Item 1. Financial Statements
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
Note 1 – Business Organization and Nature
of Operations
Allied Esports Entertainment
Inc. (“AESE” and together with its subsidiaries, “the Company”) operates a public esports and entertainment company,
consisting of the Allied Esports business and, until the sale of World Poker Tour (“WPT”) on July 12, 2021, the World Poker
Tour business. Allied Esports operates through its wholly owned subsidiaries Allied Esports International, Inc., (“AEII”),
Esports Arena Las Vegas, LLC (“ESALV”) and ELC Gaming GMBH (“ELC Gaming”). 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. ELC Gaming 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.
AESE’s wholly owned
subsidiaries, Peerless Media Limited, Club Services, Inc. (“CSI”) and WPT Enterprises, Inc., operated the poker-related business
of AESE and are collectively referred to herein as “World Poker Tour” or “WPT”. World Poker Tour is an internationally
televised gaming and entertainment company that has been involved in the sport of poker since 2002 and created a television show based
on a series of high-stakes poker tournaments.
On January 19, 2021, the
Company entered into a stock purchase agreement (as amended and restated, the “SPA”) for the sale of 100% of the capital
stock of its wholly owned subsidiary, CSI. CSI owns 100% of each of the legal entities which comprise World Poker Tour. On July 12, 2021,
the Company consummated the sale of the World Poker Tour business. As the result of the Company’s sale of WPT, the condensed
consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021, and the condensed consolidated
statements of cash flows for the three months ended March 31, 2021, present the results and accounts of World Poker Tour as discontinued
operations.
COVID-19 Pandemic.
The magnitude and duration of the COVID19 pandemic has had a significant adverse effect on the Company. As a global entertainment company
that hosts numerous live events with spectators and participants in destination cities, such outbreak has caused people to avoid traveling
to and attending our events. Early on, the Allied Esports and WPT businesses had cancelled or postponed live events, and until Allied
Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada reopened on June 25, 2020 these businesses were
operating online only. Truck events in Europe have been slow to return but the Luxor arena is currently running at full capacity for
daily play and weekly tournaments. and, given the positive effects of vaccines on the US and global populations along with relaxed restrictions
on travel and social gatherings, we expect that such impacts will be less significant on our future operations and liquidity.
Risks and Uncertainties
At this time, the regulation of digital assets,
blockchain and NFTs remains in an early stage. The extent to which securities laws or other regulations apply or may apply in the future
to such assets is unclear at this time. However, on March 9, 2022, the White House issued an Executive Order on Ensuring Responsible Development
of Digital Assets proposing, among other things, regulation of digital assets. Future regulation of such assets may increase our compliance
costs or adversely impact our business.
Note 2 – Significant Accounting Policies
There have been no material
changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements
included in the Annual Report on Form 10-K for the year ended December 31, 2021.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Basis of Presentation and Principles of Consolidation
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly,
they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. In the
opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary
for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of March 31, 2022, and for the
three months ended March 31, 2022 and 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative
of the operating results for the full year ending December 31, 2022 or any other period. These unaudited condensed consolidated financial
statements have been derived from the accounting records of AESE, WPT and Allied Esports and should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021,
filed with the Securities and Exchange Commission (“SEC”) on May 26, 2022.
Fair Value of Financial Instruments
The Company measures the
fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures”
(“ASC 820”).
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in
active markets for identical assets or liabilities.
Level 2 - quoted prices for
similar assets and liabilities in active markets or inputs that are observable.
Level 3 - inputs that are
unobservable (for example, cash flow modeling inputs based on assumptions).
