Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2023 | Aug. 21, 2023 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2023 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2023 | |
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, $0.0001 par | |
Trading Symbol | MSGM | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Common Class A [Member] | ||
Entity Common Stock, Shares Outstanding | 2,720,328 | |
Common Class B [Member] | ||
Entity Common Stock, Shares Outstanding | 700,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 1,966,553 | $ 979,306 |
Accounts receivable, net of allowances of $2,532,383 and $2,252,383 as of June 30, 2023 and December 31, 2022, respectively | 1,018,784 | 1,809,110 |
Prepaid expenses and other current assets | 1,043,214 | 1,048,392 |
Total Current Assets | 4,096,972 | 4,043,340 |
Property and equipment, net | 394,608 | 522,433 |
Operating lease right of use assets | 300,265 | 971,789 |
Intangible assets, net | 8,544,394 | 13,360,230 |
Total Assets | 13,336,239 | 18,897,792 |
Current liabilities: | ||
Accounts payable | 876,198 | 2,372,219 |
Accrued expenses and other current liabilities | 3,359,598 | 3,416,424 |
Purchase commitments | 2,239,821 | 2,563,216 |
Operating lease liabilities (current) | 190,604 | 380,538 |
Total Current Liabilities | 6,698,350 | 13,321,608 |
Operating lease liabilities (non-current) | 112,900 | 617,288 |
Other non-current liabilities | 3,105,037 | 3,055,498 |
Total Liabilities | 9,916,287 | 16,994,394 |
Commitments and contingencies (Note 9) | ||
Stockholders’ Equity: | ||
Preferred stock, $0.0001 par value per share; authorized 1,000,000 and 1,000,000 shares; and none issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | ||
Additional paid-in capital | 91,736,545 | 76,446,061 |
Accumulated deficit | (87,251,102) | (73,979,131) |
Accumulated other comprehensive loss | (1,208,945) | (933,406) |
Total Stockholders’ Equity Attributable to Motorsport Games Inc. | 3,276,837 | 1,533,711 |
Non-controlling interest | 143,115 | 369,687 |
Total Stockholders’ Equity | 3,419,952 | 1,903,398 |
Total Liabilities and Stockholders’ Equity | 13,336,239 | 18,897,792 |
Common Class A [Member] | ||
Stockholders’ Equity: | ||
Common stock, value | 269 | 117 |
Common Class B [Member] | ||
Stockholders’ Equity: | ||
Common stock, value | 70 | 70 |
Related Party [Member] | ||
Current assets: | ||
Due from related parties | 68,421 | 206,532 |
Current liabilities: | ||
Due to related parties | $ 32,129 | $ 4,589,211 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Allowances for doubtful accounts receivable | $ 2,532,383 | $ 2,252,383 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,000,000 | 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 | 2,720,328 | 1,183,808 |
Common stock, shares outstanding | 2,720,328 | 1,183,808 |
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 | 700,000 | 700,000 |
Common stock, shares outstanding | 700,000 | 700,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | ||
Income Statement [Abstract] | |||||
Revenues | $ 1,739,130 | $ 2,008,987 | $ 3,468,485 | $ 5,330,776 | |
Cost of revenues | [1] | 866,167 | 856,157 | 2,114,903 | 2,869,963 |
Gross profit | 872,963 | 1,152,830 | 1,353,582 | 2,460,813 | |
Operating expenses: | |||||
Sales and marketing | [2] | 434,788 | 1,540,220 | 1,053,198 | 3,228,669 |
Development | [3] | 1,787,768 | 2,681,643 | 4,184,902 | 5,085,980 |
General and administrative | [4] | 3,154,233 | 3,349,609 | 5,933,343 | 6,772,763 |
Impairment of goodwill | 4,788,268 | ||||
Impairment of intangible assets | 4,004,627 | 149,048 | 4,004,627 | 4,640,102 | |
Depreciation and amortization | 104,854 | 117,725 | 202,208 | 233,796 | |
Total operating expenses | 9,486,270 | 7,838,245 | 15,378,278 | 24,749,578 | |
Loss from operations | (8,613,307) | (6,685,415) | (14,024,696) | (22,288,765) | |
Interest expense | (244,750) | (191,662) | (443,870) | (393,258) | |
Other income (expense), net | 657,175 | (610,594) | 1,008,492 | (772,693) | |
Net loss | (8,200,882) | (7,487,671) | (13,460,074) | (23,454,716) | |
Less: Net loss attributable to non-controlling interest | (29,858) | (82,375) | (188,103) | (911,803) | |
Net loss attributable to Motorsport Games Inc. | $ (8,171,024) | $ (7,405,296) | $ (13,271,971) | $ (22,542,913) | |
Net loss attributable to Class A common stock per share: | |||||
Net loss attributable to Class A common stock per share - Basic | $ (3.02) | $ (6.34) | $ (5.42) | $ (19.32) | |
Net loss attributable to Class A common stock per share - Diluted | $ (3.02) | $ (6.34) | $ (5.42) | $ (19.32) | |
Weighted-average shares of Class A common stock outstanding: | |||||
Weighted-average shares of Class A common stock outstanding: Basic | 2,704,106 | 1,167,359 | 2,448,131 | 1,167,087 | |
Weighted-average shares of Class A common stock outstanding: Diluted | 2,704,106 | 1,167,359 | 2,448,131 | 1,167,087 | |
[1]Includes related party costs of $ 0 0 0 6,228 0 0 17,076 0 15,435 824 30,923 23,430 89,831 75,541 181,876 98,337 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | ||
Defined Benefit Plan Disclosure [Line Items] | |||||
Related party costs | [1] | $ 866,167 | $ 856,157 | $ 2,114,903 | $ 2,869,963 |
Sales And Marketing [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Related party expenses | 0 | 0 | 17,076 | 0 | |
Research and Development Expense [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Related party expenses | 15,435 | 824 | 30,923 | 23,430 | |
General and Administrative Expense [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Related party expenses | 89,831 | 75,541 | 181,876 | 98,337 | |
Related Party [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Related party costs | $ 0 | $ 0 | $ 0 | $ 6,228 | |
[1]Includes related party costs of $ 0 0 0 6,228 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Income Statement [Abstract] | ||||
Net loss | $ (8,200,882) | $ (7,487,671) | $ (13,460,074) | $ (23,454,716) |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustments | (196,951) | 136,976 | (275,539) | 11,731 |
Comprehensive loss | (8,397,833) | (7,350,695) | (13,735,613) | (23,442,985) |
Comprehensive loss attributable to non-controlling interests | (32,009) | (140,224) | (226,572) | (1,028,945) |
Comprehensive loss attributable to Motorsport Games Inc. | $ (8,365,824) | $ (7,210,471) | $ (13,509,041) | $ (22,414,040) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] Common Class A [Member] | Common Stock [Member] Common Class B [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | AOCI Attributable to Parent [Member] | Parent [Member] | Noncontrolling Interest [Member] | Total |
Beginning balance at Dec. 31, 2021 | $ 116 | $ 70 | $ 75,652,853 | $ (37,988,326) | $ (945,375) | $ 36,719,338 | $ 1,262,665 | $ 37,982,003 |
Beginning balance, shares at Dec. 31, 2021 | 1,163,590 | 700,000 | ||||||
Stock-based compensation | 353,030 | 353,030 | 353,030 | |||||
Stock-based compensation, shares | 3,769 | |||||||
Other comprehensive income (loss) | (125,245) | (125,245) | (59,293) | (184,538) | ||||
Net loss | (15,137,617) | (15,137,617) | (829,428) | (15,967,045) | ||||
Ending balance at Mar. 31, 2022 | $ 116 | $ 70 | 76,005,883 | (53,125,943) | (1,070,620) | 21,809,506 | 373,944 | 22,183,450 |
Ending balance, shares at Mar. 31, 2022 | 1,167,359 | 700,000 | ||||||
Beginning balance at Dec. 31, 2021 | $ 116 | $ 70 | 75,652,853 | (37,988,326) | (945,375) | 36,719,338 | 1,262,665 | 37,982,003 |
Beginning balance, shares at Dec. 31, 2021 | 1,163,590 | 700,000 | ||||||
Net loss | (23,454,716) | |||||||
Ending balance at Jun. 30, 2022 | $ 116 | $ 70 | 76,244,456 | (60,531,239) | (933,644) | 14,779,759 | 233,720 | 15,013,479 |
Ending balance, shares at Jun. 30, 2022 | 1,167,359 | 700,000 | ||||||
Beginning balance at Mar. 31, 2022 | $ 116 | $ 70 | 76,005,883 | (53,125,943) | (1,070,620) | 21,809,506 | 373,944 | 22,183,450 |
Beginning balance, shares at Mar. 31, 2022 | 1,167,359 | 700,000 | ||||||
Stock-based compensation | 238,573 | 238,573 | 238,573 | |||||
Stock-based compensation, shares | ||||||||
Other comprehensive income (loss) | 136,976 | 136,976 | (57,849) | 79,127 | ||||
Net loss | (7,405,296) | (7,405,296) | (82,375) | (7,487,671) | ||||
Ending balance at Jun. 30, 2022 | $ 116 | $ 70 | 76,244,456 | (60,531,239) | (933,644) | 14,779,759 | 233,720 | 15,013,479 |
Ending balance, shares at Jun. 30, 2022 | 1,167,359 | 700,000 | ||||||
Beginning balance at Dec. 31, 2022 | $ 117 | $ 70 | 76,446,061 | (73,979,131) | (933,406) | 1,533,711 | 369,687 | 1,903,398 |
Beginning balance, shares at Dec. 31, 2022 | 1,183,808 | 700,000 | ||||||
Issuance of common stock | $ 74 | 10,571,460 | 10,571,534 | 10,571,534 | ||||
Issuance of common stock, shares | 734,741 | |||||||
Issuance of common stock for extinguishment of related party debt | $ 78 | 3,948,488 | 3,948,566 | 3,948,566 | ||||
Issuance of common stock for extinguishment of related party loan, shares | 780,385 | |||||||
Stock-based compensation | 249,233 | 249,233 | 249,233 | |||||
Stock-based compensation, shares | ||||||||
Other comprehensive income (loss) | (78,588) | (78,588) | (36,318) | (114,906) | ||||
Net loss | (5,100,947) | (5,100,947) | (158,245) | (5,259,192) | ||||
Ending balance at Mar. 31, 2023 | $ 269 | $ 70 | 91,215,242 | (79,080,078) | (1,011,994) | 11,123,509 | 175,124 | 11,298,633 |
Ending balance, shares at Mar. 31, 2023 | 2,698,934 | 700,000 | ||||||
Beginning balance at Dec. 31, 2022 | $ 117 | $ 70 | 76,446,061 | (73,979,131) | (933,406) | 1,533,711 | 369,687 | 1,903,398 |
Beginning balance, shares at Dec. 31, 2022 | 1,183,808 | 700,000 | ||||||
Net loss | (13,460,074) | |||||||
Ending balance at Jun. 30, 2023 | $ 269 | $ 70 | 91,736,545 | (87,251,102) | (1,208,945) | 3,276,837 | 143,115 | 3,419,952 |
Ending balance, shares at Jun. 30, 2023 | 2,720,328 | 700,000 | ||||||
