0001493152-23-016408 | 10-Q | XBRL Viewer

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BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Apr. 30, 2023	Dec. 31, 2022
Subsequent Event [Line Items]
Net loss	$ 5,259,192	$ 15,967,045
Net cash provided by used in operating activities	5,683,701	$ 5,589,106
Accumulated deficit	79,080,078			$ 73,979,131
Cash and cash equivalents	$ 5,794,556			$ 979,306
Subsequent Event [Member]
Subsequent Event [Line Items]
Cash and cash equivalents			$ 4,900,000

- Definition

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

+ References

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+ Details

- Definition

Amount of accumulated undistributed earnings (deficit).

+ References + Details

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Related party costs

^[1]

$ 1,248,736

$ 2,013,806

Related Party [Member]

Related party costs

6,228

Related party expenses

17,076

Related party expenses

15,488

22,606

Related party expenses

$ 92,045

$ 22,886

[1]	Includes related party costs of $0 and $6,228 for the three months ended March 31, 2023 and 2022, respectively.

- Definition

The aggregate cost of goods produced and sold and services rendered during the reporting period.

+ References

+ Details

SCHEDULE OF CONCENTRATIONS (Details)

3 Months Ended

12 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Dec. 31, 2022

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

Concentration Risk [Line Items]

Concentration risk percentage

20.60%

19.00%

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

Concentration Risk [Line Items]

Concentration risk percentage

14.80%

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

Concentration Risk [Line Items]

Concentration risk percentage

11.30%

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

Concentration Risk [Line Items]

Concentration risk percentage

20.60%

45.10%

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

Concentration Risk [Line Items]

Concentration risk percentage

15.30%

^[1]

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

Concentration Risk [Line Items]

Concentration risk percentage

50.50%

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

Concentration Risk [Line Items]

Concentration risk percentage

29.30%

24.10%

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

Concentration Risk [Line Items]

Concentration risk percentage

29.00%

11.20%

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

Concentration Risk [Line Items]

Concentration risk percentage

27.20%

18.20%

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

Concentration Risk [Line Items]

Concentration risk percentage

40.30%

15.20%

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

Concentration Risk [Line Items]

Concentration risk percentage

27.70%

16.80%

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

Concentration Risk [Line Items]

Concentration risk percentage

18.70%

13.10%

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

Concentration Risk [Line Items]

Concentration risk percentage

84.20%

74.40%

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

Concentration Risk [Line Items]

Concentration risk percentage

88.00%

90.00%

[1]	Less than 10%.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES

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

	For the Three Months Ended
	March 31,
	2023		2022
Stock options		47,967		96,984
Warrants		33,574		-
		81,541		96,984

INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS

The following is a summary of intangible assets as of March 31, 2023:

SCHEDULE OF INTANGIBLE ASSETS

	Licensing Agreements (Finite)		Licensing Agreements (Indefinite)			Software Licenses (Finite)		Distribution Contracts (Finite)		Trade Names (Indefinite)		Non-Compete Agreements (Finite)		Accumulated Amortization			Total
Balance as of January 1, 2023	$	7,198,363	$	1,546,645		$	8,656,842	$	560,000	$	212,185	$	243,243	$	(5,057,048	)	$	13,360,230
Amortization expense		-		-			-		-		-		-		(439,640	)		(439,640	)
FX translation adjustments		27,507		(4,353	)		72,920		-		500		2,054		(11,157	)		87,471
Balance as of March 31, 2023	$	7,225,870	$	1,542,292		$	8,729,762	$	560,000	$	212,685	$	245,297	$	(5,507,845	)	$	13,008,061

Weighted average remaining amortization period at March 31, 2023		4.7		-			4.1		-		-		1.0		-			-

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Accumulated amortization of intangible assets consists of the following:

	Licensing Agreements (Finite)		Software Licenses (Finite)		Distribution Contracts (Finite)		Non-Compete Agreements (Finite)		Accumulated Amortization
Balance as of January 1, 2023	$	1,146,010	$	3,212,135	$	560,000	$	138,903	$	5,057,048
Amortization expense		56,562		362,710		-		20,368		439,640
Foreign currency translation adjustment		1,876		8,069		-		1,212		11,157
Balance as of March 31, 2023	$	1,204,448	$	3,582,914	$	560,000	$	160,483	$	5,507,845

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS

Accumulated amortization of intangible assets consists of the following:

	Licensing Agreements (Finite)		Software Licenses (Finite)		Distribution Contracts (Finite)		Non-Compete Agreements (Finite)		Accumulated Amortization
Balance as of January 1, 2023	$	1,146,010	$	3,212,135	$	560,000	$	138,903	$	5,057,048
Amortization expense		56,562		362,710		-		20,368		439,640
Foreign currency translation adjustment		1,876		8,069		-		1,212		11,157
Balance as of March 31, 2023	$	1,204,448	$	3,582,914	$	560,000	$	160,483	$	5,507,845

SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS

Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows:

For the Years Ended December 31,	Total
2023 (remaining period)	$	1,318,924
2024		1,652,026
2025		1,568,894
2026		1,322,107
2027		482,338
Thereafter		1,702,871
	$	8,047,160

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Sales return and price protection reserves	$ 0.3	$ 0.2
Contract Liability [Member]
Revenue recognized	$ 0.3	$ 0.5

SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Accrued royalties	$ 465,244	$ 274,085
Accrued professional and consulting fees	726,224	720,470
Accrued development costs	207,861	172,164
Accrued taxes	49,659	149,842
Accrued payroll	319,604	372,358
Deferred revenue	50,026	311,945
Loss contingency reserves	924,307	1,100,000
Accrued other	240,503	315,560
Total	$ 2,983,428	$ 3,416,424

INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended
INTANGIBLE ASSETS (Details Narrative) - USD ($)	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Indefinite-Lived Intangible Assets [Line Items]
Amortization expense	$ 400,000	$ 500,000
Intangible assets	13,008,061		$ 13,360,230
Non-amortizing Intangible Assets [Member]
Indefinite-Lived Intangible Assets [Line Items]
Intangible assets	1,500,000
Licensing Agreements [Member] \| Purchase Commitments [Member]
Indefinite-Lived Intangible Assets [Line Items]
Indefinite-Lived intangible assets acquired	800,000
Licensing Agreements [Member] \| Other Noncurrent Liabilities [Member]
Indefinite-Lived Intangible Assets [Line Items]
Indefinite-Lived intangible assets acquired	$ 3,300,000

SHARE-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY

The following is a summary of stock-based compensation award activity for the three months ended March 31, 2023:

	Number of Options
Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2023 (net of forfeitures)		74,285
Forfeited, cancelled or expired		(21,549	)
Awards outstanding under the MSGM 2021 Stock Plan as of March 31, 2023 (net of forfeitures)		52,736

SCHEDULE OF STOCK BASED COMPENSATION EXPENSE

The following table summarizes stock-based compensation expense resulting from equity awards included in the Company’s condensed consolidated statements of operations:

	2023			2022
	For the Three Months Ended March 31,
	2023			2022
General and Administrative	$	19,426		$	16,394
Sales and Marketing		239,717			302,007
Development		(9,910	)		34,629
Stock-based compensation expense	$	249,233		$	353,030

SEGMENT REPORTING (Details Narrative) - Segment	3 Months Ended
SEGMENT REPORTING (Details Narrative) - Segment	Mar. 31, 2023	Mar. 31, 2022
Segment Reporting [Abstract]
Number of reportable segments	2	2

SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options	81,541	96,984
Share-Based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options	47,967	96,984
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options	33,574

SHARE-BASED COMPENSATION (Details Narrative) - USD ($)			3 Months Ended
SHARE-BASED COMPENSATION (Details Narrative) - USD ($)	Apr. 04, 2023	Dec. 09, 2022	Mar. 31, 2023	Dec. 31, 2022	Jan. 12, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Compensation expense period			2 years
Unrecognized stock based compensation expense			$ 700,000
MSGM 2021 Stock Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Compensation expense period			10 years
MSGM 2021 Stock Plan [Member] \| Subsequent Event [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Compensation expense period	10 years
MSGM 2021 Stock Plan [Member] \| Board of Directors [Member] \| Subsequent Event [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Grant date fair value	$ 100,000
MSGM 2021 Stock Plan [Member] \| Board of Directors [Member] \| Restricted Stock [Member] \| Subsequent Event [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of options, granted	26,316
Common Class A [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Common stock, shares authorized			100,000,000	100,000,000
Shares available for issuance			47,264
Common Class A [Member] \| IPO [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Issuance of common stock, shares		2,000,000
Common Class A [Member] \| Chief Executive Officer Consultant And Three Director [Member] \| IPO [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Issuance of common stock, shares			33,063
Fair value			$ 661,266
Common Class A [Member] \| MSGM 2021 Stock Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Common stock, shares authorized					100,000

SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS (Details) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares shares
Registered Direct Offering 1 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 01, 2023
Shares Issued \| shares	183,020
Gross Proceeds \| $	$ 3.9
Net Proceeds \| $	$ 3.6
Warrants Issued \| shares	10,981
Warrant Strike Price \| $ / shares	$ 26.75
Warrants Term	5 years
Registered Direct Offering 2 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 02, 2023
Shares Issued \| shares	144,366
Gross Proceeds \| $	$ 3.4
Net Proceeds \| $	$ 3.1
Warrants Issued \| shares	8,662
Warrant Strike Price \| $ / shares	$ 29.375
Warrants Term	5 years
Registered Direct Offering 3 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 03, 2023
Shares Issued \| shares	232,188
Gross Proceeds \| $	$ 4.0
Net Proceeds \| $	$ 3.7
Warrants Issued \| shares	13,931
Warrant Strike Price \| $ / shares	$ 21.738
Warrants Term	5 years