Warrants previously issued
to the Company’s sponsor (the “Sponsor Warrants”) are classified as a liability measured at fair value. As March 31,
2022 and December 31, 2021, the fair value of warrant liabilities related to our Sponsor Warrants totaled $4,500 and $3,200, respectively,
which is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet. See Note
3 – Accrued Expenses and Other Current Liabilities. The Sponsor Warrants are valued using level 3 inputs. The fair value of the
Sponsor Warrants is estimated using the Black-Scholes option pricing method. Significant level 3 inputs used to calculate the fair value
of the Sponsor Warrants include the share price on the valuation date, expected volatility, expected term and the risk-free interest
rate.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The following is a roll forward
of the Company’s Level 3 instruments:
Balance, January 1, 2022 | |
$ | 3,200 | |
Change in fair value of sponsor warrants | |
| 1,300 | |
Balance, March 31, 2022 | |
$ | 4,500 | |
The key inputs into the Black-Scholes
model at the relevant measurement dates were as follows:
| |
March 31, | | |
December 31, | |
Input | |
2022 | | |
2021 | |
Risk-free rate | |
| 2.44 | % | |
| 0.97 | % |
Remaining term in years | |
| 2.36 | | |
| 2.61 | |
Expected volatility | |
| 51.0 | % | |
| 46.0 | % |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Fair value of common stock | |
$ | 1.73 | | |
$ | 1.81 | |
Net (Loss) Income per Common Share
Basic (loss) income per common
share is computed by dividing net (loss) income attributable to the Company by the weighted average number of common shares outstanding
during the period. Diluted (loss) income per common share is computed by dividing net (loss) income attributable to common stockholders
by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the potential
(a) exercise of outstanding stock options, warrants and equity purchase options; (b) the conversion of convertible instruments; (c) vesting
of restricted stock awards; (d) and receipt of contingent consideration shares.
The following table presents
the computation of basic and diluted net loss per common share:
|
|
For the Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Numerator: |
|
|
|
|
|
|
Net loss - continuing operations |
|
$ |
(3,751,197 |
) |
|
$ |
(4,973,718 |
) |
Net income - discontinued operations |
|
$ |
- |
|
|
$ |
1,637,042 |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
39,116,907 |
|
|
|
39,162,811 |
|
Less: weighted-averages unvested restricted shares |
|
|
(52,444 |
) |
|
|
(199,143 |
) |
Denominator for basic and diluted net loss per share |
|
$ |
39,064,463 |
|
|
$ |
38,963,668 |
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net (Loss) Income per Common Share |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.10 |
) |
|
$ |
(0.13 |
) |
Discontinued operations, net of tax |
|
$ |
- |
|
|
$ |
0.04 |
|
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
The following securities
are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:
|
|
For the Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Restricted common shares |
|
|
- |
|
|
|
199,143 |
|
Options |
|
|
2,415,000 |
|
|
|
2,430,000 |
|
Warrants |
|
|
20,091,549 |
|
|
|
20,091,549 |
|
Convertible debt |
|
|
- |
|
|
|
235,294 |
|
Equity purchase options |
|
|
600,000 |
|
|
|
600,000 |
|
Contingent consideration shares (1) |
|
|
192,308 |
|
|
|
269,231 |
|
|
|
|
23,298,857 |
|
|
|
23,825,217 |
|
| (1) | Holders who elected to convert their Bridge
Note into common stock are entitled to receive contingent consideration shares equal to the
product of (i) 3,846,153 shares, multiplied by (ii) that holder’s investment amount,
divided by (iii) $100,000,000, if at any time within five years after the August 9, 2019
closing date, the last exchange-reported sale price of common stock trades at or above $13.00
for thirty (30) consecutive calendar days. |
Revenue Recognition
To determine the proper revenue
recognition method, the Company evaluates each of its contractual arrangements to identify its performance obligations. A performance
obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the Company’s contracts
have a single performance obligation because the promise to transfer the individual good or service is not separately identifiable from
other promises within the contract and is therefore not distinct. Some of the Company’s contracts have multiple performance obligations,
primarily related to the provision of multiple goods or services. For contracts with more than one performance obligation, the Company
allocates the total transaction price in an amount based on the estimated relative standalone selling prices underlying each performance
obligation.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The Company recognizes revenue
from continuing operations primarily from the following sources:
In-person revenue
The Company’s in-person
revenue is comprised of event revenue, sponsorship revenue, merchandising revenue and other revenue. Event revenue is generated through
Allied Esports events held at the Company’s esports properties. Event revenues recognized from the rental of the Allied Esports
arena and gaming trucks are recognized at a point in time when the event occurs. In-person revenue also includes revenue from ticket
sales, admission fees and food and beverage sales for events held at the Company’s esports properties. Ticket revenue is recognized
at the completion of the applicable event. Point of sale revenues, such as food and beverage, gaming and merchandising revenues, are
recognized when control of the related goods are transferred to the customer.
