Allied Gaming & Entertainment (AGAE) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the quarter ended March 31, 2025 Financial Statements The company reported a net loss of $4.9 million for Q1 2025, driven by increased general and administrative expenses, with total assets rising to $117.9 million and liabilities to $45.0 million Condensed Consolidated Balance Sheets The balance sheet shows total assets increased to $117.9 million, primarily due to a rise in short-term investments, while total liabilities grew to $45.0 million from increased loans payable Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $19,486 | $59,243 | | Short-term investments | $49,204 | $8,800 | | Total Current Assets | $98,009 | $94,746 | | Total Assets | $117,861 | $112,687 | | Liabilities & Equity | | | | Loans payable | $34,511 | $25,757 | | Total Current Liabilities | $40,706 | $30,478 | | Total Liabilities | $44,972 | $35,157 | | Total Stockholders' Equity | $72,889 | $77,530 | - Total assets increased by $5.2 million, primarily due to a $40.4 million increase in short-term investments, which was offset by a $39.7 million decrease in cash and cash equivalents[10] - Total liabilities increased by $9.8 million, mainly driven by an $8.7 million increase in loans payable[10] Condensed Consolidated Statements of Operations The statement of operations reveals a widened net loss of $4.9 million in Q1 2025, primarily due to a significant increase in general and administrative expenses Statement of Operations Summary (in thousands) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues: | | | | In-person | $1,657 | $1,255 | | Casual mobile gaming | $618 | $1,124 | | Total Revenues | $2,275 | $2,379 | | Costs and Expenses: | | | | General and administrative expenses | $5,481 | $2,858 | | Total Costs and Expenses | $7,527 | $5,055 | | Loss From Operations | ($5,252) | ($2,675) | | Net Loss | ($4,900) | ($1,829) | | Net Loss per Share (Basic & Diluted) | ($0.11) | ($0.04) | - Net loss attributable to common stockholders widened to $4.8 million, or ($0.11) per share, compared to a loss of $1.7 million, or ($0.04) per share, in the prior-year period[12] - The increase in net loss was primarily driven by a 92% increase in general and administrative expenses, which rose to $5.5 million from $2.9 million year-over-year[12][144] Condensed Consolidated Statements of Cash Flows Cash flow analysis indicates a net decrease in cash of $39.8 million, primarily driven by increased cash used in investing activities for short-term investments Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | ($2,184) | ($2,145) | | Net Cash Used in Investing Activities | ($45,092) | ($14,493) | | Net Cash Provided By Financing Activities | $7,506 | $7,627 | | Net Decrease In Cash | ($39,757) | ($9,020) | - Cash used in investing activities significantly increased to $45.1 million, mainly due to $64.0 million in purchases of short-term investments and a $2.5 million investment in an unconsolidated affiliate[20][158] - Cash provided by financing activities was $7.5 million, resulting from $19.2 million in proceeds from short-term loans, partially offset by $11.7 million in repayments[20][160] Selected Notes to Financial Statements Key notes detail business segments, revenue trends, significant new investments, ongoing legal proceedings, and subsequent events including a terminated securities purchase agreement and CEO change - Business Segments: The company operates through three main subsidiaries: Allied Esports Media (AEM) for esports events, a 40% interest in ZTech for casual mobile games in China, and a 51% interest in Skyline for live entertainment events[25] - Revenue Breakdown: In Q1 2025, in-person revenue (events, sponsorships) increased to $1.66 million from $1.26 million YoY, while casual mobile gaming revenue decreased to $0.62 million from $1.12 million YoY[40][45] - New Investments: In Q1 2025, the company invested $64 million in new short-term investments, including equity-linked, ETF-linked, and bond-linked notes, and made a $2.4 million investment in Flywheel AB3 for "The Angry Birds Movie 3"[64][79] - Legal Proceedings: The company is involved in a second lawsuit with stockholder Knighted Pastures, LLC, alleging breach of fiduciary duty, which is currently stayed pending the company's 2024/2025 annual meeting, with no estimable potential loss[98][99][100] - Subsequent Events: On April 25, 2025, the company terminated a Securities Purchase Agreement with Blue Planet, refunding $6.6 million, and on June 24, 2025, Yinghua Chen resigned as CEO, succeeded by Yangyang (James) Li[119][120] Management's Discussion and Analysis (MD&A) Management attributes the wider net loss to increased legal fees and declining mobile gaming revenue, while liquidity remains strong despite Nasdaq delisting concerns and a terminated securities agreement Results of Operations Total revenues slightly decreased to $2.3 