All In FutureTech Alliance, Inc.: Form 10-Q for the period ended Mar 31, 2025

Cautionary Statements

The following discussion and analysis of the results of operations and financial condition of Allied Gaming & Entertainment Inc. (the “Company”) as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2024, which are included in the Form 10-K (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on June 9, 2025. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company and its subsidiaries. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” in our Annual Report, and other factors that we may not know. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements above, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

The Company

Allied Gaming and Entertainment Inc., along with its subsidiaries (“Allied” 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. The Company offers a variety of esports, gaming-and entertainment content and services through its three subsidiaries, Allied Esports International (“AEI”), Allied Mobile Entertainment and Allied Experiential Entertainment, 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.

Under 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. AEI 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 an original content studio which creates and produces proprietary content series to serve brand activation and promotion, fans and community engagement.

Allied Mobile Entertainment (“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. Ltd, a prominent mobile games developer and operator who is engaged in the development and distribution of casual mobile games in Mainland China, solidifies our presence in this lucrative sector.

Allied Experiential Entertainment (“AEE”) focuses on orchestrating live entertainment events and offers management and consultation service to experiential entertainment venue operations. In January 2025, AEE made a strategic investment by acquiring a minority interest stake in a partnership engaged in the production and distribution of The Angry Birds Movie 3, which will allow us to potentially receive profits generated by the movie after it is released. This initiative underscores Allied’s commitment to investing in iconic intellectual properties with broad, cross-generational appeal and multi-platform potential; supporting the Company’s growth strategy and expanding its global audience reach.

Allied’s in-person experiences include live events hosted at its flagship arena, HyperX Arena Las Vegas, an affiliate arena with one of its global network of esports arena partners, and its mobile arenas. Allied’s multiplatform content includes its partnerships with live streamers, post-produced episodic content, and short-form repackaged content. Allied’s casual mobile gaming includes contractual relationships with various advertising service providers for advertisements within the Company’s casual mobile games.

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. 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.

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.

Corporate Developments

Termination of Securities Purchase Agreement

On April 25, 2025, the Company and Blue Planet each agreed to terminate the Securities Purchase Agreement dated October 18, 2024, pursuant to which the Company had sold to Blue Planet (i) 6,000,000 shares of common stock of the Company and (ii) a corresponding warrant to purchase up to 6,000,000 shares of common stock at an exercise price of $1.80 per share, for an aggregate purchase price of $6,600,000. Pursuant to the termination agreement, the Company agreed to (1) refund the $6,600,000 purchase price, (2) Blue Planet transferred back to the Company all of the shares of common stock and warrants to purchase shares of common stock that had been issued in connection with the Securities Purchase Agreement and (3) cancel the corresponding warrant to purchase up to 6,000,000 shares of common stock.

Noncompliance with Nasdaq Listing Rules

On April 17, 2025, the Company received a deficiency letter (the “Form 10-K Letter”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that it was not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”) was not filed with the SEC by the required due date of March 31, 2025 (or April 15, 2025, following the Form 12b-25 filed by the Company on March 31, 2025).

On May 22, 2025, the Company received a deficiency letter (the “Form 10-Q Letter”) from the Staff of Nasdaq notifying the Company that it was not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the “Form 10-Q”) was not filed with the SEC by the required due date of May 15, 2025 (or May 20, 2025, following the Form 12b-25 filed by the Company on May 15, 2025) and because the Company had at the time of the Form 10-Q Letter remained delinquent in its filings for its Form 10-K (together the “Delinquent Reports”).

The Company was provided until June 16, 2025, or 60 calendar days from the receipt of the Form 10-K Letter, to submit a plan (the “Compliance Plan”) to regain compliance with the Nasdaq Listing Rules with respect to the Delinquent Reports. The Company filed its Form 10-K on June 9, 2025, and received a letter from the Staff of Nasdaq on June 10, 2025, notifying the Company that it had regained partial compliance with the periodic filings requirements upon the filing of the Form 10-K. On June 16, 2025, the Company submitted its Compliance Plan to the Staff with respect to its delinquent Form 10-Q filing.