The Company also generates
sponsorship revenues for naming rights for, and rental of, the Company’s arena and gaming trucks. Sponsorship revenues from naming
rights of the Company’s esports arena and from sponsorship arrangements are recognized on a straight-line basis over the contractual
term of the agreement. The Company records deferred revenue to the extent that payment has been received for services that have yet to
be performed.
In-person revenue was comprised
of the following for the three months ended March 31, 2022 and 2021:
| |
For the Three Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
Event revenue | |
$ | 536,597 | | |
$ | 110,441 | |
Sponsorship revenue | |
| 1,326,250 | | |
| 244,294 | |
Food and beverage revenue | |
| 201,318 | | |
| 70,704 | |
Ticket and gaming revenue | |
| 117,779 | | |
| 68,644 | |
Merchandising revenue | |
| 21,122 | | |
| 6,945 | |
Total in-person revenue | |
$ | 2,203,066 | | |
$ | 501,028 | |
Multiplatform revenue
Multiplatform revenue was
comprised of the following for the three months ended March 31, 2022 and 2021:
| |
For the Three Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
NFT revenue | |
$ | 208,758 | | |
$ | - | |
Distribution revenue | |
| 230 | | |
| - | |
Total multiplatform revenue | |
$ | 208,988 | | |
$ | - | |
The Company’s NFT revenue
was generated from the sale of non-fungible tokens (NFTs). The Company’s NFTs exist on the Ethereum Blockchain under the Company’s
EPICBEAST brand, a digital art collection of 1,958 unique beasts inspired by past and present e-sport games. The Company uses the NFT
exchange, OpenSea, to facilitate its sales of NFTs. The Company, through OpenSea, has custody and control of the NFT prior to the delivery
to the customer and records revenue at a point in time when the NFT is delivered to the customer and the customer pays. The Company has
no obligations for returns, refunds or warranty after the NFT sale.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The Company also earns a
royalty of up to 10% of the sale price when an NFT is resold by its owner in a secondary market transaction. The Company recognizes this
royalty as revenue when the sale is consummated, consideration for which is payable as Ether cryptocurrency.
The Company’s distribution
revenue is generated primarily through the distribution of content to online channels. Any advertising revenue earned by online channels
is shared with the Company. The Company recognizes online advertising revenue at the point in time when the advertisements are placed
in the video content.
