UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  to _______

 

Commission file number: 001-38226

 

ALLIED GAMING & ENTERTAINMENT INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   82-1659427
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

745 Fifth Ave, Suite 500

New York, NY 10151

(Address of principal executive offices)

 

(646) 768-4240

(Issuer’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   AGAE   NASDAQ Capital Market

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of November 6, 2023, 36,842,663 shares of common stock, par value $0.0001 per share, were outstanding.

 

 

 

 

 

 

ALLIED GAMING & ENTERTAINMENT INC.

 

Index to Condensed Consolidated Financial Statements

 

PART I FINANCIAL INFORMATION 1
   
Item 1. Financial Statements 1
   
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 1
   
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022 2
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 3
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 4
   
Notes to Unaudited Condensed Consolidated Financial Statements 5
   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 16
   
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. 21
   
ITEM 4. Controls and Procedures. 21
   
PART II - OTHER INFORMATION 22
   
ITEM 1. Legal Proceedings. 22
   
ITEM 1A. Risk Factors. 22
   
ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities. 22
   
ITEM 3. Defaults Upon Senior Securities. 23
   
ITEM 4. Mine Safety Disclosures. 23
   
ITEM 5. Other Information. 23
   
ITEM 6. Exhibits. 23
   
SIGNATURES 24

  

i

 

 

PART I FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

 

   September 30,   December 31, 
   2023   2022 
   (unaudited)     
Assets        
Current Assets        
Cash and cash equivalents  $10,435,990   $11,167,442 
Short-term investments   59,950,000    70,000,000 
Interest receivable   2,058,576    677,397 
Due from affiliate   3,500,000    
-
 
Accounts receivable   10,673    72,739 
Prepaid expenses and other current assets   470,390    459,274 
Total Current Assets   76,425,629    82,376,852 
Restricted cash   5,000,000    5,000,000 
Property and equipment, net   3,794,373    4,005,622 
Digital assets   49,300    49,761 
Intangible assets, net   688,721    72,786 
Deposits   380,703    379,105 
Operating lease right-of-use asset   5,411,841    5,845,549 
Total Assets  $91,750,567   $97,729,675 
Liabilities and Stockholders’ Equity          
Current Liabilities          
Accounts payable  $470,264   $317,561 
Accrued expenses and other current liabilities   306,270    1,645,379 
Deferred revenue   357,677    108,428 
Operating lease liability, current portion   1,390,533    1,227,164 
Total Current Liabilities   2,524,744    3,298,532 
Operating lease liability, non-current portion   5,744,166    6,527,075 
Total Liabilities   8,268,910    9,825,607 
Commitments and Contingencies (Note 5)   
 
    
 
 
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 at September 30, 2023 and December 31, 2022, and 36,842,663 and 38,503,724 shares outstanding at September 30, 2023 and December 31, 2022, respectively   3,909    3,909 
Additional paid in capital   198,663,219    198,526,614 
Accumulated deficit   (112,745,327)   (110,235,568)
Accumulated other comprehensive income   221,555    219,675 
Treasury stock, at cost, 2,242,807 and 581,746 shares at September 30, 2023 and December 31, 2022, respectively   (2,661,699)   (610,562)
Total Stockholders’ Equity   83,481,657    87,904,068 
Total Liabilities and Stockholders’ Equity  $91,750,567   $97,729,675 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1

 

 

ALLIED GAMING & 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, 
   2023   2022   2023   2022 
                 
Revenues:                
In-person  $1,119,865   $1,551,963   $3,580,968   $3,734,400 
Multiplatform content   94    13,679    2,000,518    1,401,130 
Total Revenues   1,119,959    1,565,642    5,581,486    5,135,530 
Costs and Expenses:                    
In-person (exclusive of depreciation and amortization)   575,176    1,112,645    1,891,229    2,784,933 
Multiplatform content (exclusive of depreciation and amortization)   
-
    31,010    1,517,707    1,020,886 
Selling and marketing expenses   51,448    54,445    172,987    185,614 
General and administrative expenses   894,181    2,397,901    5,660,553    8,762,193 
Stock-based compensation   
-
    
-
    
-
    
-
 
Depreciation and amortization   239,413    (328,739)   1,030,191    1,288,106 
Impairment of digital assets   
-
    
-
    
-
    164,411 
Total Costs and Expenses   1,760,218    3,267,262    10,272,667    14,206,143 
Loss From Operations   (640,259)   (1,701,620)   (4,691,181)   (9,070,613)
Other Income (Expense):                    
Other (expense) income, net   (388)   34,073    15,954    (45,859)
Interest income, net   715,893    25,316    2,165,468    34,093 
Total Other Income (Expense)   715,505    59,389    2,181,422    (11,766)
Net income (loss)   75,246    (1,642,231)   (2,509,759)   (9,082,379)
Other comprehensive income:                    
Foreign currency translation adjustments   
-
    (31,747)   1,880    (90,378)
Total Comprehensive Income (Loss)  $75,246   $(1,673,978)  $(2,507,879)  $(9,172,757)
                     

Earnings (Loss) per Common Share

                    
Basic  $0.00   $(0.04)  $(0.07)  $(0.23)
Diluted  $0.00   $(0.04)  $(0.07)  $(0.23)
                     
Weighted Average Number of Common Shares Outstanding:                    
Basic   36,942,149    39,094,696    37,351,735    39,092,133 
Diluted   37,134,457    39,094,696    37,351,735    39,092,133 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

 

(unaudited)

 

   For The Three and Nine Months Ended September 30, 2023 
                       Accumulated         
   Common Stock   Treasury Stock   Additional Paid-in   Other Comprehensive   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Income   Deficit   Equity 
Balance - January 1, 2023   39,085,470   $3,909    581,746   $(610,562)  $198,526,614   $219,675   $(110,235,568)  $87,904,068 
Stock-based compensation:                                        
Stock options   -    
-
    -    
-
    5,126    
-
    
-
    5,126 
Repurchases of common stock   
-
    
-
    1,105,604    (1,459,078)   
-
    
-
    
-
    (1,459,078)
Net loss   -    
-
    -    
-
    
-
    
-
    (1,893,787)   (1,893,787)
Other comprehensive income   -    
-
    -    
-
    
-
    1,880    
-
    1,880 
Balance - March 31, 2023   39,085,470   $3,909    1,687,350   $(2,069,640)  $198,531,740   $221,555   $(112,129,355)  $84,558,209 
Stock-based compensation:                                        
Stock options   -    
-
    -    
-
    66,856    
-
    
-
    66,856 
Repurchases of common stock   
-
    
-
    372,436    (415,313)   
-
    
-
    
-
    (415,313)
Net loss   -    
-
    -    
-
    
-
    
-
    (691,218)   (691,218)
Balance - June 30, 2023   39,085,470   $3,909    2,059,786   $(2,484,953)  $198,598,596   $221,555   $(112,820,573)  $83,518,534 
Stock-based compensation:                                        
Stock options   -    
-
    -    
-
    64,623    
-
    
-
    64,623 
Repurchases of common stock   -    -    183,021    (176,746)   
-
    
-
    
-
    (176,746)
Net loss   -    
-
    -    
-
    
-
    
-
    75,246    75,246 
Balance - September 30, 2023   39,085,470   $3,909    2,242,807   $(2,661,699)  $198,663,219   $221,555   $(112,745,327)  $83,481,657 

 

  

For The Three and Nine Months Ended September 30, 2022

 
                       Accumulated           
   Common Stock   Treasury Stock   Additional Paid-in  Other Comprehensive   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Income   Deficit   Equity 
Balance - January 1, 2022   39,116,907   $3,912    -   $-   $197,784,972   $269,606   $(99,411,683)  $98,646,807 
Stock-based compensation:                                        
Restricted common stock   -    -    -    -    82,345    -    -    82,345 
Stock options   -    -    -    -    318,951    -    -    318,951 
Net loss   -    -    -    -    -    -    (3,751,197)   (3,751,197)
Other comprehensive income   -    -    -    -    -    12,964    -    12,964 
Balance - March 31, 2022   39,116,907   $3,912    -   $-   $198,186,268   $282,570   $(103,162,880)  $95,309,870 
Stock-based compensation:                                        
Stock options   -    -    -    -    153,093    -    -    153,093 
Net loss   -    -    -    -    -    -    (3,688,951)   (3,688,951)
Other comprehensive loss   -    -    -    -    -    (71,595)   -    (71,595)
Balance - June 30, 2022   39,116,907   $3,912    -   $-   $198,339,361   $210,975   $(106,851,831)  $91,702,417 
Stock-based compensation:                                        
Stock options   -    -    -    -    238,840    -    -    238,840 
Shares withheld for employee payroll tax   (31,437)   (3)   -    -    (49,667)   -    -    (49,670)
Net loss   -    -    -    -    -    -    (1,642,231)   (1,642,231)
Other comprehensive loss   -    -    -    -    -    (31,747)   -    (31,747)
Balance - September 30, 2022   39,085,470   $3,909    -   $-   $198,528,534   $179,228   $(108,494,062)  $90,217,609 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

 

(unaudited)

 

   For the Nine Months Ended 
   September 30, 
   2023   2022 
Cash Flows From Operating Activities        
Net loss  $(2,509,759)  $(9,082,379)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   136,605    793,229 
Non-cash rent expense   723,594    646,657 
Digital currency received as revenue   
-
    (249,888)
Impairment of digital assets   
-
    164,411 
Net gains on sale of equipment   (8,388)   
-
 
Expenses paid using digital assets   461    69,533 
Change in fair value of warrant liabilities   
-
    7,400 
Depreciation and amortization   1,030,191    1,288,106 
Changes in operating assets and liabilities:          
Accounts receivable   62,066    266,889 
Interest receivable   (1,381,179)   
-
 
Prepaid expenses and other current assets   (11,116)   (243,058)
Deposit returns   (1,598)   
-
 
Accounts payable   152,701    404,715 
Accrued expenses and other current liabilities   (1,339,109)   (2,079,071)
Operating lease liability   (909,426)   (808,148)
Deferred revenue   (543,786)   269,685 
Total Adjustments   (2,088,984)   530,460 
Net Cash Used In Operating Activities   (4,598,743)   (8,551,919)
Cash Flows From Investing Activities          
Purchases of short-term investments   (19,950,000)   
-
 
Proceeds from maturing of short-term investments   30,000,000    
-
 
Loan to affiliate   (3,500,000)   
-
 
Investment in digital assets   
-
    (41,026)
Proceeds from sale of equipment   106,914    
-
 
Purchases of intangibles   (618,930)   
-
 
Purchases of property and equipment   (119,525)   (6,697)
 Net Cash Provided By (Used In) Investing Activities   5,918,459    (47,723)
Cash Flows From Financing Activities          
Repurchases of common stock   (2,051,137)   
-
 
Net Cash Used In Financing Activities   (2,051,137)   
-
 
Effect of Exchange Rate Changes on Cash   (31)   (62,388)
Net Decrease In Cash, Cash Equivalents, And Restricted Cash   (731,452)   (8,662,030)
Cash, cash equivalents, and restricted cash - Beginning of Period   16,167,442    97,887,030 
Cash, cash equivalents, and restricted cash - End of Period  $15,435,990   $89,225,000 
Cash and restricted cash consisted of the following:          
Cash  $10,435,990   $84,225,000 
Restricted cash   5,000,000    5,000,000 
   $15,435,990   $89,225,000 
           
Non-Cash Investing and Financing Activities:          
ROU asset for lease liability  $289,886   $
-
 
Property and equipment received as deferred revenue  $793,035   $
-
 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

Note 1 – Business Organization and Nature of Operations 

 

Allied Gaming & Entertainment Inc. (“AGAE” and together with its subsidiaries, “the Company”) operates a public esports and entertainment company through its wholly owned subsidiaries Allied Esports International, Inc., (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”), Allied Mobile Entertainment Inc. (“AME”), Allied Mobile Entertainment (Hong Kong) Limited (“AME-HK”), Allied Experiential Entertainment Inc. (“AEE”), and Allied Esports GmbH (“AEG” and together with AEII, AME and ESALV, “Allied Esports”). AEII produces a variety of esports and gaming-related content, including world class tournaments, live and virtual events, and original programming to continuously foster an engaged gaming community. ESALV operates HyperX Arena Las Vegas, the world’s most recognized esports facility. AME is engaged in the development and worldwide distribution of mobile casual games. AEE and AEG are currently inactive.