On June 18, 2025, the Company received a notice from the Staff of Nasdaq indicating that, based on the Company’s non-compliance with Listing Rule 5620(a), which requires the Company to hold an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end, in addition to the Company’s non-compliance with Listing Rule 5250(c)(1) with respect to its Form 10-Q, the Staff determined to initiate procedures to delist the Company’s securities unless the Company requested an appeal to a Nasdaq Hearings Panel (the “Panel”) by June 25, 2025. On June 25, 2025, the Company submitted to the Staff a Request for Additional Stay, requesting a further stay of any suspension action pending the conclusion of the hearing process. Also on June 25, 2025, the Company received from the Staff a letter providing formal notice that the Panel will consider the Company’s appeal at an oral hearing. A hearing is scheduled for July 31, 2025.

As disclosed on our Current Report on Form 8-K filed with the SEC on May 23, 2025, and the proxy statement filed with the SEC on June 30, 2025, the Company’s Annual Meeting is scheduled for August 4, 2025, the Company is diligently preparing for the hearing to address the Annual Meeting deficiency and regain compliance with the Nasdaq Listing Rules.

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. Through our subsidiaries, we offer esports fans state-of-the-art facilities to compete against other players in esports competitions, host live events with esports superstars that potentially stream to millions of viewers worldwide, and produce and distribute esports content at our on-site production facilities and studios. At our flagship arena in Las Vegas, Nevada, we provide an attractive facility for hosting a diverse range of events, including corporate events, tournaments, game launches, and brand activation. 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.

Results of Operations for the Three Months Ended March 31, 2025 and 2024

(in thousands)

27

Revenues

In-person experience revenues increased by approximately $0.4 million, or 32%, to approximately $1.7 million for the three months ended March 31, 2025 from approximately $1.3 million for the three months ended March 31, 2024. The increase in in-person revenues resulted from higher revenue generated from arena events.

Casual mobile gaming revenue was $0.6 million for the three months ended March 31, 2025 and $1.1 million for the three months ended March 31, 2024, respectively. The decrease in casual mobile games revenue was primarily due to contraction of the online card game market as well as increasing competition from new mobile game developers.

Costs and expenses

In-person costs (exclusive of depreciation and amortization) increased by approximately $0.2 million, or 35%, to approximately $0.9 million for the three months ended March 31, 2025 from approximately $0.6 million for the three months ended March 31, 2024. The increase is the result of the costs associated with third party events at the arena held during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Casual mobile gaming costs (exclusive of depreciation and amortization) were $0.6 million for the three months ended March 31, 2025 and $0.9 million for the three months ended March 31, 2024, respectively, resulting from a decrease in user incentive fees and user acquisition costs during the period in connection with the decrease in revenues described above.

Research and development expenses were $181 thousand and $195 thousand for the three months ended March 31, 2025 and 2024, respectively. Research and development expenses consist principally of costs related to the development of new casual mobile games for ZTech.

Selling and marketing expenses decreased by approximately $14 thousand, or 26%, to approximately $40 thousand for the three months ended March 31, 2025 from approximately $54 thousand for the three months ended March 31, 2024.

General and administrative expenses increased by approximately $2.6 million, or 92%, to approximately $5.5 million for the three months ended March 31, 2025, from approximately $2.9 million for the three months ended March 31, 2024. The increase in general and administrative expenses resulted primarily from a $3.2 million increase in legal and professional fees incurred in connection with a complaint filed by a dissident stockholder, as well as a $0.1 million increase in salaries due to the hiring of our new President in April of 2024. These increases were partially offset by the decrease in audit, tax, and filing fees of $0.2 million and stock-based compensation of $0.3 million due to restricted share awards granted on February 22, 2024 in which a portion immediately vested.

Depreciation and amortization increased by approximately $7 thousand, or 2%, to approximately $382 thousand for the three months ended March 31, 2025, from approximately $375 thousand for the three months ended March 31, 2024.

Other income (expense), net

We recognized other non-operating income, net, of approximately $24 thousand during the three months ended March 31, 2024, compared to $13 thousand of other expense, net, recorded for the three months ended March 31, 2024, representing a increase in other income of $37 thousand.

