0001493152-21-019355 | 10-Q | XBRL Viewer

Less: Net (loss) income attributable to non-controlling interest

(5,960,943)

(31,534)

(20,046,367)

(232,042)

(180,849)

46,781

(454,299)

85,904

Net loss attributable to Motorsport Games Inc.

$ (5,780,094)

$ (78,315)

$ (19,592,068)

$ (317,946)

Net loss attributable to Class A common stock per share [6]:

Basic and diluted

^[6]

$ (0.50)

$ (1.88)

Weighted-average shares of Class A common stock outstanding [6]:

Basic and diluted

^[6]

11,494,919

10,421,910

[1]	Includes related party costs of $0 and $15,545 for the three months ended June 30, 2021 and 2020, respectively, and $0 and $83,801 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – Related Party Transactions.
[2]	Includes related party expenses of $0 and $3,012 for the three months ended June 30, 2021 and 2020, respectively, and $0 and $68,479 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – Related Party Transactions.
[3]	Includes related party expenses of $10,882 and $45,707 for the three months ended June 30, 2021 and 2020, respectively, and $11,459 and $119,663 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – Related Party Transactions.
[4]	Includes related party expenses of $134,284 and $254,981 for the three months ended June 30, 2021 and 2020, respectively, and $1,570,518 and $591,544 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – Related Party Transactions.
[5]	Includes related party expenses of $0 and $208,758 for the three months ended June 30, 2021 and 2020, respectively, and $105,845 and $208,758 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – Related Party Transactions.
[6]	Basic and diluted net loss per Class A common stock is presented only for the period after the Company’s organizational transactions. See Note 1-Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation for a description of the organizational transactions. See Note 2-Summary of Significant Accounting Policies for the calculation of net loss per share.

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Related Party Costs	$ 0	$ 15,545	$ 0	$ 83,801
Selling and Marketing Expense [Member]
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	0	3,012	0	68,479
Development [Member]
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	10,882	45,707	11,459	119,663
General and Administrative Expense [Member]
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	134,284	254,981	1,570,518	591,544
Interest Expense [Member]
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	$ 0	$ 208,758	$ 105,845	$ 208,758

Direct costs arising from transactions with related parties who are not affiliates or joint Ventures. These costs are categorized as cost of goods sold.

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Net loss	$ (5,960,943)	$ (31,534)	$ (20,046,367)	$ (232,042)
Other comprehensive loss:
Foreign currency translation adjustments	(70,809)		(103,723)
Comprehensive loss	(6,031,752)	(31,534)	(20,150,090)	(232,042)
Comprehensive loss attributable to non-controlling interests	(180,849)	46,781	(454,299)	85,904
Comprehensive loss attributable to Motorsport Games Inc.	$ (5,850,903)	$ (78,315)	$ (19,695,791)	$ (317,946)

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income (loss) and other comprehensive income (loss), attributable to noncontrolling interests. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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Beginning balance at Dec. 31, 2019

Condensed Consolidated Statements of Changes in Stockholder's Equity / Member's Equity (Unaudited) - USD ($)

Common Class A [Member]

Common Class B [Member]

Members Equity [Member]

Additional Paid-in Capital [Member]

Retained Earnings [Member]

AOCI Attributable to Parent [Member]

Total Stockholders Equity Members Equity Attributable To Motorsport Games Inc [Member]

Noncontrolling Interest [Member]

Total

$ (3,064,354)

$ 6,676,314

$ 3,611,960

Beginning Balance, Shares at Dec. 31, 2019

Ending Balance at Mar. 31, 2020

(239,631)

39,123

(200,508)

(3,303,985)

6,715,437

3,411,452

Balance, Shares at Mar. 31, 2020

Beginning balance at Dec. 31, 2019

(3,064,354)

6,676,314

3,611,960

Beginning Balance, Shares at Dec. 31, 2019

Ending Balance at Jun. 30, 2020

(232,042)

(3,382,300)

6,762,218

3,379,918

Balance, Shares at Jun. 30, 2020

Beginning balance at Mar. 31, 2020

(3,303,985)

6,715,437

3,411,452

Beginning Balance, Shares at Mar. 31, 2020

Ending Balance at Jun. 30, 2020

(78,315)

46,781

(31,534)

(3,382,300)

6,762,218

3,379,918

Balance, Shares at Jun. 30, 2020

Beginning balance at Dec. 31, 2020

3,791,674

(4,826,335)

4,928

(1,029,733)

2,645,559

1,615,826

Beginning Balance, Shares at Dec. 31, 2020

Conversion of membership interests into shares of common stock

$ 700

(3,791,674)

3,790,274

Conversion of membership interests into shares of common stock, shares

7,000,000

Stock Issued During Period, Value, New Issues

^[1]

$ 345

63,073,783

63,074,128

Issuance of common stock in initial public offering, net, shares

^[1]

3,450,000

Stock-based compensation

$ 33

9,076,883

9,076,916

Stock-based compensation, shares

330,633

Purchase of additional interest in Le Mans

1,584,892

(32,914)

Ending Balance at Mar. 31, 2021

(13,811,974)

(273,450)

(14,085,424)

$ 1,078

$ 700

75,940,940

(18,638,309)

(27,986)

57,276,423

3,957,001

61,233,424

Balance, Shares at Mar. 31, 2021

10,780,633

7,000,000

Beginning balance at Dec. 31, 2020

3,791,674

(4,826,335)

4,928

(1,029,733)

2,645,559

1,615,826

Beginning Balance, Shares at Dec. 31, 2020

(103,723)

Ending Balance at Jun. 30, 2021

(20,046,367)

$ 1,164

$ 700

75,117,703

(24,418,403)

(98,795)

50,602,369

1,351,120

51,953,489

Balance, Shares at Jun. 30, 2021

11,635,897

7,000,000

Beginning balance at Mar. 31, 2021

$ 1,078

$ 700

75,940,940

(18,638,309)

(27,986)

57,276,423

3,957,001

61,233,424

Beginning Balance, Shares at Mar. 31, 2021

10,780,633

7,000,000

Issuance of common stock to Gaming Nation and Playfast

$ 86

Issuance of common stock to Gaming Nation and Playfast, Shares

855,264

Purchase of 704Games minority interest

(939,511)

(2,659,786)

(3,599,297)

ACO Investment in Le Mans joint venture

234,754

Stock-based compensation

116,274

(70,809)

Ending Balance at Jun. 30, 2021

(5,780,094)

(180,849)

(5,960,943)

$ 1,164

$ 700

$ 75,117,703

$ (24,418,403)

$ (98,795)

$ 50,602,369

$ 1,351,120

$ 51,953,489

Balance, Shares at Jun. 30, 2021

11,635,897

7,000,000

[1]	Gross proceeds of $69,000,000 less offering costs of $5,925,872.

Condensed Consolidated Statements of Changes in Stockholder's Equity / Member's Equity (Parenthetical)	6 Months Ended
	Jun. 30, 2021 USD ($)
Statement of Stockholders' Equity [Abstract]
Gross proceeds from initial public offering	$ 69,000,000
Offering costs	$ 5,925,872

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)

6 Months Ended

Jun. 30, 2021

Jun. 30, 2020

Cash Flows from Operating Activities:

Adjustments to reconcile net loss to net cash used in operating activities:

$ (20,046,367)

$ (232,042)

Depreciation and amortization

659,309

303,331

Sales return and price protection reserves

199,940

369,597

Stock-based compensation

9,193,190

(Gain) loss on equity method investee

(1,370,837)

29,234

Changes in operating assets and liabilities:

Accounts receivable

2,149,685

41,635

Prepaid expenses and other current assets

(751,480)

(998,225)

Other assets

25,000

(85,022)

Accounts payable

(579,061)

421,350

Other non-current liabilities

60,946

850,593

Accrued expenses

(804,871)

1,597,511

Net Cash (Used In) Provided By Operating Activities

(11,264,546)

2,297,962

Cash Flows From Investing Activities:

Purchase of additional interest in Le Mans, net of cash acquired

153,250

Acquisition of KartKraft

(1,000,000)

Acquisition of Studio397

(12,785,463)

Purchase of intangible assets

(27,928)

(891,999)

Purchase of property and equipment

(348,033)

(11,155)

Net Cash Used In Investing Activities

(14,008,174)

(903,154)

Cash Flows From Financing Activities:

Advances from related parties

1,868,312

427,376

Repayments on advances from related parties

(12,663,168)

(466,322)

Issuance of common stock in initial public offering, net [1]

^[1]

63,661,128

Payments of deferred offering costs

(27,848)

Purchase of 704Games minority interest

(3,599,211)

Contributed capital from non-controlling shareholders

234,754

Net Cash Provided By (Used In) Financing Activities

49,501,815

(66,794)

Effect of foreign exchange rate changes on cash

83,577

Net Increase In Cash

24,312,672

1,328,014

Cash - Beginning of the period

3,990,532

1,960,279

Cash - End of the period

28,303,204

3,288,293

Supplemental Disclosures of Cash Flow Information:

Interest

804,674

Non-cash investing and financing activities:

Shares issued to 704Games former minority shareholders

Purchase commitment liability

3,126,314

Accrued loss on equity method investee

(14,429)

Reduction of additional paid-in capital for initial public offering issuance costs that were previously paid

587,000

Reduction of additional paid-in capital for purchased 704Games minority shares

939,511

Purchase of additional interest in Le Mans

$ 1,584,892

[1]	Gross proceeds of $69,000,000 less issuance costs of $5,338,872. See supplemental disclosure below for $587,000 of issuance costs paid in 2020.

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Statement of Cash Flows [Abstract]
Gross proceeds issuance cost	$ 69,000,000
Less issuance of cost	$ 5,338,872
Issuance cost paid		$ 587,000

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2021

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION

NOTE 1 - BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION

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”). Upon effecting the corporate conversion on January 8, 2021, Motorsport Games now holds all the property and assets of Motorsport Gaming, and all of the debts and obligations of Motorsport Gaming were assumed by Motorsport Games by operation of law upon such corporate conversion. See “Note 6 – Stockholders’ Equity – Corporate Conversion” for additional details.

Motorsport Games, through its subsidiaries, including 704Games (as defined below) (collectively, the “Company”), is a leading racing game developer, publisher and esports ecosystem provider of official motorsport racing series throughout the world, including NASCAR, INDYCAR, the iconic 24 Hours of Le Mans endurance race and the associated World Endurance Championship, the British Touring Car Championship (the “BTCC”) and others. The Company develops and publishes multi-platform racing video games including for game consoles, personal computers (PCs) and mobile platforms. In addition, the Company organizes and facilitates esports tournaments, competitions, and events for its licensed racing games, as well as on behalf of third-party racing game developers and publishers.

On April 16, 2021, the Company acquired the remaining equity interests in 704Games Company whereby 704Games Company merged with 704Games LLC, a newly-formed Delaware limited liability company and a wholly-owned subsidiary of the Company, with 704Games LLC being the surviving entity in such merger. As used herein, “704Games” refers to (i) 704Games Company prior to the merger and (ii) 704Games LLC from and after the merger. On April 20, 2021, the Company acquired 100% of the share capital of Studio397 B.V. (“Studio397”), a company that specializes in realistic, accurate and engaging simulation racing experiences through their rFactor Technology platform. See “Note 3 – Acquisitions” for additional details.

