What changed in Allied Gaming & Entertainment Inc.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Allied Gaming & Entertainment Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+210 added−173 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-24)
Top changes in Allied Gaming & Entertainment Inc.'s 2023 10-K
210 paragraphs added · 173 removed · 120 edited across 6 sections
- Item 7. Management's Discussion & Analysis+75 / −73 · 36 edited
- Item 1A. Risk Factors+66 / −59 · 45 edited
- Item 1. Business+51 / −33 · 32 edited
- Item 3. Legal Proceedings+8 / −3 · 2 edited
- Item 5. Market for Registrant's Common Equity+8 / −4 · 4 edited
Item 1. Business
Business — how the company describes what it does
32 edited+19 added−1 removed43 unchanged
Item 1. Business
Business — how the company describes what it does
32 edited+19 added−1 removed43 unchanged
2022 filing
2023 filing
Biggest changeAEGmbH operates a mobile esports truck that serves as both a battleground and content generation hub and also operates a studio for recording and streaming gaming events. Due to the increasing uncertainty of macro-economic environment, the Company closed down the AEGmbH office in December 2022 and will manage its operations through Allied’s facilities in the U.S.
Biggest changeAllied Experiential Entertainment (“AEE”), focuses on orchestrating live entertainment events and offers management and consultation service to experiential entertainment venue operation. AEGmbH operated a mobile esports truck that serves as both a battleground and content generation hub and also operates a studio for recording and streaming gaming events.
Prior to July 2021, the Company owned and operated World Poker Tour (“WPT”) businesses and Allied Esports business. On July 12, 2021, the Company completed its sale of its business comprising the WPT business for gross proceeds of approximately $106 million.
Prior to July 2021, the Company owned and operated World Poker Tour (“WPT”) businesses and the Allied Esports business. On July 12, 2021, the Company completed its sale of its business comprising the WPT business for gross proceeds of approximately $106 million.
Gaming companies such as Tencent, Activision Blizzard, and Electronic Arts, which are involved in game development and also host their own esports events in their own selected venues. 4. Live entertainment companies such as Live Nation and AEG, which also host live events and concerts and may expand into the esports space. 5.
Gaming companies such as Tencent, Activision Blizzard, and Electronic Arts, which are involved in game development and also host their own esports events in their own selected venues. 5 4. Live entertainment companies such as Live Nation and AEG, which also host live events and concerts and may expand into the esports space. 5.
Allied updates its intellectual property portfolio from time to time as appropriate. 4 Competition The esports gaming industry is competitive. Competitors range from established leagues and championships owned directly, as well as leagues franchised by well-known and capitalized game publishers and developers, interactive entertainment companies, diversified media companies and emerging start-ups.
Allied updates its intellectual property portfolio from time to time as appropriate. Competition The esports gaming industry is competitive. Competitors range from established leagues and championships owned directly, as well as leagues franchised by well-known and capitalized game publishers and developers, interactive entertainment companies, diversified media companies and emerging start-ups.
These live events provide Allied with the material to produce exciting content that can be distributed via three different formats, each of which has its own revenue generation model: live streaming, post-produced episodic content, and short-form repackaged content. Live Streaming .
These live events provide Allied with the material to produce exciting content that can be distributed via three different formats, each of which has its own revenue generation model: live streaming, post-produced episodic content, and short-form repackaged content. 2 Live Streaming .
Through Allied’s ecosystem of esports arenas, Allied can offer streamers a large platform to put on live events that can be simultaneously streamed on both the streamer’s channels and on Allied’s channels. 2 Post-Produced Episodic Content .
Through Allied’s ecosystem of esports arenas, Allied can offer streamers a large platform to put on live events that can be simultaneously streamed on both the streamer’s channels and on Allied’s channels. Post-Produced Episodic Content .
In 2022, the games live-streaming audience grew by 14.5% year over year to 927.3 million (Newzoo report). It is estimated that this category will reach 1.21 billion by 2025 at a CAGR of +12.7%.
In 2023, the games live-streaming audience grew by [14.5]% year over year to [927.3] million (Newzoo report). It is estimated that this category will reach 1.21 billion by 2025 at a CAGR of +12.7%.
Allied can then monetize this episodic content via sponsorship, advertising, selling the content itself to third party distributors, or even use it as a marketing tool to drive customers to come to Allied’s branded properties, buy its merchandise or otherwise interact with Allied. Short-Form Repackaged Content .
Allied can then monetize this episodic content via sponsorship, advertising, selling the content itself to third party distributors, using it as a marketing tool to drive customers to come to Allied’s branded properties, buy its merchandise or otherwise interact with Allied. Short-Form Repackaged Content .
Corporate Organization Our principal offices are located at 745 Fifth Avenue, Suite 500, New York, NY 10151, and our telephone number at that office is (646) 768-4241.
Corporate Organization Our principal offices are located at 745 Fifth Avenue, Suite 500, New York, NY 10151, and our telephone number at that office is (646) 768-4240.
Other esports organizations such as ESL and Faceit, which also host esports tournaments and events. 2. Gaming lifestyle influencers network such as FaZe Clan, 100thieves, which owns gaming influencers that have strong brand partnerships could create competition to Allied on sponsorship and advertising revenue. 3.
Other esports organizations such as ESL and Faceit, which also host esports tournaments and events. 2. Gaming lifestyle influencers network and marketing companies such as Gamesquare, FaZe Clan, 100thieves, which owns gaming influencers that have strong brand partnerships could create competition to Allied on sponsorship and advertising revenue. 3.
The series was renewed for Season 2 with stronger support from our brand partner Progressive Insurance, by doubling the production and expanded to 10 episodes for Season 2, which will air in Q2 2023.
The series was renewed for Season 2 with stronger support from our brand partner Progressive Insurance, by doubling the production and expanded to 10 episodes for Season 2, which aired in Q2 2023.
Our filings with the SEC are available to the public on the SEC’s website at http:// www.sec.gov . 5
Our filings with the SEC are available to the public on the SEC’s website at http://www.sec.gov. 6
Our fiscal year ends December 31. Neither we nor any of our predecessors have been in bankruptcy, receivership, or any similar proceeding. Government Regulation Allied intends to offer subscribers the chance to win cash and prizes when playing esports games and tournaments on the esports gaming platform it intends to develop.
Neither we nor any of our predecessors have been in bankruptcy, receivership, or any similar proceeding. 4 Government Regulation Allied intends to offer subscribers the chance to win cash and prizes when playing esports games and tournaments on the esports gaming platform it intends to develop.
As of December 31 2022, the Company’s operation includes Allied Esports International, which owns and operates HyperX Arena Las Vegas, one of the world’s most recognized esports and entertainment events facilities, two mobile arenas-Allied Esports Trucks, and original content studio which creates and produces proprietary content series to serve brand activation and promotion, fans and community engagement.
As of December 31, 2023, the Company’s operation includes Allied Esports International, which owns and operates HyperX Arena Las Vegas, one of the world’s most recognized esports and entertainment events facilities, one mobile arena-Allied Esports Omen Truck, and original content studio which creates and produces proprietary content series to serve brand activation and promotion, fans and community engagement.
Additionally, Allied has two mobile esports arenas, which are 18-wheel semi-trailers that convert into first class esports arenas and competition stages with full content production capabilities and interactive talent studios.
Additionally, Allied has one mobile esports arena, which is an 18-wheel semi-trailers that convert into first class esports arenas and competition stages with full content production capabilities and interactive talent studios.
Allied’s brand visibility and reputation have already resulted in affiliate arrangements with arenas and gaming centers in China and a multi-year agreement with Fortress Esports Pty Ltd, a new gaming, esports and entertainment venue enterprise in Australia, which opened its first affiliate arena in Melbourne in March 2020 and reopened during the COVID-19 pandemic in December 2021.
Allied’s brand visibility and reputation have already resulted in affiliate arrangements with arenas and gaming centers in China and a multi-year agreement with Fortress Esports Pty Ltd, a new gaming, esports and entertainment venue enterprise in Australia, which opened its first affiliate arena in Melbourne in March 2020 and the second arena in Sydney in 2023.
Employees As of March 24, 2023, we had 78 employees, including 29 employees that operated under collective-bargaining agreements. Available Information Our company’s website address is https://www.alliedesports.gg/.
Employees As of March 27, 2024, we had 73 employees, including 27 employees that operated under collective-bargaining agreements. Available Information Our company’s website address is https://www.alliedesports.gg/.
Noble Link (prior to the AEM Merger) and its wholly owned subsidiaries Peerless Media Limited, Club Services, Inc. and WPT Enterprises, Inc. operated the poker-related business of AGAE prior to their sale on July 12, 2021, and are collectively referred to herein as “World Poker Tour” or “WPT.” Prior to the Merger, as described below, Noble Link and Allied Esports were subsidiaries of Ourgame International Holdings Limited (“Ourgame”). 3 On December 19, 2018, BRAC, Noble Link and AEM executed an Agreement and Plan of Reorganization (as amended from time to time, the “Merger Agreement”).
Noble Link (prior to the AEM Merger) and its wholly owned subsidiaries Peerless Media Limited, Club Services, Inc. and WPT Enterprises, Inc. operated the poker-related business of AGAE prior to their sale on July 12, 2021, and are collectively referred to herein as “World Poker Tour” or “WPT.” Prior to the Merger, as described below, Noble Link and Allied Esports were subsidiaries of Ourgame International Holdings Limited (“Ourgame”).