Revenue recognition
The following table summarizes
our revenue recognized under ASC 606 in our condensed consolidated statements of operations:
| |
For the Three Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Revenues Recognized at a Point in Time: | |
| | |
| |
Event revenue | |
$ | 536,597 | | |
$ | 110,441 | |
NFT revenue | |
| 208,758 | | |
| - | |
Food and beverage revenue | |
| 201,318 | | |
| 70,704 | |
Ticket and gaming revenue | |
| 117,779 | | |
| 68,644 | |
Merchandising revenue | |
| 21,122 | | |
| 6,945 | |
Sponsorship revenue | |
| - | | |
| 2,502 | |
Distribution revenue | |
| 230 | | |
| - | |
Total Revenues Recognized at a Point in Time | |
| 1,085,804 | | |
| 259,236 | |
| |
| | | |
| | |
Revenues Recognized Over a Period of Time: | |
| | | |
| | |
Sponsorship revenue | |
| 1,326,250 | | |
| 241,792 | |
Total Revenues Recognized Over a Period of Time | |
| 1,326,250 | | |
| 241,792 | |
Total Revenues | |
$ | 2,412,054 | | |
$ | 501,028 | |
The timing of the Company’s
revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior
to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services,
the Company records deferred revenue until the performance obligations are satisfied. As of March 31, 2022 and December 31, 2021,
the Company had contract liabilities of $365,537 and $141,825, respectively, which is included in deferred revenue on the condensed consolidated
balance sheet.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Digital Assets
The Company purchases Ether
cryptocurrency and accepts Ether as a form of payment for NFT sales. The Company accounts for these digital assets held as the result
of the purchase or receipt of Ether, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill
and Other. We have ownership of and control over our digital assets and we may use third-party custodial services to secure them. The
digital assets are initially recorded at cost and are subsequently remeasured, net of any impairment losses incurred since acquisition.
We determine the fair value
of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement, based on quoted prices on the
active exchange(s) that we have determined is the principal market for Ether (Level 1 inputs). We perform an analysis each quarter
to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that
it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest
market price quoted on an active exchange since acquiring the respective digital asset. If the then current carrying value of a digital
asset exceeds the fair value, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference
between their carrying values and the fair value.
The impaired digital assets
are written down to their fair value at the time of impairment and this new cost basis will not be adjusted upward for any subsequent
increase in fair value. Gains are not recorded until realized upon sale, at which point they are presented net of any impairment losses
for the same digital assets held. In determining the gain or loss to be recognized upon sale, we calculate the difference between the
sales price and carrying value of the digital assets sold immediately prior to sale. Impairment losses and gains or losses on sales are
recognized within other expense in our condensed consolidated statements of operations and comprehensive loss. There were no impairment
losses for the three months ended March 31, 2022 and we did not sell any digital assets during the same time period.
The following table sets
forth changes in our Ether holdings:
Balance, December 31, 2021 | |
$ | - | |
Purchases | |
| 36,746 | |
Received from customers | |
| 177,946 | |
Impairment loss | |
| - | |
Foreign currency translation | |
| 4,093 | |
Balance, March 31, 2022 | |
$ | 218,785 | |
Concentration Risks
During the three months ended
March 31, 2022 and 2021, 3% and 10%, respectively, of the Company’s revenues from continuing operations were from customers in
foreign countries.
During the three months ended
March 31, 2022, the Company’s two largest customers accounted for 41%, and 12% of the Company’s consolidated revenues from
continuing operations. During the three months ended March 31, 2021, the Company’s two largest customers accounted for 31%,
and 16% of the Company’s consolidated revenues from continuing operations.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Foreign Currency Translation
The Company’s reporting
currency is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies
(United States Dollar and Euro). Euro-denominated assets and liabilities are translated into the United States Dollar using the exchange
rate at the balance sheet date (1.1114 and 1.1342 at March 31, 2022 and December 31, 2021, respectively), and revenue and expense accounts
are translated using the weighted average exchange rate in effect for the period (1.1165 and 1.1829 for the three months ended March 31,
2022 and 2021, respectively). Resulting translation adjustments are made directly to accumulated other comprehensive income. Losses of
$1,890 and $324 arising from exchange rate fluctuations on transactions denominated in a currency other than the reporting currency for
the three months ended March 31, 2022 and 2021, respectively, are recognized in operating results in the accompanying condensed consolidated
statements of operations. The Company engages in foreign currency denominated transactions with customers and suppliers, as well as between
subsidiaries with different functional currencies.
Subsequent Events
The Company evaluates events
that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company
did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed
consolidated financial statements, except as disclosed.
