View:
United States securities and exchange commission logo
October 5, 2020
Dmitry Kozko
Chief Executive Officer
Motorsport Gaming US LLC
5972 NE 4th Avenue
Miami, FL 33137
Re: Motorsport Gaming
US LLC
Draft Registration
Statement on Form S-1
Submitted September
8, 2020
CIK No. 0001821175
Dear Mr. Kozko:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. You highlight both your
gaming and esports segments in the summary. We also note that
for the fiscal year
ended December 31, 2019, your esports segment accounted for less than
1% of your revenue.
Please balance your summary disclosure by highlighting, if true, that
you currently generate
substantially all of your revenue from your gaming revenue.
2. On page 1, you disclose
that you have obtained, or are in the process of obtaining, the
exclusive licenses to
develop multi-platform games for Le Mans and the British Touring
Car Championship. As
other disclosures appear to indicate that you have not yet obtained
the Le Mans license,
please revise to clarify that this is the license that you are currently in
the process of
obtaining. Additionally, please disclose an estimate of when you expect to
Dmitry Kozko
FirstName
MotorsportLastNameDmitry
Gaming US LLC Kozko
Comapany
October NameMotorsport Gaming US LLC
5, 2020
October
Page 2 5, 2020 Page 2
FirstName LastName
enter into this license agreement and whether there is a material risk
that you will be
unable to do so.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Trends and Factors Affecting Our Business, page 54
3. You disclose that you derived most of your revenue from the sale of
products made for
video game consoles, which comprised 85% of your net revenue by
product platform for
the fiscal year ended December 31, 2019. Please revise to disclose the
other product
platforms - such as mobile devices - on which you offer your games,
the percentage of
revenue each product platform accounted for each year presented in
your financial
statements and the reasons for material changes between periods.
Similarly, revise to
disclose the percentage of revenue of each distribution channel for
the years presented in
your financial statements and the reasons for any material changes
between periods.
Results of Operations, page 57
4. Tell us how you considered presenting a supplemental pro forma
presentation of your
results of operations for the year ended December 31, 2018, assuming
the 704 acquisition
had occurred on January 1, 2018. In this regard, it does not appear
appropriate to merely
combine information for the predecessor and successor periods for 2018
without also
reflecting relevant pro forma adjustments as provided for in Article
11 of Regulation S-X
or ASC 805.
Revenues, page 58
5. You disclose that your decrease in Gaming revenues in 2019 as compared
to 2018 was
primarily due to a lower volume of sales of NASCAR Heat 4 in 2019
versus sales of
NASCAR Heat 3 in 2018. Please revise your disclosures to clarify the
underlying reasons
and any known trends relating to this decrease in sales. Additionally,
to the extent
material, please revise to disclose the number of sales of each games
in each period.
Loss on Impairment of Goodwill, page 60
6. You disclose that you recognized a loss on impairment of goodwill of
$575,015 primarily
due to decreased revenue projections formulated at December 31, 2019.
Clarify your
disclosures to describe the factors that have changed resulting in the
decreased revenue
projections.
Business, page 64
7. Here, and throughout your prospectus, you describe your agreements
with various racing
series, including NASCAR, Le Mans and the World Endurance Championship
and the
British Touring Car Championship. Disclosure in this section only
lists your current
video game catalog as including NASCAR games and a risk factor on page
17 notes that
the NASCAR Heat franchise accounted for approximately 99% of your net
revenues for
Dmitry Kozko
Motorsport Gaming US LLC
October 5, 2020
Page 3
the years ended December 31, 2019 and 2018. Please revise your
disclosure to clarify
whether you currently offer games outside of your NASCAR Heat
franchise. If these
games are not yet commercially available, please revise to disclose
the developmental
status and anticipated launch dates of these games.
Product Development and Support, page 77
8. You disclose that you rely on third-party software developers from
time to time. Please
tell us whether you have any material agreements with third-party
developers and, if so,
revise to disclose the material terms of these agreements.
Description of Capital Stock
Exclusive Forum, page 101
9. We note that your forum selection provision in your certificate of
incorporation identifies
the Court of Chancery of the State of Delaware as the exclusive forum
for certain
litigation, including any derivative action." We also note your
disclosure that nothing in
your bylaws precludes stockholders that assert claims under the
Securities Act from
bringing such claims in state or federal court. Please state clearly
whether the provision
applies to actions arising under the Securities Act or Exchange Act.
In that regard, we
note that Section 27 of the Exchange Act creates exclusive federal
jurisdiction over all
suits brought to enforce any duty or liability created by the Exchange
Act or the rules and
regulations thereunder, and Section 22 of the Securities Act creates
concurrent jurisdiction
for federal and state courts over all suits brought to enforce any
duty or liability created by
the Securities Act or the rules and regulations thereunder. If the
provision applies to
Securities Act claims, please also revise your prospectus to state
that there is uncertainty
as to whether a court would enforce such provision and that investors
cannot waive
compliance with the federal securities laws and the rules and
regulations thereunder. If
this provision does not apply to actions arising under the Securities
Act or Exchange Act,
please also ensure that the exclusive forum provision in the governing
documents states
this clearly.
