SEC Filing - Motorsport Games

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended September 30, 2021

		or

	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from ___________ to ___________

Commission file number: 001-39868

Motorsport Games Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		86-1791356
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

5972 NE 4th Avenue Miami, FL		33137
Address of Principal Executive Offices		Zip Code

Registrant’s Telephone Number, Including Area Code: (305) 507-8799

Not Applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

MSGM

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2021, the registrant had 11,635,897 shares of Class A common stock and 7,000,000 shares of Class B common stock outstanding.

Motorsport Games Inc.

Form 10-Q

For the Quarter Ended September 30, 2021

TABLE OF CONTENTS

		Page
Part I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity / Member’s Equity (Deficiency) for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42

Part II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q (this “Report”) of Motorsport Games Inc. (the “Company,” “Motorsport Games,” “we,” “us” or “our”) are forward-looking statements within the meaning of federal securities laws, including statements that involve expectations, plans or intentions, such as, but not limited to, those relating to: our future business, results of operations, financial condition and/or liquidity, including with respect to the ongoing effects of the coronavirus (“COVID-19”) pandemic; new or planned products or offerings, including the anticipated timing of our product launches, such as for our NASCAR Heat Ultimate Edition+ on Nintendo Switch, British Touring Car Championship, iconic 24 Hours of Le Mans endurance race and the associated FIA World Endurance Championship, and INDYCAR video games, as well as the launch of our updated NASCAR Heat Mobile game and introduction of a slate of NASCAR branded casual gaming options for mobile devices; our intention to expand our license arrangements to other internationally recognized racing series and the platforms we operate on; our expectation that having a broader product portfolio will improve our operating results and provide a revenue stream that is less cyclical based on the release of a single game per year; our plans to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases and extra content; our expectation that we will continue to derive significant revenues from sales of our products to a very limited number of distribution partners; our belief that additions to our existing portfolio of games centered around popular licensed racing series will provide us the opportunity to further grow our esports business by having more titles to produce our esports events; our expectation that we will continue to invest in technology, hardware and software to support our games and services, including with respect to security protections; our intention to continue to look for opportunities to expand the recurring portion of our busines; our liquidity, including, without limitation, our belief that existing cash on hand will be sufficient to fund our operations for at least the next 12 months and our belief that we may choose to raise additional funds at any time through equity or debt financing arrangements, which may or may not be needed for additional working capital, capital expenditures or other strategic investments, as well as our cash flows and anticipated uses of cash; our plans and intentions with respect to our remediation efforts to address the material weaknesses in our internal control over financial reporting; our beliefs regarding the impact of any claims and litigation that we are subject to; industry trends, potential acquisitions; and management strategies. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify some forward-looking statements, but not all forward-looking statements include these words. The forward-looking statements contained in this Report are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this Report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. Important factors that could cause our actual results to differ materially from those projected in any forward-looking statements are discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) and in “Risk Factors” in Part II, Item 1A of this Report, our prior 10-Q filings during 2021, in each case as updated in our subsequent filings with the Securities and Exchange Commission (the “SEC”), which include, but are not limited to, the following principal risks:

	●	If we do not consistently deliver popular products or if consumers prefer competing products, our business may be negatively impacted.

	●	Our business and products are highly concentrated in the racing game genre, and our operating results may suffer if consumer preferences shift away from this genre.

	●	If we do not provide high-quality products in a timely manner, our business operations, financial performance, financial condition, liquidity, cash flows and/or results of operations may be negatively impacted.

	●	The ongoing and prolonged COVID-19 pandemic has impacted our operations and could continue to adversely affect our business operations, financial performance, financial condition, liquidity, cash flows and/or results of operations, the extent of which is uncertain and difficult to predict.

	●	Declines in consumer spending and other adverse changes in the economy could have a material adverse effect on our business, financial condition, liquidity, cash flows and/or operating results.

	●	We depend on a relatively small number of franchises for a significant portion of our revenues and profits.

	●	Our ability to acquire and maintain licenses to intellectual property, especially for sports titles, affects our revenues and profitability.

