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Significant Accounting Policies

9 Months Ended

Sep. 30, 2025

Significant Accounting Policies [Abstract]

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, 2024, filed with the Securities and Exchange Commission (“SEC”) on June 9, 2025.

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 September 30, 2025, and for the three and nine months ended September 30, 2025 and 2024. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the operating results for the full year ending December 31, 2025 or any other period. These unaudited condensed consolidated financial statements have been derived from the Company’s accounting records and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on June 9, 2025.

Investments in Equity Linked, Bond Linked, and FX Linked Notes

The Company has elected the fair value option for recording its equity linked, bond linked, and FX linked notes (the “Notes”), pursuant to ASC 825-10, Financial Instruments (“ASC 825”), whereby the hybrid instrument is initially recorded in its entirety at fair value and changes in fair value are recorded in other income (expense) on the condensed consolidated statements of operations. The Company determines the appropriate classification of these investments at the time of purchase and reevaluates such designation at each balance sheet date. The Notes are included in short-term investments on the Company’s balance sheet if the maturity date is less than one year from the balance sheet date.

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).

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

As of September 30, 2025	Level 1		Level 2		Level 3		Total
Digital assets	$	356,017	$	-	$	-	$	356,017
Cash equivalent - money market funds		12,339,429		-		-		12,339,429
Marketable securities		2,155,326		-		-		2,155,326
Short-term investment - bond linked notes		-		25,585,425		-		25,585,425
Short-term investment - equity linked notes		-		6,019,800		-		6,019,800
Short-term investment - FX linked notes		-		6,742,622		-		6,742,622
Total	$	14,850,772	$	38,347,847	$	-	$	53,198,619

As of December 31, 2024	Level 1		Level 2		Level 3		Total
Cash equivalent - money market funds	$	40,007,612	$	-	$	-	$	40,007,612
Marketable securities		3,483,211		-		-		3,483,211
Total	$	43,490,823	$	-	$	-	$	43,490,823

The carrying amounts of the Company’s financial instruments, such as accounts receivable, short-term investments (excluding equity, ETF, and bond linked notes), deposits - current portion, interest receivable, loans receivable, accounts payable, operating lease liabilities – current portion, accrued liabilities, and loans payable approximate fair value due to the short-term nature of these instruments.

ETF, bond, and equity linked notes are categorized within level 2 of the fair value hierarchy, as the fair value is based on the price of the underlying equity securities or foreign exchange rates. See Note 3 – Short-Term Investments for further details on short-term investments.

Net Loss per Common Share

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

The following table presents the computation of basic and diluted net loss per common share:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2025			2024			2025			2024
Numerator:
Net loss attributable to common stockholders	$	(5,361,229	)	$	(4,027,941	)	$	(15,008,847	)	$	(9,530,309	)

Denominator:
Weighted-average common shares outstanding		38,167,484			38,151,697			40,900,281			40,582,346
Less: weighted-average unvested restricted shares		-			(931,793	)		-			(828,394	)
Denominator for basic and diluted net loss per share		38,167,484			37,219,904			40,900,281			39,753,952

Basic and Diluted Net Loss per Common Share	$	(0.14	)	$	(0.11	)	$	(0.37	)	$	(0.24	)

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

	As of September 30,
	2025		2024
Options		1,270,000		1,320,000
Warrants		-		1,454,546
		1,270,000		2,774,546

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.

The Company recognizes revenue primarily from the following sources:

In-person revenue

In-person revenue was comprised of the following for the three and nine months ended September 30, 2025 and 2024:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Event revenue	$	414,318	$	700,943	$	2,000,352	$	1,572,864
Sponsorship revenue		458,967		460,237		1,377,051		1,378,711
Food and beverage revenue		45,956		44,615		170,197		115,746
Ticket and gaming revenue		81,777		103,376		247,978		325,788
Merchandising revenue		7,965		36,313		31,155		124,935
Total in-person revenue	$	1,008,983	$	1,345,484	$	3,826,733	$	3,518,044

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

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

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

Multiplatform revenue

Distribution revenue amounted to $67 and $71 for the three months ended September 30, 2025 and 2024, respectively. Distribution revenue amounted to $204 and $182 for the nine months ended September 30, 2025 and 2024, respectively. 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.