 

Note 2 – Significant Accounting Policies 

 

There have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on March 24, 2023, as amended on April 27, 2023 and May 3, 2023, on Forms 10-K/A.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These unaudited condensed consolidated financial statements have been derived from the Company’s accounting records and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report.

 

Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:  

 

Level 1 - quoted prices in active markets for identical assets or liabilities.

 

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.

 

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).  

 

5

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The following table provides information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values:

 

As of September 30, 2023  Level 1   Level 2   Level 3   Total 
                 
Digital assets  $49,300   $
-
   $
-
   $49,300 
                     
Sponsor warrants   
-
    
-
    100    100 
Total  $49,300   $
-
   $100   $49,400 

 

As of December 31, 2022  Level 1   Level 2   Level 3   Total 
                 
Digital assets  $49,761   $
-
   $
-
   $49,761 
                     
Sponsor warrants   
-
    
-
    100    100 
Total  $49,761   $
-
   $100   $49,861 

 

The carrying amounts of the Company’s financial instruments, such as cash equivalents, accounts receivable, short-term investments, interest receivable, due from affiliates, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.

 

Short-term investments consist of certificates of deposit with original maturities of greater than three months but less than or equal to twelve months when purchased.

 

The Sponsor Warrants are carried at fair value as of September 30, 2023 and December 31, 2022 and are included in accrued expenses on the accompanying condensed consolidated balance sheets. The Sponsor Warrants are valued using level 3 inputs. The fair value of the Sponsor Warrants is estimated using the Black-Scholes option pricing method. Significant level 3 inputs used to calculate the fair value of the Sponsor Warrants include the share price on the valuation date, expected volatility, expected term and the risk-free interest rate.

 

The following is a roll forward of the Company’s Level 3 instruments during the nine months ended September 30, 2023:  

 

Balance, January 1, 2023  $100 
Change in fair value of sponsor warrants   
-
 
Balance, March 31, 2023   100 
Change in fair value of sponsor warrants   
-
 
Balance, June 30, 2023   100 
Change in fair value of sponsor warrants   
-
 
Balance, September 30, 2023  $100 

 

The key inputs into the Black-Scholes model used to value Sponsor Warrants at the relevant measurement dates were as follows: 

 

   September 30,   December 31, 
Input  2023   2022 
Risk-free rate   5.46%   4.57%
Remaining term in years   0.86    1.61 
Expected volatility   64.0%   56.0%
Exercise price  $11.50   $11.50 
Fair value of common stock  $0.91   $1.05 

 

 

6

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

Net Loss per Common Share

 

Basic loss per common share is computed by dividing net loss attributable to the Company by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the potential exercise of outstanding stock options and warrants and vesting of restricted stock awards. 

 

The following table presents the computation of basic and diluted earnings (loss) per common share: 

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Numerator:                
Net income (loss)  $75,246   $(1,642,231)  $(2,509,759)  $(9,082,379)
                     
Denominator (weighted average quantities):                    
Common shares outstanding   36,942,149    39,094,696    37,351,735    39,109,422 
Less: Unvested restricted shares   
-
    
-
    
-
    (17,289)
Denominator for basic net loss per share   36,942,149    39,094,696    37,351,735    39,092,133 
Add: Contingent consideration shares   192,308    
-
    
-
    
-
 
Denominator for fully diluted net loss per share   37,134,457    39,094,696    37,351,735    39,092,133 
                     
Income (Loss) per common shares                    
Basic  $0.00   $(0.04)  $(0.07)  $(0.23)
Diluted  $0.00   $(0.04)  $(0.07)  $(0.23)

 

The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
Options   1,540,000    1,810,000    1,540,000    1,810,000 
Warrants   20,091,549    20,091,549    20,091,549    20,091,549 
Equity purchase options   
-
    600,000    -    600,000 
Contingent consideration shares(1)   
-
    192,308    192,308    192,308 
    21,631,549    22,693,857    21,823,857    22,693,857 

 

(1)Holders who elected to convert a certain former Bridge Note from the Company into common stock are entitled to receive contingent consideration shares equal to the product of (i) 3,846,153 shares, multiplied by (ii) that holder’s investment amount, divided by (iii) $100,000,000, if at any time within five years after the August 9, 2019 closing date, the last exchange-reported sale price of common stock trades at or above $13.00 for thirty (30) consecutive calendar days.

 

Revenue Recognition

 

To determine the proper revenue recognition method, the Company evaluates each of its contractual arrangements to identify its performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the Company’s contracts have a single performance obligation because the promise to transfer the individual good or service is not separately identifiable from other promises within the contract and is therefore not distinct. Some of the Company’s contracts have multiple performance obligations, primarily related to the provision of multiple goods or services. For contracts with more than one performance obligation, the Company allocates the total transaction price in an amount based on the estimated relative standalone selling prices underlying each performance obligation. 

 

7

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The Company recognizes revenue primarily from the following sources: 

 

In-person revenue 

 

In-person revenue was comprised of the following for the three and nine months ended September 30, 2023 and 2022: 

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Event Revenue  $420,192   $914,386   $1,593,277   $2,115,530 
Sponsorship revenue   457,740    175,299    1,275,218    507,799 
Food and beverage revenue   47,535    110,139    173,326    342,253 
Ticket and gaming revenue   151,391    143,413    401,096    394,564 
Merchandising revenue   43,007    208,726    138,051    374,254 
Total in-person revenue  $1,119,865   $1,551,963   $3,580,968   $3,734,400 

 

Event revenues from the rental of the Allied Esports arena and gaming trucks are recognized over the term of the event based on the number of days completed relative to the total days of the event, as this method best depicts the transfer of control to the customer. In-person revenue also includes revenue from ticket sales, admission fees and food and beverage sales for events held at the Company’s esports properties. Ticket revenue is recognized at the completion of the applicable event. Point of sale revenues, such as food and beverage, gaming and merchandising revenues, are recognized when control of the related goods are transferred to the customer.

 

The Company generates sponsorship revenue from the naming rights of its esports arena which are recognized on a straight-line basis over the contractual term of the agreement.

 

The Company records deferred revenue to the extent that payment has been received for services that have yet to be performed.

 

Multiplatform revenue

 

Multiplatform revenue was comprised of the following for the three and nine months ended September 30, 2023 and 2022:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
NFT revenue  $
-
   $13,441   $
-
   $249,889 
Sponsorship revenue   
-
    
-
    2,000,000    1,150,000 
Distribution revenue   94    238    518    1,241 
Total multiplatform revenue  $94   $13,679   $2,000,518   $1,401,130 

 

The Company’s NFT revenue is generated from the sale of non-fungible tokens (NFTs). The Company’s NFTs exist on the Ethereum Blockchain under the Company’s EPICBEAST brand, a digital art collection of 1,958 unique beasts inspired by past and present e-sport games. The Company uses the NFT exchange, OpenSea, to facilitate the sale of NFTs. The Company, through OpenSea, has custody and control of the NFT prior to the delivery to the customer and records revenue at a point in time when the NFT is delivered to the customer and the customer pays. The Company has no obligations for returns, refunds or warranty after the NFT sale.

 

8

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The Company earns a royalty of up to 10% of the sale price when an NFT is resold by its owner in a secondary market transaction. The Company recognizes this royalty as revenue when the sale is consummated.

 

The Company generates sponsorship revenue from the production and distribution of original content programming over live-streaming services. The Company recognizes sponsorship revenue pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract.

 

The Company’s distribution revenue is generated primarily through the distribution of content to online channels. Any advertising revenue earned by online channels is shared with the Company. The Company recognizes online advertising revenue at the point in time when the advertisements are placed in the video content.

 

Revenue recognition

 

The following table summarizes our revenue recognized under ASC 606 “Revenue form Contracts with Customers” in our condensed consolidated statements of operations:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Revenues Recognized at a Point in Time:                
Ticket and gaming revenue  $151,391   $143,413   $401,096   $394,564 
NFT revenue   
-
    13,441    
-
    249,889 
Food and beverage revenue   47,535    110,139    173,326    342,253 
Merchandising revenue   43,007    208,726    138,051    374,254 
Distribution revenue   94    238    518    1,241 
Total Revenues Recognized at a Point in Time   242,027    475,957    712,991    1,362,201 
                     
Revenues Recognized Over a Period of Time:                    
Event revenue   420,192    914,386    1,593,277    2,115,530 
Sponsorship revenue   457,740    175,299    3,275,218    1,657,799 
Total Revenues Recognized Over a Period of Time   877,932    1,089,685    4,868,495    3,773,329 
Total Revenues  $1,119,959   $1,565,642   $5,581,486   $5,135,530 

 

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. As of September 30, 2023 and December 31, 2022, the Company had contract liabilities of $357,677 and $108,428, respectively, which is included in deferred revenue on the condensed consolidated balance sheet.

 

As of September 30, 2023, $94,682 of performance obligations in connection with contract liabilities included within deferred revenue on the December 31, 2022 consolidated balance sheet have been satisfied. The Company expects to satisfy the remaining performance obligations of $13,746 related to its December 31, 2022 deferred revenue balance within the next twelve months. During the nine months ended September 30, 2023 and 2022, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

 

Digital Assets 

 

The Company accepts Ether as a form of payment for NFT sales. The Company accounts for digital assets held as the result of the receipt of Ether, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. The Company has ownership of and control over the digital assets and the Company may use third-party custodial services to secure them. The digital assets are initially recorded at cost and are subsequently remeasured net of any impairment losses incurred since the date of acquisition.