The entertainment industry has witnessed the rapid growth of gaming, which now ranks among the largest and fastest-growing markets. As of 2021, with a staggering 3.1 billion gamers worldwide, the global gaming industry was valued at $202.64 billion and is projected to grow at a compound annual growth rate (CAGR) of 10.2% between 2022 and 2023.
The entertainment industry has witnessed the rapid growth of gaming, which now ranks among the largest and fastest-growing markets. As of 2023, with a staggering 3.4 billion gamers worldwide, the global gaming industry was valued at $187.7 billion and is projected to grow at a compound annual growth rate (“CAGR”) of 2.6% between 2023 and 2024.
Interactive services Newzoo’s consumer research reveals that active engagement is becoming increasingly popular across all generations, with consumers spending nearly 15 hours per week engaging with games.
The transaction was closed on March 7, 2024. 3 Interactive services Newzoo’s consumer research reveals that active engagement is becoming increasingly popular across all generations, with consumers spending nearly 15 hours per week engaging with games.
Vast improvements in technology and Internet service and speed have made live streaming with large audiences widely available today. Well-known gamers live stream themselves playing their favorite games on any of the popular streaming services (Twitch, YouTube, Facebook Gaming, etc.) to a worldwide audience. The streamers derive revenue from ad sales, sponsorship, subscription fees and gift payments from spectators.
Well-known gamers live stream themselves playing their favorite games on any of the popular streaming services (Twitch, YouTube, Facebook Gaming, etc.) to a worldwide audience. The streamers derive revenue from ad sales, sponsorship, subscription fees and gift payments from spectators.
According to a report by Streamlabs and Stream Hatchet, in 2022, viewers watched a total of 29.5 billion hours of live gaming content on popular streaming platforms such as Twitch, Youtube Gaming, and Facebook Gaming.
According to a report by Stream Hatchet, in 2023, viewers watched a total of [2.76] billion hours of live gaming content on popular streaming platforms such as Twitch, Youtube Gaming, and Facebook Gaming making a 75% increase from 2020.
On August 9, 2019 (the “Closing Date”), Noble Link was merged with and into AEM, with AEM being the surviving entity, which was accounted for as a common control merger (the “AEM Merger”). Further, on August 9, 2019, a subsidiary of AGAE merged with AEM pursuant to the Merger Agreement, with AEM being the surviving entity (the “Merger”).
On December 19, 2018, BRAC, Noble Link and AEM executed an Agreement and Plan of Reorganization (as amended from time to time, the “Merger Agreement”). On August 9, 2019 (the “Closing Date”), Noble Link was merged with and into AEM, with AEM being the surviving entity, which was accounted for as a common control merger (the “AEM Merger”).
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.
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 nurture vibrant communities primarily comprising Gen Y, Z, and Alpha consumers.
Allied draws from its knowledge and experience in developing WPT, which took the slow-paced game of poker and dramatized it and created storylines that made for exciting and compelling viewing. This post-produced content can be valuable real estate for sponsors, as Allied can integrate sponsors seamlessly into the show in a way that feels organic to the viewers.
Allied draws from its knowledge and experience in developing WPT, which took the slow-paced game of poker and dramatized it and created storylines that made for exciting and compelling viewing.
The Company operates through its wholly owned subsidiaries Allied Esports International, Inc., (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”) and Allied Esports GmbH (“AEGmbH”). AEII operates global competitive esports properties designed to connect players and fans via a network of connected arenas. ESALV operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada.
AEII operates global competitive esports properties designed to connect players and fans via a network of connected arenas. ESALV operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. Allied Mobile Entertainment (“AME”), is dedicated to exploring opportunities in the massive and growing mobile games markets.
Allied can focus on different storylines, create excitement via editing and music inclusion, and generally elevate the production quality from that achievable in a live stream.
This post-produced content has been valuable real estate for sponsors, as Allied integrates sponsors seamlessly into the show in a way that feels organic to the viewers. Allied can focus on different storylines, create excitement via editing and music inclusion, and generally elevate the production quality from that achievable in a live stream.
This network of affiliate arenas allows Allied to scale its brand penetration worldwide on a rapid basis, driving more gamers into the Allied ecosystem, with minimal costs to Allied. Furthermore, the content produced by these affiliate arenas can be sold by Allied, with minimal production costs. Mobile Arenas .
Allied has been approached by and in talks with various players in the market who seek management and operation consultation for esports focused mixed use space. This network of affiliate arenas and operation consultation service allows Allied to scale its brand penetration worldwide on a rapid basis, driving more gamers into the Allied ecosystem, with minimal costs to Allied.
Under this plan, the Company intends to pursue multiple channels of opportunities instead of a single significant corporate transaction such as an acquisition of complimentary 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.
Under this plan, the Company has pursued and will continue to pursue various acquisitions, joint ventures, and other such strategic opportunities for the purpose of leveraging its location-based-entertainment expertise and focusing on gaming lifestyle and experiential entertainment, as well as growing its digital footprint and monetization capabilities through mobile gaming.
The Merger was accounted for as a reverse recapitalization, and AEM is deemed to be the accounting acquirer. Consequently, the assets and liabilities and the historical operations that are reflected in the combined financial statements prior to the Merger are those of Allied Esports and WPT.
Consequently, the assets and liabilities and the historical operations that are reflected in the combined financial statements prior to the Merger are those of Allied Esports and WPT. The Company operates through its wholly owned subsidiaries Allied Esports International, Inc. (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”), Allied Mobile Entertainment Inc, Allied Experiential Entertainment Inc and Allied Esports GmbH (“AEGmbH”).
The mobile arenas are 18-wheeler trucks that expand out into fully functional esports arenas with event hosting, broadcasting and production capabilities. The mobility of the trucks makes them ideal for sponsors to reach a large audience in multiple locations at an economical cost.
Furthermore, Allied can utilize its leading production facility to support all venues within the affiliate network content streaming and production, optimizing capex and opex for affiliated venues. Mobile Arenas . The mobile arenas are 18-wheeler trucks that expand out into fully functional esports arenas with event hosting, broadcasting and production capabilities.
The trucks serve as mobile billboards for potential third-party sponsorship, as well as the Allied brand, providing highly visible brand presence wherever they appear. Multiplatform Content Built upon state-of-the-art unique facilities and a growing gamers community, Allied continues to produce successful gamers centric original content programing.
Skyline Music Entertainment, a joint venture based in Macau, is poised to capitalize on the burgeoning entertainment industry in the Asia market. AEE owns 51% of Skyline Music Entertainment. Multiplatform Content Built upon unique state-of-the-art facilities and a growing gamers community, Allied continues to produce successful gamers centric original content programing.
Removed
This represents a decrease of 13.5% from the previous year’s 34.0 billion hours, which may be attributed in part to the easing of COVID-19 restrictions and the subsequent recovery of live events and travel. Twitch is the most popular form of esports content delivery channel today, as it offers the best interactive experiences for the audience.
Added
On October 31, 2023, the Company completed its acquisition of a 40% equity interest in Beijing Lianzhong Zhihe Technology Co., Ltd, a developer and operator of casual mobile games, see commentary on Strategic Transactions in 2023 below.
Added
The mobility of the trucks makes them ideal for sponsors to reach a large audience in multiple locations at an economical cost. The trucks serve as mobile billboards for potential third-party sponsorship, as well as the Allied brand, providing highly visible brand presence wherever they appear. Live Entertainment Events in Partnership with 3 rd Party Venues.
Added
The live concert and show market in 2023 was marked by a strong rebound from the pandemic. The global market size was estimated to be around $58.9 billion, reflecting a significant increase from previous pandemic years. Ticket sales were strong, with online sales reaching an estimated $33.8 billion, exceeding pre-pandemic levels (2019) (source: Statista).
Added
With gaming, entertainment and live events genes at heart, AGAE formed wholly owned subsidiary Allied Experiential Entertainment (“AEE”), focusing on orchestrating live entertainment events and offers management and consultation service to experiential entertainment venue operation.
Added
In February 2024, AGAE announced the debut event of its recently formed joint venture, Skyline Music Entertainment (“Skyline”), hosting the inaugural leg of the highly acclaimed multiple Juno Award-winning band Walk off the Earth’s first-ever tour in China in April 2024.
Added
The Esports Live-Streaming Trends Report, which livestreaming analytics platform Stream Hatchet releases quarterly, also indicated that co-streaming continued to boost esports viewership and engagement. Authorized co-streaming contributed a 195% growth in viewer hours. The viewership boost from co-streaming — an increasingly popular practice amongst tournament organizers — was spread across various games and content creator.
Added
Twitch is still the most popular form of esports content delivery channel today, as it offers the best interactive experiences for the audience. Twitch is especially commanding with small events, where it has a market share of 81%. Twitch and YouTube make up 62% and 30% of the market, respectively.
Added
Meanwhile, YouTube continued to grow its market share of large events this quarter by 10% measured against Twitch. Vast improvements in technology and Internet service and speed have made live streaming with large audiences widely available today.
Added
Allied has produced multiple seasons of original programs, such as Elevated, an award nominated Twitch show that helps up-and-coming streamers to gain more exposure and elevate their career growth, and Wannabe, a docu-series streamed on the Yankee Entertainment and Sports Network (YES Network) that tells stories about professional gamers, gaming content creators, and professional athletes, explores common themes between their different careers to inspire young people and help them choose the path they are passionate about.
Added
Strategic Transactions in 2023 On August 16, 2023, AME-HK entered into an Equity Interest Purchase Agreement (the “Purchase Agreement”) with, among others, Beijing Lianzhong Co., Ltd (the “Seller”) and Beijing Lianzhong Zhihe Technology Co., Ltd.