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies
Accounts Receivable, page F-10
10. Your disclosure indicates that your sales allowances for the Successor
Periods ending
December 31, 2019 and 2018 were $2,483,147 and $1,782,403, respectively.
However,
your disclosure on page F-3 indicates that your sales allowances were
$1,891,681 and
FirstName LastNameDmitry Kozko
$1,836,598 as of December 31, 2019 and 2018, respectively. Please revise
or advise.
Comapany NameMotorsport
Further, Gaming
tell us why these US LLC
allowances are not recorded as liabilities.
Refer to ASC 606-10-
October35-10 andPage
5, 2020 55-23.3
FirstName LastName
Dmitry Kozko
FirstName
MotorsportLastNameDmitry
Gaming US LLC Kozko
Comapany
October NameMotorsport Gaming US LLC
5, 2020
October
Page 4 5, 2020 Page 4
FirstName LastName
Goodwill and Intangible Assets, page F-11
11. Tell us why the amortization of your license agreement and software is
not included in
cost of sales. Further, tell us the factors you considered in
determining the useful lives of
your license agreement and software to be 16 years and 10 years,
respectively. Refer to
ASC 350-30-35-3. Disclose the license agreement terms including
renewal provisions.
Revenue Recognition, page F-12
12. Tell us how you determined your obligations to provide future update
rights and online
hosting are immaterial and why these are not accounted for as separate
performance
obligations. Clarify the nature of the hosting services and upgrade
rights that you provide
to customers and over what periods these services are provided.
13. Clarify your revenue recognition policies with respect to the sale of
virtual currencies.
Clarify how customers use the virtual currency and if revenue is
deferred until the virtual
currency is used by the customer to purchase goods or services.
Describe your
performance obligations with respect to the sale of virtual currencies
and subsequent
purchases by customers and how you determine when customers obtain
control.
14. Describe the nature of the downloadable extra content, how customers
receive the benefit
of the content, and over what period they receive any on-going
benefits. Clarify your
obligations with respect to providing any on-going services relating
to these benefits and
how you determine when customers obtain control. Also, please indicate
if you are
required to provide any hosting services in connection with the
downloadable content and
how you considered this in your revenue recognition policies.
15. To the extent material in future periods, please clarify your revenue
recognition policies
with respect to Esports. Clarify the nature of these services and your
specific performance
obligations. Describe the period of time over which the event takes
place and how you
determined when customers obtain control.
Note 3 - Business Combinations, page F-16
16. Please clarify your accounting for the acquisition, including whether
the estimated fair
value of the delayed consideration was recorded as a liability in your
balance sheet as of
the acquisition date and subsequently revalued at each reporting date,
and how you
accounted for any changes in fair value. Describe how you estimated
the fair value of the
delayed consideration as of each reporting date. We refer you to ASC
805-30-25-5.
Please also indicate if the fair value of identified net assets
acquired that you include in
your disclosure reflects the assets and liabilities that you recorded
as of the acquisition
date. If not, please disclose the fair value of assets and liabilities
recorded as of the
acquisition date. Cite the authoritative accounting literature upon
which you relied in
accounting for this acquisition.
Dmitry Kozko
FirstName
MotorsportLastNameDmitry
Gaming US LLC Kozko
Comapany
October NameMotorsport Gaming US LLC
5, 2020
October
Page 5 5, 2020 Page 5
FirstName LastName
17. Clarify why you consider the In-Kind Consideration to be part of the
business
combination and included in purchase consideration. In this regard,
your disclosure
indicates that this consideration relates to your agreement to provide
advertising,
promotional and other services to 704Games valued at $4,000,000 during
the 48 months
following the transaction. As such, these services appear to be
primarily for the benefit of
the combined entity, rather than primarily for the benefit of the
acquiree or its formers
owners and, therefore, appear to be a separate transaction. Refer to
ASC 805-10-25-21.
18. Please further clarify the nature of the 2019 payment and whether the
former owners were
required to provide employment or other services in order to receive
the payment. Tell us
how you considered ASC 805-10-25-21 in accounting for these payments.
Further, please
clarify your disclosures to indicate whether this payment has
subsequently been settled
and for what amount.
Note 10 Commitments and Contingencies
Joint Venture Agreement, page F-23
19. Your disclosure states that your investment in Le Mans generated a
loss of $608,656 for
the year ended December 31, 2019 and that as of December 31, 2019 you
have a payable
of $124,321 to Le Mans. Your statement of cash flows on page F-7
indicates that you
paid $484,335 for the acquisition of this investment. Clarify your
disclosure to describe
the nature of the $124,321 payable and the additional losses. Further,
please clarify your
obligations to fund additional capital contributions or operating
losses.
General
20. Please provide us with copies of all written communications, as
defined in Securities Act
Rule 405, that you, or anyone authorized to do so on your behalf,
present to potential
investors in reliance on Securities Act Section 5(d), whether or not
they retain copies of
the communications.
You may contact Laura Veator, Staff Accountant, at (202) 551-3716 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Mitchell Austin, Staff
Attorney, at (202) 551-3574 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Serge V. Pavluk, Esq.