              Operating lease liability                                                                                                        728,585




              Long-term loans - third party                                                                                                     13,328                          91,986




              
                Total other liabilities                                                                                             741,913                          91,986




              
                Total liabilities                                                                                                13,950,140                       7,214,819






              COMMITMENTS AND CONTINGENCIES



              Total shareholders' equity



              Ordinary shares, $0.001 par value, 50,000,000                                                                                                                    33,000
    shares authorized, 35,141,114 shares issued and
    outstanding as of December 31, 2019, and
    33,000,000 shares issued and outstanding as of
    December 31, 2018

                                                                                                                                                 35,141



              Additional paid-in capital                                                                                                    21,394,284                      12,831,969



              Statutory reserves                                                                                                             1,321,101                       1,178,432



              Retained earnings                                                                                                             24,128,114                      15,169,573



              Accumulated other comprehensive income (loss)                                                                                (1,484,667)                      (956,929)




              
                Total shareholders' equity                                                                                       45,393,973                      28,256,045




              
                Total liabilities and shareholders' equity                                                 $
              
             59,344,113               $
     
       35,470,864


                                                               
       
                BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
                                                                 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME




                                                           
     
       For the Years Ended December 31



                                                                             2019                         2018




     
                REVENUES                                                                                    $
              
                23,834,129 $
      
           18,531,178



     Interactive toys - animation series                                                                                                  160,672                522,638



     Interactive toys - game series                                                                                                    21,152,258             16,896,943



     Mobile games                                                                                                                       2,521,199              1,111,597



     
                COST OF REVENUES                                                                                                    (7,531,800)           (6,108,676)



     
                GROSS PROFIT                                                                                                         16,302,329             12,422,502




     
                OPERATING EXPENSES



     Selling                                                                                                                            (922,196)             (759,647)



     General and administrative                                                                                                       (4,805,136)           (3,058,548)



     Research and development                                                                                                         (1,030,499)             (286,842)



     
                Total operating expenses                                                                                            (6,757,831)           (4,105,037)



     
                INCOME FROM OPERATIONS                                                                                                9,544,498              8,317,465




     
                OTHER INCOME (EXPENSE)



     Interest income                                                                                                                          629                219,001



     Interest expense                                                                                                                   (171,938)             (142,641)



     Other finance expenses                                                                                                               (4,415)               (3,656)



     Other (expense) income, net                                                                                                          221,146                134,667




     
                Total other income, net                                                                                                  45,422                207,371



     
                INCOME BEFORE INCOME TAXES                                                                                            9,589,920              8,524,836



     
                PROVISION FOR INCOME TAXES                                                                                            (488,710)             (605,428)



     
                NET INCOME                                                                                                            9,101,210              7,919,408



     
                OTHER COMPREHENSIVE INCOME (LOSS)



     
                Foreign currency translation adjustment                                                                               (527,738)           (1,474,126)




     
                COMPREHENSIVE INCOME                                                                         $
              
                8,573,472  $
      
           6,445,282




     WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES



     Basic and diluted                                                                                                                 35,141,114             33,000,000




     EARNINGS PER SHARE



     Basic and diluted                                                                                                           $
              0.26        $
             0.24


                                                              
              
                BLUE HAT INTERACTIVE ENTERTAINMENT TECHNOLOGY AND SUBSIDIARIES
                                                                                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS




                                                                                                                                                                                      For the Years Ended December 31,



                                                                                                                                                                                2019                                              2018




              CASH FLOWS FROM OPERATING ACTIVITIES:



              Net income                                                                                                                                          $
            9,101,210                               $
            7,919,408



              Adjustments to reconcile net income to net cash (used in) provided by



              operating activities:



              Depreciation of property and equipment                                                                                                                        100,474                                           101,183



              Amortization of intangible assets                                                                                                                             821,203                                           362,355



              Provision for doubtful accounts                                                                                                                               382,239                                           495,528



              Deferred income taxes                                                                                                                                           3,544                                         (107,401)



              Loss on disposal of equipment                                                                                                                                                                 771