Added
(the “Target Company”), pursuant to which AME-HK agreed to acquire a 40% equity interest in the Target Company held by the Seller for a total purchase price of $7,000,000 in cash (the “Acquisition”).
Added
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.
Added
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.
Added
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. On December 28, 2023, we entered into a Share Purchase Agreement (the “SPA”) with Elite Fun Entertainment Co., Ltd.
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(the “Purchaser”), pursuant to which the Purchaser agreed to purchase 7,330,000 shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”) at a purchase price of $0.90 per share (the “Purchased Shares”) for a total purchase price of $6,597,000.
Added
The Purchased Shares represent less than 20% of the total issued and outstanding shares of the Company prior to the closing of the transaction.
Added
The SPA is subject to customary representations, warranties, covenants and conditions, including an agreement that the Company and Purchaser will each use its best efforts to negotiate and finalize a collaboration or partnership agreement under which the Purchaser will assist the Company with organizing live shows and events in Asia.
Added
Further, on August 9, 2019, a subsidiary of AGAE merged with AEM pursuant to the Merger Agreement, with AEM being the surviving entity (the “Merger”). The Merger was accounted for as a reverse recapitalization, and AEM was deemed to be the accounting acquirer.
Added
In December 2022, the Company closed down the AEGmbH office and currently manages its operations through its facilities in the U.S. Our fiscal year ends December 31.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
45 edited+21 added−14 removed125 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
45 edited+21 added−14 removed125 unchanged
2022 filing
2023 filing
Biggest changeAs a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
Biggest changeOur failure to achieve and maintain an effective system of disclosure controls and internal control over financial reporting could adversely affect our financial position and lower our stock price. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq.
Allied’s success depends on its ability to maintain and grow the number of gamers attending its live events, tournaments and competitions, and keep its gamers and attendees highly engaged.
Allied’s success depends on its ability to maintain and grow the number of gamers attending its live events, tournaments and competitions, and to keep its gamers and attendees highly engaged.
Allied cannot assure you that it will achieve profitability. Allied generates a portion of its revenues from advertising and sponsorship. If it fails to attract more advertisers and sponsors to its live events, tournaments or content, or if advertisers or sponsors are less willing to advertise with or sponsor Allied, its revenues may be adversely affected.
Allied cannot assure you that it will achieve profitability. 8 Allied generates a portion of its revenues from advertising and sponsorship. If it fails to attract more advertisers and sponsors to its live events, tournaments or content, or if advertisers or sponsors are less willing to advertise with or sponsor Allied, its revenues may be adversely affected.
The authority of our Board to issue undesignated stock and the anti-takeover provisions of Delaware law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of our company that are not approved by our Board.
The authority of our Board to issue undesignated preferred stock and the anti-takeover provisions of Delaware law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of our company that are not approved by our Board.
Either of these events would adversely affect Allied’s ability to achieve profitability. 10 Allied’s business is subject to regulation, and changes in applicable regulations may negatively impact its business. Allied is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet.
Either of these events would adversely affect Allied’s ability to achieve profitability. Allied’s business is subject to regulation, and changes in applicable regulations may negatively impact its business. Allied is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet.
If Allied’s competitors develop and launch competing arenas, leagues, tournaments or competitions, Allied’s revenue and margins could decline. 8 Allied may not provide events or tournaments with games or titles for which the esports gaming community is interested.
If Allied’s competitors develop and launch competing arenas, leagues, tournaments or competitions, Allied’s revenue and margins could decline. Allied may not provide events or tournaments with games or titles for which the esports gaming community is interested.
Furthermore, to carry out Allied’s worldwide distribution plans, film and media distribution partners will be needed and, in the event, Allied is not able to secure content distributors on terms acceptable to Allied, this will have a significant adverse impact on revenue streams from the sale or licensing of intellectual property. 13 Allied has not entered into definitive license agreements with all game publishers that it currently has relationships with, and it may never do so.
Furthermore, to carry out Allied’s worldwide distribution plans, film and media distribution partners will be needed and, in the event, Allied is not able to secure content distributors on terms acceptable to Allied, this will have a significant adverse impact on revenue streams from the sale or licensing of intellectual property. 15 Allied has not entered into definitive license agreements with all game publishers that it currently has relationships with, and it may never do so.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock on the Nasdaq market, fines, sanctions and other regulatory action and potentially civil litigation. 14 Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be severely disrupted if we lose the services of such personnel.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock on the Nasdaq market, fines, sanctions and other regulatory action and potentially civil litigation. 16 Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be severely disrupted if we lose the services of such personnel.
There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. 17 Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions.
There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. 18 Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions.
As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it. 16 If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price of our common stock could decline.
As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it. 17 If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price of our common stock could decline.
However, we may encounter difficulties and challenges in the implementation of our plans, including but are not limited to: ● Lack of experiences and expertise in new markets and offerings; ● Intense competition with other more well-established players; ● Inability to create content and products that attract gamers, consumers and other customers; ● Failure to secure partnership and collaborators to execute our plans; ● Inability to identify and develop viable targets in acquisitions and joint ventures; ● Lack of resources and strategic support in pursuing new opportunities; ● Inability to implement successful sales and marketing efforts and to secure sponsorship; ● Macroeconomic trend and slowdown in gaming and entertainment industries; ● Difficulties in obtaining investment and capital to fund desired projects; and ● Higher costs in regulatory compliance requirements.
However, we may encounter difficulties and challenges in the implementation of our plans, including but are not limited to: ● Lack of experiences and expertise in new markets and offerings; ● Intense competition with other more well-established players; ● Inability to create content and products that attract gamers, consumers and other customers; ● Failure to secure partnership and collaborators to execute our plans; ● Inability to identify and develop viable targets in acquisitions and joint ventures; ● Lack of resources and strategic support in pursuing new opportunities; ● Inability to implement successful sales and marketing efforts and to secure sponsorship; ● Macroeconomic trend and slowdown in gaming and entertainment industries; ● Shareholder activism related to the new strategic and business plans; ● Difficulties in obtaining investment and capital to fund desired projects; and ● Higher costs in regulatory compliance requirements.
Risks Related to Our Business Operations We may not be able to execute successfully our recently announced new strategic and business plans. As a result of our sale of the WPT business in July 2021, we have disposed of substantially all of our operating assets other than cash, investments and our esports business.
Risks Related to Our Business Operations We may not be able to execute successfully our new strategic and business plans. As a result of our sale of the WPT business in July 2021, we have disposed of substantially all of our operating assets other than cash, investments and our esports business.
Allied believes that maintaining and enhancing its brands is important for its business to succeed by increasing the number of gamers and engagement by the esports community. Since Allied operates in a highly competitive market, brand maintenance and enhancement directly affects its ability to maintain and enhance its market position.
Allied believes that maintaining and enhancing its brands is important for its business to succeed by increasing the number of gamers and engagement by the esports community. Since Allied operates in a highly competitive market, brand maintenance and enhancement directly affect its ability to maintain and enhance its market position.
Although Allied has relationships with many game publishers for tournament event and content experiences involving their respective intellectual properties and enters into definitive license agreements with such game publishers from time to time, Allied does not have definitive license agreements in place with all of its game publishers.
Although Allied has relationships with many game publishers for tournament events and content experiences involving their respective intellectual properties and enters into definitive license agreements with such game publishers from time to time, Allied does not have definitive license agreements in place with all of its game publishers.
If Allied is unable to come to mutually agreeable terms and enter into definitive license agreements with game publishers, game publishers may unilaterally choose to discontinue its relationship with Allied, thereby preventing Allied from offering tournament event and content experiences using their game intellectual property.
If Allied is unable to come to mutually agreeable terms and enter into definitive license agreements with game publishers, game publishers may unilaterally choose to discontinue its relationship with Allied, thereby preventing Allied from offering tournament events and content experiences using their game intellectual property.
Should game publishers choose not to allow Allied to offer tournament event and content experiences involving their intellectual property to Allied’s customers, the popularity of Allied’s tournaments and content may decline, which could materially and adversely affect its results of operations and financial condition.
Should game publishers choose not to allow Allied to offer tournament events and content experiences involving their intellectual property to Allied’s customers, the popularity of Allied’s tournaments and content may decline, which could materially and adversely affect its results of operations and financial condition.
A significant outbreak of contagious diseases in the human population, such as the COVID-19 pandemic could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services.
A significant outbreak of contagious diseases in the human population, such as a global pandemic could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services.
According to its SEC filings, Ourgame, through Primo Vital Limited, beneficially owns and controls approximately 35.8% of our outstanding common stock. Primo Vital Limited is entitled to full voting rights with respect to the shares of common stock that it owns.
According to its SEC filings, Ourgame, through Primo Vital Limited, beneficially owns and controls approximately 31% of our outstanding common stock. Primo Vital Limited is entitled to full voting rights with respect to the shares of common stock that it owns.
This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position. 12 Global health threats, such as the current COVID-19 pandemic, could have a material adverse effect on our business. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease or global or regional epidemic or pandemic.
This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position. Global health threats, such as a global pandemic, could have a material adverse effect on our business. Our business could be adversely affected by the effects of a widespread outbreak of contagious disease or global or regional epidemic or pandemic.
Allied may not be able to generate sufficient revenue to achieve and sustain profitability. Allied expects its operating expenses to increase significantly as it continues to expand its marketing efforts and operations in existing and new geographies and vertical markets (including its online esports tournament and gaming subscription platform it intends to develop).