Casual mobile gaming revenue

Casual mobile gaming revenue amounted to approximately $0.8 million and $0.8 million for the three months ended September 30, 2025 and 2024, respectively. Casual mobile gaming revenue amounted to approximately $2.2 million and $3.7 million for the nine months ended September 30, 2025 and 2024, respectively. Casual mobile gaming revenue is generated through contractual relationships with various advertising service providers for advertisements within the Company’s casual mobile games. Advertisements can be in the form of an impression, click-throughs, videos, or banners. The Company has determined the advertising service provider to be its customer and displaying the advertisements within its games is identified as the single performance obligation. Revenue from advertisements is recognized when the ad is displayed or clicked and the advertising service provider receives the benefits provided from this service. The price can be determined by the applicable evidence of the arrangement, which may include a master contract or a third-party statement of activity.

The transaction price is generally the product of the advertising units delivered (e.g. impressions, click-throughs) and the contractually agreed upon price per advertising unit. The price per advertising unit can also be based on revenue share percentages stated in the contract. The number of advertising units delivered is determined at the end of each month so there is no uncertainty about the transaction price.

The Company’s casual games are played on various mobile third-party platforms for which such third parties collect monies from advertisers and remit the net proceeds after deducting payment processing fees, user acquisition cost, agent fees, and player incentive payments. The Company is primarily responsible for providing access to the games, has control over the content and functionality of games before they are accessed by players, and has the discretion to establish the pricing for the advertisements. Therefore, the Company concluded that it is the principal, and as a result, revenues are reported gross of payment processing fees and player incentive fees. Payment processing fees and player incentive fees are recorded as components of cost of revenue in the accompanying condensed consolidated statements of operations.

Revenue recognition

The following table summarizes our revenue recognized under ASC 606 in our condensed consolidated statements of operations:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024

Revenues Recognized at a Point in Time:
Food and beverage revenue	$	45,956	$	44,615	$	170,197	$	115,746
Ticket and gaming revenue		81,777		103,376		247,978		325,788
Merchandising revenue		7,965		36,313		31,155		124,935
Casual mobile games		837,862		817,986		2,214,593		3,664,244
Distribution revenue		67		71		204		182
Total Revenues Recognized at a Point in Time		973,627		1,002,361		2,664,127		4,230,895

Revenues Recognized Over a Period of Time:
Event revenue		414,318		700,943		2,000,352		1,572,864
Sponsorship revenue		458,967		460,237		1,377,051		1,378,711
Total Revenues Recognized Over a Period of Time		873,285		1,161,180		3,377,403		2,951,575
Total Revenues	$	1,846,912	$	2,163,541	$	6,041,530	$	7,182,470

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. As of September 30, 2025 and December 31, 2024, the Company had contract liabilities of $302,429 and $656,382, respectively, which is included in deferred revenue on the condensed consolidated balance sheet.

Through September 30, 2025, $641,652 of performance obligations in connection with contract liabilities included within deferred revenue on the December 31, 2024 consolidated balance sheet have been satisfied. The Company expects to satisfy the remaining performance obligations of $14,730 related to its December 31, 2024 deferred revenue balance within the next twelve months. During the nine months ended September 30, 2025 and 2024, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Effective February 22, 2023, the Company entered into a sponsorship agreement which expires on April 2, 2026. The total contract price for this sponsorship agreement is $5.8 million. As of September 30, 2025, the aggregate transaction price allocated to the unsatisfied performance obligations under this agreement is approximately $0.9 million. The Company expects to recognize this revenue as the performance obligations are satisfied over the remaining term of the contract.

Digital Assets

The Company has ownership of and control over the digital assets and the Company may use third-party custodial services to secure them. The Company accounted for digital assets held as the result of the receipt of Ethereum and Bitcoin, as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other through December 31, 2024. Following the adoption of ASU 2023-08 effective January 1, 2025, the Company measures digital assets at fair value with changes recognized in other (expense) income in the condensed consolidated statement of operations. Refer to Note 8 – Digital Assets for further information regarding the Company’s impact of the adoption of ASU 2023-08.