COVID-19 Pandemic

The global spread of the ongoing and prolonged COVID-19 pandemic and its variants has created significant business uncertainty for the Company and others, resulting in volatility and economic disruption. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Pandemic Update” in Part I, Item 2 of this Report for information relating to the impact of the COVID-19 pandemic on our business and operations.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020. The Company’s results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 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, 2020 and 2019 and for the years then ended which are included the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2021 (the “2020 Form 10-K”).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the significant accounting policies included in the audited consolidated financial statements included in the 2020 Form 10-K, except as disclosed in this note.

Goodwill and Intangible Assets

The Company has recorded goodwill in connection with its acquisition of 704Games, Le Mans Esports Series Limited (the “Le Mans Joint Venture”) and Studio397 and has recorded indefinite lived intangible assets in connection with its acquisition of the Le Mans Joint Venture and KartKraft. Under Accounting Standards Codification (“ASC”) 350, Intangibles—Goodwill and Other (“ASC 350”), goodwill and indefinite lived intangible assets are not amortized, but are reviewed annually for impairment, or more frequently, if impairment indicators arise which may indicate that the Company may not be able to recover the carrying amount of the net assets of the reporting unit. The Company has determined that its reporting units align with its operating segments. See “Note 10 – Segment Reporting.” In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a one-step quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizes a loss on impairment if the carrying value exceeds the fair value. In assessing the fair value of a reporting unit, the Company utilizes the Income Approach-Discounted Cash Flow Method as well as the Market Approach-Guideline Public Company Method.

Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to the provisions of ASC 350. The Company’s intangible assets consist of the following which were acquired in connection with the acquisition of 704Games, the Le Mans Joint Venture, KartKraft and Studio397:

Intangible Asset		Useful Life
License agreements		6.5-16 years
Software		6-10 years
Distribution contracts		1 year
Employment and non-compete agreements		3 years

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

See “Note 3 – Acquisitions” for additional details regarding the acquisition of goodwill and intangible assets.

Revenue Recognition

The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:

	●	Identification of a contract with a customer;
	●	Identification of the performance obligations in the contract;
	●	Determination of the transaction price;
	●	Allocation of the transaction price to the performance obligations in the contract; and
	●	Recognition of revenue when or as the performance obligations are satisfied.

The Company currently derives revenue principally from sales of its games and related extra content that can be played by customers on a variety of platforms, which includes game consoles, PCs, mobile phones and tablets. The Company’s product and service offerings include, but are not limited to, the following:

Sales of Games - Full console, PC and mobile games contain a software license that is delivered digitally or via physical disc at the time of sale;

Sales of Extra Content – Includes (a) extra content that is downloaded by console and PC players that provides the ability to customize and/or enhance their gameplay and (b) virtual currencies that provide mobile players with the ability to purchase extra content that allows them to customize and/or enhance their gameplay; and

Esports Competition Events - Hosting of online esports competitions that generate sponsorship revenue.

Sales of Games. Sales of games are generally determined to have a singular distinct performance obligation, as the Company does not currently have an obligation to provide future update rights or online hosting. As a result, the Company recognizes revenue equal to the full transaction price at the point in time the customer obtains control of the software license and the Company satisfies its performance obligation.

Sales of Extra Content. Revenue received from sales of extra content are derived primarily from the sale of (a) digital in-game content that is downloaded by the Company’s console and PC customers that enhance their gameplay experience, typically by providing car upgrades or additional drivers and (b) virtual currencies that can be used by mobile customers to purchase content that allows them to customize and/or enhance their gameplay. Virtual currencies may not be used for any purpose other than for these in-game purchases. Revenue related to extra content is recognized at the point in time the Company satisfies its performance obligation, which is generally at the time the customer obtains control of the extra content, either by downloading the digital in-game content or by using the virtual currencies to purchase extra content. For console and PC customers, extra content is either purchased in a pack or on a standalone basis. Revenue associated with extra content from console and PC customers is deferred until the content has been delivered digitally to the customer. Revenue associated with virtual currencies is deferred until the virtual currency has been used by the customer to purchase extra content, which is the point in time the customer obtains control.

Esports. The Company recognizes sponsorship revenue associated with hosting online esports competition events over the period of time the Company satisfies its performance obligation under the contract, which is generally the concurrent time the event is held and the customer obtains control. If the Company enters into a contract with a customer to sponsor for a series of esports events, the Company allocates the transaction price between the series of events and recognizes revenue over the period of time each event is held and the Company satisfies its performance obligation.

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

During the three and six months ended June 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Identifying Performance Obligations

Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct (i.e., the customer can benefit from the goods or services either on its own or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises, the Company must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation.

Determining the Transaction Price

The transaction price is determined based on the consideration that the Company will be entitled to receive in exchange for transferring its goods and services to the customer. Determining the transaction price often requires significant judgment based on an assessment of contractual terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. See below for additional information regarding the Company’s sales returns and price protection reserves.

Allocating the Transaction Price

Allocating the transaction price requires that the Company determine an estimate of the relative stand-alone selling price for each distinct performance obligation.

Principal Versus Agent Considerations

The Company evaluates sales to end customers of its full games and related content via third-party storefronts, including digital storefronts such as Microsoft’s Xbox Store, Sony’s PlayStation Store, Apple’s App Store, and Google’s Play Store, to determine whether or not the Company is acting as the principal or agent in the sale to the end customer. Key indicators that the Company evaluates in determining gross versus net treatment include but are not limited to the following:

●

the underlying contract terms and conditions between the various parties to the transaction;

●

which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer;

●

which party has inventory risk before the specified good or service has been transferred to the end customer; and

●

which party has discretion in establishing the price for the specified good or service.

Based on an evaluation of the above indicators, the Company determined that, apart from contracts with customers where revenue is generated via the Apple’s App Store or Google’s Play Store, the third party is considered the principal and, as a result, the Company reports revenue net of the fees retained by the storefront. For contracts with customers where revenue is generated via the Apple’s App Store or Google’s Play Store, the Company has determined that it is the principal and, as a result, reports revenue on a gross basis, with mobile platform fees included within cost of revenues.

Sales Allowance, Sales Returns and Price Protection Reserves

Sales returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protection which may occur with distributors and retailers (“channel partners”). See “Note 2 – Summary of Significant Accounting Policies – Accounts Receivable” in the 2020 Form 10-K for additional details. Price protection represents the Company’s practice to provide channel partners with a credit allowance to lower their wholesale price on a particular game unit that they have not resold to customers. The amount of the price protection for permanent markdowns is the difference between the original wholesale price and the new reduced wholesale price. Credits are also given for short-term promotions that temporarily reduce the wholesale price. When evaluating the adequacy of sales returns and price protection reserves, the Company analyzes the following: historical credit allowances, current sell-through of channel partners’ inventory of the Company’s products, current trends in retail and the video game industry, changes in customer demand, acceptance of products, and other related factors. In addition, the Company monitors the volume of sales to its channel partners and their inventories, as substantial overstocking in the distribution channel could result in high returns or higher price protection in subsequent periods. The Company recognized sales allowances and price protection reserves for the three and six months ended June 30, 2021 in the amount of $81,600 and $199,940, respectively, and for the three and six months ended June 30, 2020 in the amount of $216,689 and $314,517, respectively, which were included as reductions of revenues.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an award, the Company issues new shares of common stock out of its authorized shares.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. Dilutive common-equivalent shares consist of shares of options, if not anti-dilutive.

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

	For the Three and Six Months Ended
	June 30,
	2021		2020
Stock options		574,073		n/a
		574,073		-

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which applies a right-of-use model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. ASU 2016-02 requires a lessor to classify leases as either sales-type, direct financing or operating, similar to existing U.S. GAAP requirements. Classification depends on the same five criteria used by lessees under U.S. GAAP plus certain additional factors. The new leases standard addresses other considerations including identification of a lease, separating lease and non-lease components of a contract, sale and leaseback transactions, modifications, combining contracts, reassessment of the lease term, and remeasurement of lease payments. Early adoption is permitted. This update is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and disclosures.

In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses” (“ASU 2019-11”). ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments update guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in ASU 2019-11 are effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. All entities may adopt the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and disclosures.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and disclosures.

In January 2020, the FASB issued Accounting Standards Update No. 2020-01—Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (ASU 2020-01). The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. ASU 2020-01 is effective for the Company on January 1, 2022. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and disclosures.

Income Taxes

On January 8, 2021, Motorsport Gaming, a Florida limited liability company, converted into Motorsport Games, a Delaware corporation, pursuant to a statutory conversion.

The Company is subject to federal and state income taxes in the U.S. The Company files income tax returns in the jurisdictions in which nexus threshold requirements are met.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. After the performance of such reviews as of June 30, 2021, management determined that uncertainty exists with respect to the future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of such date.

The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and administrative expenses in its condensed consolidated statements of operations.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

ACQUISITIONS

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

NOTE 3 – ACQUISITIONS

Le Mans

In January 2021, the Company, entered into an Amendment (the “Le Mans Amendment”) to the Le Mans Esports Series Ltd Joint Venture Agreement with Automobile Club de l’Ouest, a company registered in France (“ACO”). Pursuant to the Le Mans Amendment, the Company increased its ownership share in the Le Mans Joint Venture, from 45% to 51%, with the Company now holding a majority ownership share and ACO holding a 49% minority ownership share in the Le Mans Joint Venture.

Pursuant to the Le Mans Amendment, the parties expanded the primary objective and purpose of the Le Mans Joint Venture to include the creation, development, and publishing of video games based on the FIA World Endurance Championship and the 24 Hours of Le Mans, in addition to operating, promoting, and running an electronic sports events business replicating races of the FIA World Endurance Championship and the 24 Hours of Le Mans on an electronic gaming platform.

Pursuant to the Le Mans Amendment, if the board of directors of the Le Mans Joint Venture determines that the Le Mans Joint Venture’s working capital requirements for the development of future games exceeds its resources, the Company will be obligated to contribute such additional funding to the Le Mans Joint Venture as a loan (which loan shall bear no interest). Any such loan is required to be repaid when additional funding is no longer required by the Le Mans Joint Venture, as determined by its board of directors, with such repayment to occur prior to the Le Mans Joint Venture’s distribution of any of its profits to the shareholders of the Le Mans Joint Venture.

Further, pursuant to the Le Mans Amendment, the Company has a right to priority distribution of profits to recoup the additional funding and royalty payments that serve as the consideration for the Le Mans Video Gaming License (as defined below).

In January 2021, simultaneously with the execution of the Le Mans Amendment, the Le Mans Joint Venture and ACO entered into a license agreement pursuant to which the Le Mans Joint Venture was granted an exclusive license to use certain licensed intellectual property described in such license agreement for motorsports and/or racing video gaming products related to, themed as, or containing the FIA World Endurance Championship and the 24 Hours of Le Mans (including the Le Mans Joint Venture’s esports web platform) (the “Le Mans Video Gaming License”).