Discontinued Operations
The results of operations
of WPT for the three months ended March 31, 2021 are included in “Income from discontinued operations, net of tax provision”
in the accompanying condensed consolidated statements of operations.
Reclassifications
Certain prior year balances
have been reclassified in order to conform to current year presentation. These reclassifications had no effect on previously reported
results of operations or loss per share.
Recently Adopted Accounting Pronouncements
On May 3, 2021, the Financial
Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share
(Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges
of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s
accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity
classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after
the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to
early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes
that interim period. This standard was adopted on January 1, 2022 and did not have a material impact on the Company’s condensed
consolidated financial statements.
ALLIED
ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 3 – Accrued Expenses and Other
Current Liabilities
Accrued expenses and other current liabilities
consist of the following:
| |
March 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Compensation expense | |
$ | 2,411,357 | | |
$ | 2,202,621 | |
Current portion of deferred rent | |
| 160,993 | | |
| 198,504 | |
Event costs | |
| 465,051 | | |
| 8,874 | |
Legal and professional fees | |
| 406,027 | | |
| 368,691 | |
Warrant liabilities | |
| 4,500 | | |
| 3,200 | |
Other accrued expenses | |
| 145,732 | | |
| 172,858 | |
Other current liabilities | |
| 30,671 | | |
| 11,497 | |
Total | |
$ | 3,624,331 | | |
$ | 2,966,245 | |
Less: non current portion of accrued compensation expense | |
| (208,333 | ) | |
| - | |
Accrued expenses and other current liabilities | |
$ | 3,415,998 | | |
$ | 2,966,245 | |
| |
| | | |
| | |
Accrued expenses, related party(1) | |
$ | 1,800,000 | | |
$ | 1,800,000 | |
(1) | | Represents amounts accrued to reimburse a principal shareholder for costs incurred in connection with specified Company transactions, including $1,300,000 incurred in connection with the sale of WPT. |
Note 4 – Commitments and Contingencies
Litigations, Claims, and Assessments
The Company is involved in
various disputes, claims, liens and litigation matters arising out of the normal course of business. 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 the outcome of these matters will have a material adverse effect on the Company’s consolidated financial position, results
of operations or cash flows.
Resignation of Chief Executive Officer
On
February 18, 2022, Libing (Claire) Wu resigned as Chief Executive Officer and General Counsel of the Company. In connection with her
resignation, the Company entered into a Separation Agreement and Release with Ms. Wu (the “Release”) pursuant to which, among
other things, Ms. Wu released the Company from any and all claims she may have against the Company (subject to certain exclusions), and
the Company agreed to provide Ms. Wu with certain separation benefits, including $750,000 (gross) in severance pay payable over an 18-month
period, accelerated vesting of 200,000 unvested stock options previously granted to Ms. Wu pursuant to an Option Agreement dated effective
July 13, 2021, extended the exercise period to exercise such options to July 13, 2031, respectively, and accelerated vesting of 80,000
shares of restricted stock previously granted to Ms. Wu pursuant to an Executive Restricted Stock Agreement dated July 13, 2021. As no
future substantive services will be performed by Ms. Wu, the Company immediately recognized stock-based compensation expense of $258,979
related to the modification of these awards. The Release also contains a customary non-disparagement provision.
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
Board of Directors
On
February 18, 2022, Jerry Lewin resigned as a Class C Director of the Company. In appreciation of Mr. Lewin’s services to the Company
as a director, Chair of the Compensation Committee and a member of the Audit Committee, the Company paid to Mr. Lewin $25,000, accelerated
vesting of 40,000 unvested stock options previously granted to Mr. Lewin pursuant to an option agreement dated effective May 6, 2021,
and extended the exercise period of such options to May 6, 2031. The Company immediately recognized stock-based compensation expense
of $32,909 related to the modification of these awards.
