Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2024 | May 07, 2024 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2024 | |
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, $0.0001 par | |
Trading Symbol | MSGM | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Common Class A [Member] | ||
Entity Common Stock, Shares Outstanding | 2,722,728 | |
Common Class B [Member] | ||
Entity Common Stock, Shares Outstanding | 700,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Current assets: | ||
Cash and cash equivalents | $ 1,252,691 | $ 1,675,210 |
Accounts receivable, net of allowances of $450,000 as of March 31, 2024 and December 31, 2023, respectively | 1,423,423 | 735,839 |
Prepaid expenses and other current assets | 1,474,092 | 1,106,848 |
Total Current Assets | 4,150,206 | 3,517,897 |
Property and equipment, net | 175,199 | 247,693 |
Operating lease right of use assets | 148,725 | 197,307 |
Intangible assets, net | 5,349,403 | 5,795,807 |
Total Assets | 9,823,533 | 9,758,704 |
Current liabilities: | ||
Accounts payable | 1,509,469 | 813,659 |
Accrued expenses and other current liabilities | 2,479,993 | 1,891,315 |
Purchase commitments | 4,628,779 | 4,656,538 |
Operating lease liabilities (current) | 109,171 | 153,015 |
Total Current Liabilities | 8,775,677 | 7,592,243 |
Operating lease liabilities (non-current) | 39,856 | 45,659 |
Other non-current liabilities | 16,175 | 31,098 |
Total Liabilities | 8,831,708 | 7,669,000 |
Commitments and contingencies (Note 9) | ||
Stockholders’ Equity: | ||
Preferred stock, $0.0001 par value; authorized 1,000,000 and 1,000,000 shares; and none issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||
Additional paid-in capital | 91,991,502 | 91,923,311 |
Accumulated deficit | (88,665,020) | (87,030,270) |
Accumulated other comprehensive loss | (1,269,983) | (1,850,216) |
Total Stockholders’ Equity Attributable to Motorsport Games Inc. | 2,056,838 | 3,043,164 |
Non-controlling interest | (1,065,013) | (953,460) |
Total Stockholders’ Equity | 991,825 | 2,089,704 |
Total Liabilities and Stockholders’ Equity | 9,823,533 | 9,758,704 |
Common Class A [Member] | ||
Stockholders’ Equity: | ||
Common stock, value | 269 | 269 |
Common Class B [Member] | ||
Stockholders’ Equity: | ||
Common stock, value | 70 | 70 |
Related Party [Member] | ||
Current liabilities: | ||
Due to related parties | $ 48,265 | $ 77,716 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Allowances for doubtful accounts receivable | $ 450,000 | $ 450,000 |
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 | 2,722,728 | 2,722,728 |
Common stock, shares outstanding | 2,722,728 | 2,722,728 |
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 | ||
Mar. 31, 2024 | Mar. 31, 2023 | ||
Income Statement [Abstract] | |||
Revenues | $ 3,029,036 | $ 1,729,355 | |
Cost of revenues | 666,627 | 1,248,736 | |
Gross profit | 2,362,409 | 480,619 | |
Operating expenses: | |||
Sales and marketing | [1] | 250,386 | 618,410 |
Development | [2] | 1,063,357 | 2,397,134 |
General and administrative | [3] | 2,190,266 | 2,779,110 |
Depreciation and amortization | 73,724 | 97,354 | |
Total operating expenses | 3,577,733 | 5,892,008 | |
Loss from operations | (1,215,324) | (5,411,389) | |
Interest expense | (30,882) | (199,120) | |
Other (expense) income, net | (437,192) | 351,317 | |
Net loss | (1,683,398) | (5,259,192) | |
Less: Net loss attributable to non-controlling interest | (48,648) | (158,245) | |
Net loss attributable to Motorsport Games Inc. | $ (1,634,750) | $ (5,100,947) | |
Net loss attributable to Class A common stock per share: | |||
Basic | $ (0.60) | $ (2.33) | |
Diluted | $ (0.60) | $ (2.33) | |
Weighted-average shares of Class A common stock outstanding: | |||
Basic | 2,722,728 | 2,192,155 | |
Diluted | 2,722,728 | 2,192,155 | |
[1]Includes related party expenses of $ 0 17,076 0 15,488 81,217 92,045 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Selling and Marketing Expense [Member] | ||
Related party expenses | $ 0 | $ 17,076 |
Research and Development Expense [Member] | ||
Related party expenses | 0 | 15,488 |
General and Administrative Expense [Member] | ||
Related party expenses | $ 81,217 | $ 92,045 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income Statement [Abstract] | ||
Net loss | $ (1,683,398) | $ (5,259,192) |
Other comprehensive gain (loss): | ||
Foreign currency translation adjustments | 580,233 | (78,588) |
Comprehensive loss | (1,103,165) | (5,337,780) |
Comprehensive loss attributable to non-controlling interests | (111,553) | (194,563) |
Comprehensive loss attributable to Motorsport Games Inc. | $ (991,612) | $ (5,143,217) |
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 |
Balances at Dec. 31, 2022 | $ 117 | $ 70 | $ 76,446,061 | $ (73,979,131) | $ (933,406) | $ 1,533,711 | $ 369,687 | $ 1,903,398 |
Balance, shares at Dec. 31, 2022 | 1,183,808 | 700,000 | ||||||
Stock-based compensation | 249,233 | 249,233 | 249,233 | |||||
Other comprehensive loss | (78,588) | (78,588) | (36,318) | (114,906) | ||||
Net loss | (5,100,947) | (5,100,947) | (158,245) | (5,259,192) | ||||
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 loan | $ 78 | 3,948,488 | 3,948,566 | 3,948,566 | ||||
Issuance of common stock for extinguishment of related party debt, shares | 780,385 | |||||||
Balances at Mar. 31, 2023 | $ 269 | $ 70 | 91,215,242 | (79,080,078) | (1,011,994) | 11,123,509 | 175,124 | 11,298,633 |
Balance, shares at Mar. 31, 2023 | 2,698,934 | 700,000 | ||||||
Balances at Dec. 31, 2023 | $ 269 | $ 70 | 91,923,311 | (87,030,270) | (1,850,216) | 3,043,164 | (953,460) | 2,089,704 |
Balance, shares at Dec. 31, 2023 | 2,722,728 | 700,000 | ||||||
Stock-based compensation | 68,191 | 68,191 | 68,191 | |||||
Other comprehensive loss | 580,233 | 580,233 | (62,905) | 517,328 | ||||
Net loss | (1,634,750) | (1,634,750) | (48,648) | (1,683,398) | ||||
Balances at Mar. 31, 2024 | $ 269 | $ 70 | $ 91,991,502 | $ (88,665,020) | $ (1,269,983) | $ 2,056,838 | $ (1,065,013) | $ 991,825 |
Balance, shares at Mar. 31, 2024 | 2,722,728 | 700,000 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash flows from operating activities: | ||
Net loss | $ (1,683,398) | $ (5,259,192) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss on disposal of property and equipment | 1,016 | |
Depreciation and amortization | 601,946 | 502,357 |
Purchase commitment and license liability interest accretion | 22,241 | 157,661 |
Stock-based compensation | 68,191 | 249,233 |
Sales return and price protection reserves | 280,000 | |
Changes in the fair value of warrants | (14,922) | |
Changes in assets and liabilities: | ||
Accounts receivable | (689,294) | 630,272 |
Due from related parties | 140,358 | |
Operating lease liabilities | (978) | (5,893) |
Prepaid expenses and other assets | (363,780) | (225,562) |
Accounts payable | 643,942 | (1,331,386) |
Due to related parties | (30,238) | (473,021) |
Other non-current liabilities | (22,241) | (33,720) |
Accrued expenses and other liabilities | 620,873 | (315,824) |
Net cash used in operating activities | (847,658) | (5,683,701) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (15,057) | |
Net cash used in investing activities | (15,057) | |
