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, 2025 and 2024, which are included elsewhere in this Annual Report on Form 10-K. 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” elsewhere in this Annual Report on Form 10-K, and other factors that we have not identified.
The Company
All In FutureTech Alliance, Inc., along with its subsidiaries (“AIFA” or the “Company”) (formerly known as “Allied Gaming & Entertainment Inc.”) is a global experiential entertainment company focused on providing a growing audience of gamers with unique experiences through renowned assets, products, and services. 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. 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. Ltd (“Z-Tech”), 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. 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.
Allied’s in-person experiences include live events hosted at its flagship arena, HyperX Arena Las Vegas, an affiliate arena with one of its global network of esports arena partners, and its mobile arenas. Allied’s multiplatform content include its partnerships with live streamers, post-produced episodic content, and short-form repackaged content. Allied’s 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.
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 Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024:
For the Years Ended
December 31,
Favorable
(in thousands)
(Unfavorable)
Revenues:
In-person
Casual mobile gaming
Total Revenues
Costs and Expenses:
In-person (exclusive of depreciation and amortization)
Casual mobile gaming (exclusive of depreciation and amortization)
Research and development expenses
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Impairment of goodwill
Impairment of long-lived assets
Total Costs and Expenses
Loss From Operations
Other Income (Expense):
Other (expense) income, net
Loss on escrow settlement
Realized gain on investment in money market fund
Loss on investment in marketable securities, derivative and short-term investments
(Loss) gain on foreign currency transactions, net
Change in fair value of digital assets
Interest income, net
Total Other Income (Expense)
Pre-Tax Loss
Income tax benefit
Net Loss
Revenues
In-person experience revenue was $4.9 million and $4.7 million for the years ended December 31, 2025 and 2024. The increase in-person experience revenues consisted of a $0.3 million increase in event revenue and $0.1 million decrease in ticket and gaming revenue. The increase in event revenue is primarily attributable to the number of events held during 2025 versus the quantity of such events in the prior year.
Casual mobile gaming revenue was $3.0 million and $4.4 million for the years ended December 31, 2025 and 2024, respectively. The decrease in casual mobile games revenue was primarily due to the 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 $0.3 million, or 12%, to approximately $2.8 million for the year ended December 31, 2025 from approximately $2.5 million for the year ended December 31, 2024. The increase is the result of the costs associated with third party events held at the arena during 2025 compared to 2024.
Casual mobile gaming costs (exclusive of depreciation and amortization) were $2.8 million for the year ended December 31, 2025 and $3.9 million for the year ended December 31, 2024, respectively, resulting from a decrease in user incentive, user acquisition and other costs directly associated with the decline in revenues.
Research and development expenses were $673 thousand and $865 thousand for the years ended December 31, 2025 and 2024, respectively. Research and development expenses consist principally of costs related to the development of new casual mobile games by our BLT and Z-Tech subsidiaries.
General and administrative expenses increased by approximately $17.7 million to approximately $31.1 million for the year ended December 31, 2025, from approximately $13.3 million for the year ended December 31, 2024. The increase in general and administrative expenses resulted primarily from an $11.1 million increase in legal and professional fees incurred in connection with complaints filed by a dissident stockholder, a lawsuit filed against the stockholder for violations of Section 13 of the Securities Exchange Act of 1934, and a proxy contest between the Company and such stockholder, a $2.0 million payment under a strategic cooperation agreement, which represents a significant first step in the Company’s planned development into a leading global fiber optic communication, computing power, and AI-enabled services provider, a $2.6 million CECL allowance on the Company’s loans receivable, a $0.5 million payment to acquire access to an educational license through which the Company will launch and monetize a variety of new educational initiatives and technologies, a $0.7 million increase in payroll and travel costs, a $1.1 million increase in consulting, audit and tax fees, as well as a $0.2 million increase in directors’ and officers’ insurance costs. These increases were slightly offset by a $0.5 million decrease in stock-based compensation due to restricted share awards granted on February 22, 2024, in which a portion immediately vested.
Impairments of goodwill were approximately $0.7 and $9.6 million for the years ended December 31, 2025 and 2024, respectively. The impairments resulted from management’s determination that the fair value of one of its reporting units was less than its carrying amount at the end of each year.
Impairments of long-lived assets were approximately $7.2 and $0.4 million for the years ended December 31, 2025 and 2024, respectively. The impairments resulted from management’s determination that the fair value of these assets were less than their carrying amounts.
Loss on escrow settlement
In 2024, we recognized a loss in connection with a Settlement and Release Agreement dated September 16, 2024, with Brookfield Property Partners (“Brookfield”), under which $3.0 million was released and paid to Brookfield from an escrow account established in January 2020 (see Note 14 – Commitments and Contingencies – Investment Agreement). The entire escrow account of $5.0 million was included in restricted cash on the consolidated balance sheets from that date through the date of the Settlement and Release Agreement.
Change in fair value of digital assets
The decrease in the fair value of digital assets was approximately $78 thousand and $0 for the years ended December 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 change in fair value represents fluctuations in the fair value of Ethereum and Bitcoin from the date of adoption or the date of purchase if made during year ended December 31, 2025.
Interest income, net
Interest income, net, was approximately $4.2 million and $3.7 million for the years ended December 31, 2025 and 2024 respectively. Interest income 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 periods.
Liquidity and Capital Resources
The following table summarizes our total current assets, current liabilities and working capital at December 31, 2025 and 2024:
December 31,
December 31,
(in thousands)
Current Assets
Current Liabilities
Working Capital Surplus
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 December 31, 2025, we had cash and cash equivalents of approximately $11.8 million (not including $37.7 million of short-term investments and $1.3 million of marketable securities) and working capital of approximately $27.2 million.