million, with in-person revenue growth offset by a significant decline in casual mobile gaming, leading to a wider operating loss Results of Operations Comparison (in thousands) | Account | Q1 2025 | Q1 2024 | Favorable (Unfavorable) | | :--- | :--- | :--- | :--- | | Total Revenues | $2,275 | $2,379 | ($104) | | In-person | $1,657 | $1,255 | $402 | | Casual mobile gaming | $618 | $1,124 | ($506) | | Total Costs and Expenses | $7,527 | $5,055 | ($2,472) | | General and administrative expenses | $5,481 | $2,858 | ($2,623) | | Loss From Operations | ($5,252) | ($2,675) | ($2,577) | | Net Loss | ($4,900) | ($1,829) | ($3,071) | - In-person revenues increased by 32% due to higher revenue from arena events[139] - Casual mobile gaming revenue decreased by 45% due to market contraction and increased competition[140] - General and administrative expenses increased by 92% ($2.6 million), primarily from a $3.2 million increase in legal and professional fees related to a dissident stockholder complaint[144] Liquidity and Capital Resources The company maintains a working capital surplus of $57.3 million, primarily supported by cash, short-term investments, and funds from the World Poker Tour sale Working Capital (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current Assets | $98,009 | $94,746 | | Current Liabilities | $40,706 | $30,478 | | Working Capital Surplus | $57,303 | $64,268 | - As of March 31, 2025, the company had cash and cash equivalents of $19.5 million, short-term investments of $49.2 million, and marketable securities of $2.1 million[154] - The primary source of liquidity has been cash and short-term investments, including funds from the previous sale of the World Poker Tour[153] Corporate Developments Recent corporate developments include the termination of a $6.6 million securities purchase agreement and ongoing Nasdaq non-compliance issues leading to a delisting appeal - On April 25, 2025, the company terminated a Securities Purchase Agreement from October 2024, refunding a $6.6 million purchase price to Blue Planet[130] - The company received deficiency letters from Nasdaq for late filings of its 10-K and 10-Q reports and for not holding an annual meeting within twelve months of its fiscal year-end[131][132][134] - Nasdaq has initiated procedures to delist the company's securities, which the company has appealed, with a hearing scheduled for July 31, 2025[134] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable for this reporting period - Not applicable[165] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[166] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[168] PART II: OTHER INFORMATION This section covers ongoing legal proceedings, significant risk factors related to Nasdaq listing compliance, and other standard disclosures for the reporting period Legal Proceedings The company is engaged in ongoing litigation with stockholder Knighted Pastures, LLC, including a stayed breach of fiduciary duty complaint and a new lawsuit filed by the company - A complaint filed by Knighted Pastures, LLC in November 2024 regarding a transaction with Blue Planet is currently stayed by the court pending the outcome of the company's combined 2024/2025 annual meeting scheduled for August 4, 2025[173] - On June 11, 2025, the company filed a lawsuit against Knighted Pastures, LLC and others, alleging failure to disclose a coordinated group of stockholders acquiring more than 5% of the company's stock[174] - A separate complaint filed in September 2024 by stockholder Timothy G Schuebel regarding the company's Shareholder Rights Plan is also pending[175] Risk Factors The primary risk factor is the company's non-compliance with Nasdaq listing requirements, leading to delisting procedures and potential severe impacts on stock price and liquidity - The company is not in compliance with Nasdaq Listing Rule 5250(c)(1) for late filings and Listing Rule 5620(a) for not holding an annual meeting within twelve months of its fiscal year-end[177][181] - Nasdaq has determined to initiate procedures to delist the company's securities, a decision the company has appealed, with a hearing scheduled for July 31, 2025[181] - Potential consequences of delisting include limited market quotations, classification as a "penny stock," reduced analyst coverage, and a decreased ability to obtain future financing[182][187] Other Information (Items 2, 3, 4, 5, 6) This section confirms no unregistered sales of equity securities, no defaults on senior securities, no mine safety disclosures, and no Rule 10b5-1 trading arrangements by directors or officers during the quarter - Item 2: No unregistered sales of equity securities or purchases of equity by the issuer were made during the period[182][183] - Item 3 & 4: There were no defaults upon senior securities, and mine safety disclosures are not applicable[184][185] - Item 5: No director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[186]