              Change in operating assets and liabilities



              Accounts receivable                                                                                                                                       (2,772,546)                                      (6,588,070)



              Other receivables                                                                                                                                        (13,113,715)                                         (28,615)



              Other receivables - related party                                                                                                                              12,008                                          (12,506)



              Inventories                                                                                                                                                   145,890                                           304,072



              Prepayments                                                                                                                                                   963,524                                           829,573



              Operating lease assets                                                                                                                                        (6,375)



              Prepaid expense                                                                                                                                              (13,580)                                           50,233



              Accounts payable                                                                                                                                          (1,102,256)                                      (4,151,400)



              Other payables and accrued liabilities                                                                                                                      3,074,629                                           161,038



              Customer deposits                                                                                                                                            (76,098)                                         (29,714)



              Taxes payable                                                                                                                                               1,612,416                                           278,941



              Net cash (used in) provided by operating activities                                                                                                         (867,433)                                        (414,604)





              CASH FLOWS FROM INVESTING ACTIVITIES:



              Prepayments for intangible assets                                                                                                                         (1,018,127)                                      (3,574,784)



              Purchases of property and equipment                                                                                                                       (2,218,838)                                         (44,905)



              Proceeds from disposal of equipment                                                                                                                                                            76



              Purchase of intangible assets                                                                                                                             (3,404,004)                                        (859,841)



              Proceeds from short-term investments                                                                                                                                                   19,485,793



              Purchase of short-term investments                                                                                                                                                    (2,391,721)



              Payments on long-term investments                                                                                                                                                     (1,812,632)



              Net cash provided by (used in) investing activities                                                                                                       (6,640,969)                                       10,801,986





              CASH FLOWS FROM FINANCING ACTIVITIES:



              Capital contributions                                                                                                                                       8,564,456



              Prepaid IPO costs                                                                                                                                              89,161                                          (92,854)



              Proceeds from other payables - related party                                                                                                                 (40,634)                                           31,721



              Repayments of short-term loans - banks                                                                                                                    (3,118,473)                                      (3,549,737)



              Proceeds from short-term loans - banks                                                                                                                      5,888,837                                         3,247,632



              Change in restricted cash                                                                                                                                 (5,000,000)



              Repayments of long-term loans - third party                                                                                                                  (75,170)                                         (62,983)



              Net cash (used in) provided by financing activities                                                                                                         6,308,177                                         (426,221)





              EFFECT OF EXCHANGE RATE ON CASH                                                                                                                             (150,697)                                        (501,935)





              NET CHANGE IN CASH AND CASH EQUIVALENTS                                                                                                                   (1,350,922)                                        9,459,226





              CASH AND CASH EQUIVALENTS, beginning of year                                                                                                               11,829,509                                         2,370,283





              CASH AND CASH EQUIVALENTS, end of year                                                                                                             $
            10,478,587                              $
            11,829,509





              SUPPLEMENTAL CASH FLOW INFORMATION:



              Cash paid for income tax                                                                                                                              $
            119,243                               $
            1,713,763



              Cash paid for interest                                                                                                                                $
            171,938                                 $
            142,641





              SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:



              Equipment acquired through long-term loans - third party                                                                              
              $                                   
              $                      -





              The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the
    statement of financial position that sum to the total of the same amounts shown in the statement of cash
    flows:


                                                                                                                                          
              December 31,                                   December 31,


                                                                                                                                                                                2019                                              2018






              Cash and cash equivalents                                                                                                                          $
            10,478,587                              $
            11,829,509



              Restricted cash                                                                                                                                             5,000,000



              Total cash, cash equivalents, and restricted cash shown in                                                                                         $
            15,478,587                              $
            11,829,509
    the Consolidated statements of cash flows

(1) The average translation rates applied to statement of income accounts for the periods ended December 31, 2019 and 2018 were RMB6.88 and RMB6.62 to US$1.00, respectively. The balance sheet amounts as of December 31, 2019 and 2018 were translated at RMB6.98 and RMB6.88, respectively.

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SOURCE Blue Hat Interactive Entertainment Technology