 

9

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The Company determines the fair value of its digital assets in accordance with ASC 820, “Fair Value Measurement”, based on quoted prices on the active exchange(s) that the Company has determined is the principal market for Ether (Level 1 inputs). The Company performs an analysis each quarter to identify whether events or changes in circumstances, or decreases in the quoted prices on active exchanges, indicate that it is more likely than not that the Company’s digital assets are impaired. In determining if an impairment has occurred, the Company considers the lowest market price quoted on an active exchange since acquiring the respective digital asset. If the then-current carrying value of a digital asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the fair value of such assets.

 

The impaired digital assets are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses for the same digital assets held. In determining the gain or loss to be recognized upon sale, the Company calculates the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are recognized within operating expenses in our condensed consolidated statements of operations and comprehensive loss. There were $0 and $164,411 of impairment charges during the three and nine months ended September 30, 2023, respectively. There were no digital assets sold during the same time periods.

 

The following table sets forth changes in our digital assets for the nine months ended September 30, 2023: 

 

Balance, December 31, 2022  $49,761 
Expenses paid using digital assets   (461)
Balance, September 30, 2023  $49,300 

 

Concentration Risks

 

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, short-term investments, due from affiliate and trade accounts receivable. The Company holds cash, cash equivalents and short-term investments at major financial institutions in amounts which often exceed Federal Deposit Insurance Corporation’s insurance limits. As of September 30, 2023, two customers represented 96% of the Company’s accounts receivable balance and one related party affiliate represented 100% of the Company’s due from affiliate balance. Historically, the Company has not experienced any losses due to such concentration of credit risk.

 

During the three months ended September 30, 2023 and 2022, 0.4% and 0.5%, respectively, of the Company’s revenues were from customers in foreign countries. During the nine months ended September 30, 2023 and 2022, 0.3% and 3%, respectively, of the Company’s revenues were from customers in foreign countries. 

 

During the three months ended September 30, 2023, the Company’s two largest customers accounted for 36% and 18% of the Company’s consolidated revenues. During the nine months ended September 30, 2023, the Company’s two largest customers accounted for 36% and 20% of the Company’s consolidated revenues. During the three months ended September 30, 2022, the Company’s five largest customers accounted for 22%, 21%, 18%, 10%, and 10% of the Company’s consolidated revenues. During the nine months ended September 30, 2022, the Company’s three largest customers accounted for 20%, 17%, and 11% of the Company’s consolidated revenues.

 

 Foreign Currency Translation

 

The Company’s reporting currency is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies (United States Dollar and Euro). Euro-denominated assets and liabilities are translated into the United States Dollar using the exchange rate at the balance sheet date 1.0573 and 1.0699 at September 30, 2023 and December 31, 2022, respectively, and revenue and expense accounts are translated using the weighted average exchange rate in effect for that period 1.0883 and 0.9797 for the three months ended September 30, 2023 and 2022, respectively, and 1.0832 and 1.0078 for the nine months ended September 30, 2023 and 2022, respectively. Resulting translation adjustments are made directly to accumulated other comprehensive income.

 

10

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The Company engages in foreign currency denominated transactions with customers and suppliers, as well as between subsidiaries with different functional currencies. Realized losses of $951 and $38,853 arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency for the nine months ended September 30, 2023 and 2022, respectively, are recognized in other income (expense) in the accompanying condensed consolidated statements of operations.

 

Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, other than those disclosed below.

 

Reclassifications

 

Certain prior period balances have been reclassified in order to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or loss per share.

 

Recently Adopted Accounting Pronouncements  

 

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on January 1, 2023, using the modified retrospective approach and it did not have a material impact on its condensed consolidated financial statements.

 

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this ASU improves disclosure requirements for convertible instruments and earnings-per-share guidance. The ASU also revises the derivative scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The amendments in this update are effective for our fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption will be permitted, but no earlier than for fiscal years beginning after December 15, 2020. The Company early adopted ASU 2020-06 effective January 1, 2023 which eliminated the need to assess whether a beneficial conversion feature needs to be recognized upon the issuance of new convertible instruments.

 

Note 3 – Intangible Assets, net

 

   Intellectual Property   Licenses   Software Development Costs   Total Intangibles   Accumulated Amortization   Total 
Balance as of January 1, 2023  $37,165   $
-
   $49,950   $87,115   $(14,329)  $72,786 
Purchases of intangibles   3,980    565,000    
-
    568,980    
-
    568,980 
Software development costs             49,950    49,950    
-
    49,950 
Amortization expense   
-
    
-
    
-
    
-
    (2,995)   (2,995)
Balance as of September 30, 2023  $41,145   $565,000   $99,900   $706,045   $(17,324)  $688,721 

 

11

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

On October 31, 2022, the Company entered into a system development agreement to develop an Allied Gaming membership management system and event organizer system. Pursuant to the terms of the agreement, the Company has committed to spend an aggregate amount of $199,800 in four equal payments of $49,950. The Company has made two payments of $49,950 for a total of $99,900 as of September 30, 2023 which was capitalized and included within other assets on the accompanying condensed consolidated balance sheet. As of September 30, 2023 the system has not yet been placed into service.

 

On February 27, 2023, the Company purchased a five-year exclusive worldwide software license to operate four mobile casual games for $565,000 which will be amortized over a useful life of 5 years. As of September 30, 2023 the software has not yet been placed into service.

 

Note 4 – Accrued Expenses and Other Current Liabilities  

 

Accrued expenses and other current liabilities consist of the following: 

 

   September 30,   December 31, 
   2023   2022 
Compensation expense  $151,121   $1,546,805[1]
Event costs   2,696    8,411 
Legal and professional fees   68,429    43,676 
Property and franchise tax   31,000    22,000 
Warrant liabilities   100    100 
Other accrued expenses   52,924    24,387 
Accrued expenses and other current liabilities  $306,270   $1,645,379 

 

(1)Accrued compensation expense includes a $1 million obligation to a former CEO under a Restricted Stock Unit Agreement dated January 19, 2021, as amended in a certain Release and Separation Agreement with the former CEO dated July 8, 2021. The obligation was settled in July 2023.

 

Note 5 – Commitments and Contingencies  

 

Litigations, Claims, and Assessments 

 

The Company may, from time to time, be involved in various disputes, claims, liens and litigation matters arising out of the normal course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

Operating Leases

 

Allied Esports leases an arena in Las Vegas, Nevada, for the purpose of hosting Esports activities (the “Las Vegas Lease”). The arena opened to the public on March 23, 2018 (the “Commencement Date”). Initial lease terms were for minimum monthly payments of $125,000 for 60 months from the Commencement Date with an option to extend for an additional 60 months at $137,500 per month. Additional annual tenant obligations were estimated at $2 per square foot for Allied’s portion of real estate taxes and $5 per square foot for common area maintenance costs. The Las Vegas Lease expired on May 31, 2023 but was extended until July 31, 2023. Effective August 1, 2023, the Las Vegas Lease was extended until May 31, 2028 for minimum monthly payments of $137,500 for 58 months in addition to fixed monthly tenant obligations for real estate tax of $5,000.

 

On July 17, 2023, the Company leased 5,067 square feet of building space in Las Vegas, Nevada, through an operating lease for the purpose of storage of the mobile esports truck. The lease term is for 36 months and ends on July 31, 2026. The monthly base rent ranges from $4,560 to $5,028.

 

The Company also leased office and production space in Germany, pursuant to a lease dated August 1, 2020 which expired on July 31, 2023 (the “Germany Lease”). Rent expense under the lease was €4,000 (approximately $4,280 United States dollars) per month. The Company did not renew the lease after it expired.

 

12

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

The Company’s aggregate lease expense incurred during the three months ended September 30, 2023 and 2022 amounted to $438,874 and $421,870, respectively, of which $321,522 and $320,994, respectively, is included within in-person costs and $117,352 and $100,876, respectively, is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. 

 

The Company’s aggregate lease expense incurred during the nine months ended September 30, 2023 and 2022 amounted to $1,281,075 and $1,279,508, respectively, of which $964,038 and $962,982, respectively, is included within in-person costs and $317,037 and $316,526, respectively, is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. 

 

A summary of the Company’s right-of-use assets and liabilities is as follows:

 

   For the Nine Months Ended 
   September 30, 
   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows used in operating activities  $909,426   $808,148 
           
Right-of-use assets obtained in exchange for lease obligations          
Operating leases  $289,886   $
-
 
           
Weighted Average Remaining Lease Term (Years)          
Operating leases   4.63    5.67 
           
Weighted Average Discount Rate          
Operating leases   5.00% - 5.75%    5.00%

 

A summary of the Company’s remaining operating lease liabilities is as follows:

 

For the Year Ending December 31,  Amount 
2023  $441,180 
2024   1,765,860 
2025   1,768,656 
2026   1,745,196 
2027   1,710,000 
Thereafter   712,500 
Total lease payments   8,143,392 
Less: amount representing imputed interest   (1,008,693)
Present value of lease liability   7,134,699 
Less: current portion   (1,390,533)
Lease liability, non-current portion  $5,744,166 

 

Note 6 – Related Party Transactions

 

On September 24, 2023, AME-HK advanced Beijing Lianzhong Co., Ltd, a related party (and a subsidiary of AGAE’s largest investor), $3.5 million (the “Bridge Loan”) in connection with a certain Equity Interest Purchase Agreement dated August 16, 2023, under which AME-HK agreed to acquire a 40% equity interest in Beijing Lianzhong Zhihe Technology Co., Ltd (“Z-Tech”), a company engaged in the development and distribution of casual mobile games.  The acquisition closed on October 31, 2023 (See Note 10 – Subsequent Event).  The Bridge Loan is non-interest bearing and is repayable at the earlier of 90 days from the date of the advance or the closing of the Z-Tech acquisition, at which time the proceeds of the Bridge Loan will we applied to the purchase price of the equity interests. 