Allied may not be able to generate sufficient revenue to achieve and sustain profitability. Allied expects its operating expenses to increase significantly as it continues to expand its marketing efforts and operations in existing and new geographies and vertical markets, including its online esports tournament and gaming subscription platform and experiential entertainment.
Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate Allied’s ability to generate revenues on its esports gaming platform it intends to develop, which could materially and adversely impact the viability of this business.
As a result, Allied’s business could suffer. Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate Allied’s ability to generate revenues on its esports gaming platform it intends to develop, which could materially and adversely impact the viability of this business.
As a result, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. Additionally, we have reserved an aggregate of 7,800,000 shares of common stock for issuance under our 2019 Equity Incentive Plan (as amended, the “2019 Plan”).
As a result, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. Additionally, we have reserved an aggregate of 3,763,305 shares of common stock for issuance under our 2019 Equity Incentive Plan (as amended, the “2019 Plan”).
Public health crises, such as the COVID-19 pandemic may also continue to cause the demand for our in-person events to reduce and shift demand to online gaming. Allied may determine to enter into new opportunities to expand its business, including online gaming platforms, which may or may not be successful.
Public health crises, such as a global pandemic, may cause the demand for our in-person events to reduce and shift demand to online gaming. Allied may determine to enter into new opportunities to expand its business, including online gaming platforms, which may or may not be successful.
Adding these mobile arenas will depend upon a number of factors, many of which are beyond Allied’s control, including but not limited to our ability, or the ability of our licensees, to: ● reach acceptable agreements regarding the lease or acquisition of the trucks that are the basis of the mobile arenas; ● comply with applicable zoning, licensing, land use and environmental regulations and orders and obtain required permits and approvals; ● raise or have available an adequate amount of cash or currently available financing for construction of the mobile arenas and the related operational costs; ● timely hire, train and retain the skilled management and other employees necessary to operate the mobile arenas; ● efficiently manage the amount of time and money used to build and operate each new mobile arena; and ● manage the risks of road hazards, accidents, traffic violations, etc. that may impede the operations of the mobile arenas.
Adding these mobile arenas will depend upon a number of factors, many of which are beyond Allied’s control, including but not limited to our ability, or the ability of our licensees, to: ● reach acceptable agreements regarding the lease or acquisition of the trucks that are the basis of the mobile arenas; ● comply with applicable zoning, licensing, land use and environmental regulations and orders and obtain required permits and approvals; ● raise or have available an adequate amount of cash or currently available financing for construction of the mobile arenas and the related operational costs; ● timely hire, train and retain the skilled management and other employees necessary to operate the mobile arenas; ● efficiently manage the amount of time and money used to build and operate each new mobile arena; and ● manage the risks of road hazards, accidents, traffic violations, etc. that may impede the operations of the mobile arenas. 9 The nature of hosting esports events exposes Allied to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at the arenas, and health and safety concerns.
Additionally, if such third parties increase their prices, fail to provide their services effectively, terminate their service or agreements or discontinue their relationships with Allied, Allied could suffer service interruptions, reduced revenues, or increased costs, any of which may have a material adverse effect on its business, financial condition, and results of operations.
Additionally, if such third parties increase their prices, fail to provide their services effectively, terminate their service or agreements or discontinue their relationships with Allied, Allied could suffer service interruptions, reduced revenues, or increased costs, any of which may have a material adverse effect on its business, financial condition, and results of operations. 11 Allied may not be able to procure the necessary permits and licenses to operate its arenas.
The historical operations of Allied have resulted in net losses from continuing operations of $11.1 million and $15.1 million for the years ended December 31, 2022 and 2021, respectively. We do not know with any degree of certainty whether or when the consolidated operations of Allied will become profitable.
The historical operations of Allied have resulted in net losses of $3.6 million and $10.8 million for the years ended December 31, 2023 and 2022, respectively. We do not know with any degree of certainty whether or when the consolidated operations of Allied will become profitable.
Allied may not be able to procure the necessary permits and licenses to operate its arenas. Allied must obtain certain permits and licenses, including liquor licenses, to operate its arenas. Often these processes can be expensive and time consuming. There is no guarantee that Allied will be able to obtain such permits and licenses on a timely or cost-effective basis.
Allied must obtain certain permits and licenses, including liquor licenses, to operate its arenas. Often these processes can be expensive and time consuming. There is no guarantee that Allied will be able to obtain such permits and licenses on a timely or cost-effective basis. Any delays could jeopardize the ability of Allied to operate the arenas and host events.
In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our common stock listing on Nasdaq. Increases in interest rates may cause the market price of our common stock to decline.
In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our common stock listing on Nasdaq.
If Allied’s affiliate arenas are poorly operated, or if those operators fail to use Allied’s name and branding in a manner consistent with Allied’s corporate messaging and branding, or if there are safety issues or other negative occurrences at affiliate arenas, Allied’s name and brand could be significantly damaged, which would make its expansion difficult and materially adversely affect its results of operations and financial condition. 7 Allied’s long-term growth strategy includes deploying additional mobile arenas in the U.S. and Europe to host its tournaments and events and it must operate them profitably.
If Allied’s affiliate arenas are poorly operated, or if those operators fail to use Allied’s name and branding in a manner consistent with Allied’s corporate messaging and branding, or if there are safety issues or other negative occurrences at affiliate arenas, Allied’s name and brand could be significantly damaged, which would make its expansion difficult and materially adversely affect its results of operations and financial condition.
Any common stock that we issue, including under our 2019 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our common stockholders.
As of December 31, 2023, there were 1,662,345 shares available under the plan. Any common stock that we issue, including under our 2019 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our common stockholders.
Many elements of Allied’s’ business are unique, evolving and relatively unproven. Its business and prospects depend on the continuing development of live streaming of competitive esports gaming. The market for esports gaming competition is relatively new and rapidly developing and is subject to significant challenges.
Allied is subject to risks associated with operating in a rapidly developing industry and a relatively new market. Many elements of Allied’s business are unique, evolving and relatively unproven. Its business and prospects depend on the continuing development of live streaming of competitive esports gaming.
Allied’s business relies upon its ability to grow and garner an active gamer community, and successfully monetize this community through tournament fees, live event ticket sales, and advertising and sponsorships.
The market for esports gaming competition is relatively new and rapidly developing and is subject to significant challenges. Allied’s business relies upon its ability to grow and garner an active gamer community, and successfully monetize this community through tournament fees, live event ticket sales, and advertising and sponsorships.
In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our ability to collect, use or disclose data relating to individuals, which could increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.
In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations, could impair our ability to collect, use or disclose data relating to individuals, which could increase our costs and impair our ability to maintain and grow our customer base and increase our revenue. 13 Allied publicly posts its privacy policies and practices concerning processing, use, and disclosure of the personally identifiable information provided to it by website visitors.
In addition, if our new strategic plan fails, we will not be able to rely on our existing Allied Esports business to generate positive financial performance and may be required to seek other options and alternatives to continue our business operations, which may be subject to new risks and uncertainties. 6 Allied is subject to risks associated with operating in a rapidly developing industry and a relatively new market.
In addition, if our new strategic plan fails, we will not be able to rely on our existing Allied Esports business to generate positive financial performance and may be required to seek other options and alternatives to continue our business operations, which may be subject to new risks and uncertainties. 7 We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
As a global entertainment company that hosts numerous live events with spectators and participants in destination cities, such outbreak may cause people to avoid traveling to and attending our events, which will adversely affect our business operations and financial results.
As a global entertainment company that hosts numerous live events with spectators and participants in destination cities, such outbreak may cause people to avoid traveling to and attending our events, which will adversely affect our business operations and financial results. 14 Risks Related to Intellectual Property Allied licensed certain brand names under agreements that have expired and may also be subject to claims of infringement of third-party intellectual property rights.
As Allied expands, it may conduct various marketing and brand promotion activities using various methods to continue promoting its brands, but it cannot assure you that these activities will be successful.
As Allied expands, it may conduct various marketing and brand promotion activities using various methods to continue promoting its brands, but it cannot assure you that these activities will be successful. In addition, negative publicity, regardless of its veracity, could harm Allied’s brands and reputation, which may materially and adversely affect Allied’s business, results of operations and prospects.
These material weaknesses and any significant deficiencies could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Any significant deficiencies could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
In addition, this concentration of share ownership may adversely affect the trading price of our shares because prospective investors may perceive disadvantages in owning shares in a company such as our company with such a significant stockholder. 15 Our failure to achieve and maintain an effective system of disclosure controls and internal control over financial reporting could adversely affect our financial position and lower our stock price.
In addition, this concentration of share ownership may adversely affect the trading price of our shares because prospective investors may perceive disadvantages in owning shares in a company such as our company with such a significant stockholder.
In addition, we may incur substantial expense in complying with the obligations imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall. 11 Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims.
Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims.
Allied cannot assure you that it can attract and license popular esports games from their publishers, and failure to do so would have a material and adverse impact on Allied’s results of operations and financial conditions.
Allied cannot assure you that it can attract and license popular esports games from their publishers, and failure to do so would have a material and adverse impact on Allied’s results of operations and financial conditions. 10 If Allied fails to keep its existing gamers engaged, acquire new gamers and expand interest in its live events, leagues, tournaments and competitions, its business, its ability to achieve profitability, and its prospects may be adversely affected.
In addition, negative publicity, regardless of its veracity, could harm Allied’s brands and reputation, which may materially and adversely affect Allied’s business, results of operations and prospects. 9 If Allied fails to anticipate and successfully implement new esports technologies or adopt new business strategies, technologies or methods, its business may suffer.