Note 5 – Stockholders’ Equity
Stock Options
A summary of the option activity
during the three months ended March 31, 2022 is presented below:
| |
| | |
Weighted | | |
Weighted | | |
| |
| |
| | |
Average | | |
Average | | |
| |
| |
Number of | | |
Exercise | | |
Remaining | | |
Intrinsic | |
| |
Options | | |
Price | | |
Term (Yrs) | | |
Value | |
Outstanding, January 1, 2022 | |
| 2,415,000 | | |
$ | 3.73 | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| | | |
| | |
Exercised | |
| - | | |
| - | | |
| | | |
| | |
Expired | |
| - | | |
| - | | |
| | | |
| | |
Forfeited | |
| - | | |
| - | | |
| | | |
| | |
Outstanding, March 31, 2022 | |
| 2,415,000 | | |
$ | 3.73 | | |
| 7.27 | | |
$ | - | |
Exercisable, March 31, 2022 | |
| 1,600,000 | | |
$ | 3.80 | | |
| 6.57 | | |
$ | - | |
Options outstanding and exercisable as of March
31, 2022 are as follows:
Options Outstanding | | |
Options Exercisable | |
| | |
| | |
Weighted | | |
| |
| | |
Outstanding | | |
Average | | |
Exercisable | |
Exercise | | |
Number of | | |
Remaining Life | | |
Number of | |
Price | | |
Options | | |
In Years | | |
Options | |
$ | 2.11 | | |
| 80,000 | | |
| 8.25 | | |
| 20,000 | |
$ | 2.17 | | |
| 120,000 | | |
| 8.35 | | |
| 120,000 | |
$ | 2.21 | | |
| 350,000 | | |
| 9.29 | | |
| 200,000 | |
$ | 2.48 | | |
| 160,000 | | |
| 9.10 | | |
| 40,000 | |
$ | 4.09 | | |
| 1,425,000 | | |
| 5.60 | | |
| 1,060,000 | |
$ | 5.66 | | |
| 280,000 | | |
| 7.47 | | |
| 160,000 | |
| | | |
| 2,415,000 | | |
| 6.57 | | |
| 1,600,000 | |
ALLIED ESPORTS ENTERTAINMENT, INC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The expected term used for
options is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified”
method to develop an estimate of the expected term of “plain vanilla” option grants. The Company uses a blended volatility
calculation, the components of which are the Company’s historical volatility for the period from its initial public offering through
the valuation date and the average peer-group data of four comparable entities to supplement the Company’s own historical data
for the preceding years in computing the expected volatility. Accordingly, the Company is utilizing an expected volatility figure based
on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument
being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining
term consistent with the expected term of the instrument being valued.
For the three months ended
March 31, 2022 and 2021, the Company recorded $318,951 and $282,999, respectively, of stock-based compensation expense related to stock
options, of which $0 and $56,296, respectively, was included in income from discontinued operations before the sale of WPT on the accompanying
condensed consolidated statement of operations. As of March 31, 2022, there was $901,830 of unrecognized stock-based compensation expense
related to the stock options that will be recognized over the weighted average remaining vesting period of 2.10 years.
Restricted Common Stock
A summary of the non-vested
restricted common stock activity during the three months ended March 31, 2022 is presented below:
| |
| | |
Weighted | |
| |
Number of | | |
Average | |
| |
Restricted | | |
Grant Date | |
| |
Stock | | |
Fair Value | |
Non-vested balance, January 1, 2022 | |
| 80,000 | | |
$ | 2.00 | |
Vested | |
| (80,000 | ) | |
| 2.00 | |
Non-vested balance, March 31, 2022 | |
| - | | |
$ | - | |
For the three months ended
March 31, 2022 and 2021, the Company recorded $82,345 and $80,006, respectively, of stock-based compensation expense related to restricted
stock of which $0 and $13,561, respectively, was included in income from discontinued operations before the sale of WPT on the accompanying
condensed consolidated statement of operations. As of December 31, 2021, all restricted common stock was fully vested.