Cash requirements for our current liabilities include approximately $33.1 million for loans payable, approximately $14.5 million in the aggregate for accounts payable and accrued expenses, and approximately $1.7 million for the current portion of an operating lease liability. Cash requirements for non-current liabilities include approximately $2.4 million for the non-current portion of an operating lease liability. The Company intends to meet these cash requirements from its current cash, short-term investments, and marketable securities balances.
Cash Flows from Operating, Investing and Financing Activities
The table below summarizes cash flows for the years ended December 31, 2025 and 2024:
For the Year Ended
December 31,
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net Cash Used in Operating Activities
Net cash used in operating activities for the years ended December 31, 2025 and 2024 was approximately $9.8 million and $9.8 million, respectively, representing a decreased usage of cash of $17 thousand. During the years ended December 31, 2025 and 2024, the net cash used in operating activities was primarily attributable to the net loss of approximately $34.6 million and $22.6 million, respectively, adjusted for approximately $14.5 million and $12.7 million, respectively, of net non-cash expenses, and approximately $10.3 million and $0.1 million, respectively, of cash generated by changes in the levels of operating assets and liabilities.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 was approximately $38.4 million, which consisted of $232.5 million used for the purchase of short-term investments, $6.1 million used for loans receivable, net, $1.9 million used for the purchase of land use rights, and $3.1 million used for an investment in unconsolidated affiliate, partially offset by $134.3 million in proceeds from the maturing of short-term investments, $68.1 million from proceeds from early withdrawal of short-term investments, and $3.0 million from proceeds from the sale of marketable securities.
Net cash provided by investing activities for the year ended December 31, 2024 was approximately $23.8 million, which consisted principally of approximately $127.7 million in proceeds from the maturing of short-term investments, partially offset by approximately $79.6 million used for the purchase of short-term investments, $5.0 million for the purchase of marketable securities, $2.2 million for the purchase of land use rights and $19.1 million for the issuance of short-term loans.
Net Cash Provided By Financing Activities
Net cash provided by financing activities for the year ended December 31, 2025 was approximately $0.8 million, which consisted of approximately $50.0 million from the proceeds of short-term loans, which was partially offset by approximately $42.5 million for repayments of short-term loans, and $6.6 million returned upon the cancellation of a share purchase agreement.
Net cash provided by financing activities for the year ended December 31, 2024 was approximately $23.9 million, which consisted of approximately $26.0 million from the proceeds of short-term loans, $6.6 million of proceeds from the issuance of common stock in securities purchase agreements, and $2.0 million of proceeds from issuance of common stock in share purchase agreements. This was partially offset by approximately $8.5 million for repayments of short-term loans, $2.0 million for repayments of proceeds from the cancellation of common stock previously issued pursuant to a share purchase agreement, and approximately $0.2 million for issuance costs associated with common stock issuances.
Off-Balance Sheet Arrangements
The Company does not engage in any off-balance sheet financing activities, nor does the Company have any interest in entities referred to as variable interest entities.
Critical Accounting 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. 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. 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.
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. 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. 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. Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted-average cost of capital. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in our consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill.
Income Taxes
The Company’s annual effective income tax rate is based on the mix of income and losses in its U.S. and non-U.S. entities which are part of the Company’s consolidated financial statements, statutory tax rates, and tax-planning opportunities available to the Company in the various jurisdictions in which it operates. Significant judgment is required in evaluating the Company’s tax positions.
Tax law requires certain items to be included in the tax return at different times from when these items are reflected in the Company’s Consolidated Statements of Operations. As a result, the effective tax rate reflected in the Consolidated Financial Statements is different from the tax rate reported on the Company’s consolidated tax return. Some of these differences are permanent, such as expenses that are not deductible in the tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment dates.
The Company assesses uncertain tax positions in accordance with ASC 740, Income Taxes. Judgment is used to identify, recognize, and measure the amounts to be recorded in the financial statements related to tax positions taken or expected to be taken in a tax return. A liability is recognized to represent the potential future obligation to the taxing authority for the benefit taken in the tax return. These liabilities are adjusted, including any impact of the related interest and penalties, in light of changing facts and circumstances such as the progress of a tax audit. A number of years may elapse before a particular matter for which a reserve has been established is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction.
The Company assesses whether a valuation allowance should be established against its deferred income tax assets based on consideration of available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecast of future profitability, the duration of statutory carry back and carry forward periods, the Company’s experience with tax attributes expiring unused, and tax planning alternatives.
Assessing the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns requires judgment. The Company believes that income taxes include critical accounting estimates because variations in the actual outcome of these future tax consequences could materially impact the Company’s financial position, results of operations or cash flows.
The Company recognizes the tax benefit from an uncertain income tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement by examining taxing authorities.
Impairment of Long-Lived Assets
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.
Impairment of Goodwill
The Company reviews for the impairment of goodwill annually or on an interim basis if events or circumstances indicate that the fair value of an asset has more likely than not decreased below its carrying value. In determining whether a quantitative assessment is required, the Company will evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after performing the qualitative assessment, an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the entity would perform the quantitative impairment test described in ASC 350. However, if, after applying the qualitative assessment, the entity concludes that it is not more than likely that the fair value is less than the carrying amount, the quantitative impairment test is not required. The Company bases these assumptions on its historical data and experience, industry projections, micro and macro general economic condition projections, and its expectations.