Concentration Risks

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, short-term investments, loans receivable, accounts receivable, interest receivable, other receivables, and current and non-current deposits. The Company maintains cash deposits and short-term investments with major U.S. financial institutions that at various times may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of September 30, 2025, two customers represented 87% of the Company’s accounts receivable balance. Historically, the Company has not experienced any losses due to such concentration of credit risk.

During the three months ended September 30, 2025 and 2024, 45% and 38%, respectively, of the Company’s revenues were from customers located outside the United States. During the nine months ended September 30, 2025 and 2024, 37% and 51%, respectively, of the Company’s revenues were from customers located outside the United States.

During the three months ended September 30, 2025, the Company’s two largest customers accounted for 44%, and 25% of the Company’s consolidated revenues. During the nine months ended September 30, 2025, the Company’s two largest customers accounted for 35%, and 27% of the Company’s consolidated revenues.

During the three months ended September 30, 2024, the Company’s three largest customers accounted for 15%, 21% and 38% of the Company’s consolidated revenues. During the nine months ended September 30, 2024, the Company’s two largest customers accounted for 36%, and 20% of the Company’s consolidated revenues.

Foreign Currency Translation

The Company’s reporting currency is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies (primarily United States Dollar, and Chinese Yuan). Since the acquisition of ZTech on October 31, 2023, Yuan-denominated assets and liabilities are translated into the United States Dollar using the exchange rate at the balance sheet date (0.1404 and 0.1370 at September 30, 2025 and December 31, 2024, respectively) and revenue and expense accounts are translated using the weighted average exchange rate in effect for the period (0.1397 and 0.1396 for the three months ended September 30, 2025 and 2024, respectively, and (0.1385 and 0.1379 for the nine months ended September 30, 2025 and 2024, respectively). Resulting translation adjustments are made directly to accumulated other comprehensive income (loss).

The Company engages in foreign currency denominated transactions with customers, suppliers, investment, and financing, as well as between subsidiaries with different functional currencies. (Losses) gains of $0.3 million and ($1.2) million arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency for the three months ended September 30, 2025 and 2024, respectively, are recognized in other (expense) income in the accompanying condensed consolidated statements of operations. Losses of $0.8 million and $0.9 million arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency for the nine months ended September 30, 2025 and 2024, respectively, are recognized in other (expense) income in the accompanying condensed consolidated statements of operations.

Segment Information

Reportable segments are components of an enterprise about which separate financial information is available for evaluation by the chief operating decision maker in making decisions about how to allocate resources and assess performance. The chief operating decision maker of Allied Gaming & Entertainment Inc is its chief executive officer. Financial information for each of the separate entities are reviewed by the chief operating decision maker. The operations of Allied Esports (video game events and tournaments), Z-Tech (casual mobile games) and Skyline (live concert promotion) are reported as separate operating segments. See Note 14 – Segment Reporting.

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.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 – 04). The ASU requires, among other items, additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the condensed consolidated statements of operations. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating the effect of adopting the ASU on its disclosures.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350 – 60). This update requires an entity to subsequently measure certain assets at fair value with changes recognized in net income each reporting period. This update also requires that an entity present crypto assets measured at fair value separately from other intangible assets in the condensed consolidated balance sheet and changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the condensed consolidated statement of operations. The Company adopted ASU 2023-08 on January 1, 2025 and recorded a cumulative-effect adjustment to the opening balance of retained earnings in the amount of $89,428.

Tax Law Change

On July 4, 2025, the President signed into law significant federal tax legislation, H.R.1 (the “Tax Reform Act of 2025”). The legislation includes numerous changes to U.S. corporate income tax law, including but not limited to: permanent 100% bonus depreciation for qualified property, immediate expensing of domestic research and experimental expenditures, modifications to the limitation on business interest expense, increased Section 179 expensing limits, changes to the international tax regime, and expanded limitations on the deductibility of executive compensation under IRC Section 162(m). Most provisions are effective for tax years beginning after December 31, 2024, with certain transition rules and exceptions.

The Company is currently evaluating the impact of the Tax Reform Act of 2025 on its condensed consolidated financial statements. The effects of the new law, including remeasurement of deferred tax assets and liabilities and changes to current and future tax expense, will be evaluated. No material impact is expected given the Company’s historical net operating losses.