	●	The importance of retail sales to our business exposes us to the risks of that business model.

	●	We primarily depend on a single third-party distribution partner to distribute our games for the retail channel, and our ability to negotiate favorable terms with such partner and its continued willingness to purchase our games is critical for our business.

	●	We plan to continue to generate a portion of our revenues from advertising and sponsorship during our esports events. If we are unable to attract more advertisers and sponsors to our gaming platform, tournaments or competitions, our revenues may be adversely affected.

	●	We are reliant on the retention of certain key personnel and the hiring of strategically valuable personnel, and we may lose or be unable to hire one or more of such personnel, which could adversely affect our ability to achieve our business plans and financial objectives.

	●	The success of our business relies heavily on our marketing and branding efforts, and these efforts may not be accepted by consumers to the extent we planned.

	●	If we do not adequately address the shift to mobile device technology by our customers, operating results could be harmed and our financial performance, financial condition, liquidity, cash flows and/or growth plans could be negatively affected.

	●	Failure to adequately protect our intellectual property, technology and confidential information could harm our business and operating results.

	●	Motorsport Network, LLC (“Motorsport Network”) controls more than a majority of our Class A common stock and Class B common stock and therefore it has the ability to exert significant control over the direction of our business, which could prevent other stockholders from influencing significant decisions regarding our business plans and other matters.

	●	If we are no longer controlled by or affiliated with Motorsport Network, we may be unable to continue to benefit from that relationship, which may adversely affect our operations and have a material adverse effect on us and our financial performance, financial condition, liquidity and/or cash flows.

	●	We have incurred significant losses since our inception, and we may continue to experience losses in the future, which could adversely impact our ability to invest in new product development, marketing, advertising and other activities that are important to achieving our business plans and financial objectives.

	●	Our limited operating history makes it difficult to evaluate our current business and future prospects, and we may not be able to effectively grow our business or implement our business strategies.

	●	We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to us will make our Class A common stock less attractive to investors.

	●	The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.

	●	Higher than anticipated payments, costs, expenses and liabilities or other unanticipated consequences arising from pending or future litigation.

	●	Less than expected liquidity or the unavailability of additional sources of funds from equity or debt financing arrangements, from less than anticipated cash generated by the Company’s operations, from less than expected availability of funds under the Promissory Note from Motorsport Network, from higher than expected operating expenses (such as higher than expected capital expenditures, debt service payments and costs, cash tax payments, acquisitions, joint ventures and/or licensing arrangements, costs related to litigation, advertising, promotional and marketing activities or for product sales returns by the Company’s customers or otherwise), from the inability to efficiently manage cash and working capital and/or from macroeconomic trends, such as higher inflation and interest rates and taxes.

Additionally, there are other risks and uncertainties described from time to time in the reports that we file with the SEC. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this Report to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, except as otherwise required by law. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

iii

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

MOTORSPORT GAMES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2021			December 31, 2020
	(unaudited)
Assets

Current assets:
Cash	$	22,162,693		$	3,990,532
Accounts receivable, net of allowances of $886,247 and $2,150,684, at September 30, 2021 and December 31, 2020, respectively		3,008,986			5,975,414
Prepaid expenses and other current assets		2,680,371			507,177
Total Current Assets		27,852,050			10,473,123
Property and equipment, net		694,835			162,148
Goodwill		4,979,786			137,717
Intangible assets, net		21,507,349			5,568,452
Deferred offering costs		-			749,370
Other assets		-			296,200
Total Assets	$	55,034,020		$	17,387,010

Liabilities and Stockholders’ Equity / Member’s Equity
Current liabilities:
Accounts payable	$	501,375		$	705,951
Accrued expenses		2,401,715			3,355,003
Due to related parties		55,551			10,853,536
Purchase commitments		3,222,269			-
Total Current Liabilities		6,180,910			14,914,490
Other non-current liabilities		3,803,658			856,694
Total Liabilities		9,984,568			15,771,184

