Cover
Cover - USD ($) | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2020 | Mar. 28, 2022 | Jun. 30, 2021 | |
Entity Information [Line Items] | ||||
Document Type | 10-K | |||
Amendment Flag | false | |||
Document Annual Report | true | |||
Document Transition Report | false | |||
Document Period End Date | Dec. 31, 2021 | |||
Document Fiscal Period Focus | FY | |||
Document Fiscal Year Focus | 2021 | |||
Current Fiscal Year End Date | --12-31 | |||
Entity File Number | 001-39868 | |||
Entity Registrant Name | Motorsport Games Inc. | |||
Entity Central Index Key | 0001821175 | |||
Entity Tax Identification Number | 86-1791356 | |||
Entity Incorporation, State or Country Code | DE | |||
Entity Address, Address Line One | 5972 NE 4th Avenue | |||
Entity Address, City or Town | Miami | |||
Entity Address, State or Province | FL | |||
Entity Address, Postal Zip Code | 33137 | |||
City Area Code | (305) | |||
Local Phone Number | 507-8799 | |||
Title of 12(b) Security | Class A common stock, $0.0001 par value per share | |||
Trading Symbol | MSGM | |||
Security Exchange Name | NASDAQ | |||
Entity Well-known Seasoned Issuer | No | |||
Entity Voluntary Filers | No | |||
Entity Current Reporting Status | Yes | |||
Entity Interactive Data Current | Yes | |||
Entity Filer Category | Non-accelerated Filer | |||
Entity Small Business | true | |||
Entity Emerging Growth Company | true | |||
Elected Not To Use the Extended Transition Period | false | |||
Entity Shell Company | false | |||
Entity Public Float | $ 64,902,558 | |||
Documents Incorporated By Reference | Portions of the registrant’s definitive proxy statement relating to its 2022 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. | |||
ICFR Auditor Attestation Flag | false | |||
Auditor Firm ID | 248 | 57 | ||
Auditor Name | GRANT THORNTON LLP | Dixon Hughes Goodman LLP | ||
Auditor Location | Miami, Florida | Raleigh, North Carolina | ||
Common Class A [Member] | ||||
Entity Information [Line Items] | ||||
Entity Common Stock, Shares Outstanding | 11,673,587 | |||
Common Stock, Voting Rights | Class A common stock, with 1 vote per share | |||
Common Class A [Member] | Motorsport Network [Member] | ||||
Entity Information [Line Items] | ||||
Entity Common Stock, Shares Outstanding | 7,000,000 | |||
Common Stock, Voting Rights | 1 vote per share | |||
Common Class B [Member] | ||||
Entity Information [Line Items] | ||||
Entity Common Stock, Shares Outstanding | 7,000,000 | |||
Common Stock, Voting Rights | Class B common stock, with 10 votes per share | |||
Common Class B [Member] | Motorsport Network L L C [Member] | ||||
Entity Information [Line Items] | ||||
Entity Common Stock, Shares Outstanding | 7,000,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 17,819,640 | $ 3,990,532 |
Accounts receivable, net of allowances of $4,563,884 and $2,150,684 as of December 31, 2021 and 2020, respectively | 5,490,272 | 5,975,414 |
Due from related parties | 137,574 | |
Prepaid expenses and other current assets | 1,175,354 | 507,177 |
Total Current Assets | 24,622,840 | 10,473,123 |
Property and equipment, net | 727,089 | 162,148 |
Goodwill | 4,867,465 | 137,717 |
Intangible assets, net | 20,485,809 | 5,568,452 |
Deferred offering costs | 749,370 | |
Other assets | 296,200 | |
Total Assets | 50,703,203 | 17,387,010 |
Current Liabilities: | ||
Accounts payable | 1,784,645 | 705,951 |
Accrued expenses and other liabilities | 3,524,271 | 3,355,003 |
Due to related parties | 119,015 | 10,853,536 |
Deferred acquisition payments | 3,170,319 | |
Total Current Liabilities | 8,598,250 | 14,914,490 |
Other non-current liabilities | 4,122,950 | 856,694 |
Total Liabilities | 12,721,200 | 15,771,184 |
Commitments and contingencies (Note 12) | ||
Stockholders’ Equity/Member’s Equity | ||
Preferred stock, $0.0001 par value authorized 1,000,000 shares; 0 shares issued and outstanding as of December 31, 2021 and December 31, 2020 | ||
Common stock | ||
Additional paid-in capital | 75,651,175 | |
Member’s equity | 3,791,674 | |
Accumulated deficit | (37,988,326) | (4,826,335) |
Accumulated other comprehensive income (loss) | (945,375) | 4,928 |
Total Stockholders’ Equity/Member’s Deficit Attributable to Motorsport Games Inc. | 36,719,338 | (1,029,733) |
Noncontrolling interest | 1,262,665 | 2,645,559 |
Total Stockholders’ Equity/Member’s Equity | 37,982,003 | 1,615,826 |
Total Liabilities and Stockholders’ Equity/Member’s Equity | 50,703,203 | 17,387,010 |
Common Class A [Member] | ||
Stockholders’ Equity/Member’s Equity | ||
Common stock | 1,164 | |
Common Class B [Member] | ||
Stockholders’ Equity/Member’s Equity | ||
Common stock | $ 700 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Accounts receivable, net of allowances | $ 4,563,884 | $ 2,150,684 |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | |
Preferred Stock, Shares Authorized | 1,000,000 | |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Class A [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,635,897 | 0 |
Common stock, shares outstanding | 11,635,897 | 0 |
Common Class B [Member] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 7,000,000 | 7,000,000 |
Common stock, shares issued | 7,000,000 | 0 |
Common stock, shares outstanding | 7,000,000 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | ||
Income Statement [Abstract] | |||
Net revenues | $ 15,075,530 | $ 19,045,529 | |
Cost of Revenue | [1] | 7,529,155 | 6,595,872 |
Gross Profit | 7,546,375 | 12,449,657 | |
Operating Expenses: | |||
Selling and Marketing Expense | [2] | 6,475,867 | 3,402,310 |
Research and Development Expense | [3] | 9,621,712 | 4,649,187 |
General and Administrative Expense | [4] | 25,378,149 | 4,335,434 |
Depreciation and amortization | 280,192 | 61,579 | |
Impairment of intangible assets | 317,113 | ||
Total Operating Expenses | 42,073,033 | 12,448,510 | |
Income (Loss) From Operations | (34,526,658) | 1,147 | |
Interest Expense | [5] | (504,156) | (717,498) |
Gain (loss) attributable to equity method investment | 1,370,837 | (70,792) | |
Other income (expense), net | (44,768) | 107,289 | |
Net Loss | (33,704,745) | (679,854) | |
Less: Net income (loss) attributable to noncontrolling interest | (542,754) | 1,076,793 | |
Net Loss Attributable to Motorsport Games Inc. | $ (33,161,991) | $ (1,756,647) | |
Net loss per Class A common share attributable to Motorsport Games, Inc. [6]: | |||
Basic and Diluted | $ (2.91) | ||
Earnings Per Share, Basic and Diluted, Other Disclosures [Abstract] | |||
Basic and Diluted | 11,376,754 | ||
[1] | Includes related party costs of $0 and $135,431 for the years ended December 31, 2021 and 2020, respectively. | ||
[2] | Includes related party expenses of $75,378 and $67,686 for the years ended December 31, 2021 and 2020, respectively. | ||
[3] | Includes related party expenses of $44,423 and $93,472 for the years ended December 31, 2021 and 2020, respectively. | ||
[4] | Includes related party expenses of $1,803,709 and $1,236,591 for the years ended December 31, 2021 and 2020, respectively. | ||
[5] | Includes related party expenses of $105,845 and $698,830 for the years ended December 31, 2021 and 2020, respectively. |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Statement [Abstract] | ||
Net loss | $ (33,704,745) | $ (679,854) |
Other comprehensive loss: | ||
Foreign currency translation adjustments | (950,303) | |
Comprehensive loss | (34,655,048) | (679,854) |
Comprehensive income loss attributable to non-controlling interests | (542,754) | 1,076,793 |
Comprehensive income loss attributable to Motorsport Games Inc. | $ (34,112,294) | $ (1,756,647) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity/Member's Equity - USD ($) | Common Stock [Member]Common Class A [Member] | Common Stock [Member]Common Class B [Member] | Member Units [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | AOCI Attributable to Parent [Member] | Parent [Member] | Noncontrolling Interest [Member] | Total | |
Beginning balance, value at Dec. 31, 2019 | $ (3,069,688) | $ 4,928 | $ (3,064,760) | $ 6,676,314 | $ 3,611,554 | |||||
Beginning balance, shares at Dec. 31, 2019 | ||||||||||
Change of control adjustments | 3,791,674 | 3,791,674 | (5,107,548) | (1,315,874) | ||||||
Net loss | (1,756,647) | (1,756,647) | 1,076,793 | (679,854) | ||||||
Ending balance, value at Dec. 31, 2020 | 3,791,674 | (4,826,335) | 4,928 | (1,029,733) | 2,645,559 | 1,615,826 | ||||
Ending balance, shares at Dec. 31, 2020 | ||||||||||
Conversion of membership interest into share of common stock | $ 700 | $ 700 | (3,791,674) | 3,790,274 | ||||||
Conversion of membership interest into share of common stock, shares | 7,000,000 | 7,000,000 | ||||||||
Issuance of common stock in initial public offering, net | [1] | $ 345 | 63,073,783 | 63,074,128 | 63,074,128 | |||||
Issuance of common stock in initial public offering, net, shares | [1] | 3,450,000 | ||||||||
Issuance of common stock to Ascend and PlayFast | $ 86 | 86 | 86 | |||||||
Issuance of common stock to Ascend and Playfast, shares | 855,264 | |||||||||
Purchase of additional interest in Le Mans Esports Series Ltd | 1,584,892 | 1,584,892 | ||||||||
Purchase of 704Games minority interest | (939,511) | (939,511) | (2,659,786) | (3,599,297) | ||||||
ACO investment in Le Mans Esports Series Ltd | 234,754 | 234,754 | ||||||||
Stock-based compensation | $ 33 | 9,726,629 | 9,726,662 | 9,726,662 | ||||||
Stock-based compensation, shares | 330,633 | |||||||||
Other comprehensive loss | (950,303) | (950,303) | (950,303) | |||||||
Net loss | (33,161,991) | (33,161,991) | (542,754) | (33,704,745) | ||||||
Ending balance, value at Dec. 31, 2021 | $ 1,164 | $ 700 | $ 75,651,175 | $ (37,988,326) | $ (945,375) | $ 36,719,338 | $ 1,262,665 | $ 37,982,003 | ||
Ending balance, shares at Dec. 31, 2021 | 11,635,897 | 7,000,000 | ||||||||
[1] | Gross proceeds of $ 69,000,000 5,925,872 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity/Member's Equity (Parenthetical) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Common Stock [Member] | |
Proceeds from Issuance Initial Public Offering | $ 69,000,000 |
Payment for offering cost | $ 5,925,872 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (33,704,745) | $ (679,854) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 1,785,074 | 720,179 |
Sales return and price protection reserves | 3,934,697 | 314,086 |
Loss on disposal of property and equipment | 32,537 | |
Loss on impairment of goodwill and intangible assets | 317,113 | |
(Gain) loss on equity method investee | (1,370,837) | 70,792 |
Stock-based compensation | 9,726,662 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (3,252,041) | 642,732 |
Prepaid expenses and other current assets | (768,801) | (427,980) |
Other assets | 25,000 | (40,428) |
Accounts payable | 944,527 | (1,737,999) |
Accrued expenses | 670,107 | 5,094,585 |
Other non-current liabilities | 751,580 | 64,695 |
Net Cash Provided By (Used In) Operating Activities | (20,941,664) | 4,053,345 |
Cash Flows From Investing Activities: | ||
Purchase of additional interest in Le mans, net of cash acquired | 153,250 | |
Purchase of shares of common stock of 704Games from noncontrolling shareholders | (1,316,280) | |
Acquisition of equity method investee | (244,202) | |
Acquisition of KartKraft | (1,000,000) | |
Acquisition of Studio397 | (12,785,463) | |
Purchase of intangible assets | (227,928) | (100,000) |
Purchase of property and equipment | (754,302) | (136,755) |
Net Cash Used In Investing Activities | (14,614,443) | (1,797,237) |
Cash Flows From Financing Activities: | ||
Proceeds from advances from related parties | 2,157,707 | 361,145 |
Repayments on advances from related parties | (12,967,143) | |
Proceeds from issuance of Class A common stock sold in initial public offering, net of underwriting costs | 63,661,128 | |
Purchase of additional ownership from non-controlling interest | (3,599,211) | |
Contributed capital from non-controlling interests | 234,754 | |
Payments of deferred offering costs | (587,000) | |
Net Cash Provided By (Used In) Financing Activities | 49,487,235 | (225,855) |
Effect of exchange rate changes on cash | (102,020) | |
Net Increase In Cash | 13,829,108 | 2,030,253 |
Cash and Cash Equivalents - Beginning of the Year | 3,990,532 | 1,960,279 |
Cash and Cash Equivalents - End of the Year | 17,819,640 | 3,990,532 |
Cash paid during the year for: | ||
Interest | 804,675 | |
Non-cash investing and financing activities: | ||
Increase of additional paid-in capital for initial public offering costs paid in the prior year | 587,000 | |
Accrual of intangible asset | 2,513,871 | 791,999 |
Deferred acquisition consideration | 3,170,319 | |
Reduction of additional paid-in capital for purchased 704Games minority shares | 939,511 | |
Acquisition of controlling interest in Le Mans | 1,584,892 | |
Accrual of deferred offering costs | 162,370 | |
Accrued loss on equity method investee | $ 26,999 |
BUSINESS ORGANIZATION, NATURE O
BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTAINTIES | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTAINTIES | BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTAINTIES Organization and Operations Motorsport Gaming US LLC (“Motorsport Gaming”) was established as a limited liability company on August 2, 2018 under the laws of the State of Florida. On January 8, 2021, Motorsport Gaming converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc. (the “Company,” “Motorsport Games,” “we,” “us” or “our”). Upon effecting the corporate conversion on January 8, 2021, Motorsport Games now holds all the property and assets of Motorsport Gaming, and all of the debts and obligations of Motorsport Gaming were assumed by Motorsport Games by operation of law upon such corporate conversion. See “Note 10 – Stockholder’s/Member’s Equity – Corporate Conversion” for additional details. Risks and Uncertainties The global spread of the ongoing and prolonged COVID-19 pandemic and its variants has created significant business uncertainty for us and others, which has negatively impacted the global economy, disrupted global supply chains and workforce participation, and initially created significant volatility and disruption of financial markets. Additionally, the outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place, stay-at-home or total lock-down (or similar) orders and business limitations and shutdowns. In late fiscal 2020 and throughout fiscal 2021, vaccines for combating COVID-19 were approved by health agencies in certain countries and regions where we operate and began to be administered, and we saw some loosening of government-mandated COVID-19 restrictions in certain locations, such as the United States, in response to improved COVID-19 infection levels. More recently, new variants of COVID-19, such as the Omicron variant, that are significantly more contagious than previous strains, have emerged. Further, . The spread of these new strains have caused some government authorities to reimpose some or all of the earlier restrictions or impose other restrictions, all in an effort to lessen the spread of COVID-19 and its variants. While these lockdowns have begun to be lifted, the lingering impact of COVID-19 has continued to create significant volatility throughout the global economy, such as supply chain disruptions, limited labor supplies and higher inflation, which in turn has caused constraints on consumer spending. As a result of the ongoing and prolonged COVID-19 pandemic, including the related responses from government authorities, the Company’s business and operations have been impacted, including the temporary closures of its offices in Miami, Florida, Silverstone, England, and Moscow, Russia, which has resulted in many of employees working remotely Similarly several retailers have experienced, and continue to experience, closures, reduced operating hours and/or other restrictions as a result of the ongoing and prolonged COVID-19 pandemic and its variants, which has negatively impacted the sales of products from such retailers Additionally, in esports business, the ongoing and prolonged COVID-19 pandemic has resulted in the cancellation or postponement of certain events to later dates or shifting events from an in-person format to online only The Company continues to monitor the evolving situation caused by the COVID-19 pandemic, and the Company may take further actions required by governmental authorities or that the Company determines are prudent to support the well-being of the Company’s employees, suppliers, business partners and others. The degree to which the ongoing and prolonged COVID-19 pandemic impacts th operations, business, financial results, liquidity, and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the pandemic; its severity; the emergence and severity of its variants; the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them; and how quickly and to what extent normal economic and operating conditions can resume Liquidity and Going Concern On January 15, 2021, the Company completed its initial public offering which resulted in net proceeds to the Company of approximately $ 63.1 The Company had a net loss of approximately $ 33.7 million and negative cash flows from operations of approximately $ 20.9 million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $ 38.0 Our future liquidity and capital requirements include funds to support the planned costs to operate our business, including amounts required to fund working capital, support the development and introduction of new products, maintain existing titles, and certain capital expenditures. The adequacy of our available funds generally depends on many factors, including our ability to successfully develop consumer-preferred new products or enhancements to our existing products, continued development and expansion of our esports platform and our ability to enter into collaborations with other companies and/or acquire other companies or technologies to enhance or complement our product and service offerings. We may choose to raise additional funds during 2022 through a variety of equity and/or debt financing arrangements, as well as by focusing on cost reduction actions. While we expect to generate additional liquidity through consummating equity and/or debt financings, as well as by continued cost control initiatives, if our sales continue to decline, there can be no assurances that such actions will provide us with sufficient liquidity to meet our cash requirements as, among other things, our liquidity can be impacted by a number of factors, including our level of sales, costs and expenditures, as well as accounts receivable and inventory. There are currently no commitments in place to satisfy our future needed liquidity and capital resources and there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we are unable to obtain adequate funds on acceptable terms, we may be required to, among other things, significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. If we are unable to satisfy our cash requirements from the sources identified above, we could be required to adopt one or more of the following alternatives: ● delaying the implementation of or revising certain aspects of our business strategy; ● reducing or delaying the development and launch of new products and events; ● reducing or delaying capital spending, product development spending and marketing and promotional spending; ● selling assets or operations; ● seeking additional capital contributions and/or loans from Motorsport Network, the Company’s other affiliates and/or third parties; and/or ● reducing other discretionary spending. There can be no assurance that we would be able to take any of the actions referred to above because of a variety of commercial or market factors, including, without limitation, market conditions being unfavorable for an equity or debt issuance, additional capital contributions and/or loans not being available from Motorsport Network or affiliates and/or third parties, or that the transactions may not be permitted under the terms of our various debt instruments then in effect, such as due to restrictions on the incurrence of debt, incurrence of liens, asset dispositions and related party transactions. In addition, such actions, if taken, may not enable us to satisfy our cash requirements if the actions that we are able to consummate do not generate a sufficient amount of additional capital. Even if we do secure additional financing, if our anticipated level of revenues are not achieved because of, for example, less than anticipated consumer acceptance of our offering of products and events; less than effective marketing and promotion campaigns, decreased consumer spending in response to weak economic conditions or weakness in the overall electronic games category; adverse changes in currency; decreased sales of our products and events as a result of increased competitive activities by our competitors; changes in consumer purchasing habits; retailer inventory management or reductions in retailer display space; less than anticipated results from the Company’s existing or new products or from its advertising and/or marketing plans; or if the Company’s expenses, including, without limitation, for advertising and promotions, product returns or price protection expenditures, exceed the anticipated level of expenses, our liquidity may continue to be insufficient to satisfy our future capital requirements. