Allied Esports Entertainment, Inc. (NASDAQ: AESE) (the
“Company” or “AESE”), a global esports entertainment company, today
announced financial results for the second quarter ended June 30,
2022, as well as an update on key business initiatives. 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 second quarter 2022 results and strategic
process, the Company’s Interim CEO, Lyle Berman, said, “Our Esports
operations continue to drive strong year-over-year revenue growth
as the business recovers from the pandemic. Momentum is building
and we anticipate a strong second half of the year. In addition, we
continue efforts to execute our previously stated objective to
pursue strategic alternatives for the Esports operations, including
a potential sale of the business. At the same time, I believe we
are also making good progress to invest the cash on our balance
sheet, along with any proceeds from the potential sale of the
Esports business, to acquire or merge with an existing business. We
will provide the market with an update on these activities as
appropriate.”
Second Quarter 2022 Financial Results
Revenues: Total revenues of $1.2 million increased 40% for the
second quarter of 2022 compared to the second quarter of 2021. The
improvement was driven by an increase in truck revenue from the
Company’s agreement with NASCAR and an increase in rental and food
and beverage revenue primarily attributable to the removal of
COVID-19 pandemic related capacity restrictions at the Company’s
HyperX Arena.
Costs and expenses: Despite a second quarter 2022 impairment
charge on digital assets (cryptocurrency) of $0.2 million and a
$0.3 million increase in in-person and multiplatform content
expenses directly associated with the growth in second quarter 2022
revenues, total costs and expenses for the second quarter of 2022
were $4.8 million, a decrease of 5% compared to the second quarter
of 2021. The net decrease in costs and expenses is primarily due to
a reduction in general and administrative expenses, including
stock-based compensation and professional fees.
Net loss for the second quarter of 2022 was $3.7 million
compared to a net loss of $2.9 million in the prior year period.
The 2021 net loss includes $1.4 million of income from discontinued
operations.
Adjusted EBITDA loss was $2.7 million for the second quarter of
2022 compared to a loss of $3.0 million in the second 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 June 30, 2022, the Company had a cash position of $91.5
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. As of June 30, 2022, the Company had
approximately 39.1 million shares of outstanding common stock.
Operational Update
Allied Esports produced 91 events in the second quarter with 65
proprietary events and 26 third party productions across its North
American and European business units. Proprietary and third party
events were up 12% compared to the first quarter at HyperX Arena
Las Vegas. Third party events were highlighted by the Rainbow Six
North America League, Alien Frens Las Vegas Games and Digi1.
The Allied Esports Trucks were active in both North America and
Europe with events at ICE London and the eNASCAR Arcade taking
place in the second quarter at the Blu-Emu Maximum Pain Relief 400
at Martinsville Speedway in Martinsville, Virginia, the Geico 500
at the Talladega Superspeedway in Talladega, Alabama, the Goodyear
400 at Darlington Raceway in Darlington, South Carolina, and the
AdventHealth 400 at Kansas Speedway in Kansas City, Kansas. In
addition, the company executed pop-up gaming exhibition events for
Monster Energy at DreamHack Dallas and for NASCAR at the Toyota /
Save Mart 350 at Sonoma Raceway in Sonoma, California.
Following the mint of our first NFT collection, EPICBEAST, in
March, the project delivered on its first roadmap in the second
quarter with monthly prize shows, an Unleash The Beast party at
HyperX Arena sponsored by Stride, Inc. and a merchandise offering
for holders. In addition, as of the date of this press release, the
collection now serves as the backbone of Allied Esports’ global
rewards program EPICBEAST Rewards, and has grown from 300 holders
post-mint in March to over 5,000 holders of 8,591 EPICBEAST
NFTs.
Corporate Developments
As previously announced, late in 2021, AESE 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. AESE intends to provide
further updates in due course when appropriate.
Additionally, as previously announced, the Company remains in
the process of exploring strategic options for the Esports business
and intends to provide further updates in due course when
appropriate.