 

13

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

Note 7 – Stockholders’ Equity  

 

Stock Options

 

A summary of the option activity during the nine months ended September 30, 2023 is presented below:

 

       Weighted   Weighted     
       Average   Average     
   Number of   Exercise   Remaining   Intrinsic 
   Options   Price   Term (Yrs)   Value 
                 
Outstanding, January 1, 2023   1,675,000   $3.66                      
Granted   
-
    
-
           
Exercised   
-
    
-
           
Expired   (85,000)   4.09           
Forfeited   (50,000)   4.09           
Outstanding, September 30, 2023   1,540,000   $3.62    6.07   $
-
 
                     
Exercisable, September 30, 2023   1,275,000   $3.76    6.02   $
-
 

 

Options outstanding and exercisable as of September 30, 2023 are as follows:

 

Options Outstanding   Options Exercisable 
        Weighted     
    Outstanding   Average   Exercisable 
Exercise   Number of   Remaining Life   Number of 
Price   Options   In Years   Options 
$2.11    40,000    6.75    30,000 
$2.17    120,000    6.85    120,000 
$2.21    350,000    7.84    237,500 
$2.48    120,000    7.60    80,000 
$4.09    630,000    4.75    527,500 
$5.66    280,000    5.97    280,000 
      1,540,000    6.02    1,275,000 

 

For the three months ended September 30, 2023 and 2022, the Company recorded $64,623 and $238,840, respectively, of stock-based compensation expense related to stock options. During the nine months ended September 30, 2023 and 2022, the Company recorded $136,605 and $710,884, respectively, of stock-based compensation expense related to stock options. As of September 30, 2023, there was $132,802 of unrecognized stock-based compensation expense related to the stock options that will be recognized over the weighted average remaining vesting period of 1.74 years.

 

Restricted Common Stock

 

For the three and nine months ended September 30, 2022, the Company recorded $0 and $82,345, respectively, of stock-based compensation expense related to restricted stock. As of September 30, 2022, all restricted common stock was fully vested.

 

14

 

 

ALLIED GAMING & ENTERTAINMENT INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

 

(unaudited)

 

Note 8 – Employee Retention Credit

 

The employee retention credit (“ERC”), as originally enacted through the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) on March 27, 2020, is a refundable credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees from March 17, 2020 to December 31, 2020. The Disaster Tax Relief Act, enacted on December 27, 2020, extended the ERC for qualified wages paid from January 1, 2021 to June 30, 2021, and the credit was increased to 70% of qualified wages an eligible employer paid to employees during the extended period. The American Rescue Plan Act of 2021, enacted on March 11, 2021, further extended the ERC through December 31, 2021.

 

During the three and nine months ended September 30, 2023 and 2022, the Company recognized employee retention credits of approximately $1.5 million and $0.0, respectively, within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2023, the Company has a receivable balance of approximately $0.2 million for unsettled ERCs within prepaid expenses and other current assets on the condensed consolidated balance sheet. Commissions paid and payable to a professional advisor to process the ERC claims amounted to approximately $0.3 million and are included within general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss.

 

Note 9 – Subsequent Event

 

On October 31, 2023, AME - HK completed its acquisition of a 40% equity interest in Z-Tech for $7 million in cash.  The purchase consideration included the application of the $3.5 million loan receivable discussed in Note 6 – Related Party Transactions.

 

15

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 

 

Cautionary Statements 

 

The following discussion and analysis of the results of operations and financial condition of Allied Gaming & Entertainment Inc. (the “Company”) as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q and with the Company’s audited financial statements and related disclosures as of December 31, 2022, which are included in our Annual Report on Form 10-K (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 24, 2023, as amended on April 27, 2023 and May 3, 2023. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company and its subsidiaries. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” in our Annual Report, and other factors that we may not know. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements above, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

 

The Company 

 

Allied Gaming and Entertainment Inc., and its subsidiaries (“AGAE” or the “Company”) is a global experiential entertainment company focused on providing a growing audience of gamers with unique experiences through renowned assets, products, and services. Allied Esports International, Inc. (“Allied”) operates global competitive esports properties designed to connect players and fans via a network of connected arenas. Esports Arena Las Vegas, LLC operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. The Company offers a variety of esports and gaming-related content, including world class tournaments, live and virtual entertainment and gaming events, and original programming to continuously foster an engaged gaming community. Allied Esports operates solely through its wholly owned subsidiaries. In December 2022, the Company completed a strategic review of its business operations and announced plans to restructure the existing esports business and expand its focus to include a broader array of entertainment and gaming products and services. Under this plan, the Company intends to pursue multiple channels of opportunities instead of a single significant corporate transaction such as an acquisition of complementary assets or businesses, and it is currently exploring opportunities to leverage its location-based-entertainment expertise with a focus on gaming lifestyle and experiential entertainment, as well as growing its digital footprint and monetization capabilities through mobile gaming.

 

Allied’s in-person experiences include live events hosted at its flagship arena, HyperX Arena Las Vegas, an affiliate arena with one of its global network of esports arena partners, and its mobile arenas. Allied’s multiplatform content include its partnerships with live streamers, post-produced episodic content, and short-form repackaged content. Allied’s interactive services include strategic partnerships with various content creators, broadcasters, and streaming technology partners to provide interactive streaming experiences with a wide range of influencers.

 

Our growth depends, in part, on our ability to respond to technological evolution, shifts in gamer trends and demands, introductions of new games, game publisher intellectual property right practices, and industry standards and practices. While change in this industry may be inevitable, we will try to adapt our business model as needed to accommodate change and remain on the forefront of our competitors.

 

Our business plan requires significant capital expenditures, and we expect our operating expenses to increase as we continue to expand our marketing efforts and operations in existing and new geographies as well as new vertical markets (including live influencer events, experiential entertainment, casual mobile gaming, live streaming platforms and channels, interactive content monetization, and online esports tournament and gaming subscription platforms), which we believe will provide attractive returns on investment. 

 

Z-Tech Acquisition

 

On August 16, 2023, AME-HK entered into an Equity Interest Purchase Agreement (the “Purchase Agreement”) with, among others, Beijing Lianzhong Co., Ltd (“Z-Tech”) (the “Seller”) and Beijing Lianzhong Zhihe Technology Co., Ltd. (the “Target Company”), pursuant to which AME-HK agreed to acquire 40% equity interest in the Target Company held by the Seller for a total purchase price of $7,000,000 in cash (the “Acquisition”). Pursuant to the terms of the Purchase Agreement AME-HK has the right to appoint three out of five members of the Board of Directors of the Target Company, and AME-HK also will acquire certain rights held by the Seller as the major shareholder of the Target Company prior to the Acquisition. After the Acquisition, which was completed on October 31, 2023, the Company has become Z-Tech’s largest shareholder.

 

Z-Tech was founded in Beijing, China in April 2022 and has emerged as a mobile games developer and operator, specializing in the innovation, research, development and operation of premium card and Mahjong casual games. Leveraging advanced in-game advertising strategies, Z-Tech has generated substantial revenue streams and established a premier leisure entertainment platform and community, which further solidifies its connection with customers, enhancing engagement and fostering enduring relationships.

 

16

 

 

Results of Operations 

 

Our operations consist of our esports gaming operations, which take place at global competitive esports properties designed to connect players and fans via a network of connected arenas. Through our subsidiaries, we offer esports fans state-of-the-art facilities to compete against other players in esports competitions, host live events with esports superstars that potentially stream to millions of viewers worldwide, and produce and distribute esports content at our on-site production facilities and studios. At our flagship arena in Las Vegas, Nevada, we provide an attractive facility for hosting corporate events, tournaments, game launches or other events. Additionally, we have a mobile esports arena, which is an 18-wheel semi-trailer that converts into a first class esports arena and competition stage with full content production capabilities and an interactive talent studio.

 

Results of Operations for the Three Months Ended September 30, 2023 and 2022 

 

   For the     
   Three Months Ended     
   September 30,   Favorable 
(in thousands)  2023   2022   (Unfavorable) 
Revenues:            
In-person  $1,120   $1,552   $(432)
Multiplatform content   -    14    (14)
Total Revenues   1,120    1,566    (446)
Costs and Expenses:               
In-person (exclusive of depreciation and amortization)   576    1,113    537 
Multiplatform content (exclusive of depreciation and amortization)   -    31    31 
Selling and marketing expenses   51    54    3 
General and administrative expenses   894    2,398    1,504 
Depreciation and amortization   239    (329)   (568)
Loss From Operations   (640)   (1,701)   1,061 
Other Income (Expense)               
Other (expense) income, net   -    34    (34)
Interest income, net   715    25    690 
Net income (loss)  $75   $(1,642)  $1,717 

 

Revenues 

 

In-person revenues decreased by approximately $0.4 million, or 28%, to approximately $1.1 million for the three months ended September 30, 2023 from approximately $1.6 million for the three months ended September 30, 2022. The decrease of in-person experience revenues was driven by a $0.5 million decrease in event revenue and a $0.2 million decrease in merchandising revenue. This was slightly offset by a $0.3 million increase in sponsorship revenue related to a new naming rights agreement for our HyperX Arena in Las Vegas.

 

Multiplatform revenue decreased by approximately $14 thousand for the three months ended September 30, 2023 from $14 thousand for the three months ended September 30, 2022 to $0 for the three months ended September 30, 2023.

 

Costs and expenses 

 

In-person costs (exclusive of depreciation and amortization) decreased by approximately $0.5 million, or 48%, to approximately $0.6 million for the three months ended September 30, 2023 from approximately $1.1 million for the three months ended September 30, 2022. The decrease corresponds to the decrease in event revenue described above.

 

Multiplatform costs (exclusive of depreciation and amortization) decreased by approximately $31 thousand, or 100%, to approximately $0 for the three months ended September 30, 2023 from approximately $31 thousand for the three months ended September 30, 2022.

 

17

 

 

Selling and marketing expenses decreased by approximately $3 thousand, or 6%, to approximately $51 thousand for the three months ended September 30, 2023 from approximately $54 thousand for the three months ended September 30, 2022.

 

General and administrative expenses decreased by approximately $1.5 million, or 63%, to approximately $0.9 million for the three months ended September 30, 2023, from approximately $2.4 million for the three months ended September 30, 2022. The decrease in general and administrative expenses is primarily attributable to (a) a $1.8 million reduction in compensation costs which includes a $1.5 million Employee Retention Credit (“ERC”) and $0.3 million in higher payroll and payroll related costs in 2022 and (b) a $0.2 million reduction in stock-based compensation due to higher costs that occurred in the third quarter of 2022 to correct the vesting of options of a former employee. This was slightly offset by an increase in legal and professional fees of $0.5 million related to merger and acquisition activities in the third quarter of 2023.

  

Depreciation and amortization increased by approximately $0.5 million, or 173%, to approximately $0.2 million for the three months ended September 30, 2023, from approximately ($0.3) million for the three months ended September 30, 2022. The increase was primarily due to a $1.0 million adjustment for the three months ended September 30, 2022 to correct the amortization of leasehold improvements in prior periods. This was slightly offset by a decrease in depreciation related to production equipment that became fully depreciated on March 31, 2023.

 

Other income (expense)

 

We recognized other expense of approximately $0 during the three months ended September 30, 2023 compared to $34 thousand of other income recorded for the three months ended September 30, 2022.

 

Interest income

 

Interest income was approximately $716 thousand for the three months ended September 30, 2023 compared to approximately $25 thousand of interest income for the three months ended September 30, 2022. The increase is a result of the interest earned on short-term investments purchased at various times commencing in the fourth quarter of 2022.