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the operations of the Company and its wholly owned and majority owned subsidiaries. The interests of non-controlling members are reflected as non-controlling interest in the accompanying consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates used in these consolidated financial statements include, but are not limited to, revenue recognition criteria, including reserves for sales returns and price protection, valuation allowance of deferred income taxes, valuation of acquired companies and equity method investments, the recognition and disclosure of contingent liabilities, goodwill and intangible assets impairment testing, and stock-based compensation valuation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates. Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash in bank accounts, which, at times, may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company has not experienced any losses in such accounts, periodically evaluates the creditworthiness of the financial institutions and has determined the credit exposure to be negligible. The Company’s foreign bank accounts are not subject to FDIC insurance. Accounts Receivable Accounts receivable are carried at their contractual amounts, less an estimate for sales allowances. Management estimates the allowance for sales based on previous experience, existing economic conditions, actual sales and inventories in the distribution channel. See Note 2 – Summary of Significant Accounting Policies – Revenue Recognition - Sales Allowance, Sales Returns and Price Protection Reserves Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of December 31, 2021 and 2020, the Company determined that all of its accounts receivable were fully collectible and, accordingly, no allowance for doubtful accounts was recorded. Sales allowances represent the difference between the retail distributor purchase order price and the estimated average sell through price. As of December 31, 2021 and 2020, sales allowances were $ 4,563,884 and $ 2,150,684 , respectively. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization, which is provided on the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are expensed as incurred. Equipment, furniture and fixtures are depreciated over a range of three five years Goodwill and Intangible Assets The Company accounts for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other The Company performs its annual or interim goodwill and indefinite-lived intangible asset impairment tests by comparing the fair value of its reporting units and indefinite-lived intangible assets to their respective carrying values. An entity recognizes an impairment charge for the amount by which the carrying amount of the asset or reporting unit exceeds its fair value. The Company has determined that its reporting units align with its operating segments as defined below. In evaluating goodwill and indefinite-lived intangible assets for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit or the indefinite-lived intangible asset is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, then the Company performs a one-step quantitative impairment test by comparing the fair value of a reporting unit or indefinite-lived intangible asset with its carrying amount and recognizes a loss on impairment in the event the carrying value exceeds the fair value. In assessing the fair value of a reporting unit, the Company utilizes the Income Approach-Discounted Cash Flow Method as well as the Market Approach-Guideline Public Company Method for its reporting units and the relief from royalty method for its indefinite-lived intangible assets. The Company performs its impairment testing as of December 31 of each year or as required if triggering events occur indicating a potential for impairment. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the provisions of ASC 360, Property, Plant and Equipment SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES Intangible Asset Useful Life License agreements 6.5 16 Software 6 10 Distribution contracts 1 Employment and non-compete agreements 3 Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chief Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company classified its reportable operating segments into (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”) and (ii) the organization and facilitation of esports tournaments, competitions and events for the Company’s licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”). Revenue Recognition The Company recognizes revenue under ASC 606, “ Revenue from Contracts with Customers ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. The Company currently derives revenue principally from sales of its games and related extra content that can be played by customers on a variety of platforms, which include game consoles, PCs, mobile phones and tablets. The Company’s product and service offerings include, but are not limited to, the following: 1) Sales of Games 2) Sales of Extra Content 3) Esports Competition Events Sales of Games. Sales of Extra Content. Esports. 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 Company’s performance obligations are satisfied. During the years ended December 31, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods. The following table summarizes revenue recognized under ASC 606 in the consolidated statements of operations: SUMMARY OF REVENUE RECOGNIZED 2021 2020 For the Year Ended 2021 2020 Revenues: Gaming $ 14,267,735 $ 18,745,166 Esports 807,795 300,363 Total Revenues $ 15,075,530 $ 19,045,529 Identifying Performance Obligations Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available) and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, the Company must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation. Determining the Transaction Price The transaction price is determined based on the consideration that the Company will be entitled to receive in exchange for transferring its goods and services to the customer. Determining the transaction price often requires significant judgment based on an assessment of contractual terms and business practices. It further includes reviewing variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. See below for additional information regarding the Company’s sales returns and price protection reserves. Allocating the Transaction Price Allocating the transaction price requires the Company to determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Principal Versus Agent Considerations The Company evaluates sales to end customers of its full games and related content via third-party storefronts, including digital storefronts such as Microsoft’s Xbox Store, Sony’s PlayStation Store, Nintendo’s eShop, Apple’s App Store, and Google’s Play Store, to determine whether the Company is acting as the principal or agent in the sale to the end customer. Key indicators that the Company evaluates in determining gross versus net treatment include but are not limited to the following: ● the underlying contract terms and conditions between the various parties to the transaction; ● which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer; ● which party has inventory risk before the specified good or service has been transferred to the end customer; and ● which party has discretion in establishing the price for the specified good or service. Based on an evaluation of the above indicators, the Company determined that, apart from contracts with customers where revenue is generated via the Apple’s App Store or Google Play Store, the third party is considered the principal with the end customer and, as a result, the Company reports revenue net of the fees retained by the storefront. For contracts with customers where revenues are generated via the Apple’s App Store or Google’s Play Store, the Company has determined that it is the principal and, as a result, reports revenues on a gross basis, with mobile platform fees included within cost of revenues. Sales Allowance, Sales Returns and Price Protection Reserves Sales returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protection which may occur with distributors and retailers (“channel partners”). See Note 2 – Summary of Significant Accounting Policies – Accounts Receivable 4.6 million and $ 2.2 million , respectively. The Company recognized approximately $ 3.9 million and $ 2.2 million of sales returns and price protection charges as reductions of revenues for the years ended December 31, 2021 and 2020, respectively. Income Taxes On January 8, 2021, Motorsport Gaming US LLC converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of transactions and events. Under this method, deferred tax assets and liabilities are determined based on the difference between financial statement book values and the tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. If necessary, deferred tax assets are reduced by a valuation allowance to an amount that is determined to be more likely than not recoverable in the foreseeable future. The Company must make significant estimates and assumptions about future taxable income and future tax consequences and tax strategies available to recognize deferred tax assets when determining the amount of the valuation allowance. The additional guidance provided by ASC 740, Income Taxes On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Under ASC 740, the effects of new legislation are recognized upon enactment. Accordingly, the CARES Act is effective beginning in the quarter ended March 31, 2020. The provisions of the CARES Act do not have a material impact on the Company’s consolidated financial statements. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Subtopic 718-10. The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date, using the Black-Scholes option pricing model. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an award, the Company issues new shares of common stock out of its authorized shares. Stock-based compensation is adjusted for any forfeitures, which are accounted for on an as occurred basis. We account for share-based payments in accordance with ASC Subtopic 718-10. Share-based compensation expense for a given grant is recognized over the requisite service period (that is, the period for which the employee is being compensated) and is based on the value of share-based payment awards after a reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We generally estimate the value of stock options using a binomial-lattice model. This estimate is affected by our stock price, as well as assumptions regarding a number of highly complex and subjective variables, including our expected stock price volatility over the term of the awards and projected employee stock option exercise behaviors. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of options, if not anti-dilutive. The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES For the Year Ended December 31, 2021 2020 Stock options 573,571 n/a 573,571 n/a Foreign Currency Translation The Company’s functional and reporting currency is the United States Dollar. The functional currency of the Company’s operating subsidiaries are their local currencies (the United States Dollar, the Russian Ruble, Euro, Australian Dollar and Pound Sterling). Assets and liabilities are translated based on the exchange rates at the balance sheet date, while revenue and expense accounts are translated at the average exchange rate in effect during the year. Equity accounts are translated at historical exchange rates. The resulting translation gain and loss adjustments are accumulated as a component of other comprehensive income. Foreign currency gains and losses resulting from transactions denominated in foreign currencies, including intercompany transactions, are included in the results of operations. The Company recorded approximately $ 222,500 1,000 Recently Issued Accounting Standards As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election. In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) The Company adopted ASU 2016-02 on January 1, 2022, using the modified retrospective transition approach and has elected the optional transition method, which allows entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Upon adoption, ASU 2016-02 did not have a material effect on the Company’s consolidated balance sheets due to the recognition of approximately $ 765,000 765,000 In November 2019, the FASB issued ASU 2019-11, “ Codification Improvements to Topic 326, Financial Instruments – Credit Losses Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (“Topic 321”), Investments—Equity Method and Joint Ventures (“Topic 323”), and Derivatives and Hedging (“Topic 815”)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) Financial Instruments In October 2021, the FASB issued ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if the acquiring entity had originated the related revenue contracts. Early adoption is permitted, including interim periods within those fiscal years. An entity that early adopts this guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company early adopted the guidance during the fourth quarter of 2021. As of December 31, 2021, this guidance did not have a material impact on the consolidated financial statements. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITIONS | NOTE 3 – ACQUISITIONS Le Mans On January 25, 2021, the Company entered into an Amendment (the “Le Mans Amendment”) to the Le Mans Esports Series Ltd Joint Venture Agreement with Automobile Club de l’Ouest, a company registered in France (“ACO”). Pursuant to the Le Mans Amendment, the Company increased its ownership share in Le Mans Esports Series Ltd, from 45 % to 51 %, with the Company now holding a controlling financial interest and ACO holding a 49% minority ownership share in Le Mans Esports Series Ltd. Pursuant to the Le Mans Amendment, the parties expanded the primary objective and purpose of Le Mans Esports Series Ltd to include the creation, development, and publishing of video games based on the FIA World Endurance Championship and the 24 Hours of Le Mans, in addition to operating, promoting, and running an electronic sports events business replicating races of the FIA World Endurance Championship and the 24 Hours of Le Mans on an electronic video gaming platform. Pursuant to the Le Mans Amendment, if the board of directors of Le Mans Esports Series Ltd determines that its working capital requirements for the development of future games exceeds its resources, the Company will be obligated to contribute such additional funding to Le Mans Esports Series Ltd as a loan (which loan would not be interest bearing). Any such loan would be repayable when additional funding was no longer required by Le Mans Esports Series Ltd, as determined by its board of directors, provided that any such repayment would occur prior to Le Mans Esports Series Ltd’s distribution of any of its profits to the shareholders of Le Mans Esports Series Ltd. Further, pursuant to the Le Mans Amendment, the Company has a right to priority distribution of profits to recoup the additional funding and royalty payments that serve as the consideration for the Le Mans Video Gaming License (as defined below). On January 25, 2021, simultaneously with the execution of the Le Mans Amendment, Le Mans Esports Series Ltd and ACO entered into a license agreement pursuant to which Le Mans Esports Series Ltd was granted an exclusive license to use certain licensed intellectual property described in such license agreement for motorsports and/or racing video gaming products related to, themed as, or containing the FIA World Endurance Championship and the 24 Hours of Le Mans (including Le Mans Esports Series Ltd’s esports web platform) (the “Le Mans Video Gaming License”). The Le Mans Video Gaming License’s term is 10 years starting on the date of the first release of a product and automatically renews for an additional 10-year term, unless ACO elects not to renew. In exchange for the Le Mans Video Gaming License, the Company agreed to fund up to € 8,000,000 (approximately $ 9,060,000 USD as of December 31, 2021) as needed by Le Mans Esports Series Ltd to develop video game products, which will be contributed on an as-needed basis during the term of the Le Mans Video Gaming License. Additionally, the Company is obligated to pay ACO an annual royalty payment beginning from the time of the launch of the first video game product, which is planned for 2023, and continuing through each anniversary thereof for the term of the license. On January 25, 2021, Le Mans Esports Series Ltd and ACO entered into an esports license agreement pursuant to which Le Mans Esports Series Ltd was granted an exclusive license to use certain licensed intellectual property described in such license agreement for motorsports and/or racing esports events related to, themed as, or containing the FIA World Endurance Championship and the 24 Hours of Le Mans (including the Le Mans Esports Series Ltd’s esports web platform) (the “Le Mans Esports License”). The Le Mans Esports License’s term is through January 25, 2031, which automatically renews for an additional 10-year term, unless ACO elects not to renew. The Le Mans Esports License was granted to Le Mans Esports Series Ltd on a royalty-free basis in consideration of the investments already made into Le Mans Esports Series Ltd by the Company and ACO. On January 25, 2021, Le Mans Esports Series Ltd and ACO entered into another esports license agreement pursuant to which Le Mans Esports Series Ltd was granted an exclusive license to use certain licensed intellectual property described in such license agreement to run, promote, and exploit the 24 Hours of Le Mans Virtual event (the “24 Hours of Le Mans Virtual License”). The 24 Hours of Le Mans Virtual License’s term is through January 25, 2031, which will automatically renew for an additional 10-year term, unless ACO elects not to renew. The 24 Hours of Le Mans Virtual License was granted to Le Mans Esports Series Ltd on a royalty-free basis in consideration of the investments already made into Le Mans Esports Series Ltd by the Company and ACO. The following key assumptions were utilized by the Company to determine the fair value of the acquired intangible assets: (i) revenue projections; (ii) risk-free rate, which was estimated based on the rate of treasury securities with the same term as the mid-period of the projection periods; and (iii) revenue volatility, which was estimated based on an analysis of historical asset volatilities for similar companies and adjusted for operating leverage to estimate revenue volatility. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows: SUMMARY OF AGGREGATE PURCHASE PRICE Valuation Method Discount GBP USD Cash £ 257,232 $ 350,626 Other assets 858 1,169 Gaming license Excess earning Method 30.00 % 843,682 1,150,000 Esports licenses Excess earning Method 30.00 % 1,217,836 1,660,000 Goodwill 30.00 % 47,084 65,221 Accounts payable - (5,147 ) (7,016 ) Non-controlling interest Business Enterprise Income 30.00 % (1,157,531 ) (1,573,624 ) Total Fair value of Member’s equity £ 1,204,014 $ 1,646,376 Fair value of the previously held interest £ 1,062,999 $ 1,449,000 Fain value of the consideration £ 141,015 $ 197,376 During the year ended December 31, 2020, the Company’s investment in Le Mans Esports Series Ltd generated a net loss of $ 70,792 , which was included in gain (loss) from equity investment in the consolidated statements of operations and comprehensive loss. As of December 31, 2020, the Company had $ 234,667 payable to Le Mans Esports Series Ltd, which represents the balance due to Le Mans Esports Series Ltd attributable to the Company’s proportionate share of the loss generated by Le Mans Esports Series Ltd during 2020. As of December 31, 2020, there was $ 271,200 of investment recorded in other assets on the Company’s consolidated balance sheets. Following the Company’s acquisition of additional interest in Le Mans Esports Series Ltd on January 25, 2021, the Company ceased equity method accounting for its interest in Le Mans Esports Series Ltd and commenced consolidation accounting. Results of operations of Le Mans Esports Series Ltd for the period from January 25, 2021 to December 31, 2021 included approximately $ 741,000 288,000 The acquisition of Le Mans Esports Series Ltd has been recorded in accordance with ASC 805, Business Combinations KartKraft On March 19, 2021, the Company acquired all assets comprising the KartKraft computer video game from Black Delta Holdings PTY, Black Delta Trading Pty Ltd and Black Delta IP Pty Ltd. (collectively, “Black Delta”). The purchase price for the assets was $ 1,000,000 , of which $ 750,000 was paid at closing and $ 250,000 was transferred to an escrow account, which was released in September 2021 on the 6-month anniversary of closing. Through this acquisition, the Company entered the simulated kart-racing space and formed Motorsport Games Australia to support the Black Delta development team. The purchase price allocation for the KartKraft acquisition was completed subsequent to the acquisition date. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows: Intangible Asset Valuation Method Discount Amount KartKraft Trade Name Relief-from-Royalty 27.50 % $ 108,000 Software Replacement cost 25.00 % 833,000 Employment & Non-Compete With & Without Method 25.00 % 59,000 Total Consideration $ 1,000,000 Results of operations of KartKraft for the period from March 18, 2021 to December 31, 2021 included revenue of approximately $168,000 and approximately $ 482,000 in net losses. Revenues and net income (loss) on an unaudited pro forma basis for the years ended December 31, 2021 and 2020 are immaterial. The KartKraft acquisition has been recorded in accordance with ASC 805, Business Combinations Studio397 On April 20, 2021, the Company closed the transactions contemplated by the share purchase agreement, dated April 1, 2021 (the “SPA”), with Luminis International BV (“Luminis”) and Technology In Business B.V. (“TIB”) pursuant to which the Company purchased from TIB 100% of the share capital (the “Studio397 Shares”) of Studio397 B.V. (“Studio397”). Studio397 is a racing simulation and technology company that provides the industry-leading racing simulation platform, rFactor 2. Since early 2020, Studio397 has been providing its vehicle physics, tire modeling and artificial intelligence software to the Company’s video games. The purchase price for the Studio397 Shares was $ 16,000,000 12,800,000 3,200,000 3,111,781 2.8 3,170,319 To secure the Company’s payment of the Deferred Payment, the Company granted a right of pledge on 20 The Studio397 acquisition has been recorded in accordance with ASC 805. The purchase price allocation for total invested capital of $ 16,000,000 The purchase price allocation for total invested capital of $ 15,911,781 was completed as of the Studio397 acquisition date. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows: Valuation Method Discount Amount Debt-free net working capital - - $ (12,450 ) Fixed assets - - 21,504 rFactor 2 Trade Name Relief-from-Royalty 9.30 % 3,040,000 Software Replacement Cost 9.30 % 7,010,000 Employment & Non-Compete Agreements With & Without Method 9.30 % 214,000 Internally developed franchise Excess earning Method 9.30 % 678,000 Goodwill 4,960,727 Total Consideration $ 15,911,781 Total acquisition-related costs and expenses incurred in connection with the acquisition of Studio397 were immaterial. Studio397’s results of operations for the period from April 20, 2021 to December 31, 2021 included approximately $ 845,000 1,857,000 15,143,000 34,151,000 The components of Studio397’s debt free net working capital deficit are as follows: SUMMARY OF DEBT FREE NET WORKING CAPI TAL DEFICIT Current assets: Projects to be invoiced $ 192,658 Trade debtors 26,121 Paid in advance 47,168 Total current assets $ 265,947 Less current liabilities: Trade creditors 140,049 Advance invoices/payments 41,063 Audit costs 7,148 Holiday allowances 49,242 Bonuses 42,035 Taxes and social securities (1,140 ) Total current liabilities $ 278,397 Debt free net working capital deficit $ (12,450 ) The Studio397 acquisition has been recorded in accordance with ASC 805, Business Combinations 704Games Company On April 16, 2021, the Company closed the transactions contemplated by each of (i) the share exchange agreement with PlayFast Games, LLC, a North Carolina limited liability (“PlayFast”), dated as of March 11, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “PlayFast Exchange Agreement”) and (ii) the share exchange agreement with Ascend FS, Inc., a British Columbia corporation (“Ascend”), dated as of March 14, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “Ascend Exchange Agreement”). As a result, the Company acquired all of the remaining issued and outstanding equity interests in 704Games, which represented 17.8 % of 704Games. The transactions contemplated by the PlayFast Exchange Agreement and the Ascend Exchange Agreement were structured as a merger of 704Games Company with and into 704Games LLC, a newly-formed Delaware limited liability company and wholly-owned subsidiary of the Company, with 704Games LLC being the surviving entity in such merger. The merger consideration issued to (i) PlayFast with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 366,542 newly-issued shares of the Company’s Class A common stock with a fair market value at such date of $ 7,587,419 and $ 1,542,519 in cash and (ii) Ascend with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 488,722 newly-issued shares of the Company’s Class A common stock with a fair market value of $ 10,116,545 and $ 2,056,692 in cash. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consist of the following balances as of December 31, 2021 and 2020: SCHEDULE OF PROPERTY AND EQUIPMENT 2021 2020 December 31, 2021 2020 Furniture and fixtures $ 16,580 $ - Computer software and equipment 863,931 246,101 Leasehold improvements 127,524 - Property and equipment, gross 1,008,035 246,101 Less: accumulated depreciation (280,946 ) (83,953 ) Property and equipment, net $ 727,089 $ 162,148 ) Depreciation expense was $ 196,993 69,476 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS Licensing Agreements BTCC On May 29, 2020, the Company secured a licensing agreement with the BARC (TOCA) Limited (“BARC”), the exclusive promoter of the BTCC. Pursuant to the agreement, the Company was granted an exclusive license to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the BTCC, on consoles, PC and mobile applications, esports series and esports events (including the Company’s esports platform). In exchange for this license, the agreement requires the Company to pay BARC an initial fee in two installments, the first of which was due on June 5, 2020 and the second installment on the earlier of 60 days after the release of the products contemplated by this license or May 29, 2022. Following the initial fee, the agreement also requires the Company to pay royalties, including certain minimum annual guarantees, on an ongoing basis to BARC and to meet certain product distribution, marketing and related milestones, subject to termination penalties. The Company capitalized the initial license fee and present value of committed future minimum royalty payments as a license intangible asset in the amount of approximately $ 892,000 . During the year ended December 31, 2020, the Company paid $ 100,000 in connection with the purchase of the license. The Company considers this to be a non-amortizing intangible asset until such point the Company begins to generate revenues under the BTCC license, at which amortization will be recorded, and as such the asset has been monitored for impairment triggers throughout the year. As such, no amortization expense has been recognized in respect of this asset during the year ended December 31, 2021. As of December 31, 2021 and 2020, the Company had a remaining liability in connection with the licensing agreement of $ 853,535 and $ 791,999 , respectively, which is included in other non-current liabilities on the consolidated balance sheets. INDYCAR On July 13, 2021, the Company entered into a license agreement (the “INDYCAR Gaming License”) with INDYCAR LLC (“INDYCAR”). Pursuant to the INDYCAR Gaming License, INDYCAR granted the Company with a license to use certain licensed intellectual property (described in the INDYCAR Gaming License) for motorsports and/or racing video gaming products related to, themed as, or containing the INDYCAR SERIES. The INDYCAR Gaming License is a long-term agreement, in connection with which the parties intend to form an exclusive relationship for the development of video games to be the official video games of the INDYCAR SERIES. The Company expects the debut INDYCAR SERIES title to launch in 2023 on Xbox and PlayStation consoles, as well as on PC. In exchange for the INDYCAR Gaming License, the Company will pay to INDYCAR an annual development fee through the date of launch, after which INDYCAR will receive a royalty equal to a certain percentage of sales of physical and digital video gaming products, subject to certain minimum guarantees. The Company has agreed under the INDYCAR Gaming License to provide advertising and publicity to bring the INDYCAR SERIES racing video gaming products to the attention of as many purchasers and potential purchasers as possible. Additionally, the Company and INDYCAR entered into a license agreement pursuant to which, the Company was granted a license to use certain licensed intellectual property described in such license (“Licensed IP”) for motorsports and/or racing esports events related to, themed as, or containing the INDYCAR SERIES (including the rFactor 2 platform) (the “INDYCAR Esports License”). The INDYCAR Esports License is a long-term agreement, in connection with which the parties intend to form an exclusive relationship for the development of events to be the official esports events of the INDYCAR SERIES, which include the esports events related to and/or themed as or containing the Licensed IP and related features which, prior to launch, are hosted on the Company’s rFactor 2 and, after launch of the products, are hosted using the products. In exchange for the INDYCAR Esports License, INDYCAR will receive, on an annual basis, a royalty equal to a certain percentage of the net revenue (as defined in the INDYCAR Esports License) derived from or in connection with the events during the previous calendar year. The Company capitalized the initial license fee and present value of committed future minimum royalty payments as a license intangible asset in the amount of $ 2,713,871 , which is considered to be an indefinite lived intangible asset and, as such, not subject to amortization. The committed liability outstanding in connection with the licensing agreement as of December 31, 2021 was approximately $ 2,787,129 , of which approximately $ 79,739 and $ 2,707,390 is recorded as current and other non-current liabilities respectively on the consolidated balance sheets. Acquisitions In connection with the acquisition of Le Mans Esports Series Ltd, the Company acquired the following intangible assets (See Note 3 – Acquisitions SCHEDULE OF INTANGIBLE ASSETS ACQUISITION Intangible Asset Useful Life Cost Gaming license Indefinite $ 1,150,000 Esports licenses Indefinite 1,660,000 Total $ 2,810,000 In connection with the acquisition of KartKraft, the Company acquired the following intangible assets (See Note 3 – Acquisitions Intangible Asset Useful Life Cost KartKraft Trade Name Indefinite $ 108,000 Software 6 Years 833,000 Employment & Non-Compete 3 Years 59,000 Total $ 1,000,000 In connection with the acquisition of Studio397, the Company acquired the following intangible assets (See Note 3 – Acquisitions Intangible Asset Useful Life Cost Software 6-10 years $ 7,688,000 rFactor 2 Trade Name Indefinite 3,040,000 Employment & Non-Compete Agreements 3 years 214,000 Total $ 10,942,000 As of December 31, 2021, we performed our annual indefinite-lived intangible asset impairment review and determined the carrying value of the rFactor 2 trade name, which is part of the Gaming Segment, exceeded its fair value. Accordingly, we recognized an impairment charge of $ 317,113 for the year ended December 31, 2021 and is presented as impairment of intangible assets in the income statement. The assessment for impairment was triggered by brand specific results for the year ended December 31, 2021 being less than expected. The change in the weighted cost of capital applied when determining the fair value of the trade name is the primary contributor to the calculated impairment loss. Our Le Mans Video Gaming License and Le Mans Esports License were also subject to review and their fair values were found to exceed their carrying amounts by 266 % and 32 %, respectively. The determination of our trade name fair value was determined using a relief-from-royalty method, which requires the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the relief-from-royalty method analysis used to determine the rFactor 2 trade name fair value consisted forecasted revenues, royalty rate and weighted average cost of capital (i.e., discount rate). The following is a summary of intangible assets as of December 31, 2021 and 2020: SCHEDULE OF INTANGIBLE ASSETS Licensing (Finite) Licensing Agreements (Indefinite) Software (Finite) Distribution (Finite) Trade (Infinite) Non-Compete (Finite) Accumulated Total Balance as of January 1, 2020 $ - 3,620,000 2,340,000 560,000 - - (1,192,844 ) $ 5,327,156 Additions 891,999 - - - - - - 891,999 Disposals - - - - - - - - Impairment - - - - - - - - Amortization - - - - - - (650,703 ) (650,703 ) Foreign currency translation adjustment - - - - - - - - Balance as of December 31, 2020 $ 891,999 3,620,000 2,340,000 560,000 - - (1,843,547 ) $ 5,568,452 Additions 5,553,818 8,521,000 - 3,175,928 273,000 - 17,523,746 Disposals - - - - - - - Impairment - - - (317,113 ) - - (317,113 ) Amortization - - - - - (1,568,652 ) (1,568,652 ) Foreign currency translation adjustment (57,454 ) - (496,459 ) - (186,234 ) (15,470 ) 34,993 (720,624 ) Balance as of December 31, 2021 $ 6,388,363 3,620,000 10,364,541 560,000 2,672,581 257,530 (3,377,206 ) $ 20,485,809 Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Software Distribution Trade Non-Compete Accumulated Balance as of January 1, 2020 $ 311,094 321,750 560,000 - - 1,192,844 Amortization expense 374,918 275,785 - - - 650,703 Balance as of December 31, 2020 686,012 597,535 560,000 - - 1,843,547 Amortization expense 226,873 1,278,633 - - 63,146 1,568,652 Foreign currency translation adjustment (625 ) (32,452 ) - - (1,916 ) (34,993 ) Balance as of December 31, 2021 $ 912,260 1,843,716 560,000 - $ 61,230 3,377,206 Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows: SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS For the Years Ending December 31, Total 2022 $ 2,147,445 2023 2,147,445 2024 1,921,927 2025 1,932,455 2026 1,654,820 Thereafter 2,364,206 Estimated aggregate amortization expense $ 12,168,298 |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | NOTE 6 - GOODWILL The carrying amount of goodwill attributable to our Gaming and esports reporting units and the changes in such balances during the years ended December 31, 2021 and 2020 were as follows: SCHEDULE OF GOODWILL Games Esports Total Balance as of January 1, 2020 $ 137,717 - $ 137,717 Foreign currency translation adjustment - - - Balance as of December 31, 2020 137,717 - 137,717 Goodwill attributable to Le Mans Esports Series Ltd - 65,221 65,221 Goodwill attributable to Studio397 4,960,727 - 4,960,727 Foreign currency translation adjustment (295,562 ) (638 ) (296,200 ) Balance as of December 31, 2021 $ 4,802,882 64,583 $ 4,867,465 As of December 31, 2021, we performed our annual goodwill impairment review and determined no impairment losses existed at the date of the annual assessment. We determined the fair value of the Gaming reporting unit exceeded its carrying value at the date of this annual assessment. The fair value of the Gaming reporting unit was determined using a discounted cash flow model, which required the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the discounted cash flow model to support the fair value of the Gaming reporting unit were forecasted net revenues and weighted average cost of capital (i.e., discount rate). The assumptions used are uncertain in nature and could be subject to change in future periods, which may result in impairments to goodwill in future periods. |
ACCRUED EXPENSES AND OTHER LIAB
ACCRUED EXPENSES AND OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2021 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER LIABILITIES | NOTE 7 – ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES December 31, 2021 2020 Accrued royalties $ 1,694,011 $ 1,485,261 Accrued professional fees 80,909 129,291 Accrued consulting fees 106,006 398,526 Payable to Le Mans joint venture - 234,667 Accrued development costs 968,007 196,845 Esports prize money 168,959 - Accrued taxes 31,491 54,880 Accrued payroll 235,224 778,918 Accrued other 239,664 76,615 Total $ 3,524,271 $ 3,355,003 |
DUE TO_FROM RELATED PARTIES
DUE TO/FROM RELATED PARTIES | 12 Months Ended |
Dec. 31, 2021 | |
Due Tofrom Related Parties | |