If Allied fails to anticipate and successfully implement new esports technologies or adopt new business strategies, technologies, or methods, its business may suffer.
Furthermore, Allied’s failure to comply with these laws or the application of these laws in an unanticipated manner may harm its business and result in penalties or significant legal liability. Allied has historically operated at a net loss on a consolidated basis, and there is no guarantee that that it will be able to be profitable.
Furthermore, Allied’s failure to comply with these laws or the application of these laws in an unanticipated manner may harm its business and result in penalties or significant legal liability. We may be subject to litigation, including stockholder litigation, which could have an adverse effect on our business and operations.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to the Company’s management. Our Board of Directors’ ability to issue undesignated preferred stock and the existence of anti-takeover provisions may depress the value of our common stock. The Company’s authorized capital includes 1,000,000 shares of undesignated preferred stock.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to the Company’s management. Provisions of our amended and restated articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interest of our stockholders.
Effective internal controls are necessary for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent limitations.
Under this plan, we intend to pursue multiple channels of opportunities instead of a single significant corporate transaction such as an acquisition of complimentary assets or businesses, and we 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.
Under this plan, we have pursued and will continue to pursue various acquisitions, joint ventures, and other such strategic opportunities for the purpose of leveraging our location-based-entertainment expertise and focusing on gaming lifestyle and experiential entertainment, as well as growing our digital footprint and monetization capabilities through mobile gaming.
Removed
The nature of hosting esports events exposes Allied to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at the arenas, and health and safety concerns.
Added
From time to time, we may consider strategic transactions, such as acquisitions, asset purchases and sales, and collaborations. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments.
Removed
If Allied fails to keep its existing gamers engaged, acquire new gamers and expand interest in its live events, leagues, tournaments and competitions, its business, its ability to achieve profitability and its prospects may be adversely affected.
Added
Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures, could not result in perceived benefits that were contemplated upon entering into the transaction, and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations, solvency and financial results.
Removed
Any delays could jeopardize the ability of Allied to operate the arenas and host events. As a result, Allied’s business could suffer.
Added
For example, these transactions may entail numerous operational and financial risks, including: ● exposure to unknown and contingent liabilities; ● disruption of our business and diversion of our management’s time and attention; ● incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions, collaborations, and joint ventures; ● higher than expected acquisition and integration costs; ● write-downs of assets or goodwill or impairment charges; ● increased operating expenditures, including additional research, sales, and marketing expenses; ● increased amortization expenses; ● difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; and ● impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership.
Removed
Allied publicly posts its privacy policies and practices concerning processing, use and disclosure of the personally identifiable information provided to it by website visitors.
Added
Allied’s long-term growth strategy includes deploying additional mobile arenas in the U.S. and Europe to host its tournaments and events and it must operate them profitably.
Removed
Risks Related to Intellectual Property Allied licensed certain brand names under agreements that have expired and may also be subject to claims of infringement of third-party intellectual property rights.
Added
We may be subject to litigation from stockholders, suppliers and other third parties from time to time. Such litigation may have an adverse impact on our business and results of operations or may cause disruptions to our operations.
Removed
Management identified the following material weaknesses indicative of smaller reporting companies as of December 31, 2022: ● 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.
Added
As discussed in more detail in Item 3, “Legal Proceeding” below, Knighted Pastures, LLC (“Knighted”) recently filed a complaint against us and alleges that it seeks to nominate directors to AGAE’s Board and effect certain changes with respect to the business and management of AGAE.
Removed
As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to work toward compliance with these regulatory requirements. This diversion of management’s time and attention may have a material adverse effect on our business, financial condition and results of operations.
Added
We expect to incur additional costs to defend such litigation which may cause our management to divert attention and resources from our business operations.
Removed
While interest rates have in recent years been at record low levels, the likely return to increases in interest rates may cause a corresponding decline in demand for equity investments.
Added
In addition, in the event directors nominated by Knighted are elected to our board of director, such directors may disagree with the strategic directions of the Company or otherwise take actions that may adversely affect the interest of our shareholders. 12 Allied has historically operated at a net loss on a consolidated basis, and there is no guarantee that that it will be able to be profitable.
Removed
Any such increase in interest rates or reduction in demand for our common stock resulting from other relatively more attractive investment opportunities may cause the market price of our common stock to decline.
Added
In addition, we may incur substantial expense in complying with the obligations imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall.
Removed
Our Board has the power to issue any or all of the shares of preferred stock, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without seeking stockholder approval, subject to certain limitations on this power under Nasdaq listing requirements.
Added
Provisions of our amended and restated articles of incorporation and our bylaws, as amended, may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt.
Removed
The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver.
Added
Further, our amended and restated articles of incorporation, authorize the issuance of up to 1,000,000 shares of undesignated preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors in their sole discretion.
Removed
Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each entered into receivership. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts.
Added
Our Board of Directors may, without stockholder approval, issue series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
Removed
The standard deposit insurance amount is up to $250,000 per depositor, per insured bank, for each account ownership category. Although we do not have any funds deposited with SVB and Signature Bank, we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit.
Added
Our stockholder rights plan, or “poison pill,” includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable. On February 8, 2024, the Board of Directors approved the Stockholder Rights Plan (the “Rights Plan”), dated February 9, 2024, by and between the Company and Continental Stock Transfer & Trust Company, as Rights Agent.
Removed
A failure of a depository institution to return deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance. Item 1B. Unresolved Staff Comments None.
Added
The Rights Plan was adopted in response to stockholder activism concerns and is intended to protect the Company and its stockholders from efforts by a single stockholder or group of stockholders to obtain control of the Company without paying a control premium through a number of recognized stockholder protections.
Added
Generally the Rights Plan works by causing substantial dilution to any person or group (other than specified exempt persons) that acquires 10% or more of the shares of common stock of the Company without the approval of the Board of Directors (such person or group, an “Acquiring Person”) through the issuance of “Rights” to stockholders of record as of, and subsequent to, the start of business at 9:00 am.
Added
Eastern Time on February 9, 2024, which Rights entitle the registered holders thereof (other than the Acquiring Person) to receive additional shares of our common stock upon exercise of such Rights.
Added
As a result, the overall effect of the Rights Plan may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving our Company that is not approved by the Board of Directors even if the offer may be considered beneficial by some stockholders.
Added
The Rights will expire at the close of business on February 9, 2027, unless previously redeemed or exchanged by the Company. See Note 14 – Subsequent Events to our Consolidated Financial Statements for additional information. Shareholder activism could cause us to incur significant expense, impact the execution of our business strategy and have an adverse effect on our business.
Added
Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert our attention and resources from our business and our ability to execute our strategic plans.
Added
Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our associates, customers, service providers or other vendors and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors.
Added
Our stock price could be subject to significant fluctuations or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism. 19 Item 1B. Unresolved Staff Comments None.
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed2 unchanged
Item 2. Properties
Properties — owned and leased real estate
1 edited+1 added−0 removed2 unchanged
2022 filing
2023 filing
Biggest changeThe arena is custom-built for esports tournaments and has a broadcast-ready television studio to broadcast live events and produce content. The lease term expires on May 23, 2023 and the Company pays base rent of $125,000 per month. The Company has the option to extend for an additional 60 months at $137,500 per month
Biggest changeThe arena is custom-built for esports tournaments and has a broadcast-ready television studio to broadcast live events and produce content. The initial term of the Las Vegas Lease expired on May 31, 2023, and was extended for another two months through July 31, 2023.
Added
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.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+6 added−1 removed0 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
2 edited+6 added−1 removed0 unchanged
2022 filing
2023 filing
Biggest changeItem 3. Legal Proceedings For information regarding legal proceedings, see Note 12 “Commitments and Contingencies”, to the Consolidated Financial Statements included in this Annual Report on Form 10-K. The Company is involved in various disputes, claims, liens and litigation matters arising out of the normal course of business.
Biggest changeThe Knighted Action seeks both injunctive reliefs and money damages. We believe the claims in the Knighted Action lack merit and intend to defend against them vigorously. For information regarding legal proceedings, also see Note 12 “Commitments and Contingencies,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Item 4.
Mine Safety Disclosures Not applicable. 18 PART II
Mine Safety Disclosures Not applicable. 21 PART II
Removed
While the outcome of these disputes, claims, liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe that, except as set forth above, the outcome of these matters, either individually or collectively, will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Item 4.
Added
Item 3. Legal Proceedings We may be subject to litigation from stockholders, suppliers and other third parties from time to time. Such litigation may have an adverse impact on our business and results of operations or may cause disruptions to our operations.
Added
As discussed in more detail below, Knighted Pastures, LLC (“Knighted”) recently filed a complaint against, among other defendants, us and the members of our Board of Directors. We expect to incur additional costs to defend such litigation which may cause our management to divert attention and resources from our business operations.
Added
In addition, the complaint states that Knighted seeks to nominate directors to AGAE’s Board and effect certain changes with respect to the business and management of AGAE.
Added
In the event directors nominated by Knighted are elected to our board of directors, such directors may disagree with the strategic directions of the Company or otherwise take actions that may adversely affect the interest of our shareholders. Knighted Pastures, LLC On March 7, 2024, Knighted Pastures, LLC (“Knighted”), an AGAE stockholder, filed a complaint captioned Knighted Pastures, LLC v.
Added
Yangyang Li, et al. , C.A. No. 2024-0222 in the Court of Chancery of the State of Delaware against us, the members of our Board of Directors, and certain additional defendants (the “Knighted Action”).