The Le Mans Video Gaming License’s term is through January 25, 2031. The term will automatically renew for an additional 10-year term. In exchange for the Le Mans Video Gaming License, the Company agreed to fund up to €8,000,000 (approximately $9,000,000) as needed by the Le Mans Joint Venture for development of the video game products, to be contributed on an as-needed basis during the term of the Le Mans Video Gaming License. Additionally, the Company is obligated to pay ACO an annual royalty payment beginning from the time of the launch of the first video game product and continuing each anniversary thereof for the term of the license.

In January 2021, the Le Mans Joint Venture (a 51% controlled subsidiary of the Company) and ACO entered into another license agreement pursuant to which the Le Mans Joint Venture was granted an exclusive license to use certain licensed intellectual property described in such license agreement for motorsports and/or racing esports events related to, themed as, or containing the FIA World Endurance Championship and the 24 Hours of Le Mans (including the Le Mans Joint Venture’s esports web platform) (the “Le Mans Esports License”).

The Le Mans Esports License’s term is through January 25, 2031. The term of the Le Mans Esports License will automatically renew for an additional 10-year term. The Le Mans Esports License was granted to the Le Mans Joint Venture on a royalty-free basis in consideration of the investments already made into the Le Mans Joint Venture by the Company and ACO.

In January 2021, the Le Mans Joint Venture and ACO entered into another esports license agreement pursuant to which the Le Mans Joint Venture was granted an exclusive license to use certain licensed intellectual property described in such license agreement to run, promote, and exploit the 24 Hours of Le Mans Virtual event (the “24 Hours of Le Mans Virtual License”).

The 24 Hours of Le Mans Virtual License’s term is through January 25, 2031. The term will automatically renew for an additional 10-year term. The 24 Hours of Le Mans Virtual License was granted to the Le Mans Joint Venture on a royalty-free basis in consideration of the investments already made into the Le Mans Joint Venture by the Company and ACO.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following key assumptions were utilized by the Company: (i) revenue projections; (ii) risk-free rate, which was estimated based on the rate of treasury securities with the same term as the mid-period of the projection periods; and (iii) revenue volatility, which was estimated based on an analysis of historical asset volatilities for similar companies and adjusted for operating leverage to estimate revenue volatility.

The purchase price allocation for the Le Mans Joint Venture was completed subsequent to the acquisition date. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows:

SUMMARY OF AGGREGATE PURCHASE PRICE

	Valuation Method	Discount Rate			GBP			USD
Cash	-		-		£	257,232		$	350,626
Other assets	-		-			858			1,169
Le Mans Gaming license	Excess earning Method		30.00	%		843,682			1,150,000
Le Mans Esport license	Excess earning Method		30.00	%		1,217,836			1,660,000
Goodwill	Cost-to-recreate		30.00	%		47,848			66,280
Accounts payable	-					(5,147	)		(7,016	)
Non-controlling interest	Business Enterprise Income		30.00	%		(1,157,531	)		(1,573,624	)
FX translation adjustment						-			(1,059	)
Total Fair value of Member’s equity					£	1,204,778		$	1,646,376
Fair value of the previously held interest					£	1,062,999		$	1,449,000
Fair value of the consideration					£	141,779		$	197,376

Results of operations of the Le Mans Joint Venture for the period from January 25, 2021 to June 30, 2021 included $109,390 in operating expenses. It is impracticable to disclose revenues and net income (loss) on an unaudited pro forma basis, as the Company does not have access to the required financial information of the Le Mans Joint Venture prior to the acquisition date.

The acquisition of the Le Mans Joint Venture has been recorded in accordance with ASC 805, Business Combinations. The transactions were taxable for income tax purposes and all assets and liabilities have been recorded at fair value for both book and income tax purposes. Therefore, deferred taxes have been recorded as required.

KartKraft

In March 2021, the Company acquired all assets comprising the KartKraft computer video game from Black Delta Holdings PTY, Black Delta Trading Pty Ltd and Black Delta IP Pty Ltd. (collectively, “Black Delta”). The purchase price for the assets was $1,000,000, of which $750,000 was paid at closing and $250,000 was transferred to an escrow account, which will be released on the 6-month anniversary of closing. Through this acquisition, the Company plans to enter the simulated kart-racing space. Motorsport Games has founded a new company, Motorsport Games Australia to support the Black Delta’s development team.

The purchase price allocation for the KartKraft acquisition was completed subsequent to the acquisition date. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows:

SUMMARY OF AGGREGATE PURCHASE PRICE

Intangible Asset	Valuation Method	Discount Rate			USD
KartKraft Trade Name	Relief-from-Royalty		27.50	%	$	108,000
Technology	Replacement cost		25.00	%		833,000
Employment & Non-Compete	With & Without Method		25.00	%		59,000
Total Consideration					$	1,000,000

Results of operations of KartKraft for the period from March 18, 2021 to June 30, 2021 included $94,026 in operating expenses. It is impracticable to disclose revenues and net income (loss) on an unaudited pro forma basis, as the Company does not have access to the requisite financial information of KartKraft prior to the acquisition date.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The KartKraft acquisition has been recorded in accordance with ASC 805, Business Combinations. The transactions were taxable for income tax purposes and all assets and liabilities have been recorded at fair value for both book and income tax purposes. Therefore, deferred taxes have been recorded as required.

Studio397

In April 2021, the Company closed the transactions contemplated by the share purchase agreement, dated April 1, 2021 (the “SPA”), with Luminis International BV (“Luminis”) and Technology In Business B.V. (“TIB”) pursuant to which the Company purchased from TIB 100% of the share capital (the “Studio397 Shares”) of Studio397. Studio397 is a racing simulation and technology company that provides the industry-leading racing simulation platform, rFactor2. Since early 2020, Studio397 has been providing its vehicle physics, tire modeling and artificial intelligence software to the Company’s video games.

The purchase price for the Studio397 Shares was $16,000,000, payable in the following two installments: $12,800,000 was paid at closing (the “Completion Payment”) and $3,200,000 on the first anniversary of closing (the “Deferred Payment”). The Deferred Payment was discounted to $3,111,781 using a 2.8% discount rate as of the acquisition date and a payment date of April 20, 2022. The balance of the deferred payment as of June 30, 2021 was $3,126,314.

To secure the Company’s payment of the Deferred Payment, the Company granted a right of pledge on 20% of the Shares (“Pledged Shares”) by means of execution of a deed of pledge at the closing of the transactions contemplated by the SPA. The voting rights attached to the Pledged Shares will be transferred to TIB if and to the extent that the Company fails to pay the Deferred Payment within 30 business days following receipt of TIB’s notice of such failure.

TIB agreed to fund Studio397 with sufficient funds from its proceeds of the Completion Payment at closing by way of share premium contribution so as to enable Studio397 to fully settle at closing the royalty payment amounts to be paid to Image Space Incorporated by Studio397 pursuant to the buy-out agreement, dated December 7, 2020, between Image Space Incorporated and Studio397.

The purchase price allocation for total invested capital of $15,911,781 was completed subsequent to the Studio397 acquisition date. The aggregate purchase price was allocated to the assets acquired and liabilities assumed as follows:

SUMMARY OF AGGREGATE PURCHASE PRICE

	Valuation Method	Discount Rate			Amount
Debt-free net working capital	-		-		$	(12,450	)
Fixed assets	-		-			21,504
rFactor 2 Trade Name	Relief-from-Royalty		9.80	%		3,040,000
Technology	Replacement Cost		9.80	%		7,010,000
Employment & Non-Compete Agreements	With & Without Method		9.80	%		214,000
Internally developed franchise	Excess earning Method		9.80	%		678,000
Goodwill	Cost-to-recreate		10.00	%		4,895,069
FX translation adjustment						65,658
Total Consideration					$	15,911,781

Studio397’s results of operations for the period from April 20, 2021 to June 30, 2021 included $470,564 in revenues, $286,795 in cost of sales, $469,277 in operating expenses and $341 of other income. On an unaudited pro forma basis, if the acquisition had occurred on April 1, 2021, the Company’s consolidated revenues and net loss for three months ended June 30, 2021 would have been $2,335,293 and $6,096,648, respectively. On an unaudited pro forma basis, if the acquisition had occurred on January 1, 2021, the Company’s consolidated revenues and net loss for six months ended June 30, 2021 would have been $5,417,086 and $20,508,133, respectively.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The components of debt free net working capital deficit are as follows:

Current assets:
Projects to be invoiced	$	192,658
Trade debtors		26,121
Paid in advance		47,168
Total current assets	$	265,947

Less current liabilities:
Trade creditors		140,049
Advance invoices/payments		41,063
Audit costs		7,148
Holiday allowances		49,242
Bonuses		42,035
Taxes and social securities		(1,140	)
Total current liabilities	$	278,397

Debt free net working capital deficit	$	(12,450	)

The Studio397 acquisition has been recorded in accordance with ASC 805, Business Combinations. The transaction was taxable for income tax purposes and all assets and liabilities have been recorded at fair value for both book and income tax purposes. Therefore, deferred taxes have been recorded as required.

704Games Company

In April 2021, the Company closed the transactions contemplated by each of (i) the share exchange agreement with PlayFast Games, LLC, a North Carolina limited liability (“PlayFast”), dated as of March 11, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “PlayFast Exchange Agreement”) and (ii) the share exchange agreement with Ascend FS, Inc., a British Columbia corporation (“Ascend”), dated as of March 14, 2021, as amended by that certain amendment dated as of April 1, 2021 (as amended, the “Ascend Exchange Agreement”). As a result, the Company acquired all of the remaining equity interests in 704Games.

The transactions contemplated by the PlayFast Exchange Agreement and the Ascend Exchange Agreement were structured as a merger of 704Games Company with and into 704Games LLC, a newly-formed Delaware limited liability company and wholly-owned subsidiary of the Company, with 704Games LLC being the surviving entity in such merger. The merger consideration issued to (i) PlayFast with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 366,542 newly-issued shares of the Company’s Class A common stock and $1,542,519 in cash and (ii) Ascend with respect to the shares of common stock of 704Games Company it surrendered in such merger consisted of 488,722 newly-issued shares of the Company’s Class A common stock and $2,056,692 in cash.

Pursuant to the PlayFast Exchange Agreement and the Ascend Exchange Agreement, the Company and the other defendants, without admitting any liability by any party, were released from all claims that Ascend or PlayFast could allege or assert against the Company as minority stockholders of 704Games. Pursuant to the Ascend Exchange Agreement, the derivative legal action previously commenced by Ascend was dismissed with prejudice on April 25, 2021.