DUE TO/FROM RELATED PARTIES | NOTE 8 – DUE TO/FROM RELATED PARTIES On April 1, 2020, the Company entered into a promissory note (the “Promissory Note”) 10,000,000 at an interest rate of 10 % per annum. The principal amount under the Promissory Note Promissory Note Promissory Note Promissory Note Promissory Note Promissory Note Promissory Note 10,000,000 to $ 12,000,000 . All other terms remained the same. During the year ended December 31, 2021 and 2020, the Company recorded related party interest expense of $ 105,845 and $ 698,830 During the year ended December 31, 2021, the Company repaid approximately $ 12,665,000 to Motorsport Network, which represented the total principal owed under the Promissory Note and accumulated interest incurred. 0 11,705,000 In addition to the Promissory Note, the Company had regular related party receivables and payables outstanding as of the year ended December 31, 2021. Specifically, the Company owed $ 119,014 137,574 302,000 No |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS In August 2018, the Company entered into an agreement with its majority stockholder, Motorsport Network, to provide the Company exclusive promotion services for the Company’s business, organizations, products and services. The promotion agreement shall remain in effect until such date that Motorsport Network no longer holds at least twenty percent ( 20 %) of the Company’s voting interest, at which time the promotion agreement will terminate automatically, unless otherwise extended by the parties. The Company agreed to give Motorsport Network an exclusive first look on any media-related activity in consideration of the promotion services. In January 2020, the Company entered into a three-year services agreement with Motorsport Network, pursuant to which Motorsport Network will provide exclusive legal, development and accounting services on a full-time basis to support the Company’s business functions. The services agreement can be extended by mutual agreement and may be terminated by either party at any time. Pursuant to the services agreement, the Company is required to pay monthly fees to Motorsport Network as follows: (i) $ 5,000 for legal services, (ii) $ 2,500 for accounting services and (iii) on an hourly, per use basis, from $ 15 to $ 30 per hour for development services. From time to time, Motorsport Network, and other related entities pay for Company expenses on the Company’s behalf. In addition, Motorsport Network occasionally advances funds to the Company under the Promissory Note. During the years ended December 31, 2021 and 2020, the Company incurred expenses of $ 1,400,000 1,099,846 2,157,707 361,145 During the years ended December 31, 2021 and 2020, an entity wholly owned by Motorsport Network provided services associated with In-Kind Consideration of $ 0 149,898 As of December 31, 2021 and 2020, there was $ 24,348 and $ 10,853,536 , respectively, related to these services included within due to related parties on the consolidated balance sheets. See Note 12 – Commitments and Contingencies Subsequent Events |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 12 Months Ended |
Dec. 31, 2021 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 10 – STOCKHOLDERS’ EQUITY /MEMBER’S EQUITY Corporate Conversion On January 8, 2021, Motorsport Gaming converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc. Effective as of January 8, 2021, 100 % of the membership interests held by the sole member of Motorsport Gaming, Motorsport Network, converted into an aggregate of (i) 7,000,000 shares of Class A common stock of Motorsport Games, with 1 vote per share 7,000,000 shares of Class B common stock, with 10 votes per share Upon effecting the corporate conversion on January 8, 2021, Motorsport Games now holds all the property and assets of Motorsport Gaming, and all of the debts and obligations of Motorsport Gaming were assumed by Motorsport Games by operation of law upon such corporate conversion. Effective as of January 8, 2021, the members of the board of directors of Motorsport Gaming became the members of Motorsport Games’ board of directors, at such time, and the officers of Motorsport Gaming became the officers of Motorsport Games, at such time. Common Stock See Note 3 – Acquisitions Initial Public Offering On January 15, 2021, the Company completed its initial public offering of 3,450,000 20.00 450,000 63,074,128 Stock Warrants As of December 31, 2021 and 2020, 704Games has outstanding ten-year warrants to purchase 4,000 93.03 3.8 Stock Purchase Agreement On August 18, 2020, the Company entered into a stock purchase agreement with HC2 Holdings 2, Inc. (“HC2”) and Continental General Insurance Company (“Continental”) pursuant to which the Company purchased an aggregate of 106,307 11.29 1,200,000 939,511 106,307 On April 16, 2021, the Company closed the transactions contemplated by each of (i) the share exchange agreement with PlayFast, dated as of March 11, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “PlayFast Exchange Agreement”) and (ii) the share exchange agreement with Ascend, dated as of March 14, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “Ascend Exchange Agreement”). As a result, the Company acquired all of the remaining equity interests in 704Games Company. The transactions contemplated by the PlayFast Exchange Agreement and the Ascend Exchange Agreement were structured as a merger of 704Games Company with and into 704Games LLC, a newly-formed Delaware limited liability company and wholly-owned subsidiary of the Company, with 704Games LLC being the surviving entity in such merger. The merger consideration issued to (i) PlayFast with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 366,542 7,587,419 1,542,519 488,722 10,116,545 2,056,692 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 11 – SHARE-BASED COMPENSATION Summary of Plans and Plan Activity On January 12, 2021, Motorsport Games established the Motorsport Games Inc. 2021 Equity Incentive Plan (the “MSGM 2021 Stock Plan”). The MSGM 2021 Stock Plan provides for the grant of options, stock appreciation rights, restricted stock awards, performance share awards and restricted stock unit awards, and initially authorized 1,000,000 shares of Class A common stock to be available for issuance. As of December 31, 2021, 429,873 shares of Class A common stock were available for issuance under the MSGM 2021 Stock Plan. Shares issued in connection with awards made under the MSGM 2021 Stock Plan are generally issued as new issuances of Class A common stock. In conjunction with the Company’s initial public offering, the Company granted an aggregate of 330,633 shares of Class A common, with an aggregate grant date fair value of $ 6,612,660 The Company issued stock options under its MSGM 2021 Stock Plan during the fiscal year ended December 31, 2021. The majority of the options issued under the MSGM 2021 Stock Plan have time-based vesting schedules, typically vesting ratably over a three-year period. Certain stock option awards differed from this vesting schedule, notably awards made to the Company’s Chief Executive Officer in conjunction with the Company’s initial public offering that vested immediately, as well as those made to Company’s directors that vested on the one-year anniversary of award issuance. All stock options issued under the MSGM 2021 Stock Plan expire 10 Fair Value Valuation Assumptions The fair value of the stock options and stock appreciation rights are estimated using the Black-Scholes option pricing model. The estimation of fair value for these awards is affected by subjective and complex variables, which are typically based on historical information. Judgment is required to determine if historical trends are indicators of future outcomes. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The Company determined the risk-free interest rate using U.S. Treasury yields in effect at the time of the grant that matched the expected term of the options. Expected volatility is based on a combination of historical stock price volatility, as well as implied volatilities, of comparable publicly traded companies with operations similar to Motorsport Games over a 10-year period, consistent with the contractual term of the options. The Company calculated the expected term using the simplified method as prescribed by the SEC’s Staff Accounting Bulletin, topic 14 (“SAB Topic 14”). This decision was based on the lack of relevant historical data due to the Company’s limited historical experience. The dividend yield was zero, as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future. Share-based compensation expense recognized is based on awards ultimately expected to vest and therefore has been reduced for actual forfeitures occurring within the period. The following table presents the weighted-average assumptions, weighted average grant date fair value, and the range of expected price volatility: SCHEDULE OF FAIR VALUE STOCK OPTION WEIGHTED AVERAGE ASSUMPTIONS For the Year Ended December 31, 2021 2020 Risk-free interest rate 0.48 1.09% - Expected volatility 50 65% - Weighted-average volatility 60% - Expected term 5 6 - Expected dividends None - Weighted-average grant date fair value 9.37 - Stock Options The following table summarizes the Company’s stock option activity for the fiscal year ended December 31, 2021: SCHEDULE OF STOCK OPTIONS ACTIVITY Options Weighted- Weighted-Average Aggregate Outstanding as of January 1, 2021 - $ - Granted 573,571 20.35 Exercised - - Forfeited, cancelled or expired (22,972 ) 20.00 Outstanding as of December 31, 2021 550,599 $ 20.36 9.14 $ - Vested and expected to vest 550,599 $ 20.36 9.14 $ Exercisable as of December 31, 2021 205,425 $ 20.04 9.04 $ - The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of December 31, 2021, which would have been received by the option holders had all the option holders exercised their options as of that date. The Company issues new Class A common stock from its authorized shares upon the exercise of stock options. Stock-Based Compensation Expense The following table summarizes stock-based compensation expense resulting from stock option awards included in our Consolidated Statement of Operations: SCHEDULE OF STOCK BASED COMPENSATION EXPENSE For the Year Ended December 31, 2021 2020 General and administrative $ 9,500,265 - Sales and marketing 126,272 - Development 100,125 - Stock-based compensation expense $ 9,726,662 - As of December 31, 2021, there was $ 2,225,415 2.0 Stock Appreciation Rights On April 3, 2017, as amended on August 8, 2018, 704Games effected the 2017 Appreciation Plan (“SAR Plan”) that provides a means whereby directors, officers, employees, consultants or advisors of 704Games can be granted Stock Appreciation Rights (“SARs”) as incentive compensation measured by reference to the value of common stock. A total of 25,734 During the year ended December 31, 2020, an aggregate of 9,701 4,211 55.67 1,051,995 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12 – COMMITMENTS AND CONTINGENCIES Litigation The Company is involved in various routine legal proceedings incidental to the ordinary course of its business. The Company believes that the outcome of all pending legal proceedings in the aggregate is not reasonably likely to have a material adverse effect on the Company’s business, prospects, results of operations, financial condition and/or cash flows. However, in light of the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other things, the size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular period. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. As of December 31, 2021 and 2020, the Company has not accrued any amounts for contingencies. On January 11, 2021, Ascend, a minority stockholder of 704Games, filed a derivative action on behalf of 704Games in the Eleventh Judicial Circuit Court of Florida against the Company and the Company’s Chief Executive Officer and Executive Chairman. The complaint alleged breach of fiduciary duty and breach of contract in connection with the Company’s August and October 2020 purchases of an aggregate of 116,608 shares of common stock of 704Games (representing approximately 28.7 % of the outstanding shares of 704Games) from certain selling stockholders. In connection with the closing of the transactions contemplated by the Ascend Exchange Agreement and the PlayFast Exchange Agreement, the Company and its affiliates, without admitting any liability by any party, were released from all claims that Ascend or PlayFast could allege or assert against the Company as minority stockholders of 704Games. Pursuant to the Ascend Exchange Agreement, the derivative legal action previously commenced by Ascend against the Company and certain of its affiliates was dismissed with prejudice on April 25, 2021. On February 11, 2021, HC2 Holdings 2 Inc. and Continental General Insurance Company, former minority stockholders of 704Games, filed a complaint (the “HC2 and Continental Complaint”) in the United States District Court for the District of Delaware against the Company, the Company’s Chief Executive Officer and Executive Chairman, the Company’s Chief Financial Officer, and the sole manager of Motorsport Network (collectively, the “Individual Defendants”). The complaint alleges misrepresentations and omissions by the Company concerning 704Games’ financial condition and future prospects in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 under the Exchange Act; joint and several liability of the Individual Defendants under Section 20(a) of the Exchange Act with respect to the alleged violation of Section 10(b) and Rule 10(b); alleged violation by the Company of Section 20A of the Exchange Act in connection with plaintiffs’ August 18, 2020 sale to the Company of an aggregate of 106,307 shares of common stock of 704Games, which is equal to 26.2 % of the outstanding common stock of 704Games (the “Stock Sale”); alleged breach of the Company’s obligations under the Stockholders’ Agreement, dated August 14, 2018, by and among the Company and the other stockholders of 704Games, in connection with 704Games’ requirement to provide financial information about 704Games to the plaintiffs; the defendants’ alleged fraudulent inducement of the plaintiffs to enter into a stock purchase agreement for the Stock Sale; the defendants’ alleged breach of fiduciary duty by alleged failure to disclose key financial and other information about 704Games and allegedly diverting corporate opportunities for the benefit of defendants; and alleged unjust enrichment. The plaintiffs seek, among other things, damages from the defendants, jointly and severally, based on the alleged difference between the fair market value of the shares of common stock of 704Games on August 18, 2020, the date of the Stock Sale, and the purchase price that was paid in the Stock Sale, as well as punitive damages and other relief. In May 2021, the Company, along with the other defendants, filed a motion to dismiss the plaintiffs’ amended complaint. On March 28, 2022, the Court entered an order denying the motion to dismiss. At this time, it is premature to determine the outcome of this litigation. As a result, the Company has not accrued for any loss contingencies related to this claim because the amount and range of loss, if any, cannot currently be reasonably estimated. The Company believes that the plaintiff’s allegations are without merit and the Company intends to continue to vigorously defend its position to the fullest extent permitted by law. On March 22, 2021, the Company entered into a binding term sheet (as amended, the “Digital Tales Term Sheet”) with EleDa s.r.l. (“EleDa”) in connection with a contemplated acquisition by the Company of the shares of Digital Tales USA, LLC, a Florida limited liability company. The Digital Tales Term Sheet expired on September 30, 2021, and the Company and EleDa did not consummate any transaction by such date, nor does the Company expect to complete any such transaction. On September 29, 2021, EleDa filed a complaint in the Eleventh Judicial Circuit Court of Florida against the Company and its Chief Executive Officer relating to the expiration of the Digital Tales Term Sheet, without having consummated any transaction. In November 2021, the Company filed a motion to dismiss the plaintiffs’ complaint and EleDa filed an amended complaint on February 2, 2022. The Company filed a motion to extend case management deadlines on March 2, 2022. The Company has not accrued for any loss contingencies related to this claim because the amount and range of loss, if any, cannot currently be reasonably estimated. The Company believes, however, that the plaintiff’s allegations are without merit and intends to vigorously defend its position to the fullest extent permitted by law. Operating Leases The Company leases its facilities under operating leases. The Company’s rent expense under its operating leases was $ 387,865 291,892 On February 21, 2020, the Company entered into a sublease agreement for office space in Charlotte, North Carolina, that provides for rent payments to the Company in the amount of $ 14,896 ends on August 31, 2024 3 30,000 183,200 On May 15, 2020, the Company entered into a five-year lease agreement for office space in Miami, Florida with an entity owned by the manager of Motorsport Network. The base rent from the lease commencement date through April 15, 2025 was $ 3,000 6,000 Subsequent Events On September 3, 2021, the Company entered into a one-year lease agreement for approximately 1,600 6,700 75,000 15,000 Future minimum payments under our non-cancellable operating leases as of December 31, 2021 are as follows: SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NON-OPERATING LEASES For the Years Ending Total 2022 $ 299,442 2023 289,218 2024 189,786 2025 48,104 2026 24,069 Total $ 850,619 Employment Agreements The Company entered into an employment agreement, effective as of January 1, 2020, with Dmitry Kozko, Chief Executive Officer of the Company, for a term expiring on December 31, 2024. After such term expires, Mr. Kozko will be employed as an employee “at will.” Mr. Kozko’s base salary will be $ 500,000 103 The Company entered into an employment agreement, effective as of October 1, 2020, with Stephen Hood, President of Motorsport Games, which replaced Mr. Hood’s prior employment agreement. Pursuant to this employment agreement, Mr. Hood was entitled to a base salary of $ 198,000 230,000 100,000 On January 21, 2022, the Company notified Stephen Hood that his position will be eliminated effective January 21, 2022. Mr. Hood will receive the following separation payments: £43,750 in lieu of his entitlement to 3 months’ termination notice, £37,019 in lieu of accrued but untaken holiday pay and an £60,000 ex gratia settlement payment which includes statutory redundancy as required under the law of England & Wales Joint Venture Agreement On March 15, 2019, Motorsport Games (Party B) entered into a joint venture agreement with ACO (Party A), whereby Motorsport Games acquired 45 B Shares, which represented 45 % of the equity interests of Le Mans Esports Series Ltd, and ACO acquired the remaining 55 A Shares, which represented 55 % of the equity interests of Le Mans Esports Series Ltd. Under the joint venture agreement, Motorsport Games and ACO are jointly and severally liable for the fulfillment of the obligations of Le Mans Esports Series Ltd. The parties agreed to make the following in-kind contributions to Le Mans Esports Series Ltd: i. ACO has and will continue to provide a dedicated team to develop and implement the business and has and will continue to make the 24 Hours of Le Mans brand available to Le Mans Esports Series Ltd under a separate license agreement; and ii. Motorsport Games has provided and will continue to provide a dedicated team to develop and implement the business and has and will continue to make itself and its employees, who have experience in e-sports and e-gaming platforms, available to develop the business and create a dedicated gaming platform for use by and to facilitate the continued development of the business. On January 25, 2021, the Company entered into the Le Mans Amendment that increased the Company’s ownership interest in the joint venture from 45 % to 51 %. Additionally, through certain multi-year licensing agreements that were entered into in connection with the Le Mans Amendment, the Company secured the rights to be the exclusive video game developer and publisher for the 24 Hours of Le Mans race and the WEC, as well as the rights to create and organize esports leagues and events for the 24 Hours of Le Mans race, the WEC and the 24 Hours of Le Mans Virtual event. In exchange for certain of these license rights, the Company agreed to fund up to € 8,000,000 (approximately $ 9,060,000 USD as of December 31, 2021) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the applicable license. See Note 3 – Acquisitions Epic On August 11, 2020, the Company entered into a licensing agreement with Epic Games International (“Epic”) for worldwide licensing rights to Epic’s proprietary computer program known as the Unreal Engine 4. Pursuant to the agreement, upon payment of the initial license fee described below, the Company was granted a nonexclusive, non-transferable and terminable license to develop, market and sublicense (under limited circumstances and subject to conditions of the agreement) certain products using the Unreal Engine 4 for its next generation of games. In exchange for the license, the agreement required the Company to pay Epic an initial license fee of $ 40,000 , which was paid during the year ended December 31, 2020. An additional $ 100,000 was paid during the year ended December 31, 2021 to add the Xbox and PlayStation platforms to the license. The Company will pay Epic a license fee royalty payment equal to 5 % of product revenue, as defined in the licensing agreement. During the year ended December 31, 2021, Epic earned royalties of approximately $ 340,000 under the agreement. During a two-year support period, Epic will use commercially reasonable efforts to provide the Company with updates to the Unreal Engine 4 and technical support via a licensee forum. After the expiration of the support period, Epic has no further obligation to provide or to offer to provide any support services. The agreement is effective until terminated under the provisions of the agreement; however, pursuant to the terms of the agreement, the Company can only actively develop new or existing authorized products during a five-year active development period, which terminates on August 11, 2025. Effective September 3, 2021, this licensing agreement was assigned from MS Gaming Development LLC to Motorsport Games, Inc. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 13 - INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company establishes valuation allowances against its net deferred tax assets when it is more likely than not that the benefits will not be realized in the foreseeable future. The components of deferred tax assets and liabilities consist of the following at December 31, 2021 and 2020: SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 Assets: Net operating loss carryforwards $ 5,756,658 $ 1,937,626 Bad debts 1,312,332 - Stock options 684,238 - Charitable contribution carryforward 17,032 797 Goodwill 11,268 287,878 Other assets 44,667 45,453 Total Assets 7,826,195 2,271,754 Liabilities: Depreciable assets 21,135 45,177 Other intangible assets 590,692 923,224 Total Liabilities 611,827 968,401 Net asset before valuation allowance 7,214,368 1,303,353 Valuation allowance (7,214,368 ) (1,303,353 ) Net deferred tax (liability) asset $ - $ - A reconciliation between the Company’s effective income tax rate and the federal statutory income tax rate for the years ended December 31, 2021 and 2020 is as follows: SCHEDULE OF EFFECTIVE INCOME TAX RATE AND THE FEDERAL STATUTORY INCOME TAX RATE 2021 2020 Federal statutory income tax benefit 21.00 % 21.0 % State income taxes, net of federal income tax benefit 5.50 % -13.2 % IPO & Acquisition Costs -6.99 % Permanent differences and other -1.75 % 0.9 % Change in valuation allowance -17.54 % 46.9 % Effect of flow through entity 0.00 % -55.6 % Other adjustments -0.21 % - Effective income tax rate 0.0 % 0.0 % At December 31, 2021, the Company has United States federal net operating loss carryforwards available to reduce future taxable income in the amount of $ 20.0 million. $ 15.6 million of the Federal net operating losses do not expire due to changes made by the Tax Cuts and Jobs Act (TCJA). The remaining federal net operating losses of $ 4.4 million begin to expire in 2036 and the state net operating losses expire between 2030 and 2039. As a result of the 704 Games, LLC acquisition during the 2018 tax year, certain pre-change federal and state net operating losses were limited under Section 382 of the Internal Revenue Code and were subject to a valuation allowance to the extent they are not expected to be realized in the foreseeable future. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, we considered all available positive and negative evidence, including our past operating results, forecasted earnings, frequency and severity of current and cumulative losses, duration of statutory carryforward periods, future taxable income and prudent and feasible tax planning strategies. On the basis of this evaluation, we continue to maintain a valuation allowance against the Company’s deferred tax assets. As of December 31, 2021, we have recorded a valuation allowance against our deferred tax asset that did not meet the more-likely-than-not realization criteria. We increased the valuation allowance on our net deferred taxes by approximately $ 5.9 We do not have any unrecorded unrecognized tax positions (“UTPs”) as of December 31, 2021. While we currently do not have any UTPs, it is foreseeable that the calculation of our tax liabilities may involve dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. Upon identification of a UTP, we would (1) record the UTP as a liability in accordance with ASC 740 and (2) adjust these liabilities if/when management’s judgment changes as a result of the evaluation of new information not previously available. Ultimate resolution of UTPs may produce a result that is materially different from an entity’s estimate of the potential liability. In accordance with ASC 740, we would reflect these differences as increases or decreases to income tax expense in the period in which new information is available. We recognize and include interest and penalties accrued on uncertain tax positions as a component of income tax expense. The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its tax reserves based on new information or developments. The Company is not currently under any income tax audits or examinations, however, the tax years 2018-2021 remain open for examination. |
CONCENTRATIONS
CONCENTRATIONS | 12 Months Ended |
Dec. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 14 – CONCENTRATIONS Customer Concentrations The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the following periods: SCHEDULE OF CONCENTRATIONS For the Year Ended December 31, Customer 2021 2020 Customer A 28.11 % 29.64 % Customer B 21.50 % 25.28 % Customer C 22.36 % 23.27 % Customer D 10.79 % - Total 82.77 % 78.19 % The following table sets forth information as to each customer that accounted for 10% or more of the Company’s accounts receivable as of: December 31, Customer 2021 2020 Customer A 51.92 % 81.84 % Customer B 17.68 % - * % Total 69.60 % 81.84 % * Less than 10%. A reduction in sales from or loss of these customers, in a significant amount, would have a material adverse effect on the Company’s results of operations and financial condition. Supplier Concentrations The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s cost of revenues for the following periods: SCHEDULE OF CONCENTRATIONS For the Year Ended December 31, Supplier 2021 2020 Supplier A 30.89 % 34.59 % Supplier B 13.13 % 19.45 % Supplier C * % 11.46 % Total 44.02 % 65.50 % * Less than 10%. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | NOTE 15 – SEGMENT REPORTING The Company’s principal operating segments coincide with the types of products and services to be sold. The products and services from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including net revenues, gross profit and operating loss. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. The Company manages certain operating expenses separately at the corporate level and does not allocate such expenses to the segments. Segment income from operations excludes interest income/expense and other income or expenses and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, and unallocated costs in measuring the performance of the reportable segments. Segment information available with respect to these reportable business segments was as follows: SCHEDULE OF SEGMENT REPORTING INFORMATION For the Year Ended 2021 2020 Revenues: Gaming $ 14,267,735 $ 18,745,166 Esports 807,795 300,363 Total Revenues $ 15,075,530 $ 19,045,529 Gross Profit: Gaming $ 7,226,156 $ 12,438,584 Esports 320,219 11,073 Total Segment and Consolidated Gross Profit $ 7,546,375 $ 12,449,657 Income (Loss) From Operations: Gaming $ (33,802,804 ) $ 508,461 Esports ( 723,854 ) (507,314 ) Total Segment and Consolidated Income (Loss) From Operations $ (34,526,658 ) $ 1,147 Depreciation and Amortization: Gaming $ 1,774,072 $ 718,873 Esports 11,002 1,306 Total Segment Depreciation and Amortization $ 1,785,074 $ 720,179 Interest Expense: Gaming $ (504,156 ) $ (717,498 ) Esports - - Total Segment Interest Expense $ (504,156 ) $ (717,498 ) Equity gain (loss) in Income: Gaming $ 1,370,837 $ - Esports - (70,792 ) Total Segment Equity gain (loss) in Income $ 1,370,837 $ (70,792 ) Expenditures for Additions to Long-Lived Assets: Gaming $ 489,167 $ 126,432 Esports 265,135 10,323 Total Expenditures for Additions to Long-Lived Assets: $ 754,302 $ 136,755 December 31, 2021 December 31, 2020 Segment Total Assets: Gaming $ 47,511,471 $ 17,377,993 Esports 3,191,732 9,017 Consolidated Total Assets $ 50,703,203 $ 17,387,010 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 - SUBSEQUENT EVENTS The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustments or disclosure in the consolidated financial statements or notes. On February 8, 2022, the Company entered into a lease agreement with Lemon City Group, LLC for office space located at 350 NE 60 th 5 years commencing April 1, 2022 and expiring on March 31, 2027, terminable with a 60-day written notice with no penalty. The base rent from the lease commencement date through March 31, 2027 is fixed at approximately $ 22,000 per month. Upon commencement of the lease term on April 1, 2022, the current 5 -year lease agreement for office space in Miami, Florida, between 704Games LLC, a subsidiary of the Company, and Lemon City Group, LLC will be terminated without penalty. On January 6, 2022, the Company granted an aggregate of 12,690 25,000 57,108 543,066 16,281 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the operations of the Company and its wholly owned and majority owned subsidiaries. The interests of non-controlling members are reflected as non-controlling interest in the accompanying consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates used in these consolidated financial statements include, but are not limited to, revenue recognition criteria, including reserves for sales returns and price protection, valuation allowance of deferred income taxes, valuation of acquired companies and equity method investments, the recognition and disclosure of contingent liabilities, goodwill and intangible assets impairment testing, and stock-based compensation valuation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly-liquid instruments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash in bank accounts, which, at times, may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company has not experienced any losses in such accounts, periodically evaluates the creditworthiness of the financial institutions and has determined the credit exposure to be negligible. The Company’s foreign bank accounts are not subject to FDIC insurance. |
Accounts Receivable | Accounts Receivable Accounts receivable are carried at their contractual amounts, less an estimate for sales allowances. Management estimates the allowance for sales based on previous experience, existing economic conditions, actual sales and inventories in the distribution channel. See Note 2 – Summary of Significant Accounting Policies – Revenue Recognition - Sales Allowance, Sales Returns and Price Protection Reserves Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of December 31, 2021 and 2020, the Company determined that all of its accounts receivable were fully collectible and, accordingly, no allowance for doubtful accounts was recorded. Sales allowances represent the difference between the retail distributor purchase order price and the estimated average sell through price. As of December 31, 2021 and 2020, sales allowances were $ 4,563,884 and $ 2,150,684 , respectively. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization, which is provided on the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are expensed as incurred. Equipment, furniture and fixtures are depreciated over a range of three five years |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company accounts for goodwill and indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other The Company performs its annual or interim goodwill and indefinite-lived intangible asset impairment tests by comparing the fair value of its reporting units and indefinite-lived intangible assets to their respective carrying values. An entity recognizes an impairment charge for the amount by which the carrying amount of the asset or reporting unit exceeds its fair value. The Company has determined that its reporting units align with its operating segments as defined below. In evaluating goodwill and indefinite-lived intangible assets for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit or the indefinite-lived intangible asset is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, then the Company performs a one-step quantitative impairment test by comparing the fair value of a reporting unit or indefinite-lived intangible asset with its carrying amount and recognizes a loss on impairment in the event the carrying value exceeds the fair value. In assessing the fair value of a reporting unit, the Company utilizes the Income Approach-Discounted Cash Flow Method as well as the Market Approach-Guideline Public Company Method for its reporting units and the relief from royalty method for its indefinite-lived intangible assets. The Company performs its impairment testing as of December 31 of each year or as required if triggering events occur indicating a potential for impairment. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the provisions of ASC 360, Property, Plant and Equipment SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES Intangible Asset Useful Life License agreements 6.5 16 Software 6 10 Distribution contracts 1 Employment and non-compete agreements 3 |
Segment Reporting | Segment Reporting The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the Chief Executive Officer (“CEO”) of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company classified its reportable operating segments into (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”) and (ii) the organization and facilitation of esports tournaments, competitions and events for the Company’s licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”). |
Revenue Recognition | Revenue Recognition The Company recognizes revenue under ASC 606, “ Revenue from Contracts with Customers ● Identification of a contract with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as the performance obligations are satisfied. The Company currently derives revenue principally from sales of its games and related extra content that can be played by customers on a variety of platforms, which include game consoles, PCs, mobile phones and tablets. The Company’s product and service offerings include, but are not limited to, the following: 1) Sales of Games 2) Sales of Extra Content 3) Esports Competition Events Sales of Games. Sales of Extra Content. Esports. 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 Company’s performance obligations are satisfied. During the years ended December 31, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods. The following table summarizes revenue recognized under ASC 606 in the consolidated statements of operations: SUMMARY OF REVENUE RECOGNIZED 2021 2020 For the Year Ended 2021 2020 Revenues: Gaming $ 14,267,735 $ 18,745,166 Esports 807,795 300,363 Total Revenues $ 15,075,530 $ 19,045,529 Identifying Performance Obligations Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available) and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, the Company must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation. Determining the Transaction Price The transaction price is determined based on the consideration that the Company will be entitled to receive in exchange for transferring its goods and services to the customer. Determining the transaction price often requires significant judgment based on an assessment of contractual terms and business practices. It further includes reviewing variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. See below for additional information regarding the Company’s sales returns and price protection reserves. Allocating the Transaction Price Allocating the transaction price requires the Company to determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Principal Versus Agent Considerations The Company evaluates sales to end customers of its full games and related content via third-party storefronts, including digital storefronts such as Microsoft’s Xbox Store, Sony’s PlayStation Store, Nintendo’s eShop, Apple’s App Store, and Google’s Play Store, to determine whether the Company is acting as the principal or agent in the sale to the end customer. Key indicators that the Company evaluates in determining gross versus net treatment include but are not limited to the following: ● the underlying contract terms and conditions between the various parties to the transaction; ● which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer; ● which party has inventory risk before the specified good or service has been transferred to the end customer; and ● which party has discretion in establishing the price for the specified good or service. Based on an evaluation of the above indicators, the Company determined that, apart from contracts with customers where revenue is generated via the Apple’s App Store or Google Play Store, the third party is considered the principal with the end customer and, as a result, the Company reports revenue net of the fees retained by the storefront. For contracts with customers where revenues are generated via the Apple’s App Store or Google’s Play Store, the Company has determined that it is the principal and, as a result, reports revenues on a gross basis, with mobile platform fees included within cost of revenues. Sales Allowance, Sales Returns and Price Protection Reserves Sales returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protection which may occur with distributors and retailers (“channel partners”). See Note 2 – Summary of Significant Accounting Policies – Accounts Receivable 4.6 million and $ 2.2 million , respectively. The Company recognized approximately $ 3.9 million and $ 2.2 million of sales returns and price protection charges as reductions of revenues for the years ended December 31, 2021 and 2020, respectively. |