 

Results of Operations for the Nine Months Ended September 30, 2023 and 2022 

 

   For the     
   Nine Months Ended     
   September 30,   Favorable 
(in thousands)  2023   2022   (Unfavorable) 
Revenues:            
In-person  $3,581   $3,735   $(154)
Multiplatform content   2,001    1,401    600 
Total Revenues   5,582    5,136    446 
Costs and Expenses:               
In-person (exclusive of depreciation and amortization)   1,891    2,785    894 
Multiplatform content (exclusive of depreciation and amortization)   1,518    1,021    (497)
Selling and marketing expenses   173    186    13 
General and administrative expenses   5,661    8,762    3,101 
Depreciation and amortization   1,030    1,288    258 
Impairment of digital assets   -    164    164 
Loss From Operations   (4,691)   (9,070)   4,379 
Other Income (Expense)               
Other income (expense), net   16    (46)   62 
Interest income, net   2,165    34    2,131 
Net Loss  $(2,510)  $(9,082)  $6,572 

 

18

 

 

Revenues

 

In-person revenues decreased by approximately $0.2 million, or 4%, to approximately $3.6 million for the nine months ended September 30, 2023 from approximately $3.7 million for the nine months ended September 30, 2022. The decrease of in-person experience revenues was driven by a $0.5 million decrease in event revenue, $0.2 million decrease in food and beverage revenue and a $0.2 million decrease in merchandising revenue all due to a decrease in HyperX Arena events in 2023. This was slightly offset by a $0.7 million increase in sponsorship revenue related to a new naming rights agreement for our HyperX Arena in Las Vegas.  

 

Multiplatform revenue increased by approximately $0.6 million, or 43%, to approximately $2.0 million for the nine months ended September 30, 2023, from approximately $1.4 million for the nine months ended September 30, 2022. The increase in multiplatform revenues is the result of additional revenue generated from Season 2 of Elevated, a live streaming event which had 10 episodes in 2023 compared to 4 episodes in 2022. 

 

Costs and expenses 

 

In-person costs (exclusive of depreciation and amortization) decreased by approximately $0.9 million, or 32%, to approximately $1.9 million for the nine months ended September 30, 2023 from approximately $2.8 million for the nine months ended September 30, 2022. The decrease is a result of a decrease in HyperX Arena events in 2023.

 

Multiplatform costs (exclusive of depreciation and amortization) increased by approximately $0.5 million, or 49%, to approximately $1.5 million for the nine months ended September 30, 2023 from approximately $1.0 million for the nine months ended September 30, 2022. The increase in multiplatform costs corresponds to the production costs for 10 episodes of Season Two of Elevated which aired in Q2 2023 versus only four episodes in Season One which aired in Q1 of 2022. In addition, in 2022 there was revenue related to the sale of NFTs which had minimal direct costs. 

 

Selling and marketing expenses decreased by approximately $13 thousand, or 7%, to approximately $173 thousand for the nine months ended September 30, 2023 from approximately $186 thousand for the nine months ended September 30, 2022.

 

General and administrative expenses decreased by approximately $3.1 million, or 35%, to approximately $5.7 million for the nine months ended September 30, 2023, from approximately $8.8 million for the nine months ended September 30, 2022. The decrease in general and administrative expenses resulted from (a) a $1.5 million ERC credit recognized in 2023, (b) a 2022 accrual of $0.7 million for severance costs paid out to the former Chief Executive Officer, (d) $1.0 million in higher payroll and payroll related costs in 2022, and (e) $0.7 million of higher stock-based compensation in 2022 related to the accelerated vesting of options previously granted to the former Chief Executive Officer. These decreases were slightly offset by a $0.8 million increase in legal and professional fees related to various employment and service provider transition matters in addition to merger and acquisition related professional fees in connection with the acquisition of a 40% equity interest in Z-Tech and other strategic investment opportunities.

 

Depreciation and amortization decreased by approximately $0.3 million, or 20%, to approximately $1.0 million for the nine months ended September 30, 2023, from approximately $1.3 million for the nine months ended September 30, 2022. The decrease was primarily due to production equipment of approximately $7.0 million that became fully depreciated on March 31, 2023. The decrease also includes the amortization of leasehold improvements that occurred in the second quarter of 2022 that was corrected as an out-of-period adjustment in the third quarter of 2022.

 

Impairment in digital assets decreased to $0 for the nine months ended September 30, 2023, compared to $164 thousand for the nine months ended September 30, 2022. The impairment loss during 2022 was the result of the market price on active exchanges going below the carrying value of the digital assets. The market price has not gone below the carrying value of the digital assets during the nine months ended September 30, 2023.

 

Other income (expense)

 

We recognized other income of approximately $16 thousand during the nine months ended September 30, 2023 compared to $46 thousand of other expense recorded for the nine months ended September 30, 2022.

 

Interest income

 

Interest income was approximately $2.2 million for the nine months ended September 30, 2023 compared to approximately $34 thousand of interest income for the nine months ended September 30, 2022. The increase is a result of the interest earned on short-term investments purchased at various times commencing in the fourth quarter of 2022.

 

19

 

 

Liquidity and Capital Resources

 

The following table summarizes our total current assets, current liabilities and working capital at September 30, 2023 and December 31, 2022, respectively:

 

   September 30,   December 31, 
(in thousands)  2023   2022 
Current Assets  $76,426   $82,377 
Current Liabilities  $2,525   $3,298 
Working Capital  $73,901   $79,079 

 

Our primary sources of liquidity and capital resources are cash and short-term investments on the balance sheet and funds that can be raised through debt or equity financing.

 

As of September 30, 2023, we had cash of approximately $10.4 million (not including approximately $60.0 million of short-term investments and $5.0 million of restricted cash) and working capital of approximately $73.9 million. For the nine months ended September 30, 2023 and 2022, we incurred a net loss of approximately $2.5 million and $9.1 million, respectively, and used cash in operations of approximately $4.6 million and $8.6 million, respectively. 

 

Cash requirements for our current liabilities include approximately $0.8 million for accounts payable and accrued expenses. Cash requirements for current and non-current lease obligations are approximately $8.1 million, including $1.0 million imputed interest. The Company intends to meet these cash requirements from its current cash balance. As of September 30, 2023, the Company had no material commitments for capital expenditures. As part of our previously announced plan to pursue strategic transactions to enhance our financial performance, we expect to use a portion of our cash reserve for the acquisition of or investment in complementary businesses and assets, to the extent such opportunities are available. Such cash reserves include $3.5 million to complete the acquisition of Beijing Lianzhong Zhihe Technology Co., Ltd. We believe our current cash on hand is sufficient to meet our operating and capital requirements for at least the next twelve months from the date these financial statements are issued. Based on our current operating plan, we believe we will be able to fund future requirements from positive operating cash flows.

 

Cash Flows from Operating, Investing and Financing Activities

 

The table below summarizes cash flows for the nine months ended September 30, 2023 and 2022:

 

   Nine Months Ended 
   September 30, 
(in thousands)  2023   2022 
Net cash (used in) provided by        
Operating activities  $(4,599)  $(8,552)
Investing activities  $5,918   $(48)
Financing activities  $(2,051)  $- 

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities for the nine months ended September 30, 2023 and 2022 was approximately $4.6 million and $8.6 million, respectively, representing decreased usage of cash of $4.0 million. During the nine months ended September 30, 2023 and 2022, the net cash used in operating activities was primarily attributable to the net loss of approximately $2.5 million and $9.1 million, respectively, adjusted for approximately $1.9 million and $2.7 million, respectively, of net non-cash expenses, and approximately ($4.0) million and ($2.2) million, respectively, of cash used to fund changes in the levels of operating assets and liabilities.  

 

Net Cash Used in Investing Activities

 

Net cash provided by investing activities for the nine months ended September 30, 2023 was approximately $5.9 million, which consisted primarily of proceeds from the maturing of certificate of deposits of $30.0 million and $0.1 million in proceeds from the sale of equipment. This was slightly offset by $20.0 million of certificate of deposit purchases, $0.1 million of property and equipment purchases, $0.6 million related to the acquisition of a mobile games license, and $3.5 million in a loan to an affiliate.

 

Net cash used in investing activities for the nine months ended September 30, 2022 was approximately $48 thousand, which consisted primarily of approximately $7 thousand of cash used for the purchases of property and equipment and approximately $41 thousand of cash used for the investment in digital assets.

 

20

 

 

Net Cash Used in Financing Activities

 

Net cash used in financing activities for the nine months ended September 30, 2023 was approximately $2.1 million compared to $0 for the nine months ended September 30, 2022 which is driven solely by the repurchase of treasury stock.

 

Off-Balance Sheet Arrangements

 

The Company does not engage in any off-balance sheet financing activities, nor does the Company have any interest in entities referred to as variable interest entities.

 

Critical Accounting Policies and Estimates

 

Refer to our Annual Report for the year ended December 31, 2022, filed with the SEC on March 24, 2023, as amended on April 27, 2023 and May 3, 2023, on Forms 10-K/A, and Note 2 to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q, for a discussion of our critical accounting policies and use of estimates. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

 

Not applicable. 

 

ITEM 4. CONTROLS AND PROCEDURES. 

 

Effectiveness of Disclosure Controls and Procedures

 

Our management, under the direction of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023. Based on this evaluation our management, including the Company’s Chief Executive Officer and Chief Financial Officer, has concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2023 to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis, primarily due to the material weakness in internal control over financial reporting as discussed below.

 

Despite not conducting a formal assessment regarding internal control over financial reporting, management identified the following material weaknesses as of December 31, 2022, which persisted as of September 30, 2023:

 

  inadequate segregation of duties resulting from limited accounting staff and resources; and
     
  inadequate information technology general controls as it relates to user access and change management.

 

Our management, under the oversight of our Audit Committee, and in consultation with outside advisors, continues to evaluate and implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated. These remediation measures include but are not limited to: (i) reorganizing roles and responsibilities to address segregation of duties issues, (ii) evaluating and implementing enhanced process controls around user access and change management; and (iii) monitoring and conducting regular assessment of the effectiveness of internal controls.

 

We believe the above actions will be effective in remediating the material weakness described above and we will continue to devote time and attention to these remedial efforts. However, as we continue to evaluate and take actions to improve our internal controls over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above. Our remediation efforts will not be considered complete until the applicable controls operate for a sufficient period and our management has concluded, through testing, that these controls are operating effectively.

 

Changes in Internal Control Over Financial Reporting 

 

During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting that have affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

21

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in the Company’s Annual Report for the year ended December 31, 2022 and our other public filings, which could materially affect our business, financial condition or future results. Except as provided below, there have been no material changes from risk factors previously disclosed in “Risk Factors” in such Annual Report for the year ended December 31, 2022, filed with the SEC on March 24, 2023, as amended.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES. 