The Company’s consolidated revenue and net loss for the three and six months ended June 30, 2021 would have been the same as reported on the Condensed Consolidated Statements of Operations if the acquisition had occurred on January 1, 2021 and April 1, 2021, respectively.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 4 - INTANGIBLE ASSETS

Licensing Agreement

On May 29, 2020, the Company secured a licensing agreement with the BARC (TOCA) Limited (“BARC”), the exclusive promoter of the BTCC. Pursuant to this agreement, the Company was granted an exclusive license to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the BTCC, on consoles, PC and mobile applications, esports series and esports events (including the Company’s esports platform). In exchange for the license, this agreement requires the Company to pay BARC an initial fee in two installments, the first of which was due on June 5, 2020 and the second installment on the earlier of 60 days after the release of the products contemplated by the license or May 29, 2022. Following the initial fee, this agreement also requires the Company to pay royalties, including certain minimum annual guarantees, on an ongoing basis to BARC and to meet certain product distribution, marketing and related milestones, subject to termination penalties. In connection with this licensing agreement, the Company acquired the BTCC license with a cost of $891,999. The Company began recognizing amortization expense during the year ended December 31, 2020 over the six-and-a-half year useful life, as the license terminates on December 31, 2026. As of June 30, 2021, the Company had a remaining liability in connection with this licensing agreement of $832,505, which is included in other non-current liabilities on the condensed consolidated balance sheets.

In connection with the acquisition of the Le Mans Joint Venture, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
Gaming license	Indefinite	$	1,150,000
Esport license	Indefinite		1,660,000
Total		$	2,810,000

In connection with the acquisition of KartKraft, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
KartKraft Trade Name	Indefinite	$	108,000
Software	6 Years		833,000
Employment & Non-Compete	3 Years		59,000
Total		$	1,000,000

In connection with the acquisition of Studio397, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
Technology	6 years	$	7,010,000
rFactor 2 Trade Name	Indefinite		3,040,000
Internally developed franchise	10 years		678,000
Employment & Non-Compete Agreements	3 years		214,000

Total		$	10,942,000

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Intangible assets consist of the following:

SCHEDULE OF INTANGIBLE ASSETS

	Licensing Agreements		Software			Distribution Contracts		Trade Name (Indefinite)			Non-Compete Agreement			Domain Name (Indefinite)		Accumulated Amortization			Total
Balance as of January 1, 2021	$	4,511,999	$	2,340,000		$	560,000	$	-		$	-		$	-	$	(1,843,547	)	$	5,568,452
Intangible assets acquired through business combination		2,839,947		832,754			-		107,968			58,983			-		-			3,839,652
Purchase of intangible assets		-		-			-		-			-			26,000		-			26,000
Amortization expense		-		-			-		-			-			-		(110,297	)		(110,297	)
Balance as of March 31, 2021		7,351,946		3,172,754			560,000		107,968			58,983			-		(1,953,844	)		9,323,807
Intangible assets acquired through business combination		-		7,688,000			-		3,040,000			214,000			-		-			10,942,000
Purchase of intangible assets		-		-			-		-			-			1,928		-			1,928
Amortization expense		-		-			-		-			-			-		(471,114	)		(471,114	)
FX translation adjustments		15,668		(114,012	)		-		(41,825	)		(3,701	)		-		5,160			(138,710	)
Balance as of June 30, 2021	$	7,367,614	$	10,746,742		$	560,000	$	3,106,143		$	269,282		$	1,928	$	(2,419,798	)	$	19,657,911

Accumulated amortization of intangible assets consists of the following:

	Licensing Agreements		Software			Distribution Contracts		Non-Compete Agreement		Accumulated Amortization
Balance as of January 1, 2021	$	617,396	$	666,151		$	560,000	$	-	$	1,843,547
Amortization expense		22,254		83,571			-		4,472		110,297
Balance as of March 31, 2021		639,650		749,722			560,000		4,472		1,953,844
Amortization expense		90,870		365,390			-		14,854		471,114
FX translation adjustments		-		(5,160	)		-		-		(5,160	)
Balance as of June 30, 2021	$	730,520	$	1,109,952		$	560,000	$	19,326	$	2,419,798

Amortization expense related to intangible assets was $471,114 and $160,806 for the three months ended June 30, 2021 and 2020, respectively. Amortization expense related to intangible assets was $581,411 and $275,869 for the six months ended June 30, 2021, and 2020, respectively.

ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

ACCRUED EXPENSES

NOTE 5 – ACCRUED EXPENSES

Accrued expenses consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	June 30,		December 31,
	2021		2020
Accrued royalties	$	424,223	$	1,485,261
Accrued professional fees		57,478		129,291
Accrued consulting fees		603,988		398,526
Payable to Le Mans joint venture		647,630		234,667
Accrued development costs		683		196,845
Accrued hosting fees		40,787		551
Accrued rent		31,491		40,787
Accrued taxes		136,531		54,880
Accrued payroll		30,250		778,918
Accrued director payment		13,820		-
Accrued other		128,054		35,277
Total	$	2,114,935	$	3,355,003

STOCKHOLDERS’ EQUITY

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 6 – STOCKHOLDERS’ EQUITY

Corporate Conversion

On January 8, 2021, Motorsport Gaming converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Effective as of January 8, 2021, 100% of the membership interests held by the sole member of Motorsport Gaming, Motorsport Network, converted into an aggregate of (i) 7,000,000 shares of Class A common stock of Motorsport Games and (ii) 7,000,000 shares of Class B common stock of Motorsport Games Inc., representing all of the outstanding shares of Class A and Class B common stock immediately following the corporate conversion. Motorsport Network is the only holder of shares of the Company’s Class B common stock and does not have any transfer, conversion, registration or economic rights with respect to such shares of Class B common stock.

Upon effecting the corporate conversion on January 8, 2021, Motorsport Games now holds all the property and assets of Motorsport Gaming, and all of the debts and obligations of Motorsport Gaming were assumed by Motorsport Games by operation of law upon such corporate conversion.

Effective as of January 8, 2021, the members of the board of directors of Motorsport Gaming became the members of Motorsport Games’ board of directors, and the officers of Motorsport Gaming became the officers of Motorsport Games.

Initial Public Offering

On January 15, 2021, the Company completed its initial public offering of 3,450,000 shares of its Class A common stock at a price to the public of $20.00 per share, which includes the exercise in full by the underwriters of their option to purchase from the Company an additional 450,000 shares of the Company’s Class A common stock. The net proceeds to the Company from the initial public offering were approximately $63.1 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company during 2020 and 2021.

Common Stock

See Note 3 – Acquisitions for details of the Company’s issuance of Class A common stock in connection with certain acquisitions.

Equity Grants – Common Stock

During the six months ended June 30, 2021, in conjunction with the Company’s initial public offering, the Company granted an aggregate of 330,633 shares of Class A common stock to its Chief Executive Officer, a consultant, and three of its directors with an aggregate grant date fair value of $6,612,660. The grant date fair value of these shares was recognized as stock-based compensation expense on the date of grant as the awards were fully vested on such date.

Equity Grants – Stock Options

During the six months ended June 30, 2021, in conjunction with the Company’s initial public offering, the Company granted its Chief Executive Officer an immediately vested ten-year stock option to purchase 203,333 shares of the Company’s Class A common stock at an exercise price of $20.00 per share. The option had a grant date fair value of $2,189,896 which was recognized on the grant date.

During the six months ended June 30, 2021, in conjunction with the Company’s initial public offering, the Company granted ten-year stock options to purchase an aggregate of 158,975 shares of the Company’s Class A common stock (145,438 shares at an exercise price of $20.00 and 11,445 shares at an exercise price of $23.90) to various employees of the Company. The options vest ratably over three years from the date of grant and had an aggregate grant date fair value of $1,931,025 which is being recognized ratably over the vesting period. Approximately $308,840 of compensation expense was recognized during the six months ended June 30, 2021.

During the six months ended June 30, 2021, in conjunction with the Company’s initial public offering, the Company granted ten-year stock options to purchase an aggregate of 15,096 shares of the Company’s Class A common stock at an exercise price of $20.00 to four members of the Company’s board of directors. The options vest as follows: (i) an aggregate 11,250 shares subject to the options vest on the one-year grant date anniversary, and (ii) 3,846 shares subject to the options vest ratably over three years from the date of grant. The options had an aggregate grant date fair value of $169,377 which is being recognized ratably over the vesting period. Approximately $64,446 of compensation expense was recognized during the six months ended June 30, 2021.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

During the six months ended June 30, 2021, the Company granted a ten-year stock option to purchase 5,114 shares of the Company’s Class A common stock at an exercise price of $23.90 to the Company’s former Head of Music Strategy. The option were to vest as follows: (i) 209 shares subject to the option vested immediately, (ii) 1,767 shares subject to the option were to vest on the one-year grant date anniversary, and (iii) 3,138 shares subject to the option were to vest ratably upon each of five confirmations of pre-approved artist introductions. The option grant date fair value of $62,955 was to be recognized pursuant to the vesting terms. During the three months ended June 30, 2021, the Company modified this option such that it is now an option to purchase 2,092 shares of the Company’s Class A common stock at an exercise price of $23.90, which vested immediately on the modification date with a modified fair value of $25,418. Approximately $25,418 of compensation expense was recognized for the six months ended June 30, 2021 as a result of the modification.

During the six months ended June 30, 2021, in conjunction with an amendment to the employment agreement of its Chief Executive Officer (as amended, the “CEO Employment Agreement”), the Company granted its Chief Executive Officer a ten-year stock option to purchase 150,000 shares of the Company’s Class A common stock at an exercise price of $20.00. The option vests ratably over three years from the date of grant and had a grant date fair value of $621,923 which is being recognized ratably over the vesting period. Approximately $6,912 of compensation expense was recognized during the six months ended June 30, 2021.

During the six months ended June 30, 2021, pursuant to the terms of the CEO Employment Agreement and based on the Company’s market value following its initial public offering, the Company granted its Chief Executive Officer a ten-year stock option to purchase 44,577 shares of the Company’s Class A common stock at an exercise price of $23.86. The option vests ratably over three years from the date of grant and had a grant date fair value of $579,300 which is being recognized ratably over the vesting period. Approximately $6,437 of compensation expense was recognized during the six months ended June 30, 2021.

Stock-Based Compensation

For three months ended June 30, 2021 and 2020, the Company recognized aggregate stock-based compensation expense of $116,276 and $0, respectively, related to the issuances of stock options. For the six months ended June 30, 2021 and 2020, the Company recognized aggregate stock-based compensation expense of $9,193,190 and $0, respectively, related to the issuances of stock options. As of June 30, 2021, there was $2,936,411 of unrecognized stock-based compensation expense which will be recognized over approximately 4 years.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2021

NOTE 7 – RELATED PARTY TRANSACTIONS

During six months ended June 30, 2021, the Company drew down an additional $1,868,312, and repaid $12,663,168 of the promissory note, resulting in the balance due to Motorsport Network of $285,198 as of June 30, 2021. This balance is included within due to related parties on the Company’s condensed consolidated balance sheet.

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Litigation

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. As of June 30, 2021 and December 31, 2020, the Company has not accrued any amounts for contingencies.

On January 11, 2021, Ascend, a minority stockholder of 704Games, filed a derivative action on behalf of 704Games in the Eleventh Judicial Circuit Court of Florida against the Company and the Company’s Chief Executive Officer and Executive Chairman. The complaint alleged breach of fiduciary duty and breach of contract in connection with the Company’s August and October 2020 purchases of an aggregate of 116,608 shares of common stock of 704Games (representing approximately 28.7% of the outstanding shares of 704Games) from certain selling stockholders. In connection with the closing of the transactions contemplated by the Ascend Exchange Agreement and the PlayFast Exchange Agreement, the Company and its affiliates, without admitting any liability by any party, were released from all claims that Ascend or PlayFast could allege or assert against the Company as minority stockholders of 704Games. Pursuant to the Ascend Exchange Agreement, the derivative legal action previously commenced by Ascend against the Company and certain of its affiliates was dismissed with prejudice on April 25, 2021.