Income Taxes | Income Taxes On January 8, 2021, Motorsport Gaming US LLC converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of transactions and events. Under this method, deferred tax assets and liabilities are determined based on the difference between financial statement book values and the tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. If necessary, deferred tax assets are reduced by a valuation allowance to an amount that is determined to be more likely than not recoverable in the foreseeable future. The Company must make significant estimates and assumptions about future taxable income and future tax consequences and tax strategies available to recognize deferred tax assets when determining the amount of the valuation allowance. The additional guidance provided by ASC 740, Income Taxes On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Under ASC 740, the effects of new legislation are recognized upon enactment. Accordingly, the CARES Act is effective beginning in the quarter ended March 31, 2020. The provisions of the CARES Act do not have a material impact on the Company’s consolidated financial statements. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Subtopic 718-10. The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date, using the Black-Scholes option pricing model. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an award, the Company issues new shares of common stock out of its authorized shares. Stock-based compensation is adjusted for any forfeitures, which are accounted for on an as occurred basis. We account for share-based payments in accordance with ASC Subtopic 718-10. Share-based compensation expense for a given grant is recognized over the requisite service period (that is, the period for which the employee is being compensated) and is based on the value of share-based payment awards after a reduction for estimated forfeitures. Forfeitures are estimated at the time of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We generally estimate the value of stock options using a binomial-lattice model. This estimate is affected by our stock price, as well as assumptions regarding a number of highly complex and subjective variables, including our expected stock price volatility over the term of the awards and projected employee stock option exercise behaviors. |
Net Loss Per Common Share | Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of options, if not anti-dilutive. The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES For the Year Ended December 31, 2021 2020 Stock options 573,571 n/a 573,571 n/a |
Foreign Currency Translation | Foreign Currency Translation The Company’s functional and reporting currency is the United States Dollar. The functional currency of the Company’s operating subsidiaries are their local currencies (the United States Dollar, the Russian Ruble, Euro, Australian Dollar and Pound Sterling). Assets and liabilities are translated based on the exchange rates at the balance sheet date, while revenue and expense accounts are translated at the average exchange rate in effect during the year. Equity accounts are translated at historical exchange rates. The resulting translation gain and loss adjustments are accumulated as a component of other comprehensive income. Foreign currency gains and losses resulting from transactions denominated in foreign currencies, including intercompany transactions, are included in the results of operations. The Company recorded approximately $ 222,500 1,000 |
Recently Issued Accounting Standards | Recently Issued Accounting Standards As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election. In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) The Company adopted ASU 2016-02 on January 1, 2022, using the modified retrospective transition approach and has elected the optional transition method, which allows entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Upon adoption, ASU 2016-02 did not have a material effect on the Company’s consolidated balance sheets due to the recognition of approximately $ 765,000 765,000 In November 2019, the FASB issued ASU 2019-11, “ Codification Improvements to Topic 326, Financial Instruments – Credit Losses Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (“Topic 321”), Investments—Equity Method and Joint Ventures (“Topic 323”), and Derivatives and Hedging (“Topic 815”)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) Financial Instruments In October 2021, the FASB issued ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if the acquiring entity had originated the related revenue contracts. Early adoption is permitted, including interim periods within those fiscal years. An entity that early adopts this guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company early adopted the guidance during the fourth quarter of 2021. As of December 31, 2021, this guidance did not have a material impact on the consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES | SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES Intangible Asset Useful Life License agreements 6.5 16 Software 6 10 Distribution contracts 1 Employment and non-compete agreements 3 |
SUMMARY OF REVENUE RECOGNIZED | The following table summarizes revenue recognized under ASC 606 in the consolidated statements of operations: SUMMARY OF REVENUE RECOGNIZED 2021 2020 For the Year Ended 2021 2020 Revenues: Gaming $ 14,267,735 $ 18,745,166 Esports 807,795 300,363 Total Revenues $ 15,075,530 $ 19,045,529 |
SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES | The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES For the Year Ended December 31, 2021 2020 Stock options 573,571 n/a 573,571 n/a |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
SUMMARY OF AGGREGATE PURCHASE PRICE | The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows: SUMMARY OF AGGREGATE PURCHASE PRICE Valuation Method Discount GBP USD Cash £ 257,232 $ 350,626 Other assets 858 1,169 Gaming license Excess earning Method 30.00 % 843,682 1,150,000 Esports licenses Excess earning Method 30.00 % 1,217,836 1,660,000 Goodwill 30.00 % 47,084 65,221 Accounts payable - (5,147 ) (7,016 ) Non-controlling interest Business Enterprise Income 30.00 % (1,157,531 ) (1,573,624 ) Total Fair value of Member’s equity £ 1,204,014 $ 1,646,376 Fair value of the previously held interest £ 1,062,999 $ 1,449,000 Fain value of the consideration £ 141,015 $ 197,376 Intangible Asset Valuation Method Discount Amount KartKraft Trade Name Relief-from-Royalty 27.50 % $ 108,000 Software Replacement cost 25.00 % 833,000 Employment & Non-Compete With & Without Method 25.00 % 59,000 Total Consideration $ 1,000,000 Valuation Method Discount Amount Debt-free net working capital - - $ (12,450 ) Fixed assets - - 21,504 rFactor 2 Trade Name Relief-from-Royalty 9.30 % 3,040,000 Software Replacement Cost 9.30 % 7,010,000 Employment & Non-Compete Agreements With & Without Method 9.30 % 214,000 Internally developed franchise Excess earning Method 9.30 % 678,000 Goodwill 4,960,727 Total Consideration $ 15,911,781 |
SUMMARY OF DEBT FREE NET WORKING CAPI TAL DEFICIT | The components of Studio397’s debt free net working capital deficit are as follows: SUMMARY OF DEBT FREE NET WORKING CAPI TAL DEFICIT Current assets: Projects to be invoiced $ 192,658 Trade debtors 26,121 Paid in advance 47,168 Total current assets $ 265,947 Less current liabilities: Trade creditors 140,049 Advance invoices/payments 41,063 Audit costs 7,148 Holiday allowances 49,242 Bonuses 42,035 Taxes and social securities (1,140 ) Total current liabilities $ 278,397 Debt free net working capital deficit $ (12,450 ) |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
SCHEDULE OF PROPERTY AND EQUIPMENT | Property and equipment consist of the following balances as of December 31, 2021 and 2020: SCHEDULE OF PROPERTY AND EQUIPMENT 2021 2020 December 31, 2021 2020 Furniture and fixtures $ 16,580 $ - Computer software and equipment 863,931 246,101 Leasehold improvements 127,524 - Property and equipment, gross 1,008,035 246,101 Less: accumulated depreciation (280,946 ) (83,953 ) Property and equipment, net $ 727,089 $ 162,148 ) |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS ACQUISITION | In connection with the acquisition of Le Mans Esports Series Ltd, the Company acquired the following intangible assets (See Note 3 – Acquisitions SCHEDULE OF INTANGIBLE ASSETS ACQUISITION Intangible Asset Useful Life Cost Gaming license Indefinite $ 1,150,000 Esports licenses Indefinite 1,660,000 Total $ 2,810,000 In connection with the acquisition of KartKraft, the Company acquired the following intangible assets (See Note 3 – Acquisitions Intangible Asset Useful Life Cost KartKraft Trade Name Indefinite $ 108,000 Software 6 Years 833,000 Employment & Non-Compete 3 Years 59,000 Total $ 1,000,000 In connection with the acquisition of Studio397, the Company acquired the following intangible assets (See Note 3 – Acquisitions Intangible Asset Useful Life Cost Software 6-10 years $ 7,688,000 rFactor 2 Trade Name Indefinite 3,040,000 Employment & Non-Compete Agreements 3 years 214,000 Total $ 10,942,000 |
SCHEDULE OF INTANGIBLE ASSETS | The following is a summary of intangible assets as of December 31, 2021 and 2020: SCHEDULE OF INTANGIBLE ASSETS Licensing (Finite) Licensing Agreements (Indefinite) Software (Finite) Distribution (Finite) Trade (Infinite) Non-Compete (Finite) Accumulated Total Balance as of January 1, 2020 $ - 3,620,000 2,340,000 560,000 - - (1,192,844 ) $ 5,327,156 Additions 891,999 - - - - - - 891,999 Disposals - - - - - - - - Impairment - - - - - - - - Amortization - - - - - - (650,703 ) (650,703 ) Foreign currency translation adjustment - - - - - - - - Balance as of December 31, 2020 $ 891,999 3,620,000 2,340,000 560,000 - - (1,843,547 ) $ 5,568,452 Additions 5,553,818 8,521,000 - 3,175,928 273,000 - 17,523,746 Disposals - - - - - - - Impairment - - - (317,113 ) - - (317,113 ) Amortization - - - - - (1,568,652 ) (1,568,652 ) Foreign currency translation adjustment (57,454 ) - (496,459 ) - (186,234 ) (15,470 ) 34,993 (720,624 ) Balance as of December 31, 2021 $ 6,388,363 3,620,000 10,364,541 560,000 2,672,581 257,530 (3,377,206 ) $ 20,485,809 |
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS | Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Software Distribution Trade Non-Compete Accumulated Balance as of January 1, 2020 $ 311,094 321,750 560,000 - - 1,192,844 Amortization expense 374,918 275,785 - - - 650,703 Balance as of December 31, 2020 686,012 597,535 560,000 - - 1,843,547 Amortization expense 226,873 1,278,633 - - 63,146 1,568,652 Foreign currency translation adjustment (625 ) (32,452 ) - - (1,916 ) (34,993 ) Balance as of December 31, 2021 $ 912,260 1,843,716 560,000 - $ 61,230 3,377,206 |
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS | Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows: SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS For the Years Ending December 31, Total 2022 $ 2,147,445 2023 2,147,445 2024 1,921,927 2025 1,932,455 2026 1,654,820 Thereafter 2,364,206 Estimated aggregate amortization expense $ 12,168,298 |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF GOODWILL | The carrying amount of goodwill attributable to our Gaming and esports reporting units and the changes in such balances during the years ended December 31, 2021 and 2020 were as follows: SCHEDULE OF GOODWILL Games Esports Total Balance as of January 1, 2020 $ 137,717 - $ 137,717 Foreign currency translation adjustment - - - Balance as of December 31, 2020 137,717 - 137,717 Goodwill attributable to Le Mans Esports Series Ltd - 65,221 65,221 Goodwill attributable to Studio397 4,960,727 - 4,960,727 Foreign currency translation adjustment (295,562 ) (638 ) (296,200 ) Balance as of December 31, 2021 $ 4,802,882 64,583 $ 4,867,465 |
ACCRUED EXPENSES AND OTHER LI_2
ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Payables and Accruals [Abstract] | |
SCHEDULE OF ACCRUED EXPENSES | Accrued expenses and other liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES December 31, 2021 2020 Accrued royalties $ 1,694,011 $ 1,485,261 Accrued professional fees 80,909 129,291 Accrued consulting fees 106,006 398,526 Payable to Le Mans joint venture - 234,667 Accrued development costs 968,007 196,845 Esports prize money 168,959 - Accrued taxes 31,491 54,880 Accrued payroll 235,224 778,918 Accrued other 239,664 76,615 Total $ 3,524,271 $ 3,355,003 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
SCHEDULE OF FAIR VALUE STOCK OPTION WEIGHTED AVERAGE ASSUMPTIONS | The following table presents the weighted-average assumptions, weighted average grant date fair value, and the range of expected price volatility: SCHEDULE OF FAIR VALUE STOCK OPTION WEIGHTED AVERAGE ASSUMPTIONS For the Year Ended December 31, 2021 2020 Risk-free interest rate 0.48 1.09% - Expected volatility 50 65% - Weighted-average volatility 60% - Expected term 5 6 - Expected dividends None - Weighted-average grant date fair value 9.37 - |
SCHEDULE OF STOCK OPTIONS ACTIVITY | The following table summarizes the Company’s stock option activity for the fiscal year ended December 31, 2021: SCHEDULE OF STOCK OPTIONS ACTIVITY Options Weighted- Weighted-Average Aggregate Outstanding as of January 1, 2021 - $ - Granted 573,571 20.35 Exercised - - Forfeited, cancelled or expired (22,972 ) 20.00 Outstanding as of December 31, 2021 550,599 $ 20.36 9.14 $ - Vested and expected to vest 550,599 $ 20.36 9.14 $ Exercisable as of December 31, 2021 205,425 $ 20.04 9.04 $ - |
SCHEDULE OF STOCK BASED COMPENSATION EXPENSE | The following table summarizes stock-based compensation expense resulting from stock option awards included in our Consolidated Statement of Operations: SCHEDULE OF STOCK BASED COMPENSATION EXPENSE For the Year Ended December 31, 2021 2020 General and administrative $ 9,500,265 - Sales and marketing 126,272 - Development 100,125 - Stock-based compensation expense $ 9,726,662 - |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NON-OPERATING LEASES | Future minimum payments under our non-cancellable operating leases as of December 31, 2021 are as follows: SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NON-OPERATING LEASES For the Years Ending Total 2022 $ 299,442 2023 289,218 2024 189,786 2025 48,104 2026 24,069 Total $ 850,619 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES | The components of deferred tax assets and liabilities consist of the following at December 31, 2021 and 2020: SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES 2021 2020 Assets: Net operating loss carryforwards $ 5,756,658 $ 1,937,626 Bad debts 1,312,332 - Stock options 684,238 - Charitable contribution carryforward 17,032 797 Goodwill 11,268 287,878 Other assets 44,667 45,453 Total Assets 7,826,195 2,271,754 Liabilities: Depreciable assets 21,135 45,177 Other intangible assets 590,692 923,224 Total Liabilities 611,827 968,401 Net asset before valuation allowance 7,214,368 1,303,353 Valuation allowance (7,214,368 ) (1,303,353 ) Net deferred tax (liability) asset $ - $ - |
SCHEDULE OF EFFECTIVE INCOME TAX RATE AND THE FEDERAL STATUTORY INCOME TAX RATE | A reconciliation between the Company’s effective income tax rate and the federal statutory income tax rate for the years ended December 31, 2021 and 2020 is as follows: SCHEDULE OF EFFECTIVE INCOME TAX RATE AND THE FEDERAL STATUTORY INCOME TAX RATE 2021 2020 Federal statutory income tax benefit 21.00 % 21.0 % State income taxes, net of federal income tax benefit 5.50 % -13.2 % IPO & Acquisition Costs -6.99 % Permanent differences and other -1.75 % 0.9 % Change in valuation allowance -17.54 % 46.9 % Effect of flow through entity 0.00 % -55.6 % Other adjustments -0.21 % - Effective income tax rate 0.0 % 0.0 % |
CONCENTRATIONS (Tables)
CONCENTRATIONS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Customer Concentration Risk [Member] | |
Concentration Risk [Line Items] | |
SCHEDULE OF CONCENTRATIONS | The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the following periods: SCHEDULE OF CONCENTRATIONS For the Year Ended December 31, Customer 2021 2020 Customer A 28.11 % 29.64 % Customer B 21.50 % 25.28 % Customer C 22.36 % 23.27 % Customer D 10.79 % - Total 82.77 % 78.19 % The following table sets forth information as to each customer that accounted for 10% or more of the Company’s accounts receivable as of: December 31, Customer 2021 2020 Customer A 51.92 % 81.84 % Customer B 17.68 % - * % Total 69.60 % 81.84 % * Less than 10%. |
Supplier Concentration Risk [Member] | |
Concentration Risk [Line Items] | |
SCHEDULE OF CONCENTRATIONS | The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s cost of revenues for the following periods: SCHEDULE OF CONCENTRATIONS For the Year Ended December 31, Supplier 2021 2020 Supplier A 30.89 % 34.59 % Supplier B 13.13 % 19.45 % Supplier C * % 11.46 % Total 44.02 % 65.50 % * Less than 10%. |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Segment Reporting [Abstract] | |
SCHEDULE OF SEGMENT REPORTING INFORMATION | Segment information available with respect to these reportable business segments was as follows: SCHEDULE OF SEGMENT REPORTING INFORMATION For the Year Ended 2021 2020 Revenues: Gaming $ 14,267,735 $ 18,745,166 Esports 807,795 300,363 Total Revenues $ 15,075,530 $ 19,045,529 Gross Profit: Gaming $ 7,226,156 $ 12,438,584 Esports 320,219 11,073 Total Segment and Consolidated Gross Profit $ 7,546,375 $ 12,449,657 Income (Loss) From Operations: Gaming $ (33,802,804 ) $ 508,461 Esports ( 723,854 ) (507,314 ) Total Segment and Consolidated Income (Loss) From Operations $ (34,526,658 ) $ 1,147 Depreciation and Amortization: Gaming $ 1,774,072 $ 718,873 Esports 11,002 1,306 Total Segment Depreciation and Amortization $ 1,785,074 $ 720,179 Interest Expense: Gaming $ (504,156 ) $ (717,498 ) Esports - - Total Segment Interest Expense $ (504,156 ) $ (717,498 ) Equity gain (loss) in Income: Gaming $ 1,370,837 $ - Esports - (70,792 ) Total Segment Equity gain (loss) in Income $ 1,370,837 $ (70,792 ) Expenditures for Additions to Long-Lived Assets: Gaming $ 489,167 $ 126,432 Esports 265,135 10,323 Total Expenditures for Additions to Long-Lived Assets: $ 754,302 $ 136,755 December 31, 2021 December 31, 2020 Segment Total Assets: Gaming $ 47,511,471 $ 17,377,993 Esports 3,191,732 9,017 Consolidated Total Assets $ 50,703,203 $ 17,387,010 |
BUSINESS ORGANIZATION, NATURE_2
BUSINESS ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTAINTIES (Details Narrative) - USD ($) | Jan. 15, 2021 | Dec. 31, 2021 | Dec. 31, 2020 |
Accounting Policies [Abstract] | |||
Initial public offering | $ 63,100,000 | ||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | $ 33,704,745 | $ 679,854 | |
Net Cash Provided by (Used in) Operating Activities | 20,941,664 | (4,053,345) | |
Accumulated deficit | $ 37,988,326 | $ 4,826,335 |
SCHEDULE OF INTANGIBLE ASSETS E
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES (Details) | 12 Months Ended |
Dec. 31, 2021 | |
Licensing Agreements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 6 years 6 months |
Licensing Agreements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 16 years |
Computer Software, Intangible Asset [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 6 years |
Computer Software, Intangible Asset [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 10 years |
Distribution Rights [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 1 year |
Employment Contracts [Member] | |
Property, Plant and Equipment [Line Items] | |
Intangible asset, useful life | 3 years |
SUMMARY OF REVENUE RECOGNIZED (
SUMMARY OF REVENUE RECOGNIZED (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Product Information [Line Items] | ||
Total Revenues | $ 15,075,530 | $ 19,045,529 |
Gaming [Member] | ||
Product Information [Line Items] | ||
Total Revenues | 14,267,735 | 18,745,166 |
Esports [Member] | ||
Product Information [Line Items] | ||
Total Revenues | $ 807,795 | $ 300,363 |
SCHEDULE OF CALCULATION WEIGHTE
SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares excluded in computation of earnings per common share | 573,571 | |