Beginning balance at Mar. 31, 2023 | $ 269 | $ 70 | 91,215,242 | (79,080,078) | (1,011,994) | 11,123,509 | 175,124 | 11,298,633 |
Beginning balance, shares at Mar. 31, 2023 | 2,698,934 | 700,000 | ||||||
Stock-based compensation | 521,303 | 521,303 | 521,303 | |||||
Stock-based compensation, shares | 21,394 | |||||||
Other comprehensive income (loss) | (196,951) | (196,951) | (2,151) | (199,102) | ||||
Net loss | (8,171,024) | (8,171,024) | (29,858) | (8,200,882) | ||||
Ending balance at Jun. 30, 2023 | $ 269 | $ 70 | $ 91,736,545 | $ (87,251,102) | $ (1,208,945) | $ 3,276,837 | $ 143,115 | $ 3,419,952 |
Ending balance, shares at Jun. 30, 2023 | 2,720,328 | 700,000 |
Condensed Consolidated Statem_5
Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (13,460,074) | $ (23,454,716) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss on impairment of intangible assets | 4,004,627 | 4,640,102 |
Loss on impairment of goodwill | 4,788,268 | |
Loss on impairment of property, plant and equipment | 7,661 | |
Depreciation and amortization | 1,011,231 | 1,071,172 |
Non-cash lease expense | 196,938 | |
Purchase commitment and license liability interest accretion | 396,547 | |
Stock-based compensation | 770,536 | 591,603 |
Changes in the fair value of stock warrants | (423,403) | |
Sales return and price protection reserves | 280,000 | 1,098,397 |
Changes in assets and liabilities: | ||
Accounts receivable | 512,452 | 2,877,935 |
Due from related parties | (473,136) | |
Operating lease liabilities | (22,723) | (194,117) |
Prepaid expenses and other assets | 13,772 | (572,926) |
Accounts payable | (1,498,530) | (1,455,211) |
Due to related parties | 2,282 | |
Other non-current liabilities | (475,927) | |
Accrued expenses and other liabilities | 28,596 | (1,160,816) |
Net cash used in operating activities | (8,850,162) | (12,049,298) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (24,437) | (196,346) |
Net cash used in investing activities | (24,437) | (196,346) |
Cash flows from financing activities: | ||
Advances from related parties | 143,517 | |
Repayments on advances from related parties | (24,913) | |
Repayments of purchase commitment liabilities | (550,000) | (1,000,000) |
Payment of license liabilities | (262,500) | (100,000) |
Issuance of common stock from stock purchase commitment agreement | 644,750 | |
Issuance of common stock from registered direct offerings | 10,404,784 | |
Net cash provided by (used in) financing activities | 10,237,034 | (981,396) |
Effect of exchange rate changes on cash and cash equivalents | (375,188) | 630,451 |
Net increase (decrease) in cash and cash equivalents | 987,247 | (12,596,589) |
Total cash and cash equivalents at beginning of the period | 979,306 | 17,819,640 |
Total cash and cash equivalents at the end of the period | 1,966,553 | 5,223,051 |
Cash paid during the year for: | ||
Interest | 399,231 | |
Non-cash investing and financing activities: | ||
Shares issued to Motorsport Network LLC for extinguishment of related party loan | 3,948,566 | |
Extinguishment of Motorsport Network LLC related party loan for Class A shares | (3,948,566) | |
Issuance of warrants in connection with registered direct offerings | 54,597 | |
Purchase commitment liability | $ 29,681 |
BUSINESS ORGANIZATION, NATURE O
BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES | NOTE 1 - 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. (“Motorsport Games” or the “Company”). 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. Risks and Uncertainties Liquidity and Going Concern The Company had a net loss of approximately 13.5 8.9 87.3 2.0 1.4 1.1 The Company’s future liquidity and capital requirements include funds to support the planned costs to operate its business, including amounts required to fund working capital, support the development and introduction of new products, maintain existing titles, and certain capital expenditures. In order to address its liquidity shortfall, the Company is actively exploring several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”); ii) strategic alternatives for its business, including, but not limited to, the sale or licensing of the Company’s assets; and iii) cost reduction and restructuring initiatives, including re-evaluating its product roadmap, each of which is described more fully below. The Company continues to explore additional funding in the form of potential Capital Financing and has entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which the Company may issue and sell shares of its Class A common stock having an aggregate offering price of up to $ 10 2.9 Due to the uncertainty surrounding the Company’s ability to raise funding in the form of potential Capital Financing, and in light of its liquidity position and anticipated future funding requirements, the Company has decided to explore strategic alternatives and potential options for its business, including, but not limited to, the sale or licensing of certain of the Company’s assets. For example, the Company is currently in discussions with a third-party for the potential sale of the Company’s NASCAR license. If any such strategic alternative is executed, including the consummation of a sale of the Company’s NASCAR license, it is expected it would help to reduce certain working capital requirements and reduce overhead expenditures, thereby reducing the Company’s expected future cash-burn, and provide some short-term liquidity relief. Nonetheless, even if the Company is successful in implementing one or more strategic alternatives, including the consummation of a sale of the Company’s NASCAR license, the Company will continue to require additional funding and/or further cost reduction measures in order to continue operations, which includes further restructuring of its business and operations. There are no assurances that the Company will even be successful in implementing a strategic plan for the sale or licensing of its assets, including the consummation of a sale of the Company’s NASCAR license, or any other strategic alternative, which may be subject to the satisfaction of conditions beyond the Company’s control, such as, among other things, the required consent from NASCAR with respect to any sale of the Company’s NASCAR license. As the Company continues to address its liquidity constraints, it has re-evaluated its product roadmap in the second quarter of 2023 and modified the expected timing and scope of certain new product releases, including the release of any future NASCAR games, which have been put on hold indefinitely. Further, the Company is evaluating its ability to deliver new titles under its other licenses, such as with INDYCAR and the British Touring Car Championship (the “BTCC”), which may result in further adjustments to the Company’s product roadmap. The Company continues to seek to reduce its monthly net cash-burn by reducing its cost base through maintaining and enhancing cost control initiatives, such as those that it expects to achieve through its previously announced organizational restructuring program (the “2022 Restructuring Program”), and is evaluating the structure of its business for additional changes in order to improve both its near-term and long-term liquidity position, as well as create a healthy and sustainable Company from which to operate. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements If the Company is unable to satisfy its capital requirements, it could be required to adopt one or more of the following alternatives: ● delaying the implementation of or revising certain aspects of the Company’s business strategy; ● further reducing or delaying the development and launch of new products and events; ● further reducing or delaying capital spending, product development spending and marketing and promotional spending; ● selling additional assets or operations; ● seeking additional capital contributions and/or loans from Motorsport Network, the Company’s other affiliates and/or third parties; ● further reducing other discretionary spending; ● entering into financing agreements on unattractive terms; and/or ● significantly curtailing or discontinuing operations. There can be no assurance that the Company 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 or similar transactions, 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 the Company’s 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 the Company to satisfy its capital requirements if the actions that the Company is able to consummate do not generate a sufficient amount of additional capital. Even if the Company does secure additional Capital Financing, if the anticipated level of revenues are not achieved because of, for example, decreased sales of the Company’s products due to the disposition of key assets, such as the potential sale of its NASCAR license, further changes in the Company’s product roadmap and/or the Company’s inability to deliver new products for its various other licenses; less than anticipated consumer acceptance of the Company’s 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 foreign currency exchange rates; decreased sales of the Company’s products and events as a result of increased competitive activities by the Company’s competitors; changes in consumer purchasing habits, such as the impact of higher energy prices on consumer purchasing behavior; 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 marketing, advertising and promotions, product returns or price protection expenditures, exceed the anticipated level of expenses, the Company’s liquidity position may continue to be insufficient to satisfy its future capital requirements. If the Company is ultimately unable to satisfy its capital requirements, it would likely need to dissolve and liquidate its assets under the bankruptcy laws or otherwise. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed 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. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023. The Company’s results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related disclosures as of December 31, 2022 and 2021 and for the years then ended which are included in the 2022 Form 10-K. Effective on November 10, 2022, the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10. Fractional shares of common stock resulting from the reverse stock split were settled in cash. Shares underlying outstanding equity-based awards were proportionately decreased and the respective per share exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. All shares of common stock, equity-based awards, and per share information presented in the unaudited condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all periods presented. 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 allowances for returns and price protection, as well as current expected credit losses, 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. 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. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Adoption of Accounting Pronouncements On January 1, 2023, the Company adopted Accounting Standard Update Codification Improvements to Topic 326, Financial Instruments – Credit Losses Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument” Revenue from Contracts with Customers On January 1, 2023, the Company adopted ASU 2020-06, “ Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible instruments and Contracts in an Entity’s Own Equity These amendments improve U.S. GAAP by eliminating certain accounting models, therefore, simplifying the accounting for convertible instruments, and reducing complexity for preparers and practitioners, as well as improving the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, these amendments enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance. These amendments improve U.S. GAAP by simplifying the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and improving inconsistency in the accounting for some contracts as derivatives while accounting for economically similar contracts as equity. Entities may also elect to adopt the amendments using the fully retrospective method of transition, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Significant Accounting Policies There have been no material changes to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2022, as included in the 2022 Form 10-K, except as disclosed in this note. Fair Value Measurements The Company accounts for its assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. ● Level 1 – Quoted prices for identical instruments in active markets; ● Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and ● Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The Company’s liability-classified warrants are measured at fair value on a recurring basis, with subsequent changes in fair value recognized in earnings. Certain assets, including long-lived assets, right of use assets, goodwill, indefinite-lived intangible assets, and purchase commitments are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs are classified as Level 3. Other financial instruments, including cash and cash equivalents, accounts receivable, prepaid and other assets, accounts payable, accrued expenses, and other current liabilities are carried at cost, which approximate their fair values due to their short-term nature. Stock Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 - Distinguishing Liabilities from Equity Derivatives and Hedging Allowances for Returns and Price Protection The Company may permit product returns from, or grant price protection to, its customers under certain conditions. Price protection represents the Company’s practice of providing channel partners with a credit allowance to lower their wholesale price on a particular game unit that they have not resold to customers. The amount of the price protection for permanent markdowns is the difference between the original wholesale price and the new reduced wholesale price. Credits are also given for short-term promotions that temporarily reduce the wholesale price. Allowances for returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protections that may occur with distributors and retailers (“channel partners”). See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Accounts Receivable Motorsport Games Inc. and Subsidiaries When evaluating the adequacy of allowances for returns and price protection, the Company analyzes the following: historical credit allowances, current sell-through of channel partners’ inventory of the Company’s products, current trends in retail and the video game industry, changes in customer demand, acceptance of products, and other related factors. In addition, the Company monitors the volume of sales to its channel partners and their inventories, as substantial overstocking in the distribution channel could result in higher-than-expected returns or higher price protection in subsequent periods. The Company recognized an expense of approximately $ 0.0 0.3 0.9 1.1 Deferred Revenue The Company’s deferred revenue, or contract liability, is classified as current and is included within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets (Also refer Note 4 – Accrued Expenses and Other Current Liabilities Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $ 0.4 0.6 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 and warrants, 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 Three and Six Months Ended June 30, 2023 2022 Stock options 69,992 76,167 Warrants 33,574 - Dilutive securities 103,566 76,167 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 3 – INTANGIBLE ASSETS Licensing Agreements The Company has license agreements with various entities related to the development of video games and the organization and facilitation of esports events, including BARC (TOCA) Limited (“BARC”) with respect to the BTCC, and INDYCAR LLC (“INDYCAR”) with respect to the INDYCAR SERIES. As of June 30, 2023, the Company had a remaining liability in connection with these licensing agreements of approximately $ 0.8 3.3 Impairment During the three months ended June 30, 2023, the Company identified triggering events that indicated certain finite-lived intangible assets were at risk of impairment and as such, performed a quantitative impairment assessment to determine the recoverability of those finite-lived intangible assets. The primary trigger for the impairment review was the Company’s decision to explore strategic alternatives, including, but not limited to, the sale or licensing of the Company’s assets (the “Strategic Initiatives”), and that failure to consummate any such transaction would likely result in the Company being unable to comply with certain requirements of certain of its video game licenses. As a result of the quantitative assessment, the Company determined the fair value of certain licensing agreements, software and non-compete agreements were lower than their respective carrying values and recorded an impairment loss for the three months ended June 30, 2023 of approximately $ 4.0 The impairment loss is presented as impairment of intangible assets in the unaudited condensed consolidated statements of operations and comprehensive loss. Motorsport Games Inc. and Subsidiaries Intangible Assets The following is a summary of intangible assets as of June 30, 2023: SCHEDULE OF INTANGIBLE ASSETS Licensing Agreements (Finite) Licensing Agreements (Indefinite) Software Licenses (Finite) Distribution Contracts (Finite) Trade Names (Indefinite) Non-Compete Agreements (Finite) Accumulated Amortization Total Balance as of January 1, 2023 $ 7,198,363 $ 1,546,645 $ 8,656,842 $ 560,000 $ 212,185 $ 243,243 $ (5,057,048 ) $ 13,360,230 Amortization expense - - - - - - (842,350 ) (842,350 ) Impairment of intangible assets (3,457,202 ) - (481,142 ) - - (66,283 ) - (4,004,627 ) FX translation adjustments - 45,703 41,880 - (28,768 ) 1,216 (28,890 ) 31,141 Balance as of June 30, 2023 $ 3,741,161 $ 1,592,348 $ 8,217,580 $ 560,000 $ 183,417 $ 178,176 $ (5,928,288 ) $ 8,544,394 Weighted average remaining amortization period as of June 30, 2023 11.25 - 3.8 - - 0.8 - - Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Agreements (Finite) Software Licenses (Finite) Distribution Contracts (Finite) Non-Compete Agreements (Finite) Accumulated Amortization Balance as of January 1, 2023 $ 1,146,010 $ 3,212,135 $ 560,000 $ 138,903 $ 5,057,048 Amortization expense 113,124 690,237 - 38,989 842,350 Foreign currency translation adjustment 1,876 24,900 - 2,114 28,890 Balance as of June 30, 2023 $ 1,261,010 $ 3,927,272 $ 560,000 $ 180,006 $ 5,928,288 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 Total 2023 (remaining period) $ 767,085 2024 1,494,431 2025 1,356,899 2026 1,110,113 2027 348,055 Thereafter 1,692,046 Estimated aggregate amortization expense $ 6,768,629 Motorsport Games Inc. and Subsidiaries Amortization expense related to intangible assets was approximately $ 0.4 0.8 3.5 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 6 Months Ended |
Jun. 30, 2023 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES June 30, December 31, 2023 2022 Accrued royalties $ 595,472 $ 274,085 Accrued professional and consulting fees 732,282 720,470 Accrued development costs 93,134 172,164 Accrued taxes 23,213 149,842 Accrued payroll 703,686 372,358 Deferred revenue 136,532 311,945 Loss contingency reserves 798,268 1,100,000 Accrued other 277,011 315,560 Total $ 3,359,598 $ 3,416,424 |
RELATED PARTY LOANS
RELATED PARTY LOANS | 6 Months Ended |
Jun. 30, 2023 | |
Related Party Loans | |