On February 11, 2021, HC2 Holdings 2 Inc. and Continental General Insurance Company, former minority stockholders of 704Games, filed a complaint (the “HC2 and Continental Complaint”) in the United States District Court for the District of Delaware against the Company, the Company’s Chief Executive Officer and Executive Chairman, the Company’s Chief Financial Officer, and the sole manager of Motorsport Network (collectively, the “Individual Defendants”). The complaint alleges misrepresentations and omissions by the Company concerning 704Games’ financial condition and future prospects in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 under the Exchange Act; joint and several liability of the Individual Defendants under Section 20(a) of the Exchange Act with respect to the alleged violation of Section 10(b) and Rule 10(b); alleged violation by the Company of Section 20A of the Exchange Act in connection with plaintiffs’ sale to the Company of an aggregate of 106,307 shares of common stock of 704Games, which is equal to 26.2% of the outstanding common stock of 704Games, in August 18, 2020 (the “Stock Sale”); alleged breach of the Company’s obligations under the Stockholders’ Agreement, dated August 14, 2018, by and among the Company and the other stockholders of 704Games, in connection with 704Games’ requirement to provide financial information about 704Games to the plaintiffs; the defendants’ alleged fraudulent inducement of the plaintiffs to enter into a stock purchase agreement for the Stock Sale; the defendants’ alleged breach of fiduciary duty by alleged failure to disclose key financial and other information about 704Games and allegedly diverting corporate opportunities for the benefit of defendants; and alleged unjust enrichment. The plaintiffs seek, among other things, damages from the defendants, jointly and severally, based on the alleged difference between the fair market value of the shares of common stock of 704Games on August 18, 2020, the date of the Stock Sale, and the purchase price that was paid in the Stock Sale, as well as punitive damages and other relief.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

At this time, it is premature to determine the outcome of any litigation that may result from the HC2 and Continental Complaint. As a result, the Company has not accrued for any loss contingencies related to this claim because the amount and range of loss, if any, cannot currently be reasonably estimated. The Company believes that the plaintiff’s allegations are without merit and the Company intends to continue to vigorously defend its position to the fullest extent permitted by law.

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 this agreement, upon payment of the initial license fee described below, the Company was granted a non-exclusive, non-transferable and terminable license to develop, market and sublicense (under limited circumstances and subject to conditions of this agreement) certain products using the Unreal Engine 4 for its next generation of games. In exchange for the license, this agreement requires the Company to pay Epic an initial license fee that was paid during the year ended December 31, 2020. During the three and six months ended June 30, 2021, Epic did not earn any royalties under this agreement. During a two-year support period, Epic will use commercially reasonable efforts to provide the Company with updates to the Unreal Engine 4 and technical support via a licensee forum. After the expiration of the support period, Epic has no further obligation to provide or to offer to provide any support services. This agreement is effective until terminated under its provisions; however, pursuant to its terms, the Company can only actively develop new or existing authorized products using the Unreal Engine 4 during a five-year active development period, which terminates on August 11, 2025.

Operating Leases

The Company leases its facilities under operating leases. The Company’s rent expense under its operating leases was $101,403 and $67,658 for the three months ended June 30, 2021 and 2020, respectively. Rent expense was $191,158 and $121,959 for the six months ended June 30, 2021 and 2020, respectively.

CONCENTRATIONS

6 Months Ended

Jun. 30, 2021

Risks and Uncertainties [Abstract]

CONCENTRATIONS

NOTE 9 – CONCENTRATIONS

Customer Concentrations

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the following periods:

SCHEDULE OF CONCENTRATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Customer	2021			2020			2021			2020
Customer A		-^*			11.16	%		-^*			-^*
Customer B		24.56	%		30.59	%		30.29	%		32.86	%
Customer C		30.60	%		-^*			19.24	%		-^*
Customer D		31.37	%		33.49	%		36.85	%		32.69	%
Total		86.53	%		75.24	%		86.38	%		65.55	%

*	Less than 10%.

Motorsport Games Inc.

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 accounts receivable as of:

	June 30,			December 31,
Customer	2021			2020
Customer A		60.94	%		81.84	%
Customer C		15.65	%		-	*
Total		76.60	%		81.84	%

*	Less than 10%.

A reduction in sales from or loss of these customers, in a significant amount, could have a material adverse effect on the Company’s results of operations and financial condition.

Supplier Concentrations

The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s cost of revenues for the following periods:

SCHEDULE OF CONCENTRATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Supplier	2021			2020			2021			2020
Supplier A		27.40	%		42.34	%		36.41	%		42.28	%
Supplier B		-	*		10.57	%		-	*		-	*
Supplier C		50.86	%		12.64	%		33.67	%		11.79	%
Total		78.26	%		65.55	%		70.08	%		54.07	%

*	Less than 10%.

SEGMENT REPORTING

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 10 – SEGMENT REPORTING

The Company’s principal operating segments coincide with the types of products and services to be sold. The products and services from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the three and six months ended June 30, 2021 and 2020 were: (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”); and (ii) the organization and facilitation of esports tournaments, competitions and events for the Company’s licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”). The Company’s chief operating decision-maker has been identified as the Company’s Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of June 30, 2021 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the United States, no geographical segments are presented.

Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including net revenues, gross profit and operating loss. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. The Company manages certain operating expenses separately at the corporate level and does not allocate such expenses to the segments. Segment income from operations excludes interest income/expense and other income or expenses and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, and unallocated costs in measuring the performance of the reportable segments.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Segment information available with respect to these reportable business segments was as follows:

	For the Three Months Ended,						For the Six Months Ended,
	June 30,						June 30,
	2021			2020			2021			2020

Revenues:
Gaming	$	2,238,927		$	3,795,652		$	4,689,140		$	7,030,219
Esports		-			93,165			23,919			93,165
Total Segment and Consolidated Revenues	$	2,238,927		$	3,888,817		$	4,713,059		$	7,123,384

Cost of Revenues:
Gaming	$	902,751		$	1,174,649		$	1,617,867		$	2,098,115
Esports		3,552			97,590			70,244			242,621
Total Segment and Consolidated Cost of Revenues	$	906,303		$	1,272,239		$	1,688,111		$	2,340,736

Gross Profit:
Gaming	$	1,336,176		$	2,621,003		$	3,071,273		$	4,932,104
Esports		(3,552	)		(4,425	)		(46,325	)		(149,456	)
Total Segment and Consolidated Gross Profit	$	1,332,624		$	2,616,578		$	3,024,948		$	4,782,648

(Loss) Income From Operations:
Gaming	$	(5,716,887	)	$	149,581		$	(20,910,146	)	$	330,597
Esports		(256,517	)		(48,311	)		(440,327	)		(348,903	)
Total Segment and Consolidated (Loss) Income From Operations	$	(5,973,404	)	$	101,270		$	(21,350,473	)	$	(18,306	)

Depreciation and Amortization:
Gaming	$	58,496		$	8,511		$	85,305		$	27,462
Esports		7,952			-			11,918			-
Total Segment and Consolidated Depreciation and Amortization	$	66,448		$	8,511		$	97,223		$	27,462

Interest Expense, net:
Gaming	$	(31,899	)	$	(218,500	)	$	(151,438	)	$	(217,360	)
Esports		-			-			-			-
Total Segment and Consolidated Interest Expense, net	$	(31,899	)	$	(218,500	)	$	(151,438	)	$	(217,360	)

Gain (loss) attributable to equity method investment :
Gaming	$	-		$	41,008		$	1,370,837		$	(29,234	)
Esports		-			-			-			-
Total Gain (loss) attributable to equity method investment	$	-		$	41,008		$	1,370,837		$	(29,234	)

June 30, 2021 December 31, 2020

Segment Total Assets:

Gaming $ 56,210,264 $ 17,377,993

Esports 2,456,293 9,017

Consolidated Total assets $ 58,666,557 $ 17,387,010

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11 - SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustments or disclosure in the condensed consolidated financial statements or notes.

INDYCAR

On July 13, 2021, the Company entered into a license agreement (the “INDYCAR Gaming License”) with INDYCAR LLC (“INDYCAR”). Pursuant to the INDYCAR Gaming License, INDYCAR granted a license to the Company to use certain licensed intellectual property (described in the INDYCAR Gaming License) for motorsports and/or racing video gaming products related to, themed as, or containing the INDYCAR SERIES. The INDYCAR Gaming License is a long-term agreement, in connection with which the parties intend to form an exclusive relationship for the development of video games to be the official video games of the INDYCAR SERIES. The Company expects the debut INDYCAR SERIES title to launch in 2023 on Xbox and PlayStation consoles, as well as on PC.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In exchange for the INDYCAR Gaming License, the Company will pay to INDYCAR an annual development fee through the date of launch, after which INDYCAR will receive a royalty equal to a certain percentage of sales of physical and digital video gaming products, subject to certain minimum guarantees. The Company has agreed under the INDYCAR Gaming License to provide advertising and publicity to bring the racing video gaming products related to, themed as, or containing the INDYCAR SERIES to the attention of as many purchasers and potential purchasers as possible.

Additionally, the Company and INDYCAR entered into a license agreement pursuant to which, the Company was granted a license to use certain licensed intellectual property described in such license (“Licensed IP”) for motorsports and/or racing esports events related to, themed as, or containing the INDYCAR SERIES (including the rFactor2 platform) (the “INDYCAR Esports License”). The INDYCAR Esports License is a long-term agreement, in connection with which the parties intend to form an exclusive relationship for the development of events to be the official esports events of the INDYCAR SERIES, which include the esports events related to and/or themed as or containing the Licensed IP and related features which, prior to launch, are hosted on the Company’s rFactor 2 and, after launch of the products, are hosted using the products. In exchange for the INDYCAR Esports License, INDYCAR will receive, on an annual basis, a royalty equal to a certain percentage of the net revenue (as defined in the INDYCAR Esports License) derived from or in connection with the events during the previous calendar year.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets

Intangible Asset		Useful Life
License agreements		6.5-16 years
Software		6-10 years
Distribution contracts		1 year
Employment and non-compete agreements		3 years

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

See “Note 3 – Acquisitions” for additional details regarding the acquisition of goodwill and intangible assets.

Revenue Recognition

The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:

	●	Identification of a contract with a customer;
	●	Identification of the performance obligations in the contract;
	●	Determination of the transaction price;
	●	Allocation of the transaction price to the performance obligations in the contract; and
	●	Recognition of revenue when or as the performance obligations are satisfied.

Sales of Games - Full console, PC and mobile games contain a software license that is delivered digitally or via physical disc at the time of sale;

Esports Competition Events - Hosting of online esports competitions that generate sponsorship revenue.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

During the three and six months ended June 30, 2021 and 2020, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods.