Cash flows from financing activities: | ||
Repayments of purchase commitment liabilities | (50,000) | (250,000) |
Payment of license liabilities | (87,500) | |
Issuance of common stock from stock purchase commitment agreement | 644,694 | |
Issuance of common stock from registered direct offerings | 10,404,840 | |
Net cash (used in) provided by financing activities | (50,000) | 10,712,034 |
Effect of exchange rate changes on cash and cash equivalents | 475,139 | (198,026) |
Net (decrease) increase in cash and cash equivalents | (422,519) | 4,815,250 |
Total cash and cash equivalents at beginning of the period | 1,675,210 | 979,306 |
Total cash and cash equivalents at the end of the period | 1,252,691 | 5,794,556 |
Cash paid during the year for: | ||
Interest | 8,641 | 9,508 |
Non-cash investing and financing activities: | ||
Shares issued to Driven Lifestyle Group LLC for extinguishment of related party loan | (3,948,566) | |
Extinguishment of Driven Lifestyle Group LLC related party loan for Class A shares | 3,948,566 | |
Issuance of warrants in connection with registered direct offerings | 478,000 | |
Receivable from sale of NASCAR License | $ 500,000 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure [Table] | ||
Net Income (Loss) | $ (1,634,750) | $ (5,100,947) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Insider Trading Arrangements [Line Items] | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
BUSINESS ORGANIZATION, NATURE O
BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES | 3 Months Ended |
Mar. 31, 2024 | |
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 $ 1.7 0.8 88.7 1.3 1.3 For the three months ended March 31, 2024, the Company experienced an average net cash burn from operations of approximately $ 0.3 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 continues to explore 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) other strategic alternatives for its business, including, but not limited to, the sale or licensing of the Company’s assets in addition to the recent sales of its NASCAR License (as defined below) and Traxion (as defined below); and iii) cost reduction and restructuring initiatives, 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 1.3 Motorsport Games Inc. and Subsidiaries Due to the continuing 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 continues to explore other strategic alternatives and potential options for its business, including, but not limited to, the sale or licensing of certain of the Company’s assets in addition to the recent sales of its NASCAR License and Traxion. See Note 12 – Subsequent Events If any such additional strategic alternative is executed, it is expected it would help to improve the Company’s working capital position and reduce overhead expenditures, thereby lowering 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 additional strategic alternatives, 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 be successful in implementing any additional strategic plans for the sale or licensing of its assets, or any other strategic alternative, which may be subject to the satisfaction of conditions beyond the Company’s control. As the Company continues to address its liquidity constraints, the Company may need to make further adjustments to its product roadmap in order to reduce operating cash burn. Additionally, the Company continues to seek to improve its liquidity 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 loans from 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, loans not being available from 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. Motorsport Games Inc. and Subsidiaries 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 sale of its NASCAR License 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. |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2024 | |
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 March 31, 2024 and for the three months ended March 31, 2024. The Company’s results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 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, 2023 and 2022 and for the years then ended which are included in the 2023 Form 10-K. Use of Estimates The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Motorsport Games Inc. and Subsidiaries The Company’s significant estimates used in these condensed consolidated financial statements include, but are not limited to, revenue recognition criteria, including allowances for returns and price protection, offering periods for deferred net revenue, valuation allowance of deferred income taxes, the recognition and disclosure of contingent liabilities, 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. Non-controlling Interests Non-controlling interests represent the portion of net assets in consolidated subsidiaries that are not attributable, directly or indirectly, to the Company. The net assets of the shared entities are attributed to the controlling and non-controlling interests based on the terms of the governing contractual arrangements. Recently Issued Accounting Standards As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280) In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). 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, 2023, as included in the 2023 Form 10-K, except as disclosed in this note. Revenue Recognition The Company derives revenue principally from sales of its games, and related extra content and services that can be experienced on game consoles, PCs and mobile phones. The Company’s product and service offerings include, but are not limited to, the following: ● full games with both online and offline functionality (“Games with Services”), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content (“software license”); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future (“future update rights”); and (3) a hosted connection for online playability (“online hosting”); ● extra content related to Games with Services which provides access to additional in-game content; The Company evaluates and recognizes revenue by: ● identifying the contract(s) with the customer; ● identifying the performance obligations in the contract; ● determining the transaction price; ● allocating the transaction price to performance obligations in the contract; and ● recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., “transfer of control”). Motorsport Games Inc. and Subsidiaries Online-Enabled Games Games with Services. Since the Company does not sell the performance obligations on a stand-alone basis, the Company considers market conditions and other observable inputs to estimate the stand-alone selling price for each performance obligation. For Games with Services, generally 75 percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the customer. The remaining 25 percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided (over the Estimated Offering Period). Extra Content. Significant Judgments around Revenue Arrangements Identifying performance obligations. Determining the transaction price. Allocating the transaction price. Determining the Estimated Offering Period. Motorsport Games Inc. and Subsidiaries 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 which are subject to deferral and recognized over the Estimated Offering Period . Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $ 0.3 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 2024 2023 For the Three Months Ended March 31, 2024 2023 Stock options 97,953 47,967 Warrants 33,574 33,574 Dilutive securities 131,527 81,541 Motorsport Games Inc. and Subsidiaries |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 3 – INTANGIBLE ASSETS Licensing Agreements In March 2019, the Company entered into an agreement to facilitate the Le Mans Esports Series as part of a joint venture with Automobile Club de l’Ouest (“ACO”), the organizer of the 24 Hours of Le Mans endurance race. Through the Company’s ownership interest in this joint venture, which was increased to 51 45 In 2021, the Company also acquired intangible assets comprising the KartKraft computer video game as well as software, tradename and non-compete agreements related to its acquisition of 100 In October 2023, the Company sold its NASCAR licensed rights under that certain Second Amended and Restated Distribution and License Agreement with NASCAR Team Properties (the “NASCAR License”) 5.0 0.5 0.5 Motorsport Games Inc. and Subsidiaries Intangible Assets The following is a summary of intangible assets as of March 31, 2024: SCHEDULE OF INTANGIBLE ASSETS Licensing Licensing Software Distribution Trade Non- Accumulated Total Balance as of January 1, 2024 $ 906,166 $ 1,495,515 $ 8,115,937 $ 560,000 $ 223,194 $ 180,266 $ (5,685,271 ) $ 5,795,807 Amortization expense - - - - - - (528,222 ) (528,222 ) Foreign currency translation adjustments - 33,925 69,407 - (13,821 ) (3,400 ) (4,293 ) 81,818 Balance as of March 31, 2024 $ 906,166 $ 1,529,440 $ 8,185,344 $ 560,000 $ 209,373 $ 176,866 $ (6,217,786 ) $ 5,349,403 Weighted average remaining amortization period at March 31, 2024 0.8 - 3.2 - - - - Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Software Distribution Non- Accumulated Balance as of January 1, 2024 $ 298,538 $ 4,646,467 $ 560,000 $ 180,266 $ 5,685,271 Amortization expense 151,500 376,722 - - 528,222 Foreign currency translation adjustment - 7,693 - (3,400 ) 4,293 Balance as of March 31, 2024 $ 450,038 $ 5,030,882 $ 560,000 $ 176,866 $ 6,217,786 Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows: SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS For the Years Ended December 31, Total 2024 (remaining period) $ 1,554,401 2025 889,025 2026 887,396 2027 122,291 2028 53,130 Thereafter 104,347 Estimated aggregate amortization expense $ 3,610,590 Amortization expense related to intangible assets was approximately $ 0.5 million and $ 0.4 million for the three months ended March 31, 2024 and 2023, respectively. Motorsport Games Inc. and Subsidiaries |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Mar. 31, 2024 | |
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 March 31, December 31, 2024 2023 Accrued royalties $ 275,008 $ 217,868 Accrued professional and consulting fees 792,327 110,008 Accrued development costs 36,919 32,214 Accrued taxes 50,000 40,000 Accrued payroll 334,834 500,522 Deferred revenue 458,342 270,845 Loss contingency reserves 419,881 545,920 Accrued other 112,682 173,938 Total $ 2,479,993 $ 1,891,315 |
RELATED PARTY LOANS
RELATED PARTY LOANS | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Loans | |
RELATED PARTY LOANS | NOTE 5 – RELATED PARTY LOANS The Company has a $ 12 12 10 12 12 . On September 8, 2022, the Company entered into a support agreement with Driven Lifestyle (the “Support Agreement”) pursuant to which Driven Lifestyle issued approximately $ 3 12 12 12 12 3.9 780,385 As of March 31, 2024, the $ 12 12 As of March 31, 2024 and December 31, 2023, there was no 12 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 6 – RELATED PARTY TRANSACTIONS In addition to the $ 12 0.1 0.1 2,000 Motorsport Games Inc. and Subsidiaries Backoffice Services Agreement On March 23, 2023 (but effective as of January 1, 2023), the Company entered into a new Backoffice Services Agreement with Driven Lifestyle (the “Backoffice Services Agreement”) following the expiration of the Company’s prior services agreement with Driven Lifestyle. Pursuant to the Backoffice Services Agreement, Driven Lifestyle 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 Driven Lifestyle of $ 17,500 . For the three months ended March 31, 2024, the Company incurred $ 52,500 in fees in connection with the Backoffice Services Agreement, which is presented in general and administrative expenses within the condensed consolidated statements of operations. |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 3 Months Ended |
Mar. 31, 2024 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 7 – STOCKHOLDERS’ EQUITY Class A and B Common Stock As of March 31, 2024, the Company had 2,722,728 700,000 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 704Games Warrants As of March 31, 2024 and December 31, 2023, 704Games LLC (“704Games”), a wholly-owned subsidiary of Motorsport Games Inc., has outstanding 10 4,000 93.03 no 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 Net Warrants Warrant Strike Price Warrant 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 March 31, 2024, the Wainwright Warrants were assessed to have a fair value of approximately $ 16,000 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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. Stock Purchase Commitment Agreement During the three months ended March 31, 2023, the Company issued 175,167 657,850 2,000,000 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2024 | |
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 2,047 The Company issued stock options under its MSGM 2021 Stock Plan during the three months ended March 31, 2024 and 2023. 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, 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 On January 26, 2024, the compensation committee of the board of directors of the Company approved and authorized the grant of an option award to purchase 46,000 11,500 34,500 The following is a summary of stock-based compensation award activity for the three months ended March 31, 2024: SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY Number of Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2024 (net of forfeitures) 53,371 Granted 46,000 Forfeited, cancelled or expired (1,418 ) Awards outstanding under the MSGM 2021 Stock Plan as of March 31, 2024 (net of forfeitures) 97,953 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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 2024 2023 For the Three Months Ended 2024 2023 General and Administrative $ 69,731 $ 19,426 Sales and Marketing 1,347 239,717 Development (2,887 ) (9,910 ) Stock-based compensation expense $ 68,191 $ 249,233 As of March 31, 2024, there was approximately $ 0.1 2 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2024 | |