RELATED PARTY LOANS | NOTE 5 – RELATED PARTY LOANS On April 1, 2020, the Company entered into a promissory note (the “$ 12 million Line of Credit”) with the Company’s majority stockholder, Motorsport Network, that provides the Company with a line of credit of up to $ 10 million at an interest rate of 10 % per annum, the availability of which is dependent on Motorsport Network’s available liquidity. On November 23, 2020, the Company and Motorsport Network entered into an amendment to the $ 12 million Line of Credit, effective in 2020, pursuant to which the availability under the $ 12 million Line of Credit was increased from $ 10 million to $ 12 million, with no changes to the other terms. The $ 12 million Line of Credit does not have a stated maturity date and is payable upon demand at any time at the sole and absolute discretion of Motorsport Network, and any principal and accrued interest owed will be accelerated and become immediately payable in the event the Company consummates certain corporate events, such as a capital reorganization. The Company may prepay the $ 12 On September 8, 2022, the Company entered into a support agreement with Motorsport Network (the “Support Agreement”) pursuant to which Motorsport Network issued approximately $ 3 12 12 12 3.9 780,385 As of June 30, 2023, the $ 12 12 As of June 30, 2023 and December 31, 2022, the balance due to Motorsport Network under the $ 12 0 3,670,000 0 96,667 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 6 – RELATED PARTY TRANSACTIONS In addition to the $ 12 Related Party Loans 0.2 0.1 1 0.1 The Company has regular related party receivables and payables outstanding as of June 30, 2023 and December 31, 2022. Specifically, the Company owed approximately $ 30,000 0.1 0.8 0.2 Backoffice Services Agreement On March 23, 2023 (but effective as of January 1, 2023), the Company entered into a new Backoffice Services Agreement with Motorsport Network (the “Backoffice Services Agreement”), following the expiration of the Company’s prior services agreement with Motorsport Network. Pursuant to the Backoffice Services Agreement, Motorsport Network will provide accounting, payroll and benefits, human resources and other back-office services on a full-time basis to support the Company’s business functions. The term of the Backoffice Services Agreement is 12 months from the effective date. The term will automatically renew for successive 12-month terms unless either party provides written notice of nonrenewal at least 30 days prior to the end of the then current term. The Backoffice Services Agreement may be terminated by either party at any time with 60 days prior notice. Pursuant to the Backoffice Services Agreement, the Company is required to pay a monthly fee to Motorsport Network of $ 17,500 105,000 52,500 |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 6 Months Ended |
Jun. 30, 2023 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 7 – STOCKHOLDERS’ EQUITY Class A and B Common Stock As of June 30, 2023, the Company had 2,720,328 700,000 Holders of Class A and Class B common stock are entitled to one-vote and ten-votes, respectively, for each share held on all matters submitted to a vote of stockholders Effective on November 10, 2022, the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10. 704Games Warrants As of June 30, 2023 and December 31, 2022, 704Games LLC (“704Games”), a wholly-owned subsidiary of Motorsport Games Inc., has outstanding 10-year warrants to purchase 4,000 93.03 2.3 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Registered Direct Offerings and the Wainwright Warrants On February 1, February 2 and February 3, 2023, the Company completed three separate registered direct offerings (the “Offerings”) priced at-market under NASDAQ rules with H.C. Wainwright & Co., LLC acting as the exclusive placement agent for each transaction (the “Agent”). In connection with the Offerings, the Company paid the Agent a transaction fee equal to 7.0 common stock equal to 6.0 SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS Offering Date Shares Issued Gross Proceeds Net Proceeds Warrants Issued Warrant Strike Price Warrant Term Registered direct offering 1 February 1, 2023 183,020 $ 3.9 $ 3.6 10,981 $ 26.75 5 Registered direct offering 2 February 2, 2023 144,366 $ 3.4 $ 3.1 8,662 $ 29.375 5 Registered direct offering 3 February 3, 2023 232,188 $ 4.0 $ 3.7 13,931 $ 21.738 5 As of June 30, 2023, the Wainwright Warrants were assessed to have a fair value of approximately $ 0.1 The Company utilized a Black-Scholes Option Pricing Model to determine the fair value of the Wainwright Warrants. The Black-Scholes model requires management to make a number of key assumptions, including expected volatility, expected term, and risk-free interest rate. The risk-free interest rate is estimated using the rate of return on U.S. treasury notes with a life that approximates the expected term. The expected term assumption used in the Black-Scholes model represents the period of time that the Wainwright Warrants are Wainwright Warrants. As of , 2023, the Wainwright Warrants had no Stock Purchase Commitment Agreement During the six months ended June 30, 2023, the Company issued 175,167 657,850 2,000,000 1,302,676 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 8 – SHARE-BASED COMPENSATION On January 12, 2021, in connection with its initial public offering, 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 100,000 21,815 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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 former Chief Executive Officer in conjunction with the Company’s initial public offering that vested immediately, as well as those made to the Company’s current and former directors that vest on the one-year anniversary of award issuance. All stock options issued under the MSGM 2021 Stock Plan expire 10 The following is a summary of stock-based compensation award activity for the six months ended June 30, 2023: SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY Number of Options Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2023 (net of forfeitures) 74,285 Stock options awarded to Board of Directors under the MSGM 2021 Stock Plan 26,316 Forfeited, cancelled or expired (30,609 ) Awards outstanding under the MSGM 2021 Stock Plan as of June 30, 2023 (net of forfeitures) 69,992 On April 4, 2023, the Company granted an aggregate of 26,316 0.1 21,394 30,000 Stock-Based Compensation The following table summarizes stock-based compensation expense resulting from equity awards included in the Company’s condensed consolidated statements of operations: SCHEDULE OF STOCK BASED COMPENSATION EXPENSE 2023 2022 2023 2022 For the Three Months Ended For the Six Months Ended 2023 2022 2023 2022 General and Administrative $ 525,952 $ 188,201 $ 545,378 $ 458,323 Sales and Marketing (16,982 ) 32,365 222,735 78,839 Development 12,333 18,007 2,423 54,441 Stock-based compensation expense $ 521,303 $ 238,573 $ 770,536 $ 591,603 As of June 30, 2023, there was approximately $ 0.3 1.8 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9 – 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, except as otherwise disclosed below. 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. Litigation or other legal proceedings, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in our favor, is likely to divert significant resources from our core business, including distracting our management personnel from their normal responsibilities. Certain conditions may exist as of the date the condensed 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 condensed 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. On February 11, 2021, HC2 Holdings 2 Inc. (now known as Innovate 2) and Continental General Insurance Company (“Continental”), former minority stockholders of 704Games, filed a complaint (the “HC2 and Continental Complaint”) in the U.S. District Court for the District of Delaware against the Company, the Company’s former Chief Executive Officer and Executive Chairman, the Company’s former Chief Financial Officer, and the manager of Motorsport Network. The complaint was later amended and added Leo Capital Holdings LLC as an additional plaintiff and the controller of Motorsport Network as an additional individual defendant. The complaint alleges, among other things, purported misrepresentations and omissions concerning 704Games’ financial condition made in connection with the Company’s purchase of these minority shareholders’ interest in 704Games in August and October 2021. The complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder; Section 20(a) of the Exchange Act; Section 20A of the Exchange Act; breach of the Company’s obligations under the Stockholders’ Agreement dated August 14, 2018; fraudulent inducement; breach of fiduciary duties; and 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 the date of plaintiffs’ sale and the purchase price that was paid, 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’ complaint. On March 28, 2022, the court entered an order denying the motion to dismiss. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements On January 11, 2023, in connection with the HC2 and Continental Complaint, the Company, along with other defendants, entered into a settlement agreement with one of the plaintiffs, Continental, to settle the claims made by Continental against the defendants and the claims made by the defendants against Continental. Under the terms of the settlement agreement, the Company was obligated to pay the sum of $ 1.1 0.1 40,000 1.1 0.8 1.1 Accrued Expenses and Other Current Liabilities On July 28, 2023, Wesco Insurance Company (“Wesco”) filed a complaint in state court in Florida against the Company, as well as the other defendants involved in the litigation related to the HC2 and Continental Complaint (the “Underlying Action”). The Company had previously submitted the Underlying Action for coverage under a management liability policy issued by Hallmark Specialty Insurance Company and an excess policy with Wesco (the “Wesco Policy”). Wesco’s complaint seeks declaratory relief to determine Wesco’s obligations to the defendants under an excess policy of insurance issued to the Company by Wesco for the Underlying Action. Wesco claims that there is no coverage afforded to the defendants for the Underlying Action under the Wesco Policy. The Company disagrees with and disputes Wesco’s position regarding coverage for the Underlying Action under the Wesco Policy and will defend its position. Commitments On January 25, 2021, the Company entered into an amendment (the “Le Mans Amendment”) to the Le Mans Esports Series Ltd joint venture agreement, which resulted in an increase of the Company’s ownership interest in the Le Mans Esports Series Ltd joint venture from 45 51 8,000,000 8,700,000 Epic License Agreement 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. The Company will pay Epic a license fee royalty payment equal to 5% of product revenue, as defined in the licensing agreement. During the six months ended June 30, 2023, the Company did not pay any royalties to Epic under the agreement. Pursuant to the terms of the agreement, the Company has the right to actively develop new or existing authorized products during a 5-year period ending on August 11, 2025. Minimum Royalty Guarantees The Company is required to make certain minimum royalty guarantee payments to third-party licensors, arising primarily from its NASCAR, INDYCAR and BTCC licenses, Le Mans Video Gaming License and Le Mans Esports License (collectively the “Video Game Licenses”). These minimum royalty guarantee payments apply throughout the duration of the Video Game Licenses’ agreements, which expire between fiscal years ending December 31, 2026 and 2032, and give rise to a minimum royalty guarantee commitment of $ 17.4 0.4 1.6 In addition to the minimum royalty guarantee payments, the Company is obligated by the Video Game Licenses’ agreements to spend a minimum amount on relevant marketing activities each year, aggregating to $ 2.35 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
CONCENTRATIONS
CONCENTRATIONS | 6 Months Ended |
Jun. 30, 2023 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 10 – 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 Three Months Ended Six Months Ended Customer 2023 2022 2023 2022 Customer B 26.7 % 39.5 % 25.5 % 26.2 % Customer C 29.8 % 29.7 % 28.5 % 21.6 % Customer D 24.2 % 24.6 % 26.0 % 21.5 % Total 80.7 % 93.8 % 80.0 % 69.3 % The following table sets forth information as to each customer that accounted for 10% or more of the Company’s trade accounts receivable as of: Customer June 30, 2023 December 31, 2022 Customer A - 50.5 % Customer B 29.5 % 11.2 % Customer C 46.7 % 15.2 % Customer D 18.4 % 13.1 % Total 94.6 % 90.0 % * Less than 10%. A reduction in sales from or loss of these customers, in a significant amount, could 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 Three Months Ended Six Months Ended Supplier 2023 2022 2023 2022 Supplier A 66.5 % 54.7 % 41.8 % 27.4 % Supplier C - * 16.9 % - * - * Total 66.5 % 71.6 % 41.8 % 27.4 % * Less than 10%. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
SEGMENT REPORTING
SEGMENT REPORTING | 6 Months Ended |
Jun. 30, 2023 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | NOTE 11 – 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 reportable segments for the three months six months ended June 30, 2023 and 2022 were (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”). The Company’s Chief Operating Decision Maker (“CODM”) has been identified as the Company’s Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of June 30, 2023 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the United States, no geographical segments are presented. Segment operating profit is determined based upon internal performance measures used by the CODM. 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. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Segment information available with respect to these reportable business segments was as follows: SCHEDULE OF SEGMENT REPORTING INFORMATION Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Gaming $ 1,739,096 $ 1,941,938 $ 3,178,313 $ 4,900,326 Esports 34 67,049 290,172 430,450 Total Revenues $ 1,739,130 $ 2,008,987 $ 3,468,485 $ 5,330,776 Cost of Revenues: Gaming $ 865,309 $ 820,737 $ 1,740,148 $ 2,224,744 Esports 858 35,420 374,755 645,219 Total Cost of Revenues $ 866,167 $ 856,157 $ 2,114,903 $ 2,869,963 Gross Profit (Loss): Gaming $ 873,787 $ 1,121,201 $ 1,438,165 $ 2,675,582 Esports (824 ) 31,629 (84,583 ) (214,769 ) Total Gross Profit $ 872,963 $ 1,152,830 $ 1,353,582 $ 2,460,813 Loss From Operations: Gaming $ (8,559,203 ) $ (6,393,338 ) $ (13,664,576 ) $ (21,437,759 ) Esports (54,104 ) (292,077 ) (360,120 ) (851,006 ) Total Loss From Operations $ (8,613,307 ) $ (6,685,415 ) $ (14,024,696 ) $ (22,288,765 ) Depreciation and Amortization: Gaming $ 92,497 $ 109,656 $ 177,615 $ 217,139 Esports 12,357 8,069 24,593 16,657 Total Depreciation and Amortization $ 104,854 $ 117,725 $ 202,208 $ 233,796 Interest Expense, net: Gaming $ (244,750 ) $ (191,662 ) $ (443,870 ) $ (393,258 ) Esports - - - - Total Interest Expense, net $ (244,750 ) $ (191,662 ) $ (443,870 ) $ (393,258 ) Other Income (Expense), net: Gaming $ 664,264 $ (610,481 ) $ 1,032,508 $ (767,605 ) Esports (7,089 ) (113 ) (24,016 ) (5,088 ) Total Other Income (Expense), net $ 657,175 $ (610,594 ) $ 1,008,492 $ (772,693 ) Net Loss: Gaming $ (8,139,689 ) $ (7,195,481 ) $ (13,075,938 ) $ (22,598,621 ) Esports (61,193 ) (292,190 ) (384,136 ) (856,095 ) Total Net Loss $ (8,200,882 ) $ (7,487,671 ) $ (13,460,074 ) $ (23,454,716 ) June 30, 2023 December 31, 2022 Total Assets: Gaming $ 11,104,297 $ 16,315,359 Esports 2,231,942 2,582,433 Total Assets $ 13,336,239 $ 18,897,792 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 - SUBSEQUENT EVENTS The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the unaudited consolidated financial statements were issued. On July 28, 2023, Wesco filed a complaint in state court in Florida against the Company, as well as the other defendants involved in the litigation related to the HC2 and Continental Complaint. Refer to Note 9 – Commitments and Contingencies |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023. The Company’s results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related disclosures as of December 31, 2022 and 2021 and for the years then ended which are included in the 2022 Form 10-K. Effective on November 10, 2022, the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10. Fractional shares of common stock resulting from the reverse stock split were settled in cash. Shares underlying outstanding equity-based awards were proportionately decreased and the respective per share exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. All shares of common stock, equity-based awards, and per share information presented in the unaudited condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all periods presented. |
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 allowances for returns and price protection, as well as current expected credit losses, 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. |
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. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements |
Adoption of Accounting Pronouncements | Adoption of Accounting Pronouncements On January 1, 2023, the Company adopted Accounting Standard Update Codification Improvements to Topic 326, Financial Instruments – Credit Losses Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument” Revenue from Contracts with Customers On January 1, 2023, the Company adopted ASU 2020-06, “ Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible instruments and Contracts in an Entity’s Own Equity These amendments improve U.S. GAAP by eliminating certain accounting models, therefore, simplifying the accounting for convertible instruments, and reducing complexity for preparers and practitioners, as well as improving the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, these amendments enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance. These amendments improve U.S. GAAP by simplifying the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and improving inconsistency in the accounting for some contracts as derivatives while accounting for economically similar contracts as equity. Entities may also elect to adopt the amendments using the fully retrospective method of transition, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements Significant Accounting Policies There have been no material changes to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2022, as included in the 2022 Form 10-K, except as disclosed in this note. |
Fair Value Measurements | Fair Value Measurements The Company accounts for its assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. ● Level 1 – Quoted prices for identical instruments in active markets; ● Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and ● Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The Company’s liability-classified warrants are measured at fair value on a recurring basis, with subsequent changes in fair value recognized in earnings. Certain assets, including long-lived assets, right of use assets, goodwill, indefinite-lived intangible assets, and purchase commitments are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs are classified as Level 3. Other financial instruments, including cash and cash equivalents, accounts receivable, prepaid and other assets, accounts payable, accrued expenses, and other current liabilities are carried at cost, which approximate their fair values due to their short-term nature. |
Stock Warrants | Stock Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 - Distinguishing Liabilities from Equity Derivatives and Hedging |