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, 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 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 June 30,
December 31,
2022
2021
(unaudited) Assets Current Assets Cash
$
86,451,104
$
92,887,030
Accounts receivable
175,867
389,040
Prepaid expenses and other current assets
558,266
984,777
Total Current Assets
87,185,237
94,260,847
Restricted cash
5,000,000
5,000,000
Property and equipment, net
4,508,902
6,136,893
Digital assets
63,834
-
Intangible assets, net
24,831
26,827
Deposits
379,105
379,105
Total Assets
$
97,161,909
$
105,803,672
Liabilities and Stockholders' Equity Current Liabilities
Accounts payable
$
151,686
$
341,161
Accrued expenses and other current liabilities, current portion
2,719,076
2,966,245
Accrued expenses - related party
-
1,800,000
Deferred revenue
705,776
141,825
Total Current Liabilities
3,576,538
5,249,231
Deferred rent
1,799,621
1,907,634
Accrued expenses, non-current portion
83,333
-
Total Liabilities
5,459,492
7,156,865
Commitments and Contingencies (Note 4) 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,
39,116,907 shares issued and outstanding at June 30, 2022 and
December 31, 2021
3,912
3,912
Additional paid in capital
198,339,361
197,784,972
Accumulated deficit
(106,851,831
)
(99,411,683
)
Accumulated other comprehensive income
210,975
269,606
Total Stockholders' Equity
91,702,417
98,646,807
Total Liabilities and Stockholders' Equity
$
97,161,909
$
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 Six Months Ended June 30,
June 30,
2022
2021
2022
2021
Revenues: In-person
$
1,129,371
$
670,886
$
3,332,437
1,171,914
Multiplatform content
28,463
153,723
237,451
153,723
Total Revenues
1,157,834
824,609
3,569,888
1,325,637
Costs and Expenses: In-person (exclusive of depreciation and
amortization)
1,079,314
655,243
2,889,667
1,193,110
Multiplatform content (exclusive of depreciation and amortization)
43,364
126,885
64,497
126,885
Selling and marketing expenses
62,131
84,739
131,169
128,673
General and administrative expenses
2,620,422
3,338,731
6,072,292
7,251,753
Depreciation and amortization
808,233
807,843
1,616,845
1,689,802
Impairment of digital assets
164,411
-
164,411
-
Total Costs and Expenses
4,777,875
5,013,441
10,938,881
10,390,223
Loss From Operations
(3,620,041
)
(4,188,832
)
(7,368,993
)
(9,064,586
)
Other Expense: Other (expense) income, net
(73,225
)
(40,163
)
(79,932
)
14,979
Interest income (expense), net
4,315
(104,496
)
8,777
(257,602
)
Total Other Expense
(68,910
)
(144,659
)
(71,155
)
(242,623
)
Loss from continuing operations
(3,688,951
)
(4,333,491
)
(7,440,148
)
(9,307,209
)
Income from discontinued operations, net of tax provision
-
1,393,411
-
3,030,453
Net loss
$
(3,688,951
)
$
(2,940,080
)
$
(7,440,148
)
$
(6,276,756
)
Basic and Diluted Net Loss (Income) per Common Share
Continuing operations
$
(0.09
)
$
(0.11
)
$
(0.19
)
$
(0.24
)
Discontinued operations, net of tax
$
-
$
0.04
$
-
$
0.08
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted
39,116,907
38,963,668
39,090,830
38,955,752
Comprehensive Loss Net Loss
$
(3,688,951
)
$
(2,940,080
)
$
(7,440,148
)
$
(6,276,756
)
Other comprehensive (loss) income: Foreign currency translation
adjustments
(71,595
)
32,584
(58,631
)
57,920
Total Comprehensive Loss
$
(3,760,546
)
$
(2,907,496
)
$
(7,498,779
)
$
(6,218,836
)
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 relate to sale of WPT,
impairment losses, conversion inducement expenses and
extinguishment losses.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA from net loss, to AESE’s most directly comparable
financial measure calculated and presented in accordance with
GAAP.
Three Months EndedJune 30, Six Months EndedJune 30,
2022
2021
2022
2021
Continuing operations Net loss from continuing operations
$
(3,688,951
)
$
(4,333,491
)
$
(7,440,148
)
$
(9,307,209
)
Interest income, net
4,315
104,496
8,777
257,602
Depreciation and amortization
808,233
807,843
1,616,845
1,689,802
EBITDA
(2,876,403
)
(3,421,152
)
(5,814,526
)
(7,359,805
)
Stock compensation
153,093
386,994
554,389
1,030,142
Impairment expense
164,411
-
164,411
-
Adjusted EBITDA
$
(2,723,310
)
$
(3,034,158
)
$
(5,260,137
)
$
(6,329,663
)
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version on businesswire.com: https://www.businesswire.com/news/home/20220815005461/en/
Investor Contact: Lasse Glassen Addo Investor Relations
lglassen@addo.com 424-238-6249
Media Contact: Brian Fisher Allied Esports Entertainment
brian@alliedesports.com
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