Identifying Performance Obligations

Determining the Transaction Price

Allocating the Transaction Price

Allocating the transaction price requires that the Company determine an estimate of the relative stand-alone selling price for each distinct performance obligation.

Principal Versus Agent Considerations

●

the underlying contract terms and conditions between the various parties to the transaction;

●

which party is primarily responsible for fulfilling the promise to provide the specified good or service to the end customer;

●

which party has inventory risk before the specified good or service has been transferred to the end customer; and

●

which party has discretion in establishing the price for the specified good or service.

Sales Allowance, Sales Returns and Price Protection Reserves

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation

Net Loss Per Common Share

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

	For the Three and Six Months Ended
	June 30,
	2021		2020
Stock options		574,073		n/a
		574,073		-

Recently Issued Accounting Standards

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Income Taxes

On January 8, 2021, Motorsport Gaming, a Florida limited liability company, converted into Motorsport Games, a Delaware corporation, pursuant to a statutory conversion.

The Company is subject to federal and state income taxes in the U.S. The Company files income tax returns in the jurisdictions in which nexus threshold requirements are met.

The Company utilizes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Motorsport Games Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

+ References + Details

Disclosure of accounting policy for revenue from contract with customer.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2021

SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES

Intangible Asset		Useful Life
License agreements		6.5-16 years
Software		6-10 years
Distribution contracts		1 year
Employment and non-compete agreements		3 years

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:

	For the Three and Six Months Ended
	June 30,
	2021		2020
Stock options		574,073		n/a
		574,073		-

ACQUISITIONS (Tables)

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

SUMMARY OF AGGREGATE PURCHASE PRICE

	Valuation Method	Discount Rate			GBP			USD
Cash	-		-		£	257,232		$	350,626
Other assets	-		-			858			1,169
Le Mans Gaming license	Excess earning Method		30.00	%		843,682			1,150,000
Le Mans Esport license	Excess earning Method		30.00	%		1,217,836			1,660,000
Goodwill	Cost-to-recreate		30.00	%		47,848			66,280
Accounts payable	-					(5,147	)		(7,016	)
Non-controlling interest	Business Enterprise Income		30.00	%		(1,157,531	)		(1,573,624	)
FX translation adjustment						-			(1,059	)
Total Fair value of Member’s equity					£	1,204,778		$	1,646,376
Fair value of the previously held interest					£	1,062,999		$	1,449,000
Fair value of the consideration					£	141,779		$	197,376

SUMMARY OF AGGREGATE PURCHASE PRICE

Intangible Asset	Valuation Method	Discount Rate			USD
KartKraft Trade Name	Relief-from-Royalty		27.50	%	$	108,000
Technology	Replacement cost		25.00	%		833,000
Employment & Non-Compete	With & Without Method		25.00	%		59,000
Total Consideration					$	1,000,000

SUMMARY OF AGGREGATE PURCHASE PRICE

	Valuation Method	Discount Rate			Amount
Debt-free net working capital	-		-		$	(12,450	)
Fixed assets	-		-			21,504
rFactor 2 Trade Name	Relief-from-Royalty		9.80	%		3,040,000
Technology	Replacement Cost		9.80	%		7,010,000
Employment & Non-Compete Agreements	With & Without Method		9.80	%		214,000
Internally developed franchise	Excess earning Method		9.80	%		678,000
Goodwill	Cost-to-recreate		10.00	%		4,895,069
FX translation adjustment						65,658
Total Consideration					$	15,911,781

SUMMARY OF DEBT FREE NET WORKING CAPITAL DEFICIT

The components of debt free net working capital deficit are as follows:

Current assets:
Projects to be invoiced	$	192,658
Trade debtors		26,121
Paid in advance		47,168
Total current assets	$	265,947

Less current liabilities:
Trade creditors		140,049
Advance invoices/payments		41,063
Audit costs		7,148
Holiday allowances		49,242
Bonuses		42,035
Taxes and social securities		(1,140	)
Total current liabilities	$	278,397

Debt free net working capital deficit	$	(12,450	)

INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

SCHEDULE OF INTANGIBLE ASSETS ACQUISITION

In connection with the acquisition of the Le Mans Joint Venture, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
Gaming license	Indefinite	$	1,150,000
Esport license	Indefinite		1,660,000
Total		$	2,810,000

In connection with the acquisition of KartKraft, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
KartKraft Trade Name	Indefinite	$	108,000
Software	6 Years		833,000
Employment & Non-Compete	3 Years		59,000
Total		$	1,000,000

In connection with the acquisition of Studio397, the Company acquired the following intangible assets (See Note 3 – Acquisitions for additional details):

Intangible Asset	Useful Life	Cost
Technology	6 years	$	7,010,000
rFactor 2 Trade Name	Indefinite		3,040,000
Internally developed franchise	10 years		678,000
Employment & Non-Compete Agreements	3 years		214,000

Total		$	10,942,000

SCHEDULE OF INTANGIBLE ASSETS

Intangible assets consist of the following:

SCHEDULE OF INTANGIBLE ASSETS

	Licensing Agreements		Software			Distribution Contracts		Trade Name (Indefinite)			Non-Compete Agreement			Domain Name (Indefinite)		Accumulated Amortization			Total
Balance as of January 1, 2021	$	4,511,999	$	2,340,000		$	560,000	$	-		$	-		$	-	$	(1,843,547	)	$	5,568,452
Intangible assets acquired through business combination		2,839,947		832,754			-		107,968			58,983			-		-			3,839,652
Purchase of intangible assets		-		-			-		-			-			26,000		-			26,000
Amortization expense		-		-			-		-			-			-		(110,297	)		(110,297	)
Balance as of March 31, 2021		7,351,946		3,172,754			560,000		107,968			58,983			-		(1,953,844	)		9,323,807
Intangible assets acquired through business combination		-		7,688,000			-		3,040,000			214,000			-		-			10,942,000
Purchase of intangible assets		-		-			-		-			-			1,928		-			1,928
Amortization expense		-		-			-		-			-			-		(471,114	)		(471,114	)
FX translation adjustments		15,668		(114,012	)		-		(41,825	)		(3,701	)		-		5,160			(138,710	)
Balance as of June 30, 2021	$	7,367,614	$	10,746,742		$	560,000	$	3,106,143		$	269,282		$	1,928	$	(2,419,798	)	$	19,657,911

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS

Accumulated amortization of intangible assets consists of the following:

	Licensing Agreements		Software			Distribution Contracts		Non-Compete Agreement		Accumulated Amortization
Balance as of January 1, 2021	$	617,396	$	666,151		$	560,000	$	-	$	1,843,547
Amortization expense		22,254		83,571			-		4,472		110,297
Balance as of March 31, 2021		639,650		749,722			560,000		4,472		1,953,844
Amortization expense		90,870		365,390			-		14,854		471,114
FX translation adjustments		-		(5,160	)		-		-		(5,160	)
Balance as of June 30, 2021	$	730,520	$	1,109,952		$	560,000	$	19,326	$	2,419,798

ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

SCHEDULE OF ACCRUED EXPENSES

Accrued expenses consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	June 30,		December 31,
	2021		2020
Accrued royalties	$	424,223	$	1,485,261
Accrued professional fees		57,478		129,291
Accrued consulting fees		603,988		398,526
Payable to Le Mans joint venture		647,630		234,667
Accrued development costs		683		196,845
Accrued hosting fees		40,787		551
Accrued rent		31,491		40,787
Accrued taxes		136,531		54,880
Accrued payroll		30,250		778,918
Accrued director payment		13,820		-
Accrued other		128,054		35,277
Total	$	2,114,935	$	3,355,003

CONCENTRATIONS (Tables)

6 Months Ended

Jun. 30, 2021

Customer Concentration Risk [Member]

SCHEDULE OF CONCENTRATIONS

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the following periods:

SCHEDULE OF CONCENTRATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Customer	2021			2020			2021			2020
Customer A		-^*			11.16	%		-^*			-^*
Customer B		24.56	%		30.59	%		30.29	%		32.86	%
Customer C		30.60	%		-^*			19.24	%		-^*
Customer D		31.37	%		33.49	%		36.85	%		32.69	%
Total		86.53	%		75.24	%		86.38	%		65.55	%

*	Less than 10%.

Motorsport Games Inc.

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 accounts receivable as of:

	June 30,			December 31,
Customer	2021			2020
Customer A		60.94	%		81.84	%
Customer C		15.65	%		-	*
Total		76.60	%		81.84	%

*	Less than 10%.

Supplier Concentration Risk [Member]

SCHEDULE OF CONCENTRATIONS

The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s cost of revenues for the following periods:

SCHEDULE OF CONCENTRATIONS

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Supplier	2021			2020			2021			2020
Supplier A		27.40	%		42.34	%		36.41	%		42.28	%
Supplier B		-	*		10.57	%		-	*		-	*
Supplier C		50.86	%		12.64	%		33.67	%		11.79	%
Total		78.26	%		65.55	%		70.08	%		54.07	%

*	Less than 10%.

SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

SCHEDULE OF SEGMENT REPORTING INFORMATION

Segment information available with respect to these reportable business segments was as follows:

	For the Three Months Ended,						For the Six Months Ended,
	June 30,						June 30,
	2021			2020			2021			2020

Revenues:
Gaming	$	2,238,927		$	3,795,652		$	4,689,140		$	7,030,219
Esports		-			93,165			23,919			93,165
Total Segment and Consolidated Revenues	$	2,238,927		$	3,888,817		$	4,713,059		$	7,123,384

Cost of Revenues:
Gaming	$	902,751		$	1,174,649		$	1,617,867		$	2,098,115
Esports		3,552			97,590			70,244			242,621
Total Segment and Consolidated Cost of Revenues	$	906,303		$	1,272,239		$	1,688,111		$	2,340,736

Gross Profit:
Gaming	$	1,336,176		$	2,621,003		$	3,071,273		$	4,932,104
Esports		(3,552	)		(4,425	)		(46,325	)		(149,456	)
Total Segment and Consolidated Gross Profit	$	1,332,624		$	2,616,578		$	3,024,948		$	4,782,648

(Loss) Income From Operations:
Gaming	$	(5,716,887	)	$	149,581		$	(20,910,146	)	$	330,597
Esports		(256,517	)		(48,311	)		(440,327	)		(348,903	)
Total Segment and Consolidated (Loss) Income From Operations	$	(5,973,404	)	$	101,270		$	(21,350,473	)	$	(18,306	)

Depreciation and Amortization:
Gaming	$	58,496		$	8,511		$	85,305		$	27,462
Esports		7,952			-			11,918			-
Total Segment and Consolidated Depreciation and Amortization	$	66,448		$	8,511		$	97,223		$	27,462

Interest Expense, net:
Gaming	$	(31,899	)	$	(218,500	)	$	(151,438	)	$	(217,360	)
Esports		-			-			-			-
Total Segment and Consolidated Interest Expense, net	$	(31,899	)	$	(218,500	)	$	(151,438	)	$	(217,360	)

Gain (loss) attributable to equity method investment :
Gaming	$	-		$	41,008		$	1,370,837		$	(29,234	)
Esports		-			-			-			-
Total Gain (loss) attributable to equity method investment	$	-		$	41,008		$	1,370,837		$	(29,234	)