Allowances for Returns and Price Protection | Allowances for Returns and Price Protection The Company may permit product returns from, or grant price protection to, its customers under certain conditions. Price protection represents the Company’s practice of providing channel partners with a credit allowance to lower their wholesale price on a particular game unit that they have not resold to customers. The amount of the price protection for permanent markdowns is the difference between the original wholesale price and the new reduced wholesale price. Credits are also given for short-term promotions that temporarily reduce the wholesale price. Allowances for returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protections that may occur with distributors and retailers (“channel partners”). See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Accounts Receivable Motorsport Games Inc. and Subsidiaries When evaluating the adequacy of allowances for returns and price protection, the Company analyzes the following: historical credit allowances, current sell-through of channel partners’ inventory of the Company’s products, current trends in retail and the video game industry, changes in customer demand, acceptance of products, and other related factors. In addition, the Company monitors the volume of sales to its channel partners and their inventories, as substantial overstocking in the distribution channel could result in higher-than-expected returns or higher price protection in subsequent periods. The Company recognized an expense of approximately $ 0.0 0.3 0.9 1.1 |
Deferred Revenue | Deferred Revenue The Company’s deferred revenue, or contract liability, is classified as current and is included within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets (Also refer Note 4 – Accrued Expenses and Other Current Liabilities Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $ 0.4 0.6 |
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 and warrants, 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 Three and Six Months Ended June 30, 2023 2022 Stock options 69,992 76,167 Warrants 33,574 - Dilutive securities 103,566 76,167 |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
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 Three and Six Months Ended June 30, 2023 2022 Stock options 69,992 76,167 Warrants 33,574 - Dilutive securities 103,566 76,167 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS | The following is a summary of intangible assets as of June 30, 2023: SCHEDULE OF INTANGIBLE ASSETS Licensing Agreements (Finite) Licensing Agreements (Indefinite) Software Licenses (Finite) Distribution Contracts (Finite) Trade Names (Indefinite) Non-Compete Agreements (Finite) Accumulated Amortization Total Balance as of January 1, 2023 $ 7,198,363 $ 1,546,645 $ 8,656,842 $ 560,000 $ 212,185 $ 243,243 $ (5,057,048 ) $ 13,360,230 Amortization expense - - - - - - (842,350 ) (842,350 ) Impairment of intangible assets (3,457,202 ) - (481,142 ) - - (66,283 ) - (4,004,627 ) FX translation adjustments - 45,703 41,880 - (28,768 ) 1,216 (28,890 ) 31,141 Balance as of June 30, 2023 $ 3,741,161 $ 1,592,348 $ 8,217,580 $ 560,000 $ 183,417 $ 178,176 $ (5,928,288 ) $ 8,544,394 Weighted average remaining amortization period as of June 30, 2023 11.25 - 3.8 - - 0.8 - - |
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS | Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Agreements (Finite) Software Licenses (Finite) Distribution Contracts (Finite) Non-Compete Agreements (Finite) Accumulated Amortization Balance as of January 1, 2023 $ 1,146,010 $ 3,212,135 $ 560,000 $ 138,903 $ 5,057,048 Amortization expense 113,124 690,237 - 38,989 842,350 Foreign currency translation adjustment 1,876 24,900 - 2,114 28,890 Balance as of June 30, 2023 $ 1,261,010 $ 3,927,272 $ 560,000 $ 180,006 $ 5,928,288 |
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS | SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS Total 2023 (remaining period) $ 767,085 2024 1,494,431 2025 1,356,899 2026 1,110,113 2027 348,055 Thereafter 1,692,046 Estimated aggregate amortization expense $ 6,768,629 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Payables and Accruals [Abstract] | |
SCHEDULE OF ACCRUED EXPENSES | Accrued expenses and other current liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES June 30, December 31, 2023 2022 Accrued royalties $ 595,472 $ 274,085 Accrued professional and consulting fees 732,282 720,470 Accrued development costs 93,134 172,164 Accrued taxes 23,213 149,842 Accrued payroll 703,686 372,358 Deferred revenue 136,532 311,945 Loss contingency reserves 798,268 1,100,000 Accrued other 277,011 315,560 Total $ 3,359,598 $ 3,416,424 |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Equity [Abstract] | |
SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS | SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS Offering Date Shares Issued Gross Proceeds Net Proceeds Warrants Issued Warrant Strike Price Warrant Term Registered direct offering 1 February 1, 2023 183,020 $ 3.9 $ 3.6 10,981 $ 26.75 5 Registered direct offering 2 February 2, 2023 144,366 $ 3.4 $ 3.1 8,662 $ 29.375 5 Registered direct offering 3 February 3, 2023 232,188 $ 4.0 $ 3.7 13,931 $ 21.738 5 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY | The following is a summary of stock-based compensation award activity for the six months ended June 30, 2023: SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY Number of Options Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2023 (net of forfeitures) 74,285 Stock options awarded to Board of Directors under the MSGM 2021 Stock Plan 26,316 Forfeited, cancelled or expired (30,609 ) Awards outstanding under the MSGM 2021 Stock Plan as of June 30, 2023 (net of forfeitures) 69,992 |
SCHEDULE OF STOCK BASED COMPENSATION EXPENSE | The following table summarizes stock-based compensation expense resulting from equity awards included in the Company’s condensed consolidated statements of operations: SCHEDULE OF STOCK BASED COMPENSATION EXPENSE 2023 2022 2023 2022 For the Three Months Ended For the Six Months Ended 2023 2022 2023 2022 General and Administrative $ 525,952 $ 188,201 $ 545,378 $ 458,323 Sales and Marketing (16,982 ) 32,365 222,735 78,839 Development 12,333 18,007 2,423 54,441 Stock-based compensation expense $ 521,303 $ 238,573 $ 770,536 $ 591,603 |
CONCENTRATIONS (Tables)
CONCENTRATIONS (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
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 Three Months Ended Six Months Ended Customer 2023 2022 2023 2022 Customer B 26.7 % 39.5 % 25.5 % 26.2 % Customer C 29.8 % 29.7 % 28.5 % 21.6 % Customer D 24.2 % 24.6 % 26.0 % 21.5 % Total 80.7 % 93.8 % 80.0 % 69.3 % The following table sets forth information as to each customer that accounted for 10% or more of the Company’s trade accounts receivable as of: Customer June 30, 2023 December 31, 2022 Customer A - 50.5 % Customer B 29.5 % 11.2 % Customer C 46.7 % 15.2 % Customer D 18.4 % 13.1 % Total 94.6 % 90.0 % * 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 Three Months Ended Six Months Ended Supplier 2023 2022 2023 2022 Supplier A 66.5 % 54.7 % 41.8 % 27.4 % Supplier C - * 16.9 % - * - * Total 66.5 % 71.6 % 41.8 % 27.4 % * Less than 10%. |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
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 Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Gaming $ 1,739,096 $ 1,941,938 $ 3,178,313 $ 4,900,326 Esports 34 67,049 290,172 430,450 Total Revenues $ 1,739,130 $ 2,008,987 $ 3,468,485 $ 5,330,776 Cost of Revenues: Gaming $ 865,309 $ 820,737 $ 1,740,148 $ 2,224,744 Esports 858 35,420 374,755 645,219 Total Cost of Revenues $ 866,167 $ 856,157 $ 2,114,903 $ 2,869,963 Gross Profit (Loss): Gaming $ 873,787 $ 1,121,201 $ 1,438,165 $ 2,675,582 Esports (824 ) 31,629 (84,583 ) (214,769 ) Total Gross Profit $ 872,963 $ 1,152,830 $ 1,353,582 $ 2,460,813 Loss From Operations: Gaming $ (8,559,203 ) $ (6,393,338 ) $ (13,664,576 ) $ (21,437,759 ) Esports (54,104 ) (292,077 ) (360,120 ) (851,006 ) Total Loss From Operations $ (8,613,307 ) $ (6,685,415 ) $ (14,024,696 ) $ (22,288,765 ) Depreciation and Amortization: Gaming $ 92,497 $ 109,656 $ 177,615 $ 217,139 Esports 12,357 8,069 24,593 16,657 Total Depreciation and Amortization $ 104,854 $ 117,725 $ 202,208 $ 233,796 Interest Expense, net: Gaming $ (244,750 ) $ (191,662 ) $ (443,870 ) $ (393,258 ) Esports - - - - Total Interest Expense, net $ (244,750 ) $ (191,662 ) $ (443,870 ) $ (393,258 ) Other Income (Expense), net: Gaming $ 664,264 $ (610,481 ) $ 1,032,508 $ (767,605 ) Esports (7,089 ) (113 ) (24,016 ) (5,088 ) Total Other Income (Expense), net $ 657,175 $ (610,594 ) $ 1,008,492 $ (772,693 ) Net Loss: Gaming $ (8,139,689 ) $ (7,195,481 ) $ (13,075,938 ) $ (22,598,621 ) Esports (61,193 ) (292,190 ) (384,136 ) (856,095 ) Total Net Loss $ (8,200,882 ) $ (7,487,671 ) $ (13,460,074 ) $ (23,454,716 ) June 30, 2023 December 31, 2022 Total Assets: Gaming $ 11,104,297 $ 16,315,359 Esports 2,231,942 2,582,433 Total Assets $ 13,336,239 $ 18,897,792 |
BUSINESS ORGANIZATION, NATURE_2
BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Jul. 31, 2023 | Dec. 31, 2022 | |
Net loss | $ 8,200,882 | $ 5,259,192 | $ 7,487,671 | $ 15,967,045 | $ 13,460,074 | $ 23,454,716 | ||
Net cash provided by used in operating activities | 8,850,162 | $ 12,049,298 | ||||||
Accumulated deficit | 87,251,102 | 87,251,102 | $ 73,979,131 | |||||
Cash and cash equivalents | 1,966,553 | 1,966,553 | $ 979,306 | |||||
Average net cash decrease | $ 1,100,000 | |||||||
At The Market [Member] | ||||||||
Available for future sales | 2,900,000 | |||||||
Equity Distribution Agreement [Member] | Canaccord Genuity LLC [Member] | Common Class A [Member] | ||||||||