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. The Company recognizes legal costs associated with loss contingencies in the period incurred. 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. Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements On February 11, 2021, HC2 Holdings 2 Inc. (now known as Innovate 2) (“Innovate”) 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 Driven Lifestyle. The complaint was later amended and added Leo Capital Holdings LLC (“Leo Capital”) as an additional plaintiff and the controller of Driven Lifestyle 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 2020. 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 alleged, 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. 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 On October 14, 2023, the Company, along with other defendants, reached and executed a settlement agreement with Leo Capital in connection with the HC2 and Continental Complaint, which settles the claims made by Leo Capital against the defendants, as well as the claims made by the defendants against Leo Capital. Under the terms of the settlement agreement, the Company was obligated to pay the sum of $ 0.2 0.2 In respect of Innovate, the Company believes that the plaintiff’s allegations are without merit and the Company intends to continue to vigorously defend its position to the fullest extent permitted by law. Given the litigation is ongoing, the outcome of the litigation remains uncertain at this time. As such, the Company does not believe it is probable a settlement will be reached, nor can any such settlement amount be reasonably estimable, and has not recognized a settlement liability in respect of the remaining plaintiff. 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 (“Hallmark”) 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 plans to defend its position. On November 22, 2023, the Company entered into an insurance policy and claims release with Hallmark (the “Hallmark Settlement”) related to a previously submitted Underlying Action for coverage under a management liability policy issued by Hallmark. Under the terms of the Hallmark Settlement, Hallmark agreed to pay $ 1.75 Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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 8,640,000 Intangible Assets 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 13,000 32,000 License Commitments On May 29, 2020, the Company secured a licensing agreement (the “Prior BTCC License Agreement”) with BARC (TOCA) Limited (“BARC”), the exclusive promoter of the British Touring Car Championship (the “BTCC”). Pursuant to the Prior BTCC License Agreement, the Company was granted an exclusive license (the “BTCC License”) to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the BTCC, on consoles, PC and mobile applications, esports series and esports events (including the Company’s esports platform). In exchange for the BTCC License, the Prior BTCC License Agreement required the Company to pay BARC an initial fee in two equal installments of $ 100,000 0.9 Subsequent Events Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements On July 13, 2021, the Company entered into a license agreement with INDYCAR LLC (“INDYCAR”) Intangible Assets 2.9 0.6 2.9 Purchase Commitment Liabilities On April 20, 2021, the Company acquired 100 12.8 3.2 pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $ 3.2 1 2.2 330,000 100,000 150,000 15 0.6 0.3 |
CONCENTRATIONS
CONCENTRATIONS | 3 Months Ended |
Mar. 31, 2024 | |
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 March 31, Customer 2024 2023 Customer B 19.7 % 29.3 % Customer C 20.7 % 27.2 % Customer D 51.1 % 27.7 % Total 91.5 % 84.2 % Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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 March 31, 2024 December 31, 2023 Customer B 19.8 % 32.1 % Customer C 34.1 % 34.3 % Customer D 37.3 % 22.3 % Total 91.2 % 88.7 % 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 March 31, Supplier 2024 2023 Supplier A - 20.6 % Total - 20.6 % * Less than 10%. |
SEGMENT REPORTING
SEGMENT REPORTING | 3 Months Ended |
Mar. 31, 2024 | |
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 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 2024 2023 For the Three Months Ended 2024 2023 Revenues: Gaming $ 3,029,036 $ 1,439,217 Esports - 290,138 Total Revenues $ 3,029,036 $ 1,729,355 Cost of Revenues: Gaming $ 666,627 $ 874,839 Esports - 373,897 Total Cost of Revenues $ 666,627 $ 1,248,736 Gross Profit (Loss): Gaming $ 2,362,409 $ 564,378 Esports - (83,759 ) Total Gross Profit $ 2,362,409 $ 480,619 Loss From Operations: Gaming $ (1,123,547 ) $ (5,105,373 ) Esports (91,777 ) (306,016 ) Total Loss from Operations $ (1,215,324 ) $ (5,411,389 ) Depreciation and Amortization: Gaming $ 61,298 $ 85,118 Esports 12,426 12,236 Total Depreciation and Amortization $ 73,724 $ 97,354 Interest Expense, net: Gaming $ (30,882 ) $ (199,120 ) Esports - - Total Interest Expense, net $ (30,882 ) $ (199,120 ) Other (Expense) Income, Net: Gaming $ (409,164 ) $ 368,244 Esports (28,028 ) (16,927 ) Total Other (Expense) Income, net $ (437,192 ) $ 351,317 Net Loss: Gaming $ (1,591,569 ) $ (4,936,249 ) Esports (91,829 ) (322,943 ) Total Net Loss $ (1,683,398 ) $ (5,259,192 ) Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2024 December 31, 2023 Total Assets: Gaming $ 6,640,828 $ 7,892,388 Esports 3,182,705 1,866,316 Total Assets $ 9,823,533 $ 9,758,704 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2024 | |
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 condensed consolidated financial statements were issued. On April 12, 2024, the Company entered into the BARC Settlement Agreement with BARC Commitments and Contingencies 225,000 On April 12, 2024, the Company and BARC entered into the New BTCC License Agreement. Pursuant to the New BTCC License Agreement, BARC granted the Company a non-exclusive license to use certain licensed intellectual property relating to the BTCC for official BTCC downloadable content digitally purchased for the rFactor 2 video game. As consideration for the license under the New BTCC License Agreement, the Company will be obligated to pay BARC an annual royalty in the amount of 50 % of Adjusted Gross Annual Sales (as defined in the New BTCC License Agreement) of the Company’s BTCC downloadable content purchased for the rFactor 2 video game during the term of the New BTCC License Agreement. The term of the New BTCC License Agreement expires on December 31, 2026. On April 26, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Traxion.GG Limited (“Traxion.GG”). Pursuant to the Purchase Agreement, the Company sold to Traxion.GG certain of the Company’s assets related to the Company’s motorsport and racing games community content platform (“Traxion”). Such sale, which closed on April 26, 2024, was in furtherance of the Company’s divestiture of non-core components. The consideration received was $ 250,000 200,000 50,000 On May 3, 2024 (but effective as of October 1, 2023), the Company entered into a new lease agreement with Lemon City Group, LLC, an entity controlled by Driven Lifestyle, for approximately 800 The term of the lease is nine months, with a commencement date of October 1, 2023, consistent with the Company’s initial date of occupancy, and expiring on June 30, 2024, terminable with a 60-day written notice with no penalty. 1,800 |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