 

Recent Sales of Unregistered Securities

 

None.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

On November 11, 2022, our Board of Directors (the “Board”) authorized a stock repurchase program under which we are authorized to repurchase up to $10 million of our outstanding shares of common stock through November 17, 2024. The manner, timing and amount of any purchase will be based on an evaluation of market conditions, stock price and other factors. Repurchases under the program will be made in open market transactions in compliance with the SEC Rule 10b-18 and federal securities laws. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be extended, suspended or discontinued at any time at the Company’s discretion. The stock repurchase will be funded using the Company’s working capital.

 

The following table provides information with respect to repurchases made under the stock repurchase program for the quarter ended September 30, 2023:

 

               Approximate 
           Total Number   Dollar 
           of Shares   Value of 
           Purchased as   Shares that 
           Part of   May be 
   Total Number       Publicly   Purchased 
   of Shares   Average Price   Announced   Under 
   (or Units)   Paid Per   Plans or   the Plans or 
Period  Purchased   Share (Unit)   Program   Programs (1) 
                 
July 1, 2023 to July 31, 2023   21,411   $1.01    21,411   $7,492,726 
                     
August 1, 2023 to August 31, 2023   150,110   $0.93    150,110   $7,350,152 
                     
September 1, 2023 to September 30, 2023   11,500   $1.00    11,500   $7,338,263 

 

(1) On November 11, 2022, the Board of Directors authorized a stock repurchase program under which the Company was authorized to repurchase up to $10 million of the Company’s common stock through November 17, 2024.

 

22

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 

 

None. 

 

ITEM 4. MINE SAFETY DISCLOSURES. 

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

To the best of the Company’s knowledge during the fiscal quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.

 

ITEM 6. EXHIBITS. 

 

Exhibit   Description

10.1

 

Equity Interest Purchase Agreement, dated August 16, 2023, by and between Beijing Lianzhong Co., Ltd., Allied Mobile Entertainment (Hong Kong) Limited, Beijing Lianzhong Zhihe Technology Co., Ltd., Beijing Shuimu Zhijiang Technology Center (LLP), and Beijing Mizar JY Technology Co., Ltd.

31.1*   Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a)
31.2*   Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14(a)
32.1*   Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350
32.2*   Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document.
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* Filed herewith

 

23

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  ALLIED GAMING & ENTERTAINMENT INC.
   
Dated: November 9, 2023 By: /s/ Yinghua Chen
    Yinghua Chen, Chief Executive Officer,
(Principal Executive Officer)
     
Dated: November 9, 2023 By: /s/ Roy Anderson
    Roy Anderson, Chief Financial Officer
(Principal Financial Officer)

 

 

 

24

 

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Exhibit 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

EQUITY Interest PURCHASE AGREEMENT

股权购买协议

 

FOR THE SALE AND PURCHASE OF Equity

INterests in

Beijing Lianzhong Zhihe Technology Co.,

LTD.

 

出售和购买

北京联众智合科技有限公司

之股权

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONTENTS目录

 

Clause   Page
     
1. Interpretation解释 2
     
2. Sale And Purchase出售和购买7 6
     
3. Equity Structure Of The Company公司的股权结构8 7
     
4. Conditions条件 8
     
5. Completion交割 9
     
6. Board Of Directors And Management董事会及管理层 11
     
7. Shareholder Reoslution股东决议 14
     
8. Shareholder Right股东权利 15
     
9. Warranties保证 17
     
10. Confidential Information保密信息 18
     
11. Costs, Stamp Duty And Other Taxes成本、印花税及其他税费 18
     
12. General一般条款 19
     
13. Notices通知 21
     
14. Governing Law适用法律 23
     
15. Jurisdiction管辖 23
     
Schedule 1 Seller Warranties附件1卖方保证 25
   
Schedule 2 Buyer Warranties附件2买方保证 26

 

- i -

 

 

THIS EQUITY Interest PURCHASE AGREEMENT (“Agreement”) is made on 16 August 2023

 

本《股权购买协议》(“协议”)于2023816日签订:

 

BETWEEN:

 

(1)Beijing Lianzhong Co., Ltd.(北京联众互动网络股份有限公司), a company incorporated under the laws of the People’s Republic of China (“China”, for the purpose of this Agreement, excluding Hong Kong, Macau and Taiwan) whose registered office is at 5076, 5/F, Building 8, Weibohao Home, No.1, Weigongcun Street, Haidian District, Beijing, China (the “Seller”);

 

北京联众互动网络股份有限公司,一家根据中华人民共和国(“中国”,为本协议之目的,不包含香港、澳门及台湾)法律成立的公司,注册地址为中国北京市海淀区魏公村街1号韦伯豪家园8号楼55076(“卖方”);

 

(2)Allied Mobile Entertainment (Hong Kong) Limited, a company incorporated under the laws of Hong Kong, whose registered office is at Unit C, 20/F., Nathan Commercial Building, 430-436 Nathan Road, Yaumati, Kln., Hong Kong, China (the “Buyer”);

 

Allied Mobile Entertainment (Hong Kong) Limited,一家根据香港法律成立的公司,注册地址为中国香港九龙油麻地弥敦道430-436号弥敦商务大厦20C室(“买方”);

 

(3)Beijing Lianzhong Zhihe Technology Co., Ltd.(北京联众智合科技有限公司), a company incorporated under the laws of China, whose registered office is at Room 2518, Building 2, China Agricultural University International Pioneer Park, 10 Tianxiu Road, Haidian District, Beijing, China (the “Company”);

 

北京联众智合科技有限公司,一家根据中国法律成立的公司,注册地址为中国北京市海淀区天秀路10号中国农大国际创业园2号楼2518室(“公司”);

 

(4)Beijing Shuimu Zhijiang Technology Center (LLP), a limited partnership incorporated under the laws of China, whose registered office is at No.2112, 2/F, Building 2, Yard 2, Yongjie South Road, Baiwang Innovation and Technology Park, Xibeiwang Town, Haidian District, Beijing, China (“Shuimu Zhijiang”); and

 

北京水木之江科技中心(有限合伙),一家根据中国法律成立的有限合伙企业,注册地址为中国北京市海淀区西北旺镇百旺创新科技园永捷南路2号院2号楼22112号(“水木之江”);及

 

(5)Beijing Mizar JY Technology Co., Ltd (北京开阳久盈科技有限公司), a limited liability company incorporated under the laws of China, whose registered office is at 1001, Unit 1, 10/F, Building 4, Shangshuiyuan, Baijiatan, Haidian District, Beijing, China (“Mizar JY”).

 

北京开阳久盈科技有限公司,一家根据中国法律成立的有限公司,注册地址为中国北京市海淀区白家疃尚水园4号楼101单元1001(“开阳久盈”)。

 

- 1 -

 

 

RECITALS:

 

前言:

 

(A)As of the date of this Agreement, the Seller, Shuimu Zhijiang and Mizar JY hold 50%, 35% and 15% equity interest of the Company respectively, and the corresponding registered capital of the Company held by each of them respectively is RMB1,000,000, RMB700,000 and RMB300,000; and

 

于本协议签署日,卖方、水木之江及开阳久盈分别持有公司50%35% 15%的股权,对应公司注册资本人民币1,000,000元、人民币700,000元及人民币300,000元;及

 

(B)The Seller wishes to sell, and the Buyer wishes to buy, certain equity interests of the Company (as defined below) together with all rights accruing or attached thereto (the “Transaction”).

 

卖方拟出售及买方拟购买公司(定义见下文)的部分股权以及其产生及附带的全部权利(“交易”)。

 

THE PARTIES AGREE as follows:

 

各方同意如下:

 

1.INTERPRETATION

 

解释

 

1.1Definitions

 

定义

 

In this Agreement:

 

本协议中:

 

Acquired Equity Interests” means 40% equity interests of the Company (the corresponding registered capital of the Company is RMB800,000) owned by the Seller;

 

被收购股权”是指卖方拥有的公司40%的股权(对应的公司注册资本为人民币800,000)

 

Affiliate” means, in relation to a person, any other person which, directly or indirectly, controls, is controlled by or is under the common control of the first mentioned person, where “control” means the ownership, directly or indirectly, of more than 50 per cent. of the voting shares, registered capital or other equity interest of the relevant person or the possession, directly or indirectly, of the power to direct the shareholders’ general meeting, to appoint or elect a majority of the directors, or otherwise to direct the management of the relevant person;

 

关联人士”是指,就某个自然人,系指直接或间接控制、受上述第一个人控制或受其共同控制的任何其他人,其中“控制”系指直接或间接拥有相关人士50%以上的有表决权的股份、注册资本或其他股权,或直接或间接拥有领导股东大会的权力,任命或者选举过半数的董事,或者以其他方式指导有关人员的管理;

 

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Applicable Laws” means with respect to any person, any laws, rules, regulations, guidelines, directives, treaties, judgments, determination, orders or notices of any Authority or stock exchange that is applicable to such person;

 

适用法律”是指就任何人而言,任何主管部门或证券交易所适用于该人的任何法律、规则、规章、指引、指令、条约、判决、决定、命令或通知;

 

Authority” means any national, provincial, municipal or local government, administrative or regulatory body or department, court, tribunal, arbitrator or any body that exercises the function of a regulator;

 

主管部门”指任何国家、省、市或地方政府、行政或监管机构或部门、法院、法庭、仲裁员或行使监管职能的任何机构;

 

Business Day” means a day other than a Saturday or Sunday or public holiday in Hong Kong;

 

工作日”指除香港星期六、星期日或公众假期以外的一天;

 

Buyer Warranty” means a statement contained in Schedule 2 and “Buyer Warranties” means all those statements;

 

买方保证”指附录2中包含的某项声明,“买方保证”指所有声明;

 

Company” means Beijing Lianzhong Zhihe Technology Co., LTD., a company incorporated in China whose registered office is at Room 2518, Building 2, China Agricultural University International Pioneer Park, Tianxiu Road, Haidian District, Beijing, China;

 

公司”指北京联众智合科技有限公司,是一家在中国注册成立的公司,注册地址为中国北京市海淀区天秀路10号中国农大国际创业园2号楼2518;

 

Completion” means completion of the transfer of the Acquired Equity Interests in accordance with this Agreement;

 

交割”系指按照本协议完成被收购股权的转让;

 

Completion Date” means the date set out in Clause 5;

 

交割日”是指第5条规定的日期;

 

Condition” means the condition set out in Clause 4;

 

条件”是指第4条中规定的条件;

 

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Confidential Information” means all information which relates to the provisions or subject matter of this Agreement or any documents referred to in this Agreement or the negotiations relating to this Agreement;

 

保密信息”是指与本协议的条款或内容或本协议中提及的任何文件或与本协议有关的谈判相关的所有信息;

 

Consideration” means the amount being USD 7,000,000, shall be settled in RMB equivalent to the central parity rate of USD/RMB published on China Money Network on the date of this Agreement;