Realized gain on investment in money market fund

We realized a gain on investment in money market fund of $0.4 million for the three months ended March 31, 2025, resulting from to the change in fair value of the money market funds between the purchase date and March 31, 2025. There were no investments in money market funds for the three months ended March 31, 2024.

Loss on investment in marketable securities

The Company recognized a loss of $0.3 million on its investments in marketable securities during the three months ended March 31, 2025, due to the change in fair value of the marketable securities that were owned during the period. There were no investments in marketable securities for the three months ended March 31, 2024.

Loss on foreign currency transactions, net

The loss on foreign currency transactions was approximately $0.6 million for the three months ended March 31, 2025 compared to $0 for the three months ended March 31, 2024. The increase in loss is a result of changes in the exchange rate of the Japanese Yen to United States Dollar between the dates certain loans payable were borrowed, the dates certain loans receivable were issued, and the dates certain equity linked notes, bond linked notes, ETF linked notes, and foreign securities were purchased and the remeasurement date of March 31, 2025.

Change in fair value of digital assets

The decrease in the fair value of digital assets was approximately $63 thousand and $0 for the three months ended March 31, 2025 and 2024, respectively. We adopted ASU 2023-08 on January 1, 2025, which requires entities to measure crypto assets at fair value. The decrease in fair value is a result of the decrease in the fair value of Ethereum from the date of adoption.

Interest income, net

Interest income, net, was approximately $864 thousand for the three months ended March 31, 2025 compared to approximately $859 thousand of interest income for the three months ended March 31, 2024. The increase is a result of the interest earned on fixed term deposits and equity, bond, and ETF linked notes, as well as interest earned on loans receivable during the period.

Liquidity and Capital Resources

The following table summarizes our total current assets, current liabilities and working capital at March 31, 2025 and December 31, 2024, respectively:

(in thousands)

Our primary sources of liquidity and capital resources have been cash and short-term investments on the balance sheet, including the funds received through the sale of World Poker Tour.

As of March 31, 2025, we had cash and cash equivalents of approximately $19.5 million (not including $49.2 million of short-term investments and $2.1 million of marketable securities) and working capital of approximately $57.3 million.

Cash requirements for our current liabilities include approximately $34.5 million for loans payable, approximately $4.5 million in the aggregate for accounts payable and accrued expenses, and approximately $1.6 million for the current portion of an operating lease liability. Cash requirements for non-current liabilities include approximately $3.6 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 Flows from Operating, Investing and Financing Activities

The table below summarizes cash flows for the three months ended March 31, 2025 and 2024:

(in thousands)

29

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2025 and 2024 was approximately $2.2 million and $2.1 million, respectively, representing increased usage of cash of $0.1 million. During the three months ended March 31, 2025 and 2024, the net cash used in operating activities was primarily attributable to the net loss of approximately $4.9 million and $1.8 million, respectively, adjusted for approximately $1.5 million and $1.1 million, respectively, of net non-cash expenses, and approximately $1.2 and $1.4 million, respectively, of cash used to fund changes in the levels of operating assets and liabilities.

Net Cash Used In Investing Activities

Net cash used in investing activities for the three months ended March 31, 2025 was approximately $45.1 million, which consisted of $64.0 million used for the purchase of short-term investments, $2.4 million used for loans receivable, $2.6 million used for other receivables, and $2.5 million used for the investments, partially offset by $23.8 million in proceeds from the maturing of short-term investments, $1.3 million from proceeds from repayment of short-term loans, and $1.2 million from proceeds from the sale of marketable securities.

Net cash used in investing activities for the three months ended March 31, 2024 was approximately $14.5 million, which consisted of $19.6 million used for the purchase of short-term investments and $1.3 million used for the issuance of a short-term loan, partially offset by $6.5 million in proceeds from the maturing of short-term investments.

Net Cash Provided By Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2025 was approximately $7.5 million compared to approximately $7.6 million of net cash used in financing activities during the three months ended March 31, 2024. Net cash provided by financing activities during the three months ended March 31, 2025 represented proceeds from a short-term loan of $19.2 million, which is partially offset by a repayment of short-term loans of 11.7 million.