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 March 31, 2024 and for the three months ended March 31, 2024. The Company’s results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 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, 2023 and 2022 and for the years then ended which are included in the 2023 Form 10-K. |
Use of Estimates | Use of Estimates The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Motorsport Games Inc. and Subsidiaries The Company’s significant estimates used in these condensed consolidated financial statements include, but are not limited to, revenue recognition criteria, including allowances for returns and price protection, offering periods for deferred net revenue, valuation allowance of deferred income taxes, the recognition and disclosure of contingent liabilities, 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. |
Non-controlling Interests | Non-controlling Interests Non-controlling interests represent the portion of net assets in consolidated subsidiaries that are not attributable, directly or indirectly, to the Company. The net assets of the shared entities are attributed to the controlling and non-controlling interests based on the terms of the governing contractual arrangements. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280) In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). |
Significant Accounting Policies | 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, 2023, as included in the 2023 Form 10-K, except as disclosed in this note. |
Revenue Recognition | Revenue Recognition The Company derives revenue principally from sales of its games, and related extra content and services that can be experienced on game consoles, PCs and mobile phones. The Company’s product and service offerings include, but are not limited to, the following: ● full games with both online and offline functionality (“Games with Services”), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content (“software license”); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future (“future update rights”); and (3) a hosted connection for online playability (“online hosting”); ● extra content related to Games with Services which provides access to additional in-game content; The Company evaluates and recognizes revenue by: ● identifying the contract(s) with the customer; ● identifying the performance obligations in the contract; ● determining the transaction price; ● allocating the transaction price to performance obligations in the contract; and ● recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., “transfer of control”). Motorsport Games Inc. and Subsidiaries Online-Enabled Games Games with Services. Since the Company does not sell the performance obligations on a stand-alone basis, the Company considers market conditions and other observable inputs to estimate the stand-alone selling price for each performance obligation. For Games with Services, generally 75 percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the customer. The remaining 25 percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided (over the Estimated Offering Period). Extra Content. Significant Judgments around Revenue Arrangements Identifying performance obligations. Determining the transaction price. Allocating the transaction price. Determining the Estimated Offering Period. Motorsport Games Inc. and Subsidiaries |
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 which are subject to deferral and recognized over the Estimated Offering Period . Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $ 0.3 |
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 2024 2023 For the Three Months Ended March 31, 2024 2023 Stock options 97,953 47,967 Warrants 33,574 33,574 Dilutive securities 131,527 81,541 |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
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 2024 2023 For the Three Months Ended March 31, 2024 2023 Stock options 97,953 47,967 Warrants 33,574 33,574 Dilutive securities 131,527 81,541 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
SCHEDULE OF INTANGIBLE ASSETS | The following is a summary of intangible assets as of March 31, 2024: SCHEDULE OF INTANGIBLE ASSETS Licensing Licensing Software Distribution Trade Non- Accumulated Total Balance as of January 1, 2024 $ 906,166 $ 1,495,515 $ 8,115,937 $ 560,000 $ 223,194 $ 180,266 $ (5,685,271 ) $ 5,795,807 Amortization expense - - - - - - (528,222 ) (528,222 ) Foreign currency translation adjustments - 33,925 69,407 - (13,821 ) (3,400 ) (4,293 ) 81,818 Balance as of March 31, 2024 $ 906,166 $ 1,529,440 $ 8,185,344 $ 560,000 $ 209,373 $ 176,866 $ (6,217,786 ) $ 5,349,403 Weighted average remaining amortization period at March 31, 2024 0.8 - 3.2 - - - - |
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS | Accumulated amortization of intangible assets consists of the following: SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS Licensing Software Distribution Non- Accumulated Balance as of January 1, 2024 $ 298,538 $ 4,646,467 $ 560,000 $ 180,266 $ 5,685,271 Amortization expense 151,500 376,722 - - 528,222 Foreign currency translation adjustment - 7,693 - (3,400 ) 4,293 Balance as of March 31, 2024 $ 450,038 $ 5,030,882 $ 560,000 $ 176,866 $ 6,217,786 |
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS | Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows: SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS For the Years Ended December 31, Total 2024 (remaining period) $ 1,554,401 2025 889,025 2026 887,396 2027 122,291 2028 53,130 Thereafter 104,347 Estimated aggregate amortization expense $ 3,610,590 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Payables and Accruals [Abstract] | |
SCHEDULE OF ACCRUED EXPENSES | Accrued expenses and other current liabilities consisted of the following: SCHEDULE OF ACCRUED EXPENSES March 31, December 31, 2024 2023 Accrued royalties $ 275,008 $ 217,868 Accrued professional and consulting fees 792,327 110,008 Accrued development costs 36,919 32,214 Accrued taxes 50,000 40,000 Accrued payroll 334,834 500,522 Deferred revenue 458,342 270,845 Loss contingency reserves 419,881 545,920 Accrued other 112,682 173,938 Total $ 2,479,993 $ 1,891,315 |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Equity [Abstract] | |
SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS | SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS Offering Date Shares Issued Gross Net Warrants Warrant Strike Price Warrant 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) | 3 Months Ended |
Mar. 31, 2024 | |
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 three months ended March 31, 2024: SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY Number of Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2024 (net of forfeitures) 53,371 Granted 46,000 Forfeited, cancelled or expired (1,418 ) Awards outstanding under the MSGM 2021 Stock Plan as of March 31, 2024 (net of forfeitures) 97,953 |
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 2024 2023 For the Three Months Ended 2024 2023 General and Administrative $ 69,731 $ 19,426 Sales and Marketing 1,347 239,717 Development (2,887 ) (9,910 ) Stock-based compensation expense $ 68,191 $ 249,233 |