Available for future sales | $ 10,000,000 | |||||||
Subsequent Event [Member] | ||||||||
Cash and cash equivalents | $ 1,400,000 |
SCHEDULE OF CALCULATION WEIGHTE
SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dilutive securities | 103,566 | 76,167 | 103,566 | 76,167 |
Share-Based Payment Arrangement, Option [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dilutive securities | 69,992 | 76,167 | 69,992 | 76,167 |
Warrant [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dilutive securities | 33,574 | 33,574 |
BASIS OF PRESENTATION AND SUM_4
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Sales return and price protection reserves | $ 0 | $ 0.9 | $ 0.3 | $ 1.1 |
Contract Liability [Member] | ||||
Revenue recognized | $ 0.4 | $ 0.6 |
SCHEDULE OF INTANGIBLE ASSETS (
SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 13,360,230 | |||
Intangible assets, amortization beginning | (5,057,048) | |||
Amortization expense | (842,350) | |||
Impairment of intangible assets | $ (4,004,627) | $ (149,048) | (4,004,627) | $ (4,640,102) |
FX translation adjustments | 31,141 | |||
Intangible assets, ending | 8,544,394 | 8,544,394 | ||
Intangible assets, amortization ending | (5,928,288) | $ (5,928,288) | ||
Weighted average remaining amortization | ||||
Licensing Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 7,198,363 | |||
Intangible assets, amortization beginning | (1,146,010) | |||
Amortization expense | ||||
Impairment of intangible assets | (3,457,202) | |||
FX translation adjustments | ||||
Intangible assets, ending | 3,741,161 | 3,741,161 | ||
Intangible assets, amortization ending | (1,261,010) | $ (1,261,010) | ||
Weighted average remaining amortization | 11 years 3 months | |||
Licensing Agreements (Indefinite) [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 1,546,645 | |||
Amortization expense | ||||
Impairment of intangible assets | ||||
FX translation adjustments | 45,703 | |||
Intangible assets, ending | 1,592,348 | $ 1,592,348 | ||
Weighted average remaining amortization | ||||
Software Licenses (Finite) [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 8,656,842 | |||
Intangible assets, amortization beginning | (3,212,135) | |||
Amortization expense | ||||
Impairment of intangible assets | (481,142) | |||
FX translation adjustments | 41,880 | |||
Intangible assets, ending | 8,217,580 | 8,217,580 | ||
Intangible assets, amortization ending | (3,927,272) | $ (3,927,272) | ||
Weighted average remaining amortization | 3 years 9 months 18 days | |||
Distribution Contracts (Finite) [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 560,000 | |||
Intangible assets, amortization beginning | (560,000) | |||
Amortization expense | ||||
Impairment of intangible assets | ||||
FX translation adjustments | ||||
Intangible assets, ending | 560,000 | 560,000 | ||
Intangible assets, amortization ending | (560,000) | $ (560,000) | ||
Weighted average remaining amortization | ||||
Trade Names [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 212,185 | |||
Amortization expense | ||||
Impairment of intangible assets | ||||
FX translation adjustments | (28,768) | |||
Intangible assets, ending | 183,417 | $ 183,417 | ||
Weighted average remaining amortization | ||||
Noncompete Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, Beginning | $ 243,243 | |||
Intangible assets, amortization beginning | (138,903) | |||
Amortization expense | ||||
Impairment of intangible assets | (66,283) | |||
FX translation adjustments | 1,216 | |||
Intangible assets, ending | 178,176 | 178,176 | ||
Intangible assets, amortization ending | (180,006) | $ (180,006) | ||
Weighted average remaining amortization | 9 months 18 days | |||
Accumulated Amortization [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets, amortization beginning | $ (5,057,048) | |||
Amortization expense | (842,350) | |||
Impairment of intangible assets | ||||
FX translation adjustments | (28,890) | |||
Intangible assets, amortization ending | $ (5,928,288) | $ (5,928,288) | ||
Weighted average remaining amortization |
SCHEDULE OF ACCUMULATED AMORTIZ
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Accumulated amortization, beginning | $ 5,057,048 | |||
Amortization expense | $ 400,000 | $ 400,000 | 842,350 | $ 800,000 |
Amortization of intangible assets foreign currency translation adjusments | 28,890 | |||
Accumulated amortization, ending | 5,928,288 | 5,928,288 | ||
Licensing Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Accumulated amortization, beginning | 1,146,010 | |||
Amortization expense | 113,124 | |||
Amortization of intangible assets foreign currency translation adjusments | 1,876 | |||
Accumulated amortization, ending | 1,261,010 | 1,261,010 | ||
Software Licenses (Finite) [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Accumulated amortization, beginning | 3,212,135 | |||
Amortization expense | 690,237 | |||
Amortization of intangible assets foreign currency translation adjusments | 24,900 | |||
Accumulated amortization, ending | 3,927,272 | 3,927,272 | ||
Distribution Contracts (Finite) [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Accumulated amortization, beginning | 560,000 | |||
Amortization expense | ||||
Amortization of intangible assets foreign currency translation adjusments | ||||
Accumulated amortization, ending | 560,000 | 560,000 | ||
Noncompete Agreements [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Accumulated amortization, beginning | 138,903 | |||
Amortization expense | 38,989 | |||
Amortization of intangible assets foreign currency translation adjusments | 2,114 | |||
Accumulated amortization, ending | $ 180,006 | $ 180,006 |
SCHEDULE OF ESTIMATED AGGREGATE
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS (Details) | Jun. 30, 2023 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2023 (remaining period) | $ 767,085 |
2024 | 1,494,431 |
2025 | 1,356,899 |
2026 | 1,110,113 |
2027 | 348,055 |
Thereafter | 1,692,046 |
Estimated aggregate amortization expense | $ 6,768,629 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Indefinite-Lived Intangible Assets [Line Items] | |||||
Impairment loss for intangible assets | $ 4,004,627 | $ 149,048 | $ 4,004,627 | $ 4,640,102 | |
Amortization expense | 400,000 | $ 400,000 | 842,350 | $ 800,000 | |
Intangible assets | 8,544,394 | 8,544,394 | $ 13,360,230 | ||
Non-amortizing Intangible Assets [Member] | |||||
Indefinite-Lived Intangible Assets [Line Items] | |||||
Intangible assets | $ 3,500,000 | 3,500,000 | |||
Licensing Agreements [Member] | Purchase Commitments [Member] | |||||
Indefinite-Lived Intangible Assets [Line Items] | |||||
Indefinite-Lived intangible assets acquired | 800,000 | ||||
Licensing Agreements [Member] | Other Noncurrent Liabilities [Member] | |||||
Indefinite-Lived Intangible Assets [Line Items] | |||||
Indefinite-Lived intangible assets acquired | $ 3,300,000 |
SCHEDULE OF ACCRUED EXPENSES (D
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Payables and Accruals [Abstract] | ||
Accrued royalties | $ 595,472 | $ 274,085 |
Accrued professional and consulting fees | 732,282 | 720,470 |
Accrued development costs | 93,134 | 172,164 |
Accrued taxes | 23,213 | 149,842 |
Accrued payroll | 703,686 | 372,358 |
Deferred revenue | 136,532 | 311,945 |
Loss contingency reserves | 798,268 | 1,100,000 |
Accrued other | 277,011 | 315,560 |
Total | $ 3,359,598 | $ 3,416,424 |
RELATED PARTY LOANS (Details Na
RELATED PARTY LOANS (Details Narrative) - USD ($) | Feb. 01, 2023 | Jan. 30, 2023 | Sep. 08, 2022 | Jun. 30, 2023 | Dec. 31, 2022 | Nov. 23, 2020 | Apr. 01, 2020 |
Liine of credit | $ 12,000,000 | $ 12,000,000 | |||||
Principal and accrued interest payments | $ 3,900,000 | $ 3,900,000 | |||||
Line of credit current | 0 | $ 3,670,000 | |||||
Accrued related party | $ 0 | $ 96,667 | |||||
Common Class A [Member] | |||||||
Stock issued during period, shares, other | 780,385 | 780,385 | |||||
Support Agreement [Member] | |||||||
Liine of credit | 3,000,000 | ||||||
Principal and accrued interest payments | $ 12,000,000 | ||||||
Promissory Note [Member] | |||||||
Liine of credit | $ 12,000,000 | $ 12,000,000 | |||||
Interest rate | 10% | ||||||
Promissory Note [Member] | Maximum [Member] | |||||||
Line of credit, maximum borrowing capacity | 12,000,000 | $ 10,000,000 | |||||
Promissory Note [Member] | Minimum [Member] | |||||||
Line of credit, maximum borrowing capacity | $ 10,000,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Mar. 23, 2023 USD ($) | Jun. 30, 2023 USD ($) | Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) | Jun. 30, 2023 EUR (€) | Sep. 08, 2022 USD ($) | |
Related Party Transaction [Line Items] | |||||||
Line of credit | $ 12,000,000 | $ 12,000,000 | $ 12,000,000 | ||||
Payment to related parties | 1,000,000 | $ 100,000 | $ 800,000 | ||||
Due from related parties | 8,700,000 | 8,700,000 | € 8,000,000 | ||||
New Services Agreement [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Monthly fee payment | $ 17,500 | 52,500 | 105,000 | ||||
Related Party [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Incurred expenses | 200,000 | $ 100,000 | |||||
Due from related parties | 30,000 | 30,000 | 200,000 | ||||
Due to related parties | 32,129 | 32,129 | $ 4,589,211 | ||||
Related Parties [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Due to related parties | $ 100,000 | $ 100,000 |
SCHEDULE OF REGISTERED DIRECT O
SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS (Details) $ / shares in Units, $ in Millions | 6 Months Ended |
Jun. 30, 2023 USD ($) $ / shares shares | |
Registered Direct Offering 1 [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Offering Date | Feb. 01, 2023 |
Shares Issued | shares | 183,020 |
Warrants Issued | shares | 10,981 |
Warrant Strike Price | $ / shares | $ 26.75 |
Gross proceeds | $ | $ 3.9 |
Net Proceeds | $ | $ 3.6 |
Warrants Term | 5 years |