Share-based Payment Arrangement, Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares excluded in computation of earnings per common share | 573,571 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Jan. 01, 2022 | |
Property, Plant and Equipment [Line Items] | |||
Sales allowances | $ 4,563,884 | $ 2,150,684 | |
Sales allowances and price protection reserves | 4,600,000 | 2,200,000 | |
Sales return and price protection reserves | 3,900,000 | 2,200,000 | |
Gain loss on foreign currency translation | $ 222,500 | $ 1,000 | |
Operating lease assets | $ 765,000 | ||
Operating lease liabilities | $ 765,000 | ||
Minimum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment useful lifes | 3 years | ||
Maximum [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment useful lifes | 5 years |
SUMMARY OF AGGREGATE PURCHASE P
SUMMARY OF AGGREGATE PURCHASE PRICE (Details) | Mar. 19, 2021USD ($) | Jan. 25, 2021USD ($) | Jan. 25, 2021GBP (£) | Apr. 20, 2021USD ($) | Dec. 31, 2021USD ($) | Jan. 25, 2021GBP (£) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Business Acquisition [Line Items] | ||||||||
Goodwill | $ 4,867,465 | $ 137,717 | $ 137,717 | |||||
Le Mans Esports Series Limited [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Cash | $ 350,626 | £ 257,232 | ||||||
Other assets | 1,169 | 858 | ||||||
Gaming license | 1,150,000 | 843,682 | ||||||
Esport licenses | 1,660,000 | 1,217,836 | ||||||
Goodwill | 65,221 | 47,084 | ||||||
Accounts payable | (7,016) | (5,147) | ||||||
Non- controlling interest | (1,573,624) | £ (1,157,531) | ||||||
Total Fair value of Member's equity | 1,646,376 | £ 1,204,014 | ||||||
Fair value of the previously held interest | 1,449,000 | 1,062,999 | ||||||
Fair value of the consideration | $ 197,376 | £ 141,015 | ||||||
Total Consideration | 2,810,000 | |||||||
Le Mans Esports Series Limited [Member] | Gaming License [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Excess earning Method | Excess earning Method | ||||||
Discount Rate | 30.00% | 30.00% | ||||||
Le Mans Esports Series Limited [Member] | Esport License [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Excess earning Method | Excess earning Method | ||||||
Discount Rate | 30.00% | 30.00% | ||||||
Le Mans Esports Series Limited [Member] | Goodwill [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Discount Rate | 30.00% | 30.00% | ||||||
Le Mans Esports Series Limited [Member] | Noncontrolling Interest [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Business Enterprise Income | Business Enterprise Income | ||||||
Discount Rate | 30.00% | 30.00% | ||||||
Kart Kraft [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | $ 1,000,000 | 1,000,000 | ||||||
Kart Kraft [Member] | Kart Kraft Trade Name [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Relief-from-Royalty | |||||||
Discount Rate | 27.50% | |||||||
Total Consideration | $ 108,000 | 108,000 | ||||||
Kart Kraft [Member] | Software [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Replacement cost | |||||||
Discount Rate | 25.00% | |||||||
Total Consideration | $ 833,000 | |||||||
Kart Kraft [Member] | Employment Non Compete Agreements [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | With & Without Method | |||||||
Discount Rate | 25.00% | |||||||
Total Consideration | $ 59,000 | 59,000 | ||||||
Studio 397 [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | $ 15,911,781 | 10,942,000 | ||||||
Studio 397 [Member] | Software [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Replacement Cost | |||||||
Discount Rate | 9.30% | |||||||
Studio 397 [Member] | Employment Non Compete Agreements [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | With & Without Method | |||||||
Discount Rate | 9.30% | |||||||
Total Consideration | $ 214,000 | $ 214,000 | ||||||
Studio 397 [Member] | Debt-free net working capital [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | (12,450) | |||||||
Studio 397 [Member] | Fixed Assets [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | $ 21,504 | |||||||
Studio 397 [Member] | R Factor Two R Factor Two Trade Name [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Relief-from-Royalty | |||||||
Discount Rate | 9.30% | |||||||
Total Consideration | $ 3,040,000 | |||||||
Studio 397 [Member] | Technology [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | $ 7,010,000 | |||||||
Studio 397 [Member] | Internally Developed Franchise [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Valuation Method | Excess earning Method | |||||||
Discount Rate | 9.30% | |||||||
Total Consideration | $ 678,000 | |||||||
Studio 397 [Member] | Goodwill [Member] | ||||||||
Business Acquisition [Line Items] | ||||||||
Total Consideration | $ 4,960,727 |
SUMMARY OF DEBT FREE NET WORKIN
SUMMARY OF DEBT FREE NET WORKING CAPI TAL DEFICIT (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current assets | $ 24,622,840 | $ 10,473,123 |
Total current liabilities | 8,598,250 | 14,914,490 |
Total current liabilities | (8,598,250) | $ (14,914,490) |
Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current assets | 265,947 | |
Total current liabilities | 278,397 | |
Total current liabilities | (278,397) | |
Debt free net working capital deficit | (12,450) | |
Projects to be Invoiced [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current assets | 192,658 | |
Trade Debtors [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current assets | 26,121 | |
Paid-In Advance [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current assets | 47,168 | |
Trade Creditors [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 140,049 | |
Total current liabilities | (140,049) | |
Advance Invoices Payments [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 41,063 | |
Total current liabilities | (41,063) | |
Audit Costs [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 7,148 | |
Total current liabilities | (7,148) | |
Holiday Allowances [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 49,242 | |
Total current liabilities | (49,242) | |
Bonuses [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 42,035 | |
Total current liabilities | (42,035) | |
Taxes and Social Securities [Member] | Studio 397 [Member] | ||
Business Combination, Separately Recognized Transactions [Line Items] | ||
Total current liabilities | 1,140 | |
Total current liabilities | $ (1,140) |
ACQUISITIONS (Details Narrative
ACQUISITIONS (Details Narrative) | Jan. 25, 2031GBP (£) | Apr. 02, 2021USD ($) | Mar. 19, 2021USD ($) | Apr. 30, 2022USD ($) | Apr. 30, 2021USD ($)shares | Dec. 31, 2021USD ($) | Dec. 31, 2021USD ($) | Sep. 30, 2021 | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2022USD ($) | Jan. 25, 2021 | Jan. 08, 2021 |
Business Acquisition [Line Items] | |||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | ||||||||||||
Development expenses | $ 9,060,000 | ||||||||||||
Income (Loss) from Equity Method Investments | 1,370,837 | $ (70,792) | |||||||||||
Accounts Payable, Underwriters, Promoters, and Employees, Current | 234,667 | ||||||||||||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures | 271,200 | ||||||||||||
Revenues | $ 741,000 | ||||||||||||
Net loss | (33,161,991) | (1,756,647) | $ 288,000 | ||||||||||
Operating Expenses | 42,073,033 | 12,448,510 | |||||||||||
KartKraft Acquisition [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | $ 1,000,000 | ||||||||||||
KartKraft Acquisition [Member] | At Closing [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | 750,000 | ||||||||||||
KartKraft Acquisition [Member] | Six Month Anniversary Closing [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | $ 250,000 | ||||||||||||
Studio Three Nine Seven [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Stock Issued During Period, Value, Acquisitions | $ 16,000,000 | ||||||||||||
[custom:PurchaseCommitmentLiabilites] | 3,170,319 | ||||||||||||
Pledged percentage | 20.00% | ||||||||||||
Business Combination, Consideration Transferred | 15,911,781 | ||||||||||||
Business acquisition, revenue | 845,000 | 15,143,000 | |||||||||||
Business acquisition, cost of sales | $ 1,857,000 | ||||||||||||
Business acquisition, net income loss | $ 34,151,000 | ||||||||||||
Studio Three Nine Seven [Member] | Subsequent Event [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | $ 3,111,781 | ||||||||||||
Business combination discount percentage | 2.80% | ||||||||||||
Studio Three Nine Seven [Member] | At Closing [Member] | Subsequent Event [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | $ 12,800,000 | ||||||||||||
Studio Three Nine Seven [Member] | First Anniversary Of Closing [Member] | Subsequent Event [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Payments to Acquire Businesses, Gross | $ 3,200,000 | ||||||||||||
Seven Zero Four Games Company [Member] | Ascend Exchange Agreement [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 17.80% | ||||||||||||
Seven Zero Four Games Company [Member] | Ascend Exchange Agreement [Member] | Common Class A [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Stock Issued During Period, Value, Acquisitions | $ 10,116,545 | ||||||||||||
Business Combination, Consideration Transferred | $ 2,056,692 | ||||||||||||
Stock Issued During Period, Shares, Acquisitions | shares | 488,722 | ||||||||||||
Seven Zero Four Games Company [Member] | Play Fast Exchange Agreement [Member] | Common Class A [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Stock Issued During Period, Value, Acquisitions | $ 7,587,419 | ||||||||||||
Business Combination, Consideration Transferred | $ 1,542,519 | ||||||||||||
Stock Issued During Period, Shares, Acquisitions | shares | 366,542 | ||||||||||||
Le Mans Esports Series Limited [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Income (Loss) from Equity Method Investments | 70,792 | ||||||||||||
Accounts Payable, Underwriters, Promoters, and Employees, Current | $ 234,667 | ||||||||||||
Kart Kraft [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Operating Expenses | $ 482,000 | ||||||||||||
Minimum [Member] | Le Mans Esports Series Limited [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Equity Method Investment, Ownership Percentage | 45.00% | ||||||||||||
Maximum [Member] | Le Mans Esports Series Limited [Member] | |||||||||||||
Business Acquisition [Line Items] | |||||||||||||
Equity Method Investment, Ownership Percentage | 51.00% | ||||||||||||
Development expenses | £ | £ 8,000,000 |
SCHEDULE OF PROPERTY AND EQUIPM
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Abstract] | ||
Furniture and fixtures | $ 16,580 | |
Computer software and equipment | 863,931 | 246,101 |
Leasehold improvements | 127,524 | |
Property and equipment, gross | 1,008,035 | 246,101 |
Less: accumulated depreciation | (280,946) | (83,953) |
Property and equipment, net | $ 727,089 | $ 162,148 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 196,993 | $ 69,476 |
SCHEDULE OF INTANGIBLE ASSETS A
SCHEDULE OF INTANGIBLE ASSETS ACQUISITION (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Apr. 20, 2021 | Mar. 19, 2021 | |
Le Mans Esports Series Limited [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total, cost | $ 2,810,000 | ||
Le Mans Esports Series Limited [Member] | Gaming License [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | Indefinite | ||
Total, cost | $ 1,150,000 | ||
Le Mans Esports Series Limited [Member] | Esport License [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | Indefinite | ||
Total, cost | $ 1,660,000 | ||
Kart Kraft [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total, cost | $ 1,000,000 | $ 1,000,000 | |
Kart Kraft [Member] | Kart Kraft Trade Name [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | Indefinite | ||
Total, cost | $ 108,000 | 108,000 | |
Kart Kraft [Member] | Computer Software, Intangible Asset [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | 6 Years | ||
Total, cost | $ 833,000 | ||
Kart Kraft [Member] | Employment Non Compete Agreements [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | 3 Years | ||
Total, cost | $ 59,000 | $ 59,000 | |
Studio 397 [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total, cost | $ 10,942,000 | $ 15,911,781 | |
Studio 397 [Member] | Computer Software, Intangible Asset [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | 6-10 years | ||
Total, cost | $ 7,688,000 | ||
Studio 397 [Member] | Employment Non Compete Agreements [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | 3 years | ||
Total, cost | $ 214,000 | $ 214,000 | |
Studio 397 [Member] | rFactor 2 Trade Name [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life | Indefinite | ||
Total, cost | $ 3,040,000 |
SCHEDULE OF INTANGIBLE ASSETS (
SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | $ 1,843,547 | $ 1,192,844 |
Intangible assets, net beginning | 5,568,452 | 5,327,156 |
Additions | 17,523,746 | 891,999 |
Disposals | ||
Impairment | (317,113) | |
Amortization | (1,568,652) | (650,703) |
Foreign currency translation adjustment | (720,624) | |
Intangible assets,net ending | 20,485,809 | 5,568,452 |
Intangible assets, amortizated ending | (3,377,206) | (1,843,547) |
Licensing Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | 3,620,000 | 3,620,000 |
Additions | ||
Disposals | ||
Impairment | ||
Amortization | ||
Foreign currency translation adjustment | ||
Intangible assets, finite gross Ending | 3,620,000 | 3,620,000 |
Licensing Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | 891,999 | |
Intangible assets, amortization beginning | 686,012 | 311,094 |
Additions | 5,553,818 | 891,999 |
Disposals | ||
Impairment | ||
Amortization | ||
Foreign currency translation adjustment | (57,454) | |
Intangible assets,net ending | 6,388,363 | |
Intangible assets, finite gross Ending | 891,999 | |
Intangible assets, amortizated ending | (912,260) | (686,012) |
Software [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | 2,340,000 | 2,340,000 |
Intangible assets, amortization beginning | 597,535 | 321,750 |
Additions | 8,521,000 | |
Disposals | ||
Impairment | ||
Amortization | ||
Foreign currency translation adjustment | (496,459) | |
Intangible assets,net ending | 10,364,541 | |
Intangible assets, finite gross Ending | 2,340,000 | |
Intangible assets, amortizated ending | (1,843,716) | (597,535) |
Distribution Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | 560,000 | 560,000 |
Intangible assets, amortization beginning | 560,000 | 560,000 |
Additions | ||
Disposals | ||
Impairment | ||
Amortization | ||
Foreign currency translation adjustment | ||
Intangible assets,net ending | 560,000 | |
Intangible assets, finite gross Ending | 560,000 | |
Intangible assets, amortizated ending | (560,000) | (560,000) |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | ||
Intangible assets, amortization beginning | ||
Additions | 3,175,928 | |
Disposals | ||
Impairment | (317,113) | |
Amortization | ||
Foreign currency translation adjustment | (186,234) | |
Intangible assets,net ending | 2,672,581 | |
Intangible assets, finite gross Ending | ||
Intangible assets, amortizated ending | ||
Noncompete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross beginning | ||
Intangible assets, amortization beginning | ||
Additions | 273,000 | |
Disposals | ||
Impairment | ||
Amortization | ||
Foreign currency translation adjustment | (15,470) | |
Intangible assets,net ending | 257,530 | |
Intangible assets, finite gross Ending | ||
Intangible assets, amortizated ending | (61,230) | |
Accumulated Amortization [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | (1,843,547) | (1,192,844) |
Additions | ||
Disposals | ||
Impairment | ||
Amortization | (1,568,652) | (650,703) |
Foreign currency translation adjustment | 34,993 | |
Intangible assets, amortizated ending | $ (3,377,206) | $ 1,843,547 |
SCHEDULE OF ACCUMULATED AMORTIZ
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | $ 1,843,547 | $ 1,192,844 |
Accumulated amortization, ending | 3,377,206 | 1,843,547 |
Licensing Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | 686,012 | 311,094 |
Amortization expense | 226,873 | 374,918 |
FX translation adjustments | (625) | |
Accumulated amortization, ending | 912,260 | 686,012 |
Software [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | 597,535 | 321,750 |
Amortization expense | 1,278,633 | 275,785 |
FX translation adjustments | (32,452) | |
Accumulated amortization, ending | 1,843,716 | 597,535 |
Distribution Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | 560,000 | 560,000 |
Amortization expense | ||
FX translation adjustments | ||
Accumulated amortization, ending | 560,000 | 560,000 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | ||
Amortization expense | ||
FX translation adjustments | ||
Accumulated amortization, ending | ||
Noncompete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | ||
Amortization expense | 63,146 | |
FX translation adjustments | (1,916) | |
Accumulated amortization, ending | 61,230 | |
Accumulated Amortization [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, amortization beginning | (1,843,547) | (1,192,844) |
Amortization expense | 1,568,652 | 650,703 |
FX translation adjustments | (34,993) | |
Accumulated amortization, ending | $ 3,377,206 | $ (1,843,547) |
SCHEDULE OF ESTIMATED AGGREGATE
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS (Details) | Dec. 31, 2021USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2022 | $ 2,147,445 |
2023 | 2,147,445 |
2024 | 1,921,927 |
2025 | 1,932,455 |
2026 | 1,654,820 |
Thereafter | 2,364,206 |
Estimated aggregate amortization expense | $ 12,168,298 |
SCHEDULE OF GOODWILL (Details)
SCHEDULE OF GOODWILL (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Goodwill, beginning balance | $ 137,717 | $ 137,717 |
Foreign currency translation adjustment | 296,200 | |
Goodwill attributable | 65,221 | |
Goodwill attributable | 4,960,727 | |
Foreign currency translation adjustment | (296,200) | |
Goodwill, ending balance | 4,867,465 | 137,717 |
Le Mans Gaming [Member] | ||
Goodwill, beginning balance | 137,717 | 137,717 |
Foreign currency translation adjustment | 295,562 | |
Goodwill attributable | ||
Goodwill attributable | 4,960,727 | |
Foreign currency translation adjustment | (295,562) | |
Goodwill, ending balance | 4,802,882 | 137,717 |
Esports Licenses [Member] | ||
Goodwill, beginning balance | ||
Foreign currency translation adjustment | 638 | |
Goodwill attributable | 65,221 | |
Goodwill attributable | ||
Foreign currency translation adjustment | (638) | |
Goodwill, ending balance | $ 64,583 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Payments to Acquire Intangible Assets | $ 227,928 | $ 100,000 |
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill) | 317,113 | |
License Agreements [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Finite-Lived License Agreements, Gross | 892,000 | |
Licensing Agreements [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Payments to Acquire Intangible Assets | 100,000 | |
BTCC License [Member] | Other Current Liabilities [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Finite-Lived License Agreements, Gross | 853,535 | $ 791,999 |
INDYCAR Gaming License [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Finite-Lived License Agreements, Gross | 2,787,129 | |
Finite-Lived Intangible Assets, Gross | 2,713,871 | |
INDYCAR Gaming License [Member] | Current Liabilities [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Finite-Lived License Agreements, Gross | 79,739 | |
INDYCAR Gaming License [Member] | Other Noncurrent Liabilities [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Finite-Lived License Agreements, Gross | $ 2,707,390 | |
LeMans Video Gaming License [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
[custom:IndefiniteLivedIntangibleAssetsTerm] | 266.00% | |