CONCENTRATIONS (Tables)
CONCENTRATIONS (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
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 March 31, Customer 2024 2023 Customer B 19.7 % 29.3 % Customer C 20.7 % 27.2 % Customer D 51.1 % 27.7 % Total 91.5 % 84.2 % Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements 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 March 31, 2024 December 31, 2023 Customer B 19.8 % 32.1 % Customer C 34.1 % 34.3 % Customer D 37.3 % 22.3 % Total 91.2 % 88.7 % |
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 March 31, Supplier 2024 2023 Supplier A - 20.6 % Total - 20.6 % * Less than 10%. |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
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 2024 2023 For the Three Months Ended 2024 2023 Revenues: Gaming $ 3,029,036 $ 1,439,217 Esports - 290,138 Total Revenues $ 3,029,036 $ 1,729,355 Cost of Revenues: Gaming $ 666,627 $ 874,839 Esports - 373,897 Total Cost of Revenues $ 666,627 $ 1,248,736 Gross Profit (Loss): Gaming $ 2,362,409 $ 564,378 Esports - (83,759 ) Total Gross Profit $ 2,362,409 $ 480,619 Loss From Operations: Gaming $ (1,123,547 ) $ (5,105,373 ) Esports (91,777 ) (306,016 ) Total Loss from Operations $ (1,215,324 ) $ (5,411,389 ) Depreciation and Amortization: Gaming $ 61,298 $ 85,118 Esports 12,426 12,236 Total Depreciation and Amortization $ 73,724 $ 97,354 Interest Expense, net: Gaming $ (30,882 ) $ (199,120 ) Esports - - Total Interest Expense, net $ (30,882 ) $ (199,120 ) Other (Expense) Income, Net: Gaming $ (409,164 ) $ 368,244 Esports (28,028 ) (16,927 ) Total Other (Expense) Income, net $ (437,192 ) $ 351,317 Net Loss: Gaming $ (1,591,569 ) $ (4,936,249 ) Esports (91,829 ) (322,943 ) Total Net Loss $ (1,683,398 ) $ (5,259,192 ) Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements March 31, 2024 December 31, 2023 Total Assets: Gaming $ 6,640,828 $ 7,892,388 Esports 3,182,705 1,866,316 Total Assets $ 9,823,533 $ 9,758,704 |
BUSINESS ORGANIZATION, NATURE_2
BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2024 | Mar. 31, 2023 | Apr. 30, 2024 | Dec. 31, 2023 | |
Net loss | $ 1,683,398 | $ 5,259,192 | ||
Net cash provided by used in operating activities | 847,658 | $ 5,683,701 | ||
Retained earnings accumulated deficit | 88,665,020 | $ 87,030,270 | ||
Cash and cash equivalents | 1,252,691 | $ 1,675,210 | ||
Average net cash decrease | 300,000 | |||
At The Market [Member] | ||||
Available for future sales | 2,900,000 | |||
Available for future sales | 1,300,000 | |||
Equity Distribution Agreement [Member] | Canaccord Genuity LLC [Member] | Common Class A [Member] | ||||
Aggregate offering price | $ 10,000,000 | |||
Subsequent Event [Member] | ||||
Cash equivalents | $ 1,300,000 |
SCHEDULE OF CALCULATION WEIGHTE
SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dilutive securities | 131,527 | 81,541 |
Share-Based Payment Arrangement, Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Dilutive securities | 97,953 | 47,967 |
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 | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Contract Liability [Member] | ||
Revenue recognized | $ 0.3 | $ 0.3 |
SCHEDULE OF INTANGIBLE ASSETS (
SCHEDULE OF INTANGIBLE ASSETS (Details) | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, Beginning | $ 5,795,807 |
Amortization | (528,222) |
Foreign currency translation adjustment | 81,818 |
Intangible assets, net ending | 5,349,403 |
Licensing Agreements (Indefinite) [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Indefinite intangible assets, net beginning | 1,495,515 |
Indefinite amortization | |
Indefinite foreign currency translation adjustment | 33,925 |
Indefinite intangible assets, net ending | $ 1,529,440 |
Indefinite weighted average remaining amortization | |
Trade Names [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Indefinite intangible assets, net beginning | $ 223,194 |
Indefinite amortization | |
Indefinite foreign currency translation adjustment | (13,821) |
Indefinite intangible assets, net ending | $ 209,373 |
Finite weighted average remaining amortization | |
Licensing Agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite intangible assets, net beginning | $ 906,166 |
Finite amortization | |
Foreign currency translation adjustment | |
Finite intangible assets, net ending | $ 906,166 |
Finite weighted average remaining amortization | 9 months 18 days |
Software [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite intangible assets, net beginning | $ 8,115,937 |
Finite amortization | |
Foreign currency translation adjustment | 69,407 |
Finite intangible assets, net ending | 8,185,344 |
Distribution Contracts [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite intangible assets, net beginning | 560,000 |
Finite amortization | |
Foreign currency translation adjustment | |
Finite intangible assets, net ending | 560,000 |
Noncompete Agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite intangible assets, net beginning | 180,266 |
Finite amortization | |
Foreign currency translation adjustment | (3,400) |
Finite intangible assets, net ending | $ 176,866 |
Finite weighted average remaining amortization | |
Accumulated Amortization [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, amortization beginning | $ (5,685,271) |
Amortization | (528,222) |
Foreign currency translation adjustment | (4,293) |
Intangible assets, amortization ending | $ (6,217,786) |
Accumulated amortization weighted average remaining amortization | |
Software Licenses Finite [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite weighted average remaining amortization | 3 years 2 months 12 days |
Distribution Contracts Finite [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite weighted average remaining amortization |
SCHEDULE OF ACCUMULATED AMORTIZ
SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated amortization, beginning | $ 5,685,271 | |
Amortization expense | 500,000 | $ 400,000 |
Accumulated amortization, ending | 6,217,786 | |
Licensing Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated amortization, beginning | 298,538 | |
Amortization expense | 151,500 | |
Foreign currency translation adjustment | ||
Accumulated amortization, ending | 450,038 | |
Software [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated amortization, beginning | 4,646,467 | |
Amortization expense | 376,722 | |
Foreign currency translation adjustment | 7,693 | |
Accumulated amortization, ending | 5,030,882 | |
Distribution Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated amortization, beginning | 560,000 | |
Amortization expense | ||
Accumulated amortization, ending | 560,000 | |
Noncompete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Accumulated amortization, beginning | 180,266 | |
Amortization expense | ||
Foreign currency translation adjustment | (3,400) | |
Accumulated amortization, ending | 176,866 | |
Accumulated Amortization [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization expense | 528,222 | |
Foreign currency translation adjustment | 4,293 | |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Foreign currency translation adjustment |