Added
The complaint alleges, among other things, that the members of our Board of Directors breached their fiduciary duty in connection with (1) the approval of a Share Purchase Agreement that AGAE entered into on or around December 28, 2023, (2) the approval and adoption of certain amendments to AGAE’s Bylaws on or around January 5, 2024, and (3) the approval and adoption of a rights agreement on or around February 8, 2024.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+4 added−0 removed5 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
4 edited+4 added−0 removed5 unchanged
2022 filing
2023 filing
Biggest changeThe following table provides information with respect to repurchases made under the stock repurchase program since inception: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares Available to be Purchased Under the Program October 1, 2022 to October 31, 2022 - $ - - $ - November 1, 2022 to November 30, 2022 - $ - - $ - December 1, 2022 to December 31, 2022 581,746 $ 1.02 581,746 $ 9,389,438
Biggest changeThe following table provides information with respect to repurchases made under the stock repurchase program during the fourth quarter of 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares Available to be Purchased Under the Program October 1, 2023 to October 31, 2023 - $ - - $ - November 1, 2023 to November 30, 2023 36,977 $ 0.83 36,977 $ 7,306,347 December 1, 2023 to December 31, 2023 - $ - - $ - Item 6. [Reserved] 22
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the NASDAQ Capital Market under the symbol “AGAE.” Holders On March 21, 2023, there were 23 holders of record of our common stock, one of which was Cede & Co., a nominee for The Depository Trust Company, or DTC.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the NASDAQ Capital Market under the symbol “AGAE.” Holders On March 27, 2024, there were 23 holders of record of our common stock, one of which was Cede & Co., a nominee for The Depository Trust Company, or DTC.
Payment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of our current or then-existing debt instruments and other factors our Board of Directors deems relevant. Recent Sales of Unregistered Securities None.
Payment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of our current or then-existing debt instruments and other factors our Board of Directors deems relevant.
Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plan in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference.
The Shares were issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act of 1933, as amended. Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plan in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference.
Added
Recent Sales of Unregistered Securities On December 28, 2023, we entered into a securities purchase agreement with Elite Fun Entertainment Co., Ltd.
Added
(“Elite Fun”) (as amended by those certain Side Letters dated February 28, 2024, and March 7, 2024, the “SPA”), pursuant to which we agreed to issue and sell to Elite Fun an aggregate of 7,330,000 shares of our common stock (the “Shares”) for a total purchase price of $6,597,000.
Added
Elite Fun also agreed to assist us in the pursuit of certain strategic and business transactions in China. The transaction closed on March 7, 2024 (the “Closing Date”). We intend to use the net proceeds from this financing for working capital and general corporate purposes.
Added
In addition, pursuant to the SPA, we have agreed to use commercially reasonable efforts to (i) prepare and file with the SEC within 45 days of the Closing Date a registration statement registering the resale of the Shares and (ii) ensure that the registration statement is declared effective within 90 days following the Closing Date.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
36 edited+39 added−37 removed5 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
36 edited+39 added−37 removed5 unchanged
2022 filing
2023 filing
Biggest changeDuring the years ended December 31, 2022 and 2021, the net cash used in operating activities was primarily attributable to the net loss from continuing operations of approximately $10.8 million and $15.1 million, respectively, $4.0 million and $3.8 million, respectively, of net non-cash expenses, and approximately ($4.1) million and $1.2 million, respectively, of cash (used in) provided by changes in the levels of operating assets and liabilities. 24 Net Cash (Used In) Provided By Investing Activities Net cash (used in) provided by investing activities primarily relates to cash used for the purchase of property and equipment and other investment activity.
Biggest changeDuring the years ended December 31, 2023 and 2022, the net cash used in operating activities was primarily attributable to the net losses of approximately $3.6 million and $10.8 million, respectively, adjusted for $2.6 million and $4.0 million, respectively, of net non-cash expenses, and approximately $7.1 million and $4.1 million, respectively, of cash used to fund changes in the levels of operating assets and liabilities.
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 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 management’s discretion. The stock repurchase will be funded using the Company’s working capital.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements and related for the years ended December 31, 2022 and 2021, which are included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements and related disclosures for the years ended December 31, 2023 and 2022, which are included elsewhere in this Annual Report on Form 10-K.
Through our subsidiary Allied Esports, 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, produce and distribute esports content with at our on-site production facilities and studios.
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.
Net cash used in investing activities during the year ended December 31, 2022 was approximately $70.1 million, which consisted primarily of approximately $70.0 million for the purchase of certificates of deposit.
Net cash used in investing activities during the year ended December 31, 2022 was approximately $70.1 million, which consisted primarily of approximately $70.0 million for the purchase of short-term investments, and $0.1 million for capital expenditures.
Other income, net We recognized other income, net, of approximately $153 thousand during the year ended December 31, 2022, compared to $69 thousand recorded for the year ended December 31, 2021. The increase was due to the reversal of an income tax payable that was no longer due.
Other income (expense), net We recognized other income, net, of approximately $47 thousand during the year ended December 31, 2023, compared to $153 thousand of other income, net, recorded for the year ended December 31, 2022. The decrease was a result of the reversal of an income tax payable in 2022 that was no longer due.
For the Years Ended December 31, (in thousands) 2022 2021 Net cash provided by (used in) Operating activities $ (10,934 ) $ (10,079 ) Investing activities $ (70,135 ) $ 105,858 Financing activities $ (611 ) $ (3,421 ) Net Cash Used in Operating Activities Net cash used in operating activities primarily represents the results of operations exclusive of non-cash expenses plus the impact of changes in operating assets and liabilities.
For the Years Ended December 31, (in thousands) 2023 2022 Net cash provided by (used in) Operating activities $ (8,139 ) $ (10,934 ) Investing activities $ 6,128 $ (70,135 ) Financing activities $ 7,147 $ (611 ) Net Cash Used in Operating Activities Net cash used in operating activities primarily represents the results of operations exclusive of non-cash expenses plus the impact of changes in operating assets and liabilities.
Cash requirements for our current liabilities include approximately $2.0 million for accounts payable and accrued expenses and $1.2 million for the current portion of an operating lease liability. Cash requirements for non-current liabilities include approximately $6.5 million for the non-current portion of an operating lease liability. The Company intends to meet these cash requirements from its current cash balance.
Cash requirements for our current liabilities include approximately $9.2 million for loans payable, $1.1 million for accounts payable and accrued expenses, and $1.5 million for the current portion of an operating lease liability. Cash requirements for non-current liabilities include approximately $5.6 million for the non-current portion of an operating lease liability.
For the years ended December 31, 2022 and 2021, we incurred net losses from continuing operations of approximately $10.8 million and $15.1 million, respectively, and used cash in continuing operations of approximately $11.0 million and $10.1 million, respectively.
For the years ended December 31, 2023 and 2022, we incurred net losses of approximately $3.7 million and $10.8 million, respectively, and used cash in operations of approximately $8.1 million and $10.9 million, respectively.
December 31, (in thousands) 2022 2021 Current Assets $ 82,377 $ 94,261 Current Liabilities $ 3,298 $ 5,249 Working Capital Surplus $ 79,079 $ 89,012 Our primary sources of liquidity and capital resources are cash and short-term investments on the balance sheet and funds raised through debt or equity financing.
December 31, (in thousands) 2023 2022 Current Assets $ 78,341 $ 82,377 Current Liabilities $ 11,952 $ 3,298 Working Capital Surplus $ 66,389 $ 79,079 Our primary sources of liquidity and capital resources have been cash and short-term investments on the balance sheet and funds raised through debt or equity financing.
General and administrative expenses decreased by approximately $2.6 million, or 20%, to approximately $10.5 million for the year ended December 31, 2022 from approximately $13.1 million for the year ended December 31, 2021.
General and administrative expenses decreased by approximately $3.2 million, or 30%, to approximately $7.6 million for the year ended December 31, 2023 from approximately $10.8 million for the year ended December 31, 2022.
Costs and expenses In-person costs (exclusive of depreciation and amortization) increased by approximately $1.3 million, or 35%, to approximately $5.0 million for the year ended December 31, 2022 from approximately $3.7 million for the year ended December 31, 2021.
Multiplatform content costs (exclusive of depreciation and amortization) increased by approximately $0.5 million, or 47%, to approximately $1.5 million for the year ended December 31, 2023 from approximately $1.0 million for the year ended December 31, 2022.
Net cash used in operating activities for the years ended December 31, 2022 and 2021 was approximately $11.0 million and $10.1 million, respectively, representing an increase of $0.9 million.
Net cash used in operating activities for the years ended December 31, 2023 and 2022 were approximately $8.1 million and $10.9 million, respectively, representing a decrease of $2.8 million.
Net Cash Used in Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was approximately $0.6 million compared to approximately $3.4 million for the year ended December 31, 2021. Net cash used in financing activities during the year ended December 31, 2022 represented the purchase of treasury stock.
Net Cash Provided by (Used in) Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was approximately $7.1 million compared to approximately $0.6 million of net cash used in financing activities during the year ended December 31, 2022.
We recognized an impairment of digital assets of approximately $164 thousand for the year ended December 31, 2022. The impairment loss is a result of the market price on active exchanges falling below the carrying value of the digital assets.
Impairment of digital assets was $0 for the year ended December 31, 2023, compared to $164 thousand for the year ended December 31, 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.
Impairment of property and equipment was approximately $68 thousand for the year ended December 31, 2022 compared to $0 for the year ended December 31, 2021. The impairment resulted from management’s determination that the projected cash flows from certain equipment will not be sufficient to recover the carrying value of those assets.