Net cash provided by financing activities for the three months ended March 31, 2024 was approximately $7.6 million, which consisted of approximately $5.6 million from proceeds from short-term loans and $2.0 million from proceeds from issuance of common stock in a share purchase agreement.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Estimates

We prepare our condensed 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. 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. We evaluate these estimates on an ongoing basis.

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. We consider accounting for income taxes, impairment of long-lived assets, and impairment of goodwill to be critical accounting estimates. There are other items within our financial statements that require estimation but are not deemed critical, as defined above.

Effectiveness of Disclosure Controls and Procedures

Our management, under the direction of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based on this evaluation our management, including the Company’s Chief Executive Officer and Chief Financial Officer, has concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2025 to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

Inherent Limitations on Effectiveness of Controls

Even assuming the effectiveness of our controls and procedures, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. In general, our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2025, there were no changes in our internal control over financial reporting that have affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2024 and our other public filings, which could materially affect our business, financial condition or future results. Except as listed below, there have been no material changes from risk factors previously disclosed in “Risk Factors” in such Form 10-K in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on June 9, 2025.

We are currently not in compliance with Nasdaq’s continued listing requirements. Failure to regain compliance with Nasdaq’s listing requirements could result in delisting and adversely affect our stock price, liquidity and ability to raise capital.

Our continued eligibility for listing on Nasdaq depends on our ability to comply with Nasdaq’s continued listing requirements. Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards.

On April 17, 2025, the Company received the Form 10-K Letter from the Staff of Nasdaq notifying the Company that it was not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company’s Form 10-K was not filed with the SEC by the required due date of March 31, 2025 (or April 15, 2025, following the Form 12b-25 filed by the Company on March 31, 2025). The Form 10-K Letter had no immediate effect on the listing or trading of the Company’s shares. We filed the Form 10-K on June 9, 2025, and received a letter from the Staff of Nasdaq on June 10, 2025, notifying the Company that it had regained partial compliance with the periodic filings requirements upon the filing of the Form 10-K.

On May 22, 2025, the Company received the Form 10-Q Letter from the Staff of Nasdaq notifying the Company that it was not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1) because the Company’s Form 10-Q was not filed with the SEC by the required due date of May 15, 2025 (or May 20, 2025, following the Form 12b-25 filed by the Company on May 15, 2025) and because the Company had at the time of the Form 10-Q Letter remained delinquent in its filings for its Form 10-K.

Under Nasdaq rules, the Company had until Monday June 16, 2025, or 60 calendar days from the receipt of the Form 10-K Letter, to submit the Compliance Plan to the Staff. On June 16, 2025, the Company submitted its Compliance Plan to the Staff with respect to its delinquent Form 10-Q filings. If Nasdaq accepts the Compliance Plan, Nasdaq may grant an exception until Monday, October 13, 2025, to regain compliance with the Nasdaq rules.

In addition, on June 18, 2025, the Company received a notice from the Staff of Nasdaq indicating that, based on the Company's non-compliance with Listing Rule 5620(a), which requires the Company to hold an annual meeting of shareholders within twelve months of the end of the Company's fiscal year end, in addition to the Company's non-compliance with Listing Rule 5250(c)(1) with respect to its Form 10-Q, the Staff determined to initiate procedures to delist the Company's securities unless the Company requested an appeal the Panel by June 25, 2025. On June 25, 2025, the Company submitted to the Staff a Request for Additional Stay, requesting a further stay of any suspension action pending the conclusion of the hearing process. Also on June 25, 2025, the Company received from the Staff a letter providing formal notice that the Panel will consider the Company's appeal at an oral hearing. A hearing is scheduled for July 31, 2025.

If Nasdaq delists the Company’s common stock from trading on its exchange for failure to meet the requirements for continued listing or any other listing standards, we and our stockholders could face significant material adverse consequences including:

• a limited availability of market quotations for our securities;
• a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;
• a limited amount of analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.