SCHEDULE OF ESTIMATED AGGREGATE
SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS (Details) - Finite-Lived Intangible Assets [Member] | Mar. 31, 2024 USD ($) |
Impairment Effects on Earnings Per Share [Line Items] | |
2024 (remaining period) | $ 1,554,401 |
2025 | 889,025 |
2026 | 887,396 |
2027 | 122,291 |
2028 | 53,130 |
Thereafter | 104,347 |
Estimated aggregate amortization expense | $ 3,610,590 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||||
Oct. 30, 2023 | Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2021 | Jan. 31, 2021 | Dec. 31, 2020 | |
Paid for the assignment | $ 5 | |||||
Notes payable | $ 0.5 | |||||
Amortization of Intangible Assets | $ 0.5 | $ 0.4 | ||||
Le Mans Esports Series Limited [Member] | ||||||
Ownership percentage | 51% | 45% | ||||
Studio Three Nine Seven [Member] | ||||||
Ownership percentage | 100% |
SCHEDULE OF ACCRUED EXPENSES (D
SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Payables and Accruals [Abstract] | ||
Accrued royalties | $ 275,008 | $ 217,868 |
Accrued professional and consulting fees | 792,327 | 110,008 |
Accrued development costs | 36,919 | 32,214 |
Accrued taxes | 50,000 | 40,000 |
Accrued payroll | 334,834 | 500,522 |
Deferred revenue | 458,342 | 270,845 |
Loss contingency reserves | 419,881 | 545,920 |
Accrued other | 112,682 | 173,938 |
Total | $ 2,479,993 | $ 1,891,315 |
RELATED PARTY LOANS (Details Na
RELATED PARTY LOANS (Details Narrative) - USD ($) | 3 Months Ended | ||||
Feb. 01, 2023 | Jan. 30, 2023 | Mar. 31, 2024 | Dec. 31, 2023 | Sep. 08, 2022 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Liine of credit | $ 12,000,000 | $ 12,000,000 | $ 12,000,000 | ||
Principal and accrued interest payments | $ 3,900,000 | $ 3,900,000 | |||
Line of credit current | 0 | $ 0 | |||
Common Class A [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Debt conversion, shares issued | 780,385 | 780,385 | |||
Support Agreement [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Liine of credit | $ 3,000,000 | ||||
Majority Shareholder [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Liine of credit | $ 12,000,000 | ||||
Interest rate | 10% |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) | 3 Months Ended | ||||
Mar. 23, 2023 USD ($) | Mar. 31, 2024 USD ($) ft² | Mar. 31, 2023 USD ($) | Dec. 31, 2023 USD ($) | 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 | $ 100,000 | $ 100,000 | |||
Area of land | ft² | 2,000 | ||||
New Services Agreement [Member] | |||||
Related Party Transaction [Line Items] | |||||
Payments for Rent | $ 17,500 | $ 52,500 | |||
Related Party [Member] | |||||
Related Party Transaction [Line Items] | |||||
Due from 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 | 3 Months Ended |
Mar. 31, 2024 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 |
Warrant Strike Price | $ / shares | $ 26.75 |
Gross proceeds | $ | $ 3.9 |
Net Proceeds | $ | $ 3.6 |
Warrants issued | shares | 10,981 |
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 |
Warrant Strike Price | $ / shares | $ 29.375 |
Gross proceeds | $ | $ 3.4 |
Net Proceeds | $ | $ 3.1 |
Warrants issued | shares | 8,662 |
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 |
Warrant Strike Price | $ / shares | $ 21.738 |
Gross proceeds | $ | $ 4 |
Net Proceeds | $ | $ 3.7 |
Warrants issued | shares | 13,931 |
Warrants Term | 5 years |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | 3 Months Ended | |||
Dec. 09, 2022 | Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Class of Stock [Line Items] | ||||
Common stock 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 | |||
Transaction fee percentage | 7% | |||
Fair value of warrants | $ (14,922) | |||
Stock issued during period value new issues | $ 10,571,534 | |||
Wainwright Warrants [Member] | ||||
Class of Stock [Line Items] | ||||
Fair value of warrants | $ 16,000 | |||
704 Games Company [Member] | ||||
Class of Stock [Line Items] | ||||
Warrants outstanding term | 10 years | 10 years | ||
Shares of common stock | 4,000 | 4,000 | ||
Stock option exercise price increase | $ 93.03 | $ 93.03 | ||
Warrants intrinsic value | $ 0 | |||
Common Class A [Member] | ||||
Class of Stock [Line Items] | ||||
Common stock shares outstanding | 2,722,728 | 2,722,728 | ||
Percentage of aggregate number of shares of common stock placed in each offering | 6% | |||
Common Class A [Member] | Alumni Capital LP [Member] | Stock Purchase Commitment Agreement [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 | |||
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] | 3 Months Ended |
Mar. 31, 2024 shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Number of options, outstanding, beginning | 53,371 |
Number of options, granted | 46,000 |
Number of options, forfeited, cancelled or expired | (1,418) |
Number of options, outstanding, ending | 97,953 |
SCHEDULE OF STOCK BASED COMPENS
SCHEDULE OF STOCK BASED COMPENSATION EXPENSE (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ 68,191 | $ 249,233 |
General and Administrative Expense [Member] | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 69,731 | 19,426 |
Selling and Marketing Expense [Member] | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | 1,347 | 239,717 |
Research and Development Expense [Member] | ||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Stock-based compensation expense | $ (2,887) | $ (9,910) |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ in Millions | 3 Months Ended | ||
Jan. 26, 2024 | Mar. 31, 2024 | Jan. 12, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Unrecognized stock based compensation expense | $ 0.1 | ||
Compensation expense period | 2 years | ||
Board of Directors Chairman [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Option award vested, shares | 11,500 | ||
Option award expected vested, shares | 34,500 | ||
MSGM 2021 Stock Plan [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Share based compensation expiring period | 10 years | ||
Common Class A [Member] | MSGM 2021 Stock Plan [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Shares available for issuance | 2,047 | 100,000 | |
Class A Common Stock [Member] | MSGM 2021 Stock Plan [Member] | Chief Executive Officer [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Grant option award to purchase, shares | 46,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 3 Months Ended | |||||||||||||||||||
Nov. 22, 2023 USD ($) | Nov. 08, 2023 USD ($) | Oct. 16, 2023 USD ($) | Oct. 14, 2023 USD ($) | Jan. 17, 2023 USD ($) | Jan. 11, 2023 USD ($) | Jul. 21, 2022 USD ($) | Apr. 22, 2022 USD ($) | Apr. 20, 2021 USD ($) | May 29, 2020 USD ($) | Mar. 31, 2024 USD ($) | Mar. 31, 2023 USD ($) | Mar. 31, 2024 EUR (€) | Dec. 31, 2023 USD ($) | Jan. 15, 2023 USD ($) | Dec. 15, 2022 USD ($) | Jul. 31, 2022 USD ($) | Jul. 19, 2022 | Jan. 25, 2021 | Aug. 11, 2020 | |
Loss Contingencies [Line Items] | ||||||||||||||||||||
Fund for research | $ 8,640,000 | € 8,000,000 | ||||||||||||||||||
Earned royalties | 13,000 | $ 32,000 | ||||||||||||||||||
Other income (expense) | (437,192) | $ 351,317 | ||||||||||||||||||