June 30, 2021 December 31, 2020

Segment Total Assets:

Gaming $ 56,210,264 $ 17,377,993

Esports 2,456,293 9,017

Consolidated Total assets $ 58,666,557 $ 17,387,010

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, RISKS AND UNCERTAINTIES AND BASIS OF PRESENTATION (Details Narrative)	Apr. 20, 2021
Studio Three Nine Seven B V [Member]
Product Information [Line Items]
Business Acquisition, Percentage of Voting Interests Acquired	100.00%

SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES (Details)	6 Months Ended
	Jun. 30, 2021
Licensing Agreements [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	6 years 6 months
Licensing Agreements [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	16 years
Computer Software, Intangible Asset [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	6 years
Computer Software, Intangible Asset [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	10 years
Distribution Rights [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	1 year
Noncompete Agreements [Member]
Property, Plant and Equipment [Line Items]
Intangible asset, useful life	3 years

SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded in computation of earnings per common share	574,073
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded in computation of earnings per common share	574,073

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Change in Accounting Estimate [Line Items]
Price protection reserves	$ 216,689	$ 314,517
Sales Returns and Allowances [Member]
Change in Accounting Estimate [Line Items]
Price protection reserves	$ 81,600	$ 199,940

SUMMARY OF AGGREGATE PURCHASE PRICE (Details)			1 Months Ended	6 Months Ended
SUMMARY OF AGGREGATE PURCHASE PRICE (Details)	Jan. 25, 2021 USD ($)	Jan. 25, 2021 GBP (£)	Apr. 20, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jan. 25, 2021 GBP (£)	Dec. 31, 2020 USD ($)
Business Acquisition [Line Items]
Goodwill				$ 5,099,065
Goodwill				5,099,065		$ 137,717
Le Mans Esports Series Limited [Member]
Business Acquisition [Line Items]
Cash	$ 350,626	£ 257,232
Cash	350,626				£ 257,232
Other assets	1,169	858
Other assets	1,169				858
Le Mans Gaming license	1,150,000	843,682
Gaming license	1,150,000				843,682
Le Mans Esport license	1,660,000	1,217,836
Esport licenses	1,660,000				1,217,836
Goodwill	66,280	47,848
Goodwill	66,280				47,848
Accounts payable	(7,016)				(5,147)
Non- controlling interest	(1,573,624)	(1,157,531)
Non- controlling interest	(1,573,624)				(1,157,531)
FX translation adjustment	(1,059)	(0)
FX translation adjustment	(1,059)				£ (0)
Total Fair value of Member's equity	1,646,376	1,204,778
Fair value of the previously held interest	1,449,000	1,062,999
Fair value of the consideration	$ 197,376	£ 141,779
Total Consideration				2,810,000
Le Mans Esports Series Limited [Member] \| Gaming License [Member]
Business Acquisition [Line Items]
Valuation Method	Excess earning Method	Excess earning Method
Discount Rate	30.00%	30.00%
Le Mans Esports Series Limited [Member] \| Esport License [Member]
Business Acquisition [Line Items]
Valuation Method	Excess earning Method	Excess earning Method
Discount Rate	30.00%	30.00%
Le Mans Esports Series Limited [Member] \| Goodwill [Member]
Business Acquisition [Line Items]
Valuation Method	Cost-to-recreate	Cost-to-recreate
Discount Rate	30.00%	30.00%
Le Mans Esports Series Limited [Member] \| Noncontrolling Interest [Member]
Business Acquisition [Line Items]
Valuation Method	Business Enterprise Income	Business Enterprise Income
Discount Rate	30.00%	30.00%
Studio397 [Member]
Business Acquisition [Line Items]
Total Consideration			$ 15,911,781
Studio397 [Member] \| Debt-free net working capital [Member]
Business Acquisition [Line Items]
Total Consideration			(12,450)
Studio397 [Member] \| Fixed Assets [Member]
Business Acquisition [Line Items]
Total Consideration			$ 21,504
Studio397 [Member] \| rFactor 2 Trade Name [Member]
Business Acquisition [Line Items]
Valuation Method			Relief-from-Royalty
Discount Rate			9.80%
Total Consideration			$ 3,040,000	3,040,000
Studio397 [Member] \| Technology [Member]
Business Acquisition [Line Items]
Valuation Method			Replacement Cost
Discount Rate			9.80%
Total Consideration			$ 7,010,000	7,010,000
Studio397 [Member] \| Employment Non Compete Agreements [Member]
Business Acquisition [Line Items]
Valuation Method			With & Without Method
Discount Rate			9.80%
Total Consideration			$ 214,000	214,000
Studio397 [Member] \| Internally Developed Franchise [Member]
Business Acquisition [Line Items]
Valuation Method			Excess earning Method
Discount Rate			9.80%
Total Consideration			$ 678,000	$ 678,000
Studio397 [Member] \| Goodwill [Member]
Business Acquisition [Line Items]
Valuation Method			Cost-to-recreate
Discount Rate			10.00%
Total Consideration			$ 4,895,069
Studio397 [Member] \| FX Translation Adjustment [Member]
Business Acquisition [Line Items]
Total Consideration			$ 65,658

SUMMARY OF DEBT FREE NET WORKING CAPITAL DEFICIT (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Business Combination, Separately Recognized Transactions [Line Items]
Total current assets	$ 33,456,969	$ 10,473,123
Total current liabilities	5,795,428	14,914,490
Liabilities, Current	(5,795,428)	$ (14,914,490)
Studio397 [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current assets	265,947
Total current liabilities	278,397
Liabilities, Current	(278,397)
Debt free net working capital deficit	(12,450)
Studio397 [Member] \| Projects to be Invoiced [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current assets	192,658
Studio397 [Member] \| Trade Debtors [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current assets	26,121
Studio397 [Member] \| Paid-In Advance [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current assets	47,168
Studio397 [Member] \| Trade Creditors [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	140,049
Liabilities, Current	(140,049)
Studio397 [Member] \| Advance Invoices Payments [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	41,063
Liabilities, Current	(41,063)
Studio397 [Member] \| Audit Costs [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	7,148
Liabilities, Current	(7,148)
Studio397 [Member] \| Holiday Allowances [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	49,242
Liabilities, Current	(49,242)
Studio397 [Member] \| Bonuses [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	42,035
Liabilities, Current	(42,035)
Studio397 [Member] \| Taxes and Social Securities [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Total current liabilities	1,140
Liabilities, Current	$ (1,140)

ACQUISITIONS (Details Narrative)					1 Months Ended		2 Months Ended	3 Months Ended			5 Months Ended	6 Months Ended
ACQUISITIONS (Details Narrative)	Jan. 25, 2031 USD ($)	Jan. 25, 2031 EUR (€)	Apr. 02, 2021 USD ($)	Mar. 18, 2021 USD ($)	Apr. 30, 2021 USD ($) shares	Mar. 31, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2020 USD ($)	Jan. 31, 2021	Jan. 08, 2021
Business Acquisition [Line Items]
Ownership percentage															100.00%
Total Operating Expenses									$ 7,306,028	$ 2,515,308		$ 24,375,421	$ 4,800,954
Purchase commitment liability												3,126,314
KartKraft Acquisition [Member]
Business Acquisition [Line Items]
Purchase price for the assets						$ 1,000,000
KartKraft Acquisition [Member] \| At Closing [Member]
Business Acquisition [Line Items]
Purchase price for the assets						750,000
KartKraft Acquisition [Member] \| Six Month Anniversary Closing [Member]
Business Acquisition [Line Items]
Purchase price for the assets						$ 250,000
Kart Kraft [Member]
Business Acquisition [Line Items]
Total Consideration				$ 1,000,000
Kart Kraft [Member] \| Kart Kraft Trade Name [Member]
Business Acquisition [Line Items]
Valuation Method				Relief-from-Royalty
Discount Rate				27.50%
Total Consideration				$ 108,000			$ 108,000	$ 108,000	108,000		$ 108,000	108,000
Kart Kraft [Member] \| Technology [Member]
Business Acquisition [Line Items]
Valuation Method				Replacement cost
Discount Rate				25.00%
Total Consideration				$ 833,000
Kart Kraft [Member] \| Employment Non Compete Agreements [Member]
Business Acquisition [Line Items]
Valuation Method				With & Without Method
Discount Rate				25.00%
Total Consideration				$ 59,000			59,000	59,000	59,000		59,000	59,000
Studio Three Nine Seven [Member]
Business Acquisition [Line Items]
Purchase price for the assets				3,111,781
Fair value of shares issued for acquisition			$ 16,000,000
Business combination discount percentage			2.80%
Purchase commitment liability												$ 3,126,314
Pledged percentage												2000.00%
Business combination, consideration												$ 15,911,781
Business acquisition, revenue							470,564		2,335,293			5,417,086
Business acquisition, cost of sales							286,795
Business acquisition, operating expenses							469,277
Business acquisition, other income							$ 341
Business acquisition, net income loss									$ 6,096,648			$ 20,508,133
Studio Three Nine Seven [Member] \| Share Purchase Agreement [Member]
Business Acquisition [Line Items]
Ownership percentage			100.00%
Studio Three Nine Seven [Member] \| At Closing [Member]
Business Acquisition [Line Items]
Purchase price for the assets				12,800,000
Studio Three Nine Seven [Member] \| First Anniversary Of Closing [Member]
Business Acquisition [Line Items]
Purchase price for the assets				$ 3,200,000
Seven Zero Four Games Company [Member] \| Play Fast Exchange Agreement [Member] \| Common Class A [Member]
Business Acquisition [Line Items]
Fair value of shares issued for acquisition					$ 1,542,519
Number of shares issued for business acquisition \| shares					366,542
Seven Zero Four Games Company [Member] \| Ascend Exchange Agreement [Member] \| Common Class A [Member]
Business Acquisition [Line Items]
Fair value of shares issued for acquisition					$ 2,056,692
Number of shares issued for business acquisition \| shares					488,722
Le Mans Esports Series Limited [Member]
Business Acquisition [Line Items]
Development expenses	$ 9,000,000
Total Operating Expenses											$ 109,390
Le Mans Esports Series Limited [Member] \| Minimum [Member]
Business Acquisition [Line Items]
Ownership percentage														45.00%
Le Mans Esports Series Limited [Member] \| Maximum [Member]
Business Acquisition [Line Items]
Ownership percentage														51.00%
Development expenses \| €		€ 8,000,000
Automobile Clubdel Ouest [Member]
Business Acquisition [Line Items]
Ownership percentage														49.00%
Kart Kraft [Member]
Business Acquisition [Line Items]
Total Operating Expenses								$ 94,026