The impairment in 2022 resulted from management’s determination that the projected cash flows from certain equipment will not be sufficient to recover the carrying value of those assets.
Its growth also depends, in part, on its 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.
Our growth depends, in part, on our ability to adapt to technological advancements, shifts in gamer trends and demands, introductions of new games, evolving intellectual property practices among game publishers, the fusion of gaming and music and industry standards and practices.
As of December 31, 2022, we had cash of $11.2 million (not including approximately $70.0 million of short-term investments and $5.0 million of restricted cash) and working capital from continuing operations of approximately $79.1 million.
As of December 31, 2023, we had cash of $16.3 million (not including approximately $5.0 million of restricted cash and $56.5 million of short-term investments) and working capital of approximately $66.4 million.
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.
The dollar value of the shares available to be purchased under the program is $7,306,347 as of December 31, 2023. 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.
The Company Allied 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. operates global competitive esports properties designed to connect players and fans via a network of connected arenas.
The Company Allied Gaming and Entertainment Inc., along with 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.
Cash Flows from Operating, Investing and Financing Activities The tables below summarize cash flows from continuing operations for the years ended December 31, 2022 and 2021, respectively.
The Company intends to meet these cash requirements from its current cash balance. Cash Flows from Operating, Investing and Financing Activities The table below summarizes cash flows from operations for the years ended December 31, 2023 and 2022, respectively.
Critical Accounting Estimates and Policies The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.
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.
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 nurture vibrant communities primarily comprising of Gen Y, Z, and Alpha consumers.
No cash was provided by, or (used in), discontinued operations in 2022. Capital Expenditures As of December 31, 2022, the Company had no material commitments for capital expenditures.
Net cash used in financing activities during the year ended December 31, 2022 represented the purchase of treasury stock. 26 Capital Expenditures As of December 31, 2023, the Company had no material commitments for capital expenditures.
Net cash provided by investing activities during the year ended December 31, 2021 was approximately $105.9 million, which consisted primarily of approximately $106.0 million cash consideration for the sale of WPT, partially offset by approximately $192 thousand of cash used for the purchase of property and equipment.
Net Cash Provided By (Used In) Investing Activities Net cash provided by investing activities during the year ended December 31, 2023 was approximately $6.1 million, which consisted of $80.0 million in proceeds from the maturing of short-term investments and $0.1 million proceeds from the sale of equipment.
Depreciation and amortization decreased by approximately $1.2 million, or 38%, to approximately $2.1 million for the year ended December 31, 2022, from approximately $3.3 million for the year ended December 31, 2021. The decrease was primarily due to an out-of-period adjustment of $0.6 million to correct the amortization of leasehold improvements in prior periods.
Depreciation and amortization decreased by approximately $0.6 million, or 29%, to approximately $1.5 million for the year ended December 31, 2023, from approximately $2.1 million for the year ended December 31, 2022. The decrease was primarily due to production equipment with a gross cost of approximately $7.0 million that became fully depreciated on March 31, 2023.
The total number of shares purchased by the Company between December 1, 2022, and December 31, 2022, was 581,746. The average price per share for the shares purchased was $1.02. The approximate dollar value of the shares available to be purchased under the program is $9,389,438 as of December 31, 2022.
The total number of shares purchased by the Company during the years ended December 31, 2023 and 2022 was 1,698,038 and 581,746, respectively. The average price per share for the shares purchased during the years ended December 31 2023 and 2022 were $1.18 per share.
This was partially offset by an increase in costs associated with the sale of NFT for the year ended December 31, 2022. 22 Selling and marketing expenses decreased by approximately $59 thousand, or 20%, to approximately $235 thousand for the year ended December 31, 2022 from approximately $294 thousand for the year ended December 31, 2021.
Selling and marketing expenses decreased by approximately $8 thousand, or 3%, to approximately $227 thousand for the year ended December 31, 2023 from approximately $235 thousand for the year ended December 31, 2022.
This was slightly offset by changes in the fair value of the warrant liability in 2022. Interest income (expense), net Interest income (expense), net was approximately $0.8 million and approximately $(0.3) million for the years ended December 31, 2022 and 2021, respectively, representing an increase of interest income of approximately $1.1 million, or 394%.
Interest income, net Interest income was approximately $3.0 million for the twelve months ended December 31, 2023 compared to approximately $0.8 million for the year ended December 31, 2022, representing an increase of interest income of approximately $2.2 million, or 274%.
Allied’s business plan requires significant capital expenditures, and it expects its operating expenses to increase significantly as it continues to expand its marketing efforts and operations in existing and new geographies and vertical markets (including its online esports tournament and gaming subscription platform it intends to develop).
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, top artist events and concerts, 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.
Multiplatform content costs (exclusive of depreciation and amortization) decreased by approximately $277 thousand, or 72%, to approximately $110 thousand for the year ended December 31, 2022 from approximately $387 thousand for the year ended December 31, 2021.
Costs and expenses In-person costs (exclusive of depreciation and amortization) decreased by approximately $1.1 million, or 29%, to approximately $2.7 million for the year ended December 31, 2023 from approximately $3.8 million for the year ended December 31, 2022. The decrease is a result of a decrease in HyperX Arena events in 2023.
While the COVID-19 pandemic adversely affected our financial performance during fiscal year 2022, we do not anticipate such an adverse effect in 2023. 20 Results of Operations Continuing Operations Our continuing 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.
Results of Operations Our operations consist of our esports gaming operations, casual mobile games and live entertainment events organizing. Our esports gaming operations take place at global competitive esports properties designed to connect players and fans via a network of connected arenas.
While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that there were no critical accounting policies and estimates that affect the preparation of financial statements. 25
The following are not intended to be a comprehensive list of all of our accounting estimates. Our accounting estimates are more fully described in Note 2 – Summary of Significant Accounting Policies, in our financial statements included at the end of this Annual Report.
While change in this industry may be inevitable, Allied Esports will try to adapt its business model as needed to accommodate change and remain on the forefront of its competitors.
While change in this industry may be inevitable, we are committed to flexibly adjusting our business model as necessary to accommodate such shifts and maintain a leading position among our competitors.
At our flagship arena in Las Vegas, Nevada, we provide an attractive facility for hosting corporate events, tournaments, game launches or other events. Additionally, Allied Esports has two mobile esports arenas, which are 18-wheel semi-trailers that convert into first class esports arenas and competition stages with full content production capabilities and interactive talent studios.
At our flagship arena in Las Vegas, Nevada, we provide an attractive facility for hosting a diverse range of events, including corporate events, tournaments, game launches, and brand activation.
Results of Discontinued Operations We recognized income from discontinued operations, net of tax, of $77.9 million during the year ended December 31, 2021, primarily as a result of the sale of the WPT business on July 12, 2021. 23 Liquidity and Capital Resources The following table summarizes our total current assets, liabilities and working capital surplus from continuing operations at December 31, 2022 and December 31, 2021, respectively.
The increase is a result of the interest earned on short-term investments purchased at various times commencing in the fourth quarter of 2022. 25 Liquidity and Capital Resources The following table summarizes our total current assets, current liabilities and working capital at December 31, 2023 and December 31, 2022, respectively.
Removed
Esports Arena Las Vegas, LLC operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. Allied Esports GmbH operates a mobile esports trucks that serves as both a battleground and content generation hub and also operates a studio for recording and streaming gaming events.
Added
Under the Allied Esports International subsidiary (“AEI”) we operate global competitive esports properties designed to connect players and fans via a network of connected arenas and creation of original esports content. Esports Arena Las Vegas, LLC subsidiary, operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada.
Removed
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.
Added
Meanwhile, Allied Mobile Entertainment subsidiary (“AME”), is dedicated to exploring opportunities in the massive and growing mobile games markets. AME’s ownership of a 40% equity interest in Beijing Lianzhong Zhihe Technology Co.
Removed
Under this plan, the Company intends to pursue multiple channels of opportunities instead of a single significant corporate transaction such as an acquisition of complimentary 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.
Added
Ltd (“ZTech”), a prominent mobile games developer and operator, is engaged in the development and distribution of casual mobile games in Mainland China, solidifies our presence in this lucrative sector. Moreover, our subsidiary Allied Experiential Entertainment (“AEE”), focuses on orchestrating live entertainment events and offers management and consultation service to experiential entertainment venue operation.
Removed
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. Allied Esports Gaming is one of the largest and fastest growing markets in the entertainment sector, with an estimated 2.56 billion gamers playing esports globally, and esports is the major driver of this growth.
Added
Allied’s casual mobile gaming includes contractual relationships with various advertising service providers for advertisements within the Company’s casual mobile games.
Removed
Esports, short for “electronic sports,” is a general label that comprises a diverse offering of competitive electronic games that gamers play against each other. It is projected that by 2023, 646 million people will be watching esports globally, and that global esports revenue will grow to approximately $1.5 billion. The esports gaming industry is relatively new and is challenging.