Commitments and contingencies (Note 8)		-			-

Stockholders’ Equity / Member’s Equity:

Preferred stock, $0.0001 par value, 1,000,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31, 2020		-			-
Class A common stock - $0.0001 par value; authorized 100,000,000 shares; 11,635,897 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		1,164			-
Class B common stock - $0.0001 par value; authorized 7,000,000 shares; 7,000,000 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		700			-
Common stock value
Additional paid-in capital		75,409,876			-
Member’s equity		-			3,791,674
Accumulated deficit		(30,977,918	)		(4,826,335	)
Accumulated other comprehensive loss		(636,376	)		4,928
Total Stockholders’ Equity / Member’s Deficit Attributable to Motorsport Games Inc.		43,797,446			(1,029,733	)
Non-controlling interest		1,252,006			2,645,559
Total Stockholders’ Equity / Member’s Equity		45,049,452			1,615,826
Total Liabilities and Stockholders’ Equity / Member’s Equity	$	55,034,020		$	17,387,010

The accompanying notes are an integral part of these condensed consolidated financial statements.

MOTORSPORT GAMES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenues	$	2,138,466		$	8,988,197		$	6,851,525		$	16,111,581
Cost of revenues [1]		949,139			2,920,747			2,637,250			5,261,483
Gross profit		1,189,327			6,067,450			4,214,275			10,850,098

Operating expenses:
Sales and marketing [2]		1,348,773			961,450			3,077,213			2,321,635
Development [3]		3,015,233			1,300,314			6,083,773			3,438,461
General and administrative [4]		3,130,944			936,818			22,612,162			2,227,373
Depreciation and amortization		81,874			38,016			179,097			50,083
Total operating expenses		7,576,824			3,236,598			31,952,245			8,037,552
(Loss) income from operations		(6,387,497	)		2,830,852			(27,737,970	)		2,812,546
Interest expense [5]		(160,310	)		(230,965	)		(311,748	)		(448,325	)
Gain (loss) attributable to equity method investment		-			(40,530	)		1,370,837			(69,764	)
Other (loss) income, net		(110,822	)		46,337			(26,115	)		79,195
Net (loss) income		(6,658,629	)		2,605,694			(26,704,996	)		2,373,652
Less: Net (loss) income attributable to non-controlling interest		(99,114	)		1,412,329			(553,413	)		1,498,233
Net (loss) income attributable to Motorsport Games Inc.	$	(6,559,515	)	$	1,193,365		$	(26,151,583	)	$	875,419

Net loss attributable to Class A common stock per share [6]:
Basic and diluted	$	(0.56	)				$	(2.32	)

Weighted-average shares of Class A common stock outstanding [6]:
Basic and diluted		11,635,897						11,285,757

[1]	Includes related party costs of $0 and $8,721 for the three months ended September 30, 2021 and 2020, respectively. Includes related party costs of $0 and $92,522 for the nine months ended September 30, 2021 and 2020, respectively.

[2]	Includes related party expenses of $71,865 and $48,609 for the three months ended September 30, 2021 and 2020, respectively. Includes related party costs of $71,865 and $117,088 for the nine months ended September 30, 2021 and 2020, respectively.

[3]	Includes related party expenses of $3,132 and $15,279 for the three months ended September 30, 2021 and 2020, respectively. Includes related party costs of $14,591 and $134,942 for the nine months ended September 30, 2021 and 2020, respectively.

[4]	Includes related party expenses of $22,853 and $539,320 for the three months ended September 30, 2021 and 2020, respectively. Includes related party costs of $1,593,371 and $1,130,864 for the nine months ended September 30, 2021 and 2020, respectively.

[5]	Includes related party expenses of $0 and $230,965 for the three months ended September 30, 2021 and 2020, respectively. Includes related party costs of $105,845 and $439,723 for the nine months ended September 30, 2021 and 2020, respectively.

[6]	Basic and diluted net loss per share of Class A common stock is presented only for the period after the Company’s organizational transactions. See Note 1 for a description of the organizational transactions. See Note 3 for the calculation of net loss per share.