 

对价”指金额为7,000,000美元,最终按照本协议签署日中国货币网公布的美元/人民币汇率中间价折合的人民币金额进行结算;

 

Encumbrance” means a mortgage, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including, without limitation, a title transfer or retention arrangement) having similar effect;

 

权利负担”系指具有类似效力的抵押、质押、留置、选择权、限制、优先购买权、优先认购权、第三方权利或权益、其他任何形式的权利负担或担保权益,或其他类型的优先安排(包括但不限于权利转让或保留安排);

 

License Agreement” means the license agreement (联合运营协议) dated 8 August 2022 executed by the Seller and the Company and its relevant amendments and supplements, pursuant to which the Seller granted relevant license to the Company to jointly operate relevant online games;

 

许可协议”指卖方与公司签署的日期为202288日的联合运营协议及其相关修订和补充协议,据此,卖方授予公司联合运营相关网络游戏的相关许可;

 

Notice” has the meaning specified in Clause 13.1;

 

通知”具有第13.1条规定之含义;

 

Seller Warranty” means a statement contained in Schedule 1 and “Seller Warranties” means all those statements;

 

卖方保证”指附录1中包含的某项声明,“卖方保证”指所有声明;

 

Seller’s Bank Account” means the Seller’s bank account, details of which shall be notified by the Seller to the Buyer prior to the date of this Agreement or the Completion Date (as applicable); and

 

卖方银行账户”系指卖方的银行账户,其详细信息应于本协议签署日或交割日(如适用)之前通知买方;

 

Tax” means any form of taxation, levy, duty, charge, contribution, or withholding of whatever nature (including any related fine, penalty, surcharge or interest) imposed, collected or assessed by, or payable to, any national, provincial, municipal or local government or other authority, body or official anywhere in the world exercising a fiscal, revenue, customs or excise function.

 

税收”指由世界上任何地方的任何国家、省、市或地方政府或行使财政、税收、海关或消费税职能的其他当局、机构或官员征收、征收或评估或支付的任何形式的税收、征费、关税、费用、分摊或扣缴的任何性质的税款(包括任何相关的罚款、罚款、附加费或利息)

 

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1.2References

 

In this Agreement, a reference to:

 

在本协议中,提及:

 

1.2.1a party being liable to another party, or to liability, includes, but is not limited to, any liability in equity, contract or tort (including negligence);

 

一方对另一方负有责任或承担责任,包括但不限于衡平法、合同或侵权(包括疏忽)方面的任何责任;

 

1.2.2a statutory provision includes a reference to the statutory provision as modified from time to time before the date of this Agreement and any implementing regulations made under the statutory provision (as so modified) before the date of this Agreement;

 

法律规定包括在本协议签署日之前不时修改的法律规定,以及在本协议签署日之前根据该法律规定(如已修改)制定的任何实施条例;

 

1.2.3a “person” includes a reference to any individual, company, enterprise or other economic organisation, government authority or agency, or any joint venture, association or partnership, trade union or employee representative body (whether or not having separate legal personality) and includes a reference to that person’s successors and permitted assigns;

 

”包括任何个人、公司、企业或其他经济组织、政府机关或机构,或任何合资企业、协会或合伙企业、工会或雇员代表机构(无论是否具有独立法人资格),并包括该人的继承人和允许的受让人;

 

1.2.4a “party” or “parties”, unless the context otherwise requires, is a reference to a party or parties to this Agreement and includes a reference to that party’s successors and permitted assigns;

 

一方”或“各方”,除非上下文另有约定,系指本协议的一方或多方,并包括该方的继承人和获准受让人;

 

1.2.5a clause, paragraph or schedule, unless the context otherwise requires, is a reference to a clause or paragraph of, or schedule to, this Agreement;

 

条款、段落或附件,除非上下文另有约定,系指本协议的条款、段落或附件;

 

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1.2.6the Schedules to this Agreement form part of this Agreement;

 

本协议的附件构成本协议的一部分;

 

1.2.7the singular includes the plural and vice versa unless the context otherwise requires;

 

除非上下文另有约定,表示单数的词语包括复数,反之亦然;

 

1.2.8times of the day is to Beijing time; and

 

时间为北京时间;和

 

1.2.9the words “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind.

 

在引入一个例子时,“包括”、“例如”或“诸如”等词不限制该例子与该例子或类似例子相关的词的含义。

 

1.3Headings

 

标题

 

The headings in this Agreement do not affect its interpretation.

 

本协议中的标题不影响对本协议的解释。

 

2.SALE AND PURCHASE

 

出售和购买

 

2.1The Seller agrees to sell, and the Buyer agrees to buy, the Acquired Equity Interests with effect from Completion with all rights then attaching to them and free of any Encumbrance.

 

卖方同意自交易交割日起出售、买方同意购买被收购股权及其附带的所有权利,且不存在任何权利负担。

 

2.2The Parties mutually agreed to engage CHFT Advisory and Appraisal Ltd. to conduct independent evaluation on the Acquired Equity Interest. With reference to the valuation report dated 4 August 2023 issued by CHFT Advisory and Appraisal Ltd, the Buyer shall pay USD7,000,000 as the Consideration to purchase the Acquired Equity Interests, which shall be settled in RMB equivalent to the central parity rate of USD/RMB published on China Money Network on the date of this Agreement.

 

卖方和买方共同聘请了华坊谘询评估有限公司对被收购股权进行了独立评估。经参考华坊谘询评估有限公司出具的日期为2023 84日的估值报告,买方将支付7,000,000美元作为购买被收购股权的对价,该对价应以本协议签署日中国货币网公布的美元/人民币汇率中间价折合的人民币金额进行结算。

 

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2.3Both Shuimu Zhijiang and Mizar JY agree to the Transaction and they will not exercise the right of first refusal in connection with the Acquired Equity Interest in accordance with relevant laws of China.

 

水木之江及开阳久盈均同意本交易,且他们将不会依据中国相关法律对被收购股权行使优先购买权。

 

3.equity structure of the company

 

公司的股权结构

 

3.1Immediately prior to the Transaction, the Company’s equity structure is as follows:

 

紧接本交易前,公司的股权结构如下:

 

Shareholders 

股东 

 

Registered capital
subscribed
 

认缴出资额 

(RMB/人民币) 

  

Registered
capital
paid-in

实缴出资额 

(RMB/人民币) 

  

Percentages

比例 

 
Beijing Lianzhong Co., Ltd.
北京联众互动网络股份有限公司
   1,000,000    1,000,000    50%
Beijing Shuimu Zhi Jiang Technology Center (LLP)  
北京水木之江科技中心(有限合伙)
   700,000    700,000    35%
Beijing Mizar JY Technology Co., Ltd  
北京开阳久盈科技有限公司
   300,000    300,000    15%
Total   2,000,000    2,000,000    100%

 

3.2Upon the completion of the Transaction, the Company’s equity structure shall be as follows:

 

Shareholders 

股东 

 

Registered capital subscribed  

认缴出资额 

(RMB/人民币) 

  

Registered capital paid-in 

实缴出资额 

(RMB/人民币) 

  

Percentages

比例 

 
The Buyer
买方
   800,000    800,000    40%
Beijing Shuimu Zhi Jiang Technology Center (LLP)
北京水木之江科技中心(有限合伙)
   700,000    700,000    35%
Beijing Mizar JY Technology Co., Ltd
北京开阳久盈科技有限公司
   300,000    300,000    15%
The Seller
卖方
   200,000    200,000    10%
Total   2,000,000    2,000,000    100%

 

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4.Conditions

 

条件

 

4.1The preconditions for the Completion of this Transaction to be satisfied by the Buyer shall be as follows:

 

买方交割本交易应满足的先决条件如下:

 

4.1.1the representations, warranties and undertakings made by the Buyer in this Agreement are true, complete, accurate and valid, and do not violate any terms and conditions of this Agreement as of the Completion Date;

 

截至交割日,买方在本协议中所作的陈述、保证和承诺是真实、完整、准确和有效的,且不违反本协议的任何条款和条件;

 

4.1.2both the Buyer and its shareholder Allied Gaming & Entertainment Inc., have obtained the approval from its board of directors in connection with the Transaction and the execution of the Agreement.

 

买方及其股东Allied Gaming & Entertainment Inc.已就本交易和本协议的签署获得其董事会的批准。

 

4.2The preconditions for the Completion of this Transaction to be satisfied by the Seller shall be as follows

 

卖方交割本交易应满足的先决条件如下:

 

4.2.1The Seller has obtained relevant board approval for the execution of this Agreement and the Transaction contemplated therein;

 

卖方已就本协议的签署及本交易获得相关董事会批准;

 

4.2.2the Seller has caused the board of directors of the Company to approve the execution of this Agreement and the Transaction herein;

 

卖方已促使公司董事会批准本协议的签署及本交易;

 

4.2.3the Seller has caused the Company to file and complete relevant registration in relation to this Transaction and change of board of directors with competent government authority in accordance with this Agreement

 

卖方已促使公司按照本协议向政府主管部门提交并完成与本交易和董事会变更相关的登记;

 

4.2.4The Seller has filed and completed relevant registration with the competent foreign exchange authority relating to this Transaction; and

 

卖方已向外汇主管部门申办并完成与本交易相关的登记;

 

4.2.5The Seller has caused the Company and other shareholders of the Company to consent to the articles of association of the Company or its amendments which has been satisfactory to the Buyer.

 

卖方已促使公司及公司的其他股东同意公司章程或章程修正案,该公司章程或章程修正案是令买方满意的。

 

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5.COMPLETION

 

交割

 

5.1The Completion shall take place within 1 business days (“Completion Date”) following the satisfaction or waiver of the Conditions as set out in Clause 4, at the offices of the Seller, or at such other place as the parties may agree.

 

交割应在满足或放弃第4条所列条件后的1个工作日内(交割日),在卖方办公室或双方可能同意的其他地点完成。

 

5.2At Completion:

 

交割时:

 

5.2.1Each of the Seller and the Buyer shall deliver relevant document to evidence the duly performance of its respective obligations under Clause 4;

 

卖方和买方均应提交相关文件,以证明其已如期履行第4条项下的各自义务;

 

5.2.2the Buyer shall pay to the Seller the Consideration in immediately available funds to the Seller’s Bank Account; and

 

买方应将对价以立即可用的资金支付给卖方的银行账户;

 

5.2.3the Seller itself and the Seller shall cause the Company to deliver a register of shareholders and directors/a registered articles of association of the Company to the Buyer evidencing the Completion of Transaction in accordance with this Agreement.

 

卖方本身和卖方应促使公司向买方交付股东和董事名册或已登记的公司章程,以证明本协议项下的交易已交割。

 

5.3Neither the Seller or the Buyer is obliged to complete the sale and purchase of the Acquired Equity Interests in accordance with this Agreement unless both the Seller and the Buyer have performed or waivered all their obligations under this Clause 4.