Registered Direct Offering 2 [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Offering Date | Feb. 02, 2023 |
Shares Issued | shares | 144,366 |
Warrants Issued | shares | 8,662 |
Warrant Strike Price | $ / shares | $ 29.375 |
Gross proceeds | $ | $ 3.4 |
Net Proceeds | $ | $ 3.1 |
Warrants Term | 5 years |
Registered Direct Offering 3 [Member] | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Offering Date | Feb. 03, 2023 |
Shares Issued | shares | 232,188 |
Warrants Issued | shares | 13,931 |
Warrant Strike Price | $ / shares | $ 21.738 |
Gross proceeds | $ | $ 4 |
Net Proceeds | $ | $ 3.7 |
Warrants Term | 5 years |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Dec. 09, 2022 | Nov. 10, 2022 | Mar. 31, 2023 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Class of Stock [Line Items] | ||||||
Voting rights | Holders of Class A and Class B common stock are entitled to one-vote and ten-votes, respectively, for each share held on all matters submitted to a vote of stockholders | |||||
Reverse stock split ratio | the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10. | |||||
Transaction fee percentage | 7% | |||||
Fair value of warrants | $ (423,403) | |||||
Stock issued during period value new issues | $ 10,571,534 | |||||
Wainwright Warrants [Member] | ||||||
Class of Stock [Line Items] | ||||||
Fair value of warrants | $ 100,000 | |||||
704 Games Company [Member] | ||||||
Class of Stock [Line Items] | ||||||
Shares of common stock | 4,000 | |||||
Stock option exercise price increase | $ 93.03 | |||||
704 Games Company [Member] | Warrant [Member] | ||||||
Class of Stock [Line Items] | ||||||
Remaining life of years | 2 years 3 months 18 days | |||||
Common Class A [Member] | ||||||
Class of Stock [Line Items] | ||||||
Common stock shares outstanding | 2,720,328 | 1,183,808 | ||||
Percentage of aggregate number of shares of common stock placed in each offering | 6% | |||||
Common Class A [Member] | Stock Purchase Commitment Agreement [Member] | Alumni Capital LP [Member] | ||||||
Class of Stock [Line Items] | ||||||
Stock issued during period shares new issues | 2,000,000 | 175,167 | ||||
Stock issued during period value new issues | $ 657,850 | |||||
Purchase obligation | $ 1,302,676 | |||||
Common Class B [Member] | ||||||
Class of Stock [Line Items] | ||||||
Common stock shares outstanding | 700,000 | 700,000 |
SCHEDULE OF STOCK-BASED COMPENS
SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY (Details) - MSGM 2021 Stock Plan [Member] | 6 Months Ended |
Jun. 30, 2023 shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Number of options, outstanding, beginning | 74,285 |
Number of options, granted | 26,316 |
Number of options, forfeited, cancelled or expired | (30,609) |
Number of options, outstanding, ending | 69,992 |
SCHEDULE OF STOCK BASED COMPENS
SCHEDULE OF STOCK BASED COMPENSATION EXPENSE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expense | $ 521,303 | $ 238,573 | $ 770,536 | $ 591,603 |
General and Administrative Expense [Member] | ||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expense | 525,952 | 188,201 | 545,378 | 458,323 |
Selling and Marketing Expense [Member] | ||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expense | (16,982) | 32,365 | 222,735 | 78,839 |
Research and Development Expense [Member] | ||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expense | $ 12,333 | $ 18,007 | $ 2,423 | $ 54,441 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 6 Months Ended | |||
Jun. 09, 2023 | Apr. 04, 2023 | Jun. 30, 2023 | Jan. 12, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Unrecognized stock based compensation expense | $ 300,000 | |||
Compensation expense period | 1 year 9 months 18 days | |||
MSGM 2021 Stock Plan [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Share based compensation expiring period | 10 years | |||
MSGM 2021 Stock Plan [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Number of options, granted | 26,316 | |||
MSGM 2021 Stock Plan [Member] | Board of Directors [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Number of options, granted | 26,316 | |||
Grant date fair value | $ 100,000 | |||
Common Class A [Member] | MSGM 2021 Stock Plan [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Shares available for issuance | 21,815 | 100,000 | ||
Common Class A [Member] | MSGM 2021 Stock Plan [Member] | Consultant [Member] | Restricted Stock [Member] | ||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Grant date fair value | $ 30,000 | |||
Number of options, granted | 21,394 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 6 Months Ended | 12 Months Ended | |||||
Jan. 17, 2023 USD ($) | Jan. 11, 2023 USD ($) | Jun. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2023 USD ($) | Jun. 30, 2023 EUR (€) | Jan. 25, 2021 | |
Loss Contingencies [Line Items] | |||||||
Fund for research | $ 8,700,000 | € 8,000,000 | |||||
Minimum royalty guarantee commitment | $ 17,400,000 | ||||||
Minimum royalty guarantee commitments, paid | 400,000 | ||||||
Video Games Licenses Agreement [Member] | |||||||
Loss Contingencies [Line Items] | |||||||
Minimum royalty guarantee commitments, paid | 2,350,000 | ||||||
Forecast [Member] | |||||||
Loss Contingencies [Line Items] | |||||||
Minimum royalty guarantee commitments, paid | $ 1,600,000 | ||||||
LeMans Esports Series Ltd [Member] | Minimum [Member] | |||||||
Loss Contingencies [Line Items] | |||||||
Ownership percent | 45% | ||||||
LeMans Esports Series Ltd [Member] | Maximum [Member] | |||||||
Loss Contingencies [Line Items] | |||||||
Ownership percent | 51% | ||||||
Continental [Member] | |||||||
Loss Contingencies [Line Items] | |||||||
Litigation Settlement, Amount Awarded to Other Party | $ 1,100,000 | ||||||
Litigation settlement | $ 100,000 | $ 800,000 | $ 1,100,000 | ||||
Litigation Settlement Interest | $ 40,000 |
SCHEDULE OF CONCENTRATIONS (Det
SCHEDULE OF CONCENTRATIONS (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | ||||
Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | Supplier A [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 66.50% | 54.70% | 41.80% | 27.40% | ||||
Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | Supplier C [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | [1] | 16.90% | [1] | [1] | ||||
Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | Supplier [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 66.50% | 71.60% | 41.80% | 27.40% | ||||
Customer B [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 26.70% | 39.50% | 25.50% | 26.20% | ||||
Customer B [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 29.50% | 11.20% | ||||||
Customer C [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 29.80% | 29.70% | 28.50% | 21.60% | ||||
Customer C [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 46.70% | 15.20% | ||||||
Customer D [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 24.20% | 24.60% | 26% | 21.50% | ||||
Customer D [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 18.40% | 13.10% | ||||||
Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 80.70% | 93.80% | 80% | 69.30% | ||||
Customer [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | 94.60% | 90% | ||||||
Customer A [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk percentage | [2] | 50.50% | ||||||
[1]Less than 10%.[2]Less than 10%. |
SCHEDULE OF SEGMENT REPORTING I
SCHEDULE OF SEGMENT REPORTING INFORMATION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2023 | Mar. 31, 2023 | Jun. 30, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | ||
Revenue from External Customer [Line Items] | ||||||||
Total Revenues | $ 1,739,130 | $ 2,008,987 | $ 3,468,485 | $ 5,330,776 | ||||
Total Cost of Revenues | [1] | 866,167 | 856,157 | 2,114,903 | 2,869,963 | |||
Total Gross Profit | 872,963 | 1,152,830 | 1,353,582 | 2,460,813 | ||||
Total Loss From Operations | (8,613,307) | (6,685,415) | (14,024,696) | (22,288,765) | ||||
Total Depreciation and Amortization | 104,854 | 117,725 | 202,208 | 233,796 | ||||
Total Interest Expense, net | (244,750) | (191,662) | (443,870) | (393,258) | ||||
Total Other (Expense) Income, net | 657,175 | (610,594) | 1,008,492 | (772,693) | ||||
Total Net Loss | (8,200,882) | $ (5,259,192) | (7,487,671) | $ (15,967,045) | (13,460,074) | (23,454,716) | ||
Total assets | 13,336,239 | 13,336,239 | $ 18,897,792 | |||||
Gaming [Member] | ||||||||
Revenue from External Customer [Line Items] | ||||||||
Total Revenues | 1,739,096 | 1,941,938 | 3,178,313 | 4,900,326 | ||||
Total Cost of Revenues | 865,309 | 820,737 | 1,740,148 | 2,224,744 | ||||
Total Gross Profit | 873,787 | 1,121,201 | 1,438,165 | 2,675,582 | ||||
Total Loss From Operations | (8,559,203) | (6,393,338) | (13,664,576) | (21,437,759) | ||||
Total Depreciation and Amortization | 92,497 | 109,656 | 177,615 | 217,139 | ||||
Total Interest Expense, net | (244,750) | (191,662) | (443,870) | (393,258) | ||||
Total Other (Expense) Income, net | 664,264 | (610,481) | 1,032,508 | (767,605) | ||||
Total Net Loss | (8,139,689) | (7,195,481) | (13,075,938) | (22,598,621) | ||||
Total assets | 11,104,297 | 11,104,297 | 16,315,359 | |||||
Esports [Member] | ||||||||
Revenue from External Customer [Line Items] | ||||||||
Total Revenues | 34 | 67,049 | 290,172 | 430,450 | ||||
Total Cost of Revenues | 858 | 35,420 | 374,755 | 645,219 | ||||
Total Gross Profit | (824) | 31,629 | (84,583) | (214,769) | ||||
Total Loss From Operations | (54,104) | (292,077) | (360,120) | (851,006) | ||||
Total Depreciation and Amortization | 12,357 | 8,069 | 24,593 | 16,657 | ||||
Total Interest Expense, net | ||||||||
Total Other (Expense) Income, net | (7,089) | (113) | (24,016) | (5,088) | ||||
Total Net Loss | (61,193) | $ (292,190) | (384,136) | $ (856,095) | ||||
Total assets | $ 2,231,942 | $ 2,231,942 | $ 2,582,433 | |||||
[1]Includes related party costs of $ 0 0 0 6,228 |