The accompanying notes are an integral part of these condensed consolidated financial statements.

MOTORSPORT GAMES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,					For the Nine Months Ended September 30,
	2021			2020		2021			2020
Net Income (loss)	$	(6,658,629	)	$	2,605,694	$	(26,704,996	)	$	2,373,652
Other comprehensive income (loss):
Foreign currency translation adjustments		(537,581	)		-		(466,772	)		-
Comprehensive income (loss)		(7,196,210	)		2,605,694		(27,171,768	)		2,373,652
Comprehensive income (loss) attributable to non-controlling interests		(99,114	)		1,412,329		(553,413	)		1,498,233
Comprehensive income (loss) attributable to Motorsport Games Inc.	$	(7,097,096	)	$	1,193,365	$	(26,618,355	)	$	875,419

The accompanying notes are an integral part of these condensed consolidated financial statements.

MOTORSPORT GAMES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	For the Nine Months Ended September 30, 2021

																					Total Stockholders’
																		Accumulated			Equity / Member’s Equity						Total Stockholders’
	Class A				Class B							Additional						Other			Attributable			Non-			Equity /
	Common Stock				Common Stock				Member’s			Paid-In			Accumulated			Comprehensive			to Motorsport			controlling			Member’s
	Shares		Amount		Shares		Amount		Equity			Capital			Deficit			Income (Loss)			Games Inc.			Interest			Equity
Balance - January 1, 2021		-	$	-		-	$	-	$	3,791,674		$	-		$	(4,826,335	)	$	4,928		$	(1,029,733	)	$	2,645,559		$	1,615,826
Issuance of common stock to Ascend and PlayFast
Issuance of common stock to Ascend and PlayFast, shares
Purchase of 704Games minority interest
Conversion of membership interests into shares of common stock		7,000,000		700		7,000,000		700		(3,791,674	)		3,790,274			-			-			-			-			-
Issuance of common stock in initial public offering, net [1]		3,450,000		345		-		-		-			63,073,783			-			-			63,074,128			-			63,074,128
ACO Investment in Le Mans Joint Venture
Stock-based compensation		330,633		33		-		-		-			9,076,883			-			-			9,076,916			-			9,076,916
Purchase of additional interest in Le Mans		-		-		-		-		-			-			-			-			-			1,584,892			1,584,892
Comprehensive loss:
Other comprehensive loss		-		-		-		-		-			-			-			(32,914	)		(32,914	)		-			(32,914	)
Change of control adjustments
Net loss		-		-		-		-		-			-			(13,811,974	)		-			(13,811,974	)		(273,450	)		(14,085,424	)
Balance - March 31, 2021		10,780,633	$	1,078		7,000,000	$	700	$	-		$	75,940,940		$	(18,638,309	)	$	(27,986	)	$	57,276,423		$	3,957,001		$	61,233,424
Issuance of common stock to Ascend and PlayFast		855,264		86		-		-		-			-			-			-			86			-			86
Purchase of 704Games minority interest		-		-		-		-		-			(939,511	)		-			-			(939,511	)		(2,659,786	)		(3,599,297	)
ACO Investment in Le Mans Joint Venture		-		-		-		-		-			-			-			-			-			234,754			234,754
Stock-based compensation		-		-		-		-		-			116,274			-			-			116,274			-			116,274
Comprehensive loss:
Other comprehensive loss		-		-		-		-		-			-			-			(70,809	)		(70,809	)		-			(70,809	)
Net loss		-		-		-		-		-			-			(5,780,094	)		-			(5,780,094	)		(180,849	)		(5,960,943	)
Balance - June 30, 2021		11,635,897	$	1,164		7,000,000	$	700	$	-		$	75,117,703		$	(24,418,403	)	$	(98,795	)	$	50,602,369		$	1,351,120		$	51,953,489
Stock-based compensation		-		-		-		-		-			292,173			-			-			292,173			-			292,173
Other comprehensive loss		-		-		-		-		-			-			-			(537,581	)		(537,581	)		-			(537,581	)
Net loss																(6,559,515	)					(6,559,515	)		(99,114	)		(6,658,629	)
Balance - September 30, 2021		11,635,897	$	1,164		7,000,000	$	700	$	-		$	75,409,876		$	(30,977,918	)	$	(636,376	)	$	43,797,446		$	1,252,006		$	45,049,452