SCHEDULE OF INTANGIBLE ASSETS ACQUISITION (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Apr. 20, 2021	Mar. 18, 2021
Le Mans Esports Series Limited [Member]
Finite-Lived Intangible Assets [Line Items]
Total	$ 2,810,000
Le Mans Esports Series Limited [Member] \| Gaming License [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	Indefinite
Total	$ 1,150,000
Le Mans Esports Series Limited [Member] \| Esport License [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	Indefinite
Total	$ 1,660,000
Kart Kraft [Member]
Finite-Lived Intangible Assets [Line Items]
Total			$ 1,000,000
Kart Kraft [Member] \| Kart Kraft Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	Indefinite
Total	$ 108,000		108,000
Kart Kraft [Member] \| Computer Software, Intangible Asset [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	6 Years
Total	$ 833,000
Kart Kraft [Member] \| Employment Non Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	3 Years
Total	$ 59,000		59,000
Kart Kraft [Member] \| Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Total			$ 833,000
Studio397 [Member]
Finite-Lived Intangible Assets [Line Items]
Total		$ 15,911,781
Studio397 [Member] \| Employment Non Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	3 years
Total	$ 214,000	214,000
Studio397 [Member] \| Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	6 years
Total	$ 7,010,000	7,010,000
Studio397 [Member] \| rFactor 2 Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	Indefinite
Total	$ 3,040,000	3,040,000
Studio397 [Member] \| Internally Developed Franchise [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Life	10 years
Total	$ 678,000	$ 678,000

SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($)	3 Months Ended			6 Months Ended
SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	$ 9,323,807	$ 5,568,452		$ 5,568,452
Accumulated amortization, beginning	(1,953,844)	(1,843,547)		(1,843,547)
Intangible assets acquired through business combination	10,942,000	3,839,652
Purchase of intangible assets	1,928	26,000
Amortization expense	(471,114)	(110,297)	$ (160,806)	(581,411)	$ (275,869)
FX translation adjustments	(138,710)
Intangible assets, ending	19,657,911	9,323,807		19,657,911
Accumulated amortization, ending	(2,419,798)	(1,953,844)		(2,419,798)
Licensing Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	7,351,946	4,511,999		4,511,999
Intangible assets acquired through business combination		2,839,947
Purchase of intangible assets
Amortization expense
FX translation adjustments	15,668
Intangible assets, ending	7,367,614	7,351,946		7,367,614
Software [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	3,172,754	2,340,000		2,340,000
Intangible assets acquired through business combination	7,688,000	832,754
Purchase of intangible assets
Amortization expense
FX translation adjustments	(114,012)
Intangible assets, ending	10,746,742	3,172,754		10,746,742
Distribution Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	560,000	560,000		560,000
Intangible assets acquired through business combination
Purchase of intangible assets
Amortization expense
FX translation adjustments
Intangible assets, ending	560,000	560,000		560,000
Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	107,968
Intangible assets acquired through business combination	3,040,000	107,968
Purchase of intangible assets
Amortization expense
FX translation adjustments	(41,825)
Intangible assets, ending	3,106,143	107,968		3,106,143
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning	58,983
Intangible assets acquired through business combination	214,000	58,983
Purchase of intangible assets
Amortization expense
FX translation adjustments	(3,701)
Intangible assets, ending	269,282	58,983		269,282
Domain Name [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, beginning
Intangible assets acquired through business combination
Purchase of intangible assets	1,928	26,000
Amortization expense
FX translation adjustments
Intangible assets, ending	1,928			$ 1,928
Accumulated Amortization [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	(471,114)	$ (110,297)
FX translation adjustments	$ 5,160

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization, beginning	$ 1,953,844	$ 1,843,547		$ 1,843,547
Amortization expense	471,114	110,297	$ 160,806	581,411	$ 275,869
FX translation adjustments	138,710
Accumulated amortization, ending	2,419,798	1,953,844		2,419,798
Licensing Agreement [Member]
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization, beginning	639,650	617,396		617,396
Amortization expense	90,870	22,254
FX translation adjustments
Accumulated amortization, ending	730,520	639,650		730,520
Softwares [Member]
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization, beginning	749,722	666,151		666,151
Amortization expense	365,390	83,571
FX translation adjustments	(5,160)
Accumulated amortization, ending	1,109,952	749,722		1,109,952
Distribution Contract [Member]
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization, beginning	560,000	560,000		560,000
Amortization expense
FX translation adjustments
Accumulated amortization, ending	560,000	560,000		560,000
Noncompete Agreement [Member]
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization, beginning	4,472
Amortization expense	14,854	4,472
FX translation adjustments
Accumulated amortization, ending	19,326	4,472		$ 19,326
Accumulated Amortization [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense	471,114	$ 110,297
FX translation adjustments	$ (5,160)

INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended			6 Months Ended
INTANGIBLE ASSETS (Details Narrative) - USD ($)	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Amortization expense	$ 471,114	$ 110,297	$ 160,806	$ 581,411	$ 275,869
Customer A [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-Lived License Agreements, Gross		891,999
Customer A [Member] \| Other Noncurrent Liabilities [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-Lived Intangible Assets, Net		$ 832,505

SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Accrued royalties	$ 424,223	$ 1,485,261
Accrued professional fees	57,478	129,291
Accrued consulting fees	603,988	398,526
Payable to Le Mans joint venture	647,630	234,667
Accrued development costs	683	196,845
Accrued hosting fees	40,787	551
Accrued rent	31,491	40,787
Accrued taxes	136,531	54,880
Accrued payroll	30,250	778,918
Accrued director payment	13,820
Accrued other	128,054	35,277
Total	$ 2,114,935	$ 3,355,003

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)

3 Months Ended

6 Months Ended

Jan. 15, 2021

Jan. 08, 2021

Jun. 30, 2021

Mar. 31, 2021

Jun. 30, 2020

Jun. 30, 2021

Jun. 30, 2020

Proceeds from initial public offering

Membership interests

100.00%

^[1]

$ 63,661,128

Unrecognized stock-based compensation expense

$ 2,936,411

Period for Recognition

4 years

IPO [Member] | Companys Head Music Strategy [Member]

$ 6,437

579,300

Common Class A [Member]

Conversion of shares

7,000,000

Proceeds from initial public offering

^[2]

3,450,000

$ 63,100,000

Common Class A [Member] | C E O Employment Agreement [Member]

$ 116,276

$ 0

9,193,190

$ 0

$ 6,912

150,000

$ 20.00

Common Class A [Member] | C E O Employment Agreement [Member] | Chief Executive Officer [Member]

$ 621,923

ten

44,577

Common Class A [Member] | IPO [Member]

23.86

$ 23.86

Common Class A [Member] | IPO [Member] | Chief Executive Officer Consultant Three Of Its Directors [Member]

3,450,000

Stock price per share

$ 20.00

330,633

Common Class A [Member] | IPO [Member] | Chief Executive Officer [Member]

$ 6,612,660

ten

203,333

20.00

$ 20.00

Common Class A [Member] | IPO [Member] | Employees [Member]

$ 2,189,896

$ 308,840

ten

158,975

Common Class A [Member] | IPO [Member] | Employees One [Member]

$ 1,931,025

145,438

Common Class A [Member] | IPO [Member] | Employees Two [Member]

20.00

$ 20.00

11,445

Common Class A [Member] | IPO [Member] | Four Directors [Member]

23.90

$ 23.90

$ 64,446

ten

15,096

$ 20.00

Common Class A [Member] | IPO [Member] | Four Directors [Member] | One Year Grant Date Anniversary [Member]

$ 169,377

Common Class A [Member] | IPO [Member] | Four Directors [Member] | Three Years [Member]

11,250

Common Class A [Member] | IPO [Member] | Companys Head Music Strategy [Member]

3,846

$ 25,418

2,092

5,114

$ 23.90

Common Class A [Member] | IPO [Member] | Companys Head Music Strategy [Member] | One Year Grant Date Anniversary [Member]

$ 25,418

$ 62,955

Common Class A [Member] | IPO [Member] | Companys Head Music Strategy [Member] | Immediately [Member]

1,767

Common Class A [Member] | IPO [Member] | Companys Head Music Strategy [Member] | Five Confirmations Pre Approved Artist Introductions [Member]

209

Common Class A [Member] | IPO [Member] | Additional Shares For Underwriters [Member]

3,138

450,000

Common Class B [Member]

Conversion of shares

7,000,000

[1]	Gross proceeds of $69,000,000 less issuance costs of $5,338,872. See supplemental disclosure below for $587,000 of issuance costs paid in 2020.
[2]	Gross proceeds of $69,000,000 less offering costs of $5,925,872.

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Related Party Transactions [Abstract]
Advances from related parties	$ 1,868,312	$ 427,376
Repayments on advances from related parties	12,663,168	$ 466,322
Due to related parties	$ 285,198		$ 10,853,536

Carrying amount as of the balance sheet date of obligations due all related parties. For classified balance sheets, represents the current portion of such liabilities (due within one year or within the normal operating cycle if longer).

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iii)(C))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442552-122756

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(5))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442552-122756

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 850
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iv))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442526-122756

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iii)(B))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442526-122756

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(5))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442526-122756

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.19(a))
-URI http://asc.fasb.org/extlink&oid=120391452&loc=d3e13212-122682

Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(k)(1))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iv))
-URI http://asc.fasb.org/extlink&oid=124359900&loc=SL124442552-122756

Customer Concentration Risk [Member] | Customer A [Member] | Revenue Benchmark [Member]

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Oct. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Feb. 11, 2021	Jan. 11, 2021
Operating leases, rent expense		$ 101,403	$ 67,658	$ 191,158	$ 121,959
Ascend FS, Inc [Member]
Percentage of outstanding shares							$ 28.07
N 704 Games [Member]
Shares purchased	116,608
HC2 Holdings 2 Inc [Member]
Percentage of outstanding shares						$ 26.02

SCHEDULE OF CONCENTRATIONS (Details)

3 Months Ended

6 Months Ended

12 Months Ended

Jun. 30, 2021

Jun. 30, 2020

Jun. 30, 2021

Jun. 30, 2020

Dec. 31, 2020

Customer Concentration Risk [Member] | Customer A [Member] | Accounts Receivable [Member]

^[1]

11.16%

^[1]

Customer Concentration Risk [Member] | Customer B [Member] | Revenue Benchmark [Member]

60.94%

81.84%

Customer Concentration Risk [Member] | Customer C [Member] | Revenue Benchmark [Member]

24.56%

30.59%

30.29%

32.86%

Customer Concentration Risk [Member] | Customer C [Member] | Accounts Receivable [Member]

30.60%

^[1]

19.24%

^[1]

Customer Concentration Risk [Member] | Customer D [Member] | Revenue Benchmark [Member]

15.65%

^[2]

Customer Concentration Risk [Member] | Customer [Member] | Revenue Benchmark [Member]

31.37%

33.49%

36.85%

32.69%

Customer Concentration Risk [Member] | Customer [Member] | Accounts Receivable [Member]

86.53%

75.24%

86.38%

65.55%

Supplier Concentration Risk [Member] | Supplier A [Member] | Revenue Benchmark [Member]

76.60%

81.84%

Supplier Concentration Risk [Member] | Supplier B [Member] | Revenue Benchmark [Member]

27.40%

42.34%

36.41%

42.28%

Supplier Concentration Risk [Member] | Supplier C [Member] | Revenue Benchmark [Member]

^[3]

10.57%

^[3]

Supplier Concentration Risk [Member] | Supplier [Member] | Revenue Benchmark [Member]

50.86%

12.64%

33.67%

11.79%