Added
Furthermore, we boast a mobile esports arena, an 18-wheel semi-trailer, which seamlessly transforms into a top-tier esports arena and competition stage or a dynamic live show arena complete with full content production capabilities and an interactive talent studio. 23 Results of Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 For the Years Ended December 31, Favorable (in thousands) 2023 2022 (Unfavorable) Revenues: In-person $ 4,956 $ 4,951 $ 5 Multiplatform content 2,000 1,401 599 Casual mobile games 699 - 699 Total Revenues 7,655 6,352 1,303 Costs and Expenses: In-person (exclusive of depreciation and amortization) 2,684 3,777 1,093 Multiplatform content (exclusive of depreciation and amortization) 1,518 1,035 (483 ) Casual mobile games (exclusive of depreciation and amortization) 594 - (594 ) Research and development expenses 163 - (163 ) Selling and marketing expenses 227 235 8 General and administrative expenses 7,569 10,774 3,205 Depreciation and amortization 1,500 2,065 565 Impairment of digital assets - 164 164 Impairment of property and equipment - 68 68 Total Costs and Expenses 14,255 18,118 3,863 Loss From Operations (6,600 ) (11,766 ) 5,166 Other income, net 47 153 (106 ) Interest income, net 2,958 790 2,168 Total Other Income 3,005 943 2,062 Net loss $ (3,595 ) $ (10,823 ) $ 7,228 Revenues In-person experience revenue was $5.0 million for each of the years ended December 31, 2023 and 2022.
Removed
Competition is rapidly developing. Allied’s business relies upon its ability to grow and garner an active gamer community, and successfully monetize this community through tournament fees, live event ticket sales, and advertising and sponsorships utilizing a three-pillar approach, which includes: ● in-person experiences; ● developing multiplatform content; and ● providing interactive services.
Added
The in-person experience revenues consisted of a $0.5 million decrease in event revenue and a $0.6 million decrease in food and beverage revenue all due to a decrease in HyperX Arena events in 2023. The decreases were offset by an increase in sponsorship revenue related to a new naming rights agreement for our HyperX Arena in Las Vegas.
Removed
A key element of Allied’s growth strategy is to extend its brand by opening additional flagship arenas throughout the world and by licensing the Allied brand to third party esports arena operators, which it believes will provide attractive returns on investment. COVID-19 Pandemic. The COVID-19 pandemic had an adverse effect on the Company.
Added
Multiplatform content revenues increased by approximately $0.6 million, or 43%, to approximately $2 million for the year ended December 31, 2023 from approximately $1.4 million for the year ended December 31, 2022.
Removed
As a global entertainment company, our business revenue is generated through live, in person events with participants and spectators in multiple destination cities. The pandemic resulted in government regulation and restrictions on travel, resulting in significantly decreased attendance for our events.
Added
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. Casual mobile games revenue was $0.7 million for the year ended December 31, 2023 and $0 for the year ended December 31, 2022, respectively.
Removed
Allied was forced to cancel or postponed live events, and until Allied’s flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada reopened on June 25, 2020, operate online only. The arena is currently running at full capacity for daily play and weekly tournaments.
Added
The increase in casual mobile games revenue was due to the casual mobile gaming revenue earned subsequent to the business combination with ZTech on October 31, 2023.
Removed
During the course of 2022, the risks of the COVID-19 pandemic largely subsided and restrictions on live, in-person events were lifted.
Added
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. 24 Casual mobile games costs (exclusive of depreciation and amortization) were $594 thousand for the year ended December 31, 2023 and $0 for the year ended December 31, 2022, respectively.
Removed
Discontinued Operations The World Poker Tour is an internationally televised gaming and entertainment with brand presence in land-based poker tournaments, television, online and mobile. Leading innovation in the sport of poker since 2002, WPT helped ignite the global poker boom with the creation of a unique television show based on a series of high-stakes poker tournaments. Sale of WPT Business.
Added
Casual gaming costs and revenues began in connection with the business combination with ZTech on October 31, 2023. Research and development expenses were $163 thousand and $0 for the years ended December 31, 2023 and 2022, respectively. Research and development expenses consist principally of costs related to the development of new casual mobile games for ZTech.
Removed
On January 19, 2021, the Company and its direct and indirect wholly-owned subsidiaries, Allied Esports Media, Inc. (“Esports Media,” and together with the Company, the “Selling Parties”) and Club Services, Inc.
Added
The decrease in general and administrative expenses resulted from (a) a $1.5 million ERC credit recognized in 2023, (b) a $0.8 million reduction in payroll and payroll related costs during 2023 due to reduced headcount, (c) $0.8 million of higher stock-based compensation in 2022 related to the accelerated vesting of options previously granted to the former Chief Executive Officer, (d) a $0.2 million decrease in insurance expenses, and a $0.1 million decrease in rent expense.
Removed
(“CSI”), entered into a Stock Purchase Agreement (the “Original Agreement”) with Element Partners, LLC (“Buyer”), pursuant to which the Selling Parties sold 100% of the outstanding capital stock of CSI to the Buyer.
Added
These decreases were slightly offset by a $0.2 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 ZTech and other strategic investment opportunities.
Removed
Prior to the sale of CSI capital stock, CSI was the Company’s indirect wholly-owned subsidiary that owned 100% of the outstanding capital stock of each of the legal entities that collectively operate or engage in the Company’s poker-related business and assets (the “WPT Business”). The sale of CSI is referred to herein as the “Sale Transaction”.
Added
The market price has not gone below the carrying value of the digital assets during the twelve months ended December 31, 2023. Impairment of property and equipment was $0 for the year ended December 31, 2023, compared to $68 thousand for the year ended December 31, 2022.
Removed
The Selling Parties, CSI and Buyer entered into an Amended and Restated Stock Purchase Agreement on March 19, 2021, and thereafter amended such agreement on March 29, 2021 (as amended, the “Stock Purchase Agreement”).
Added
This was offset by $66.5 million for the purchase of short-term investments, $6.4 million from the acquisition of ZTech, $0.7 million from the purchases of intangible assets, and $0.4 million from the purchases of property and equipment.
Removed
Under the Stock Purchase Agreement, the Buyer agreed to pay Esports Media a total purchase price of $105 million for the stock of CSI (the “base purchase price”) at the closing of the Sale Transaction, as further described below.
Added
Net cash provided by financing activities during the year ended December 31, 2023 represented proceeds from a short-term loan of $9.2 million partially offset by the purchase of treasury stock of $2.1 million.
Removed
The base purchase price was adjusted to reflect the amount of CSI’s cash, indebtedness and accrued and unpaid transaction expenses as of the closing of the Sale Transaction.
Added
To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.
Removed
Buyer remitted a $10.0 million advance payment of the base purchase price in connection with the execution of the Stock Purchase Agreement and paid the balance of the base purchase price at the closing of the Sale Transaction. The sale of the WPT business was closed on July 12, 2021 for $106.0 million.
Added
We evaluate these estimates on an ongoing basis.
Removed
The Company recorded a gain on the sale of WPT as follows: Cash consideration for sale of WPT (1) $ 106,049,884 Less: book value of assets sold Cash 3,579,988 Accounts receivable 2,999,352 Restricted cash 100,000 Prepaid expenses and other assets 264,385 Property and equipment, net 1,429,706 Goodwill 4,083,621 Intangible assets, net 10,986,463 Deposits 79,500 Deferred production costs 12,684,054 Net book value of assets sold 36,207,069 Add: liabilities assumed by buyer Accounts payable 487,579 Accrued expenses and other liabilities 5,567,072 Deferred revenue 1,807,176 Deferred rent 2,619,967 Total liabilities assumed 10,481,794 Less: transaction expenses (2) 2,465,774 Gain on sale of WPT (3) $ 77,858,835 (1) Includes $105,120 of post-closing adjustments.
Added
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Removed
(2) Includes $1,165,774 of legal and professional fees and $1,300,000 of amounts reimbursed to the Company’s principal stockholder. See Note 7 - Accrued Expense and Other Current Liabilities for additional details.
Added
Business Combinations We record business combinations using the acquisition method of accounting, which requires all of the assets acquired and liabilities assumed to be recorded at fair value as of the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill.
Removed
(3) Management has determined that there are no current federal or state income taxes payable in connection with the sale of WPT, after considering the Company’s tax basis in the stock of WPT, as well as the Company’s projected tax losses for the 2021 tax year. 21 Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 For the Years Ended December 31, Favorable (in thousands) 2022 2021 (Unfavorable) Revenues: In-person $ 6,101 $ 4,201 $ 1,900 Multiplatform content 251 755 (504 ) Total Revenues 6,352 4,956 1,396 Costs and Expenses: In-person (exclusive of depreciation and amortization) 4,994 3,689 (1,305 ) Multiplatform content (exclusive of depreciation and amortization) 110 387 277 Selling and marketing expenses 235 294 59 General and administrative expenses 10,482 13,053 2,571 Depreciation and amortization 2,065 3,306 1,241 Impairment of property and equipment 68 - (68 ) Impairment of digital assets 164 - (164 ) Loss From Operations (11,766 ) (15,773 ) 4,007 Gain on forgiveness of PPP loans and interest - 912 (912 ) Other income, net 153 69 84 Interest income (expense), net 789 (268 ) 1,057 Loss from continuing operations (10,824 ) (15,060 ) 4,236 Income from discontinued operations - 67 (67 ) Gain on sale of WPT - 77,859 (77,859 ) Income from discontinued operations, net of tax - 77,926 (77,926 ) Net income (loss) $ (10,824 ) $ 62,866 $ (73,690 ) Revenues In-person experience revenues increased by approximately $1.9 million, or 45%, to approximately $6.1 million for the year ended December 31, 2022 from approximately $4.2 million for the year ended December 31, 2021.
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The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill.
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The increase of in-person experience revenues was driven by (a) a $1.1 million increase in sponsorship revenue from a new contract entered into in the first quarter of 2022, (b) a $0.4 million increase in food and beverage, ticket and gaming and merchandising revenue primarily attributable to the removal of COVID-19 pandemic-related capacity restrictions at the Company’s HyperX Esports Arena in Las Vegas on June 1, 2021, and (c) a $0.4 million increase in event revenue.
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The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.
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