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

	For the Nine Months Ended September 30, 2020
																	Total Stockholders’
															Accumulated		Equity / Member’s Equity						Total Stockholders’
	Class A			Class B						Additional					Other		Attributable			Non-			Equity /
	Common Stock			Common Stock				Member’s		Paid-In		Accumulated			Comprehensive		to Motorsport			controlling			Member’s
	Shares		Amount	Shares		Amount		Equity		Capital		Deficit			Income (Loss)		Games Inc.			Interest			Equity
Balance - January 1, 2020	-	$	-	-	$	-	$	-	$	-	$	(3,064,354	)	$	-	$	(3,064,354	)	$	6,676,314		$	3,611,960
Net loss	-		-	-		-		-		-		(239,631	)		-		(239,631	)		39,123			(200,508	)
Balance - March 31, 2020	-	$	-	-	$	-	$	-	$	-	$	(3,303,985	)	$	-	$	(3,303,985	)	$	6,715,437		$	3,411,452
Net loss	-		-	-		-		-		-		(78,315	)		-		(78,315	)		46,781			(31,534	)
Balance - June 30, 2020	-	$	-	-	$	-	$	-	$	-	$	(3,382,300	)	$	-	$	(3,382,300	)	$	6,762,218		$	3,379,918
Balance	-	$	-	-	$	-	$	-	$	-	$	(3,382,300	)	$	-	$	(3,382,300	)	$	6,762,218		$	3,379,918
Change of control adjustments	-		-	-		-		-		-		927,102			-		927,102			(2,127,102	)		(1,200,000	)
Net loss	-		-	-		-		-		-		1,193,365			-		1,193,365			1,412,329			2,605,694
Balance - September 30, 2020	-	$	-	-	$	-	$	-	$	-	$	(1,261,833	)	$	-	$	(1,261,833	)	$	6,047,445		$	4,785,612
Balance	-	$	-	-	$	-	$	-	$	-	$	(1,261,833	)	$	-	$	(1,261,833	)	$	6,047,445		$	4,785,612

The accompanying notes are an integral part of these condensed consolidated financial statements.

MOTORSPORT GAMES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2021			2020

Cash Flows from Operating Activities:
Net loss	$	(26,704,996	)	$	2,373,652
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,217,234			457,729
Sales return and price protection reserves		257,060			55,077
Loss on disposal of property and equipment		-			32,537
Stock-based compensation		9,485,363			-
(Gain) loss on equity method investee		(1,370,837	)		69,764
Changes in operating assets and liabilities:
Accounts receivable		2,914,584			(3,313,292	)
Prepaid expenses and other current assets		(2,277,279	)		(529,391	)
Other assets		25,000			55,363
Accounts payable		(338,895	)		266,495
Accrued expenses		(374,033	)		1,035,703
Other non-current liabilities		443,700			58,594
Net Cash Used In Operating Activities		(16,723,099	)		562,231

Cash Flows From Investing Activities:
Purchase of additional interest in Le Mans, net of cash acquired		153,250			-
Purchase of shares of common stock of 704Games from noncontrolling shareholders		-			(1,200,000	)
Acquisition of equity method investee		-			(65,156	)
Acquisition of KartKraft		(1,000,000	)		-
Acquisition of Studio397		(12,785,463	)		-
Purchase of intangible assets		(227,928	)		(100,000	)
Purchase of property and equipment		(665,190	)		(78,640	)
Net Cash Used In Investing Activities		(14,525,331	)		(1,443,796	)

Cash Flows From Financing Activities:
Advances from related parties		2,073,312			2,342,926
Repayments on advances from related parties		(12,935,519	)		-
Issuance of common stock in initial public offering, net [1]		63,661,128