 

除非卖方和买方均已履行或放弃其在第4条项下的全部义务,否则卖方或买方均无义务按照本协议交割被收购股权的买卖。

 

5.4Upon the Completion and from the Completion Date, the Buyer shall enjoy and exercise relevant shareholder rights in proportionate to the equity interest percentage held by the Buyer in the Company.

 

交割后且自交割日起,买方应按其所持有的公司的股权比例享有并行使相关股东权利。

 

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5.5Post-Completion Obligation

 

交割后的义务

 

5.5.1Upon the Completion, the License Agreement shall remain in force until the expiration of the validity period as set out therein, and the Seller promises to renew this License Agreement with the Company under the same terms and conditions thereunder or otherwise mutually agreed in writing by the Seller and the Company for another 4 years until 31 July 2028, provided that there is no material breach of the License Agreement by the Company and this License Agreement and its execution would not violate the then effective Applicable laws.

 

交割后,许可协议将继续有效,直至许可协议规定的有效期届满,且卖方承诺按照许可协议下相同的条款和条件或卖方与公司以书面形式共同同意的其他条款和条件,与公司续签许可协议4年,至2028731日,前提是公司没有实质性违反许可协议,且许可协议及其执行不违反当时有效的适用法律。

 

5.5.2Upon the expiration of the renewed period as set out in Clause 5.5.1 above, the Company shall have the priority to further renew the License Agreement with the Seller under the same terms and conditions which were offered by the third parties. In the event that there were no third parties to offer to execute relevant license agreement with the Seller with respect to relevant online games as set out in the License Agreement, to the maximum extent permitted by law, the Seller shall further extend the term of the License Agreement with the Company for an agreed period.

 

在上述第5.5.1条规定的续期届满后,公司有权按照第三方提供的相同条款和条件与卖方进一步续签许可协议。如果没有第三方提出与卖方就许可协议中所列的相关网络游戏签署相关许可协议,则在法律允许的最大范围内,卖方应将与本公司的许可协议的期限进一步延长至约定的期限。

 

5.5.3The Company shall, and the Seller shall cause the Company to, maintain, renew or extend any licenses, permits or approvals issued by the applicable government agencies in People’s Republic of China (the “Government Licenses”) that are required for the Company to continue to operate its current business activities, and shall inform the Buyer promptly of any expiration, suspension or lapses in such Government Licenses.

 

公司应,且卖方应促使公司维持、更新或续展公司继续经营其当前商业活动所需的中华人民共和国有关政府机构颁发的任何许可证、许可或批文(政府许可证),并应及时通知买方该等政府许可证的任何到期、暂停或失效。

 

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6.BOARD OF DIRECTORS AND MANAGEMENT

 

董事会和管理层

 

6.1The Parties agree that the board of directorsBoardof the Company shall be composed of five members from the Completion Date hereof:

 

各方同意,自交割日起,公司董事会(董事会)由五名成员组成:

 

6.1.1the Buyer shall have the right to appoint three (3) members to the Board;

 

买方有权任命三(3)名董事会成员;

 

6.1.2Shuimu Zhi Jiang shall have the right to appoint one (1) member to the Board; and

 

水木之江有权任命一(1)名董事会成员;

 

6.1.3Mizar JY shall have the right to appoint one (1) member to the Board.

 

开阳久盈有权任命一(1)名董事会成员

 

6.2Each Shareholder may remove a director appointed by it and appoint a new director as successor at any time, by notice in writing to the Company and the other Shareholders.

 

各股东可随时以书面形式通知公司和其他股东,免去其任命的董事,并任命一名新董事作为继任者。

 

6.3The Company agrees to take all actions necessary to ensure that the directors appointed by the Buyer are completed immediately from the Completion Date.

 

公司同意采取一切必要行动,确保买方任命的董事从交割日起立即完成。

 

6.4Upon the Completion, Mr. Zhang Zhangfei (张章飞) shall continue to serve as the Chief Executive Officer, chairman and legal representative of the Company, who is responsible for the day-to-day management and operation of the Company, provided that the Board of Director shall have the right to appoint a new legal representative of the Company anytime following the Completion .

 

交割后,张章飞先生将继续担任公司首席执行官、董事长兼法定代表人,负责公司的日常管理和运营,但董事会有权在交割后的任何时间任命新的公司法定代表人。

 

6.5Except for those matters which are required under Applicable Laws to be approved by the shareholders, consent of a majority of the directors of the Board shall be required for any action that approves or relates to any of the following transactions involving the Company unless such transaction is made pursuant to the annual budget duly approved by the Board:

 

除适用的法律规定须经股东批准的事项外,批准或涉及公司的任何下列交易的任何行动均需获得董事会多数董事的同意,除非该交易是根据董事会正式批准的年度预算进行的:

 

6.5.1Approve or make material amendment to, the mid and long-term development plan, business plan or any annual budget;

 

批准或重大修改中长期发展规划、经营计划或任何年度预算;

 

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6.5.2change in the nature or scope of the business, including the introduction of any field of activity that is not ancillary to the business or discontinuance of any field of activity or the relocation or expansion of the business

 

业务性质或范围的变化,包括引入与业务无关的任何活动领域,或终止任何活动领域,或变更或扩展业务;

 

6.5.3make or dispose of any major business, sell, mortgage, pledge, lease, transfer or otherwise dispose of its tangible or intangible assets or control, except for disposals of assets the net book value of which in any 12 month period do not exceed RMB 2,000,000;

 

进行或处置重大业务,出售、抵押、质押、租赁、转让或以其他方式处置其有形或无形资产或控制权,但处置任何12个月期间账面净值不超过人民币2,000,000元的资产除外;

 

6.5.4acquire through purchase, lease or rental any products (except for the products used in the ordinary course of business), or real estate, whether or not accounted for as a capital expenditure, in excess of RMB 2,000,000 for any single item or in the aggregate, except for real estate leases entered into in the ordinary course of business consistent with past practice;

 

通过购买、租赁或租用的方式获取任何单项或合计超过人民币2,000,000元的任何产品(日常经营中使用的产品除外)或房产,无论是否计入资本支出,但在符合以往惯例的日常经营中签订的房产租赁除外;

 

6.5.5approve the annual final accounts, but which shall not be unreasonably withheld;

 

批准年度决算,但不得无正当理由的拖延;

 

6.5.6appoint or change the Auditor or any auditor of the Company;

 

任命或变更公司的核数师或任何核数师;

 

6.5.7appoint or change the chief executive officer of the Company;

 

任命或变更公司首席执行官;

 

6.5.8engage, enter into or amend any transaction or agreement with Related Parties in excess of RMB1,000,000 for any single item or RMB2,000,000 for any 12-month period;

 

与关联方进行、签订或修改任何单项金额超过人民币1,000,000元或任何12个月期间的金额超过人民币2,000,000元的交易或协议;

 

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6.5.9approve any lending or loaning activity, except the advance payment provided to employees in the ordinary course of business not in excess of RMB 2,000,000 at any one time outstanding;

 

批准任何借贷或贷款活动,但在正常业务过程中向员工提供的预付款除外,该预付款在任何时候都不超过人民币2,000,000元;

 

6.5.10any merger or consolidation with any other company or acquisition of or by another company or formation of any non-wholly owned subsidiary which exceeds RMB2,000,000 for any 12 month period; and

 

在任何12个月内,与任何其他公司的任何合并或联营,或被其他公司收购或成立任何非全资子公司,金额超过人民币2,000,000元;和

 

6.5.11other matters which are material or significant to the development of the Company in opinion of the Board.

 

董事会认为对公司发展具有实质性或重大意义的其他事项。

 

6.6Resolutions of the Board shall be made as follows:

 

董事会的决议应当按照如下方式做出:

 

6.6.1all resolutions of the Board shall be made by the approval of a simple majority of the directors attending the meeting of such Board;

 

董事会的所有决议均应经出席董事会会议的过半数董事通过;

 

6.6.2The quorum for a meeting of the Board shall be three Directors. In the absence of a valid quorum at a meeting of the Board, such meeting of the Board shall be adjourned to the same time and place five (5) Business Days thereafter and any three Directors attending such adjourned meeting shall constitute the valid quorum; and

 

董事会会议的法定人数为三名董事。在董事会会议达不到法定人数的情况下,该等董事会会议应延期至五(5)个工作日后的同一时间和地点,出席该等延期会议的任何三名董事应构成有效法定人数;

 

6.6.3Upon written notification to all directors of the Company, a resolution in writing signed by a simple majority of the directors of the Board shall be valid as if it had been passed by the directors in a duly convened and quorate meeting of the Board.

 

经书面通知公司全体董事后,经董事会简单多数董事签署的书面决议,与董事会在正式召开的法定人数会议上通过的决议一样有效。

 

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7.Shareholder Reoslution

 

股东会决议

 

7.1Upon Completion, in addition to those matters which are required under Applicable Laws to be approved by the shareholders holding more than 2/3 interests of the Company, consent of the Buyer shall be required for any action that approves or relates to any of the following matters involving the Company:

 

交割后,除适用法律要求持有本公司三分之二以上股权的股东批准的事项外,批准或涉及本公司的任何下列事项的任何行动均需征得买方同意:

 

7.1.1make any alteration or amendment to, or waiver of, any provision of the articles of association of the Company;

 

对公司章程的任何条款进行变更、修改或废止;

 

7.1.2alter or change the rights, preferences or privileges of the equity interest of the Company or create (by reclassification or otherwise) any new class or series of equity interests having rights, preferences or privileges senior to or on a parity with the equity interest held by the Buyer in the Company;

 

改变或变更本公司股权的权利、优先或特权,或创建(通过重新分类或其他方式)任何新的类别或系列股权,其权利、优先或特权高于或等同于买方在公司持有的股权;

 

7.1.3any increase, change, cancel or decrease of the registered capital or the issue of options or other securities convertible or exchangeable for the registered capital of the Company;

 

公司注册资本的任何增加、变更、取消或减少,或发行期权或其他可转换或可交换的证券;

 

7.1.4any redemption or repurchase of any equity interest or equity equivalents by the Company;

 

本公司对任何股权或股权等价物的任何赎回或回购;

 

7.1.5pass any resolution or take any action for the winding up, termination or similar insolvency or bankruptcy proceedings or undertake any merger, separation, spin-off, change of company form, combination with any other economic organization, reconstruction or liquidation exercise or make any composition or arrangement with creditors concerning or apply for the appointment of a receiver, manager or judicial manager or like officer;

 

就清盘、终止或类似的破产或破产程序通过任何决议或采取任何行动,或进行任何合并、分离、分拆、公司形式变更、与任何其他经济组织合并、重组或清算活动,或与债权人就接管人、管理人或司法管理人或类似官员作出任何和解或安排或申请任命;

 

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