Studio Three Nine Seven [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Voting interest acquired | 100% | |||||||||||||||||||
Deferred payment | $ 12,800,000 | |||||||||||||||||||
Studio Three Nine Seven [Member] | Deferred Payment [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Deferred payment | $ 1,000,000 | $ 1,000,000 | ||||||||||||||||||
Contingent consideration liability to be paid | $ 3,200,000 | $ 3,200,000 | $ 3,200,000 | 600,000 | $ 150,000 | $ 100,000 | $ 330,000 | |||||||||||||
letter agreements, description | pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $3.2 million to $1 million with the remaining $2.2 million to be settled in installments of: $330,000 to be paid on July 31, 2022; for the period August 15, 2022, through December 15, 2022 monthly installments of $100,000; and for the period beginning on January 15, 2023, monthly installments of $150,000 until the remaining Deferred Payment amount is satisfied | pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $3.2 million to $1 million with the remaining $2.2 million to be settled in installments of: $330,000 to be paid on July 31, 2022; for the period August 15, 2022, through December 15, 2022 monthly installments of $100,000; and for the period beginning on January 15, 2023, monthly installments of $150,000 until the remaining Deferred Payment amount is satisfied | ||||||||||||||||||
Remaining consideration | $ 2,200,000 | $ 2,200,000 | ||||||||||||||||||
Contingent consideration interest | 300,000 | |||||||||||||||||||
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% | |||||||||||||||||||
Assignment and Assumption Agreement [Member] | Leo Capital [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Litigation settlement amount | $ 200,000 | $ 200,000 | ||||||||||||||||||
Licensing Agreement [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
License fee royalty percentage | 5% | |||||||||||||||||||
BTCC License Agreement [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Payments to Acquire Intangible Assets | $ 100,000 | |||||||||||||||||||
BTCC License Agreement [Member] | Other Current Liabilities [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Purchase commitment liabilities | 900,000 | |||||||||||||||||||
INDYCAR License Agreement [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Purchase commitment liabilities | 2,900,000 | $ 2,900,000 | ||||||||||||||||||
Liquidating damage claim amount | $ 2,900,000 | |||||||||||||||||||
Other income (expense) | $ 600,000 | |||||||||||||||||||
Letter Agreement [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Interest rate | 15% | |||||||||||||||||||
Continental [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Litigation settlement amount | $ 1,100,000 | $ 1,100,000 | ||||||||||||||||||
Litigation settlement, expense | 100,000 | |||||||||||||||||||
Payments of litigation settlement | $ 40,000 | |||||||||||||||||||
Hallmark Settlement [Member] | ||||||||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||||||||
Litigation settlement payment | $ 1,750,000 |
SCHEDULE OF CONCENTRATIONS (Det
SCHEDULE OF CONCENTRATIONS (Details) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | ||
Customer B [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 19.70% | 29.30% | ||
Customer B [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 19.80% | 32.10% | ||
Customer C [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.70% | 27.20% | ||
Customer C [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 34.10% | 34.30% | ||
Customer D [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 51.10% | 27.70% | ||
Customer D [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 37.30% | 22.30% | ||
Customer [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 91.50% | 84.20% | ||
Customer [Member] | Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 91.20% | 88.70% | ||
Supplier A [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.60% | [1] | ||
Supplier [Member] | Revenue Benchmark [Member] | Supplier Concentration Risk [Member] | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.60% | [1] | ||
[1]Less than 10%. |
SCHEDULE OF SEGMENT REPORTING I
SCHEDULE OF SEGMENT REPORTING INFORMATION (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Segment Reporting Information [Line Items] | |||
Total Revenues | $ 3,029,036 | $ 1,729,355 | |
Total Cost of Revenues | 666,627 | 1,248,736 | |
Total Gross Profit | 2,362,409 | 480,619 | |
Total Loss from Operations | (1,215,324) | (5,411,389) | |
Total Depreciation and Amortization | 73,724 | 97,354 | |
Total Interest Expense, net | (30,882) | (199,120) | |
Total Other (Expense) Income, net | (437,192) | 351,317 | |
Total Net Loss | (1,683,398) | (5,259,192) | |
Total Assets | 9,823,533 | $ 9,758,704 | |
Gaming [Member] | |||
Segment Reporting Information [Line Items] | |||
Total Revenues | 3,029,036 | 1,439,217 | |
Total Cost of Revenues | 666,627 | 874,839 | |
Total Gross Profit | 2,362,409 | 564,378 | |
Total Loss from Operations | (1,123,547) | (5,105,373) | |
Total Depreciation and Amortization | 61,298 | 85,118 | |
Total Interest Expense, net | (30,882) | (199,120) | |
Total Other (Expense) Income, net | (409,164) | 368,244 | |
Total Net Loss | (1,591,569) | (4,936,249) | |
Total Assets | 6,640,828 | 7,892,388 | |
Esports [Member] | |||
Segment Reporting Information [Line Items] | |||
Total Revenues | 290,138 | ||
Total Cost of Revenues | 373,897 | ||
Total Gross Profit | (83,759) | ||
Total Loss from Operations | (91,777) | (306,016) | |
Total Depreciation and Amortization | 12,426 | 12,236 | |
Total Interest Expense, net | |||
Total Other (Expense) Income, net | (28,028) | (16,927) | |
Total Net Loss | (91,829) | $ (322,943) | |
Total Assets | $ 3,182,705 | $ 1,866,316 |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative) - Segment | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Segment Reporting [Abstract] | ||
Number of reportable segments | 2 | 2 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | May 03, 2024 USD ($) ft² | Apr. 26, 2024 USD ($) | Apr. 12, 2024 USD ($) | Mar. 31, 2024 ft² |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Area of land | ft² | 2,000 | |||
Subsequent Event [Member] | BARC Settlement Agreement [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Payment for consideration | $ 225,000 | |||
Subsequent Event [Member] | BTCC License Agreement [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Annual royalty percentage | 50% | |||
Subsequent Event [Member] | Asset Purchase Agreement [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Cash payment | $ 200,000 | |||
Subsequent Event [Member] | Asset Purchase Agreement [Member] | Traxion GG Limited [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Consideration | 250,000 | |||
Marketing services | $ 50,000 | |||
Subsequent Event [Member] | New Lease Agreement [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Area of land | ft² | 800 | |||
Lease expiration | The term of the lease is nine months, with a commencement date of October 1, 2023, consistent with the Company’s initial date of occupancy, and expiring on June 30, 2024, terminable with a 60-day written notice with no penalty. | |||
Base rent | $ 1,800 |