LeMans Esports License [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
[custom:IndefiniteLivedIntangibleAssetsTerm] | 32.00% |
SCHEDULE OF ACCRUED EXPENSES (D
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Payables and Accruals [Abstract] | ||
Accrued royalties | $ 1,694,011 | $ 1,485,261 |
Accrued professional fees | 80,909 | 129,291 |
Accrued consulting fees | 106,006 | 398,526 |
Payable to Le Mans joint venture | 234,667 | |
Accrued development costs | 968,007 | 196,845 |
Esports prize money | 168,959 | |
Accrued taxes | 31,491 | 54,880 |
Accrued payroll | 235,224 | 778,918 |
Accrued other | 239,664 | 76,615 |
Total | $ 3,524,271 | $ 3,355,003 |
DUE TO_FROM RELATED PARTIES (De
DUE TO/FROM RELATED PARTIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Apr. 01, 2020 | |
Short-term Debt [Line Items] | |||
Interest Expense, Debt | $ 105,845 | $ 698,830 | |
Repayments of Related Party Debt | 12,967,143 | ||
Promissory Note [Member] | |||
Short-term Debt [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 10,000,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 10.00% | ||
Repayments of lines of credit | 12,665,000 | ||
Line of credit, outstanding | 0 | ||
Interest Expense, Related Party | 11,705,000 | ||
Accounts Payable, Related Parties | 119,014 | ||
Accounts Receivable, Related Parties | 137,574 | ||
Repayments of Related Party Debt | $ 302,000 | $ 0 | |
Promissory Note [Member] | Minimum [Member] | |||
Short-term Debt [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 10,000,000 | ||
Promissory Note [Member] | Maximum [Member] | |||
Short-term Debt [Line Items] | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 12,000,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Jan. 02, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Aug. 03, 2020 |
Related Party Transaction [Line Items] | ||||
Due to Related Parties | $ 24,348 | $ 10,853,536 | ||
Promissory Note [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related party expenses | 1,400,000 | 1,099,846 | ||
Proceeds from Related Party Debt | 2,157,707 | 361,145 | ||
Seven Hundred And Four Games Company [Member] | ||||
Related Party Transaction [Line Items] | ||||
Related party expenses | $ 0 | $ 149,898 | ||
Services Agreement [Member] | Principal Owner [Member] | ||||
Related Party Transaction [Line Items] | ||||
Legal Fees | $ 5,000 | |||
Accounting service fee | 2,500 | |||
Services Agreement [Member] | Principal Owner [Member] | Minimum [Member] | ||||
Related Party Transaction [Line Items] | ||||
Development services hourly fee | 15 | |||
Services Agreement [Member] | Principal Owner [Member] | Maximum [Member] | ||||
Related Party Transaction [Line Items] | ||||
Development services hourly fee | $ 30 | |||
Services Agreement [Member] | Principal Owner [Member] | Motorsport Network [Member] | ||||
Related Party Transaction [Line Items] | ||||
Business Acquisition, Percentage of Voting Interests Acquired | 20.00% |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | Jan. 15, 2021 | Jan. 08, 2021 | Aug. 18, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Class of Stock [Line Items] | ||||||
Equity Method Investment, Ownership Percentage | 100.00% | |||||
Proceeds from issuance initial public offering | $ 63,100,000 | |||||
Remaining life of years | 9 years 14 days | |||||
Fair market value | [1] | $ 63,074,128 | ||||
Additional paid in capital | $ 75,651,175 | |||||
Seven Zero Four Games Company [Member] | ||||||
Class of Stock [Line Items] | ||||||
Shares of common stock | 4,000 | |||||
Stock option exercise price increase | $ 93.03 | |||||
Seven Zero Four Games Company [Member] | Warrant [Member] | ||||||
Class of Stock [Line Items] | ||||||
Remaining life of years | 3 years 9 months 18 days | |||||
Stock Purchase Agreement [Member] | ||||||
Class of Stock [Line Items] | ||||||
Stockholders equity description | The merger consideration issued to (i) PlayFast with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 366,542 newly-issued shares of the Company’s Class A common stock with a fair market value of $7,587,419 and $1,542,519 in cash and (ii) Ascend with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 488,722 newly-issued shares of the Company’s Class A common stock with a fair market value of $10,116,545 and $2,056,692 in cash | |||||
HC2 Holding Mermber [Member] | Stock Purchase Agreement [Member] | ||||||
Class of Stock [Line Items] | ||||||
Newly issued | 106,307 | 106,307 | ||||
Share price | $ 11.29 | |||||
Fair market value | $ 1,200,000 | |||||
Additional paid in capital | $ 939,511 | |||||
Common Class A [Member] | ||||||
Class of Stock [Line Items] | ||||||
Conversion of Stock, Shares Converted | 7,000,000 | |||||
Common Stock, Voting Rights | Class A common stock, with 1 vote per share | |||||
Proceeds from issuance initial public offering | $ 63,074,128 | |||||
Common Class A [Member] | Play Fast Agreement [Member] | ||||||
Class of Stock [Line Items] | ||||||
Newly issued | 366,542 | |||||
Fair market value | $ 7,587,419 | |||||
Cash | $ 1,542,519 | |||||
Common Class A [Member] | Ascend Exchange Agreement [Member] | ||||||
Class of Stock [Line Items] | ||||||
Newly issued | 488,722 | |||||
Fair market value | $ 10,116,545 | |||||
Cash | $ 2,056,692 | |||||
Common Class A [Member] | IPO [Member] | ||||||
Class of Stock [Line Items] | ||||||
Newly issued | 3,450,000 | |||||
Shares issued price per share | $ 20 | |||||
Common Class A [Member] | IPO [Member] | Additional Shares For Underwriters [Member] | ||||||
Class of Stock [Line Items] | ||||||
Newly issued | 450,000 | |||||
Common Class A [Member] | Motorsport Network [Member] | ||||||
Class of Stock [Line Items] | ||||||
Common Stock, Voting Rights | 1 vote per share | |||||
Common Class B [Member] | ||||||
Class of Stock [Line Items] | ||||||
Conversion of Stock, Shares Converted | 7,000,000 | |||||
Common Stock, Voting Rights | Class B common stock, with 10 votes per share | |||||
[1] | Gross proceeds of $ 69,000,000 5,925,872 |
SCHEDULE OF FAIR VALUE STOCK OP
SCHEDULE OF FAIR VALUE STOCK OPTION WEIGHTED AVERAGE ASSUMPTIONS (Details) - $ / shares | Jan. 12, 2020 | Dec. 31, 2021 | Dec. 31, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | |||
Risk-free interest rate | |||
Risk-free interest rate | 60.00% | ||
Expected term | |||
Risk-free interest rate | 0.00% | ||
Risk-free interest rate | $ 9.37 | ||
Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 0.48% | ||
Risk-free interest rate | 50.00% | ||
Expected term | 5 years | ||
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Risk-free interest rate | 1.09% | ||
Risk-free interest rate | 65.00% | ||
Expected term | 6 years |
SCHEDULE OF STOCK OPTIONS ACTIV
SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) | 12 Months Ended |
Dec. 31, 2021USD ($)$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Number of Options, beginning | shares | |
Weighted-Average Exercise Prices, beginning | |
Number of Options, granted | shares | 573,571 |
Weighted-Average Exercise Prices, Granted | $ 20.35 |
Number of Options, Exercised | shares | |
Weighted-Average Exercise Prices, Exercised | |
Number of Options, Forfeited, Cancelled or expired | shares | (22,972) |
Weighted-Average Exercise Prices, Forfeited, Cancelled or expired | $ 20 |
Number of Options, ending | 550,599 |
Weighted-Average Exercise Prices, ending | $ 20.36 |
Weighted-Average Remaining Contractual Term (in years) outstanding | 9 years 1 month 20 days |
Aggregate Intrinsic Value outstanding | $ | |
Number of Options, Vested and expected to vest | shares | 550,599 |
Weighted-Average Exercise Prices, Vested and expected to vest | $ 20.36 |
Weighted-Average Remaining Contractual Term (in years), Vested and expected to vest | 9 years 1 month 20 days |
Aggregate Intrinsic Value, Vested and expected to vest | $ | |
Number of Options, Exercisable ending | shares | 205,425 |
Weighted-Average Exercise Prices, Exercisable, ending | $ 20.04 |
Weighted-Average Remaining Contractual Term (in years), Exercisable | 9 years 14 days |
Aggregate Intrinsic Value, Exercisable | $ |
SCHEDULE OF STOCK BASED COMPENS
SCHEDULE OF STOCK BASED COMPENSATION EXPENSE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 9,726,662 | |
General and Administration [Member] | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 9,500,265 | |
Sales And Marketing [Member] | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 126,272 | |
Development [Member] | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 100,125 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | Jan. 15, 2021 | Apr. 03, 2017 | Dec. 31, 2021 | Dec. 31, 2020 | Jan. 12, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Compensation expense period | 2 years | |||||
Unrecognized stock based compensation | $ 2,225,415 | |||||
Stock Issued During Period, Value, New Issues | [1] | $ 63,074,128 | ||||
SARs [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock issued | 25,734 | 4,211 | ||||
Shares Issued, Shares, Share-based Payment Arrangement, Forfeited | 9,701 | |||||
Share price | $ 55.67 | |||||
Stock Issued During Period, Value, New Issues | $ 1,051,995 | |||||
MSGM 2021 Stock Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Compensation expense period | 10 years | |||||
Common Class A [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 | ||||
Common Class A [Member] | IPO [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock issued | 3,450,000 | |||||
Common Class A [Member] | Chief Executive Officer Consultant And Three Director [Member] | IPO [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock issued | 330,633 | |||||
Fair value | $ 6,612,660 | |||||
Common Class A [Member] | Motorsport Games [Member] | MSGM 2021 Stock Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Common Stock, Shares Authorized | 429,873 | 1,000,000 | ||||
[1] | Gross proceeds of $ 69,000,000 5,925,872 |
SCHEDULE OF FUTURE MINIMUM PAYM
SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NON-OPERATING LEASES (Details) | Dec. 31, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 299,442 |
2023 | 289,218 |
2024 | 189,786 |
2025 | 48,104 |
2026 | 24,069 |
Total | $ 850,619 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Jan. 21, 2022 | Sep. 03, 2021USD ($)ft² | Mar. 02, 2021USD ($) | Feb. 11, 2021shares | Jan. 25, 2021 | Jan. 11, 2021shares | Oct. 01, 2020USD ($) | Feb. 21, 2020USD ($) | Jan. 02, 2020USD ($) | Mar. 15, 2019 | Jan. 31, 2021USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2021GBP (£) | May 15, 2020USD ($) |
Product Liability Contingency [Line Items] | |||||||||||||||
Rental payment | $ 387,865 | $ 291,892 | |||||||||||||
Security deposit | $ 6,000 | ||||||||||||||
Base rent | $ 3,000 | ||||||||||||||
Employment Agreements [Member] | Chief Executive Officer [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Base salary | $ 500,000 | ||||||||||||||
Annual increase percentage of base salary | 103.00% | ||||||||||||||
Employment Agreements [Member] | Mr. Hood [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Base salary | $ 198,000 | $ 230,000 | |||||||||||||
Cash bonus to be paid | $ 100,000 | ||||||||||||||
Employment Agreements [Member] | Mr. Hood [Member] | Subsequent Event [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Payment of lieu description | On January 21, 2022, the Company notified Stephen Hood that his position will be eliminated effective January 21, 2022. Mr. Hood will receive the following separation payments: £43,750 in lieu of his entitlement to 3 months’ termination notice, £37,019 in lieu of accrued but untaken holiday pay and an £60,000 ex gratia settlement payment which includes statutory redundancy as required under the law of England & Wales | ||||||||||||||
Joint Venture Agreement [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Joint venture equity ownership percentage | 45.00% | ||||||||||||||
[custom:AgreedToExchangeForLicenseRight-0] | 9,060,000 | £ 8,000,000 | |||||||||||||
Joint Venture Agreement [Member] | Minimum [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Joint venture equity ownership percentage | 45.00% | ||||||||||||||
Joint Venture Agreement [Member] | Maximum [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Joint venture equity ownership percentage | 51.00% | ||||||||||||||
Joint Venture Agreement [Member] | Automobile Club de l'Oues [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Joint venture equity ownership percentage | 55.00% | ||||||||||||||
Charlotte, North Carolina [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Rental payment | $ 14,896 | ||||||||||||||
Lease description | ends on August 31, 2024 | ||||||||||||||
Periodical increase percentage of rent | 3.00% | ||||||||||||||
Security deposit | $ 30,000 | ||||||||||||||
Sublease income | 183,200 | ||||||||||||||
Silverstone, England [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Rental payment | $ 75,000 | ||||||||||||||
Security deposit | $ 15,000 | ||||||||||||||
Area of land | ft² | 1,600 | ||||||||||||||
Rental payment, per month | $ 6,700 | ||||||||||||||
Ascend FS Inc [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Shares purchased | shares | 116,608 | ||||||||||||||
[custom:PercentageOfOutstandingShares-0] | 28.70% | ||||||||||||||
HC2 Holdings 2 Inc and Continental General Insurance Company [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Shares purchased | shares | 106,307 | ||||||||||||||
[custom:PercentageOfOutstandingShares-0] | 26.20% | ||||||||||||||
Epic Games International [Member] | License Agreement [Member] | |||||||||||||||
Product Liability Contingency [Line Items] | |||||||||||||||
Payment for license fee | $ 100,000 | $ 40,000 | |||||||||||||
Licens fee royalty | 5.00% | ||||||||||||||
Royalties earned | $ 340,000 |
SCHEDULE OF COMPONENTS OF DEFER
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 5,756,658 | $ 1,937,626 |
Bad debts | 1,312,332 | |
Stock options | 684,238 | |
Charitable contribution carryforward | 17,032 | 797 |
Goodwill | 11,268 | 287,878 |
Other assets | 44,667 | 45,453 |
Total Assets | 7,826,195 | 2,271,754 |
Depreciable assets | 21,135 | 45,177 |
Other intangible assets | 590,692 | 923,224 |
Total Liabilities | 611,827 | 968,401 |
Net asset before valuation allowance | 7,214,368 | 1,303,353 |
Valuation allowance | (7,214,368) | (1,303,353) |
Net deferred tax (liability) asset |
SCHEDULE OF EFFECTIVE INCOME TA
SCHEDULE OF EFFECTIVE INCOME TAX RATE AND THE FEDERAL STATUTORY INCOME TAX RATE (Details) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory income tax benefit | 21.00% | 21.00% |
State income taxes, net of federal income tax benefit | 5.50% | (13.20%) |
IPO & Acquisition Costs | (6.99%) | |
Permanent differences and other | (1.75%) | 0.90% |
Change in valuation allowance | (17.54%) | 46.90% |
Effect of flow through entity | 0.00% | (55.60%) |
Other adjustments | (0.21%) | |
Effective income tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) $ in Millions | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Operating Loss Carryforwards [Line Items] | |
Increase in valuation allowance | $ 5.9 |
Domestic Tax Authority [Member] | |
Operating Loss Carryforwards [Line Items] | |
Operating Loss Carryforwards | 20 |
Operating loss carryforwards not subject to expiration | 15.6 |
Operating losses subject to expiration | $ 4.4 |
SCHEDULE OF CONCENTRATIONS (Det
SCHEDULE OF CONCENTRATIONS (Details) | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2020 | |||
Customer A [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 28.11% | 29.64% | ||
Customer A [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 51.92% | 81.84% | ||
Customer B [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 21.50% | 25.28% | ||
Customer B [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 17.68% | [1] | ||
Customer C [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 22.36% | 23.27% | ||
Customer D [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 10.79% | [1] | ||
Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 82.77% | 78.19% | ||
Customer [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 44.02% | 65.50% | ||
Customer [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 69.60% | 81.84% | ||
Supplier A [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 30.89% | 34.59% | ||
Supplier B [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | 13.13% | 19.45% | ||
Supplier C [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Total | [2] | 11.46% | ||
[1] | Less than 10%. | |||
[2] | Less than 10%. |
SCHEDULE OF SEGMENT REPORTING I
SCHEDULE OF SEGMENT REPORTING INFORMATION (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | ||
Revenue from External Customer [Line Items] | |||
Total Revenues | $ 15,075,530 | $ 19,045,529 | |
Total Segment and Consolidated Gross Profit | 7,546,375 | 12,449,657 | |
Total Segment and Consolidated Income (Loss) From Operations | (34,526,658) | 1,147 | |
Total Segment Depreciation and Amortization | 1,785,074 | 720,179 | |
Total Segment Interest Expense | [1] | (504,156) | (717,498) |
Esports | [1] | 504,156 | 717,498 |
Total Segment Equity gain (loss) in Income | 1,370,837 | (70,792) | |
Total Expenditures for Additions to Long-Lived Assets: | 754,302 | 136,755 | |
Consolidated Total Assets | 50,703,203 | 17,387,010 | |
Gaming [Member] | |||
Revenue from External Customer [Line Items] | |||
Total Revenues | 14,267,735 | 18,745,166 | |
Total Segment and Consolidated Gross Profit | 7,226,156 | 12,438,584 | |
Total Segment and Consolidated Income (Loss) From Operations | (33,802,804) | 508,461 | |
Total Segment Depreciation and Amortization | 1,774,072 | 718,873 | |
Total Segment Interest Expense | (504,156) | (717,498) | |
Esports | 504,156 | 717,498 | |
Total Segment Equity gain (loss) in Income | 1,370,837 | ||
Total Expenditures for Additions to Long-Lived Assets: | 489,167 | 126,432 | |
Consolidated Total Assets | 47,511,471 | 17,377,993 | |
Esports [Member] | |||
Revenue from External Customer [Line Items] | |||
Total Revenues | 807,795 | 300,363 | |
Total Segment and Consolidated Gross Profit | 320,219 | 11,073 | |
Total Segment and Consolidated Income (Loss) From Operations | 723,854 | (507,314) | |
Total Segment Depreciation and Amortization | 11,002 | 1,306 | |
Total Segment Interest Expense | |||
Esports | |||
Total Segment Equity gain (loss) in Income | (70,792) | ||
Total Expenditures for Additions to Long-Lived Assets: | 265,135 | 10,323 | |
Consolidated Total Assets | $ 3,191,732 | $ 9,017 | |
[1] | Includes related party expenses of $105,845 and $698,830 for the years ended December 31, 2021 and 2020, respectively. |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative) | 12 Months Ended |
Dec. 31, 2021Segment | |
Segment Reporting [Abstract] | |
Number of segments | 2 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Mar. 31, 2027 | Mar. 03, 2022 | Jan. 18, 2022 | Jan. 06, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Apr. 02, 2022 | Feb. 08, 2022 |
Subsequent Event [Line Items] | ||||||||
Payments for rent | $ 387,865 | $ 291,892 | ||||||
Stock options granted | 573,571 | |||||||
Forecast [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Payments for rent | $ 22,000 | |||||||
Subsequent Event [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Lessee, Operating Lease, Term of Contract | 5 years | 5 years | ||||||
Subsequent Event [Member] | Common Class A [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Number of restricted shares granted | 25,000 | 12,690 | ||||||
Subsequent Event [Member] | Common Class A [Member] | Employee Stock [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Stock options granted | 16,281 | 543,066 | ||||||
Subsequent Event [Member] | Common Class A [Member] | Board of Directors Chairman [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Stock options granted | 57,108 |