SEGMENT REPORTING

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 11 – SEGMENT REPORTING

The Company’s principal operating segments coincide with the types of products and services to be sold. The products and services from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the three months ended March 31, 2023 and 2022 were (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”); and (ii) the organization and facilitation of esports tournaments, competitions and events for the Company’s licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “Esports segment”). The Company’s Chief Operating Decision Maker (“CODM”) has been identified as the Company’s Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of March 31, 2023 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the United States, no geographical segments are presented.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

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

	For the Three Months Ended March 31,
	2023			2022
Revenues:
Gaming	$	1,439,217		$	2,958,388
Esports		290,138			363,401
Total Revenues	$	1,729,355		$	3,321,789

Cost of Revenues:
Gaming	$	874,839		$	1,404,007
Esports		373,897			609,799
Total Cost of Revenues	$	1,248,736		$	2,013,806

Gross Profit (Loss):
Gaming	$	564,378		$	1,554,381
Esports		(83,759	)		(246,398	)
Total Gross Profit	$	480,619		$	1,307,983

Loss From Operations:
Gaming	$	(5,105,373	)	$	(15,044,421	)
Esports		(306,016	)		(558,929	)
Total Loss from Operations	$	(5,411,389	)	$	(15,603,350	)

Depreciation and Amortization:
Gaming	$	85,118		$	107,483
Esports		12,236			8,588
Total Depreciation and Amortization	$	97,354		$	116,071

Interest Expense, net:
Gaming	$	(199,120	)	$	(201,596	)
Esports		-			-
Total Interest Expense, net	$	(199,120	)	$	(201,596	)

Other (Expense) Income, Net:
Gaming	$	368,244		$	(157,123	)
Esports		(16,927	)		(4,976	)
Total Other (Expense) Income, net	$	351,317		$	(162,099	)

Net Loss:
Gaming	$	(4,936,249	)	$	(15,403,140	)
Esports		(322,943	)		(563,905	)
Total Net Loss	$	(5,259,192	)	$	(15,967,045	)

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

	March 31, 2023		December 31, 2022
Total Assets:
Gaming	$	20,026,416	$	16,315,359
Esports		2,071,396		2,582,433
Total Assets	$	22,097,812	$	18,897,792

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 22
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-22

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-15

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 31
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-31

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 42
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (f)
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 40
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-Name Accounting Standards Codification
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-URI https://asc.fasb.org//280/tableOfContent

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-26

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 34
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-34

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-Paragraph 21
-Subparagraph (a)
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-21

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Subparagraph (b)
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-21

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

+ Details

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 5,794,556	$ 979,306
Accounts receivable, net of allowances of $2,532,383 and $2,252,383 as of March 31, 2023 and December 31, 2022, respectively	899,926	1,809,110
Due from related parties	66,295	206,532
Prepaid expenses and other current assets	1,279,767	1,048,392
Total Current Assets	8,040,544	4,043,340
Property and equipment, net	466,095	522,433
Operating lease right of use assets	583,112	971,789
Intangible assets, net	13,008,061	13,360,230
Total Assets	22,097,812	18,897,792
Current liabilities:
Accounts payable	1,040,291	2,372,219
Accrued expenses and other current liabilities	2,983,428	3,416,424
Due to related parties	167,860	4,589,211
Purchase commitments	2,486,011	2,563,216
Operating lease liabilities (current)	254,472	380,538
Total Current Liabilities	6,932,062	13,321,608
Operating lease liabilities (non-current)	348,753	617,288
Other non-current liabilities	3,518,364	3,055,498
Total Liabilities	10,799,179	16,994,394
Commitments and contingencies (Note 9)
Stockholders’ Equity:
Preferred stock, $0.0001 par value per share; authorized 100,000,000 and 1,000,000 shares; and none issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
Additional paid-in capital	91,215,242	76,446,061
Accumulated deficit	(79,080,078)	(73,979,131)
Accumulated other comprehensive loss	(1,011,994)	(933,406)
Total Stockholders’ Equity Attributable to Motorsport Games Inc.	11,123,509	1,533,711
Non-controlling interest	175,124	369,687
Total Stockholders’ Equity	11,298,633	1,903,398
Total Liabilities and Stockholders’ Equity	22,097,812	18,897,792
Common Class A [Member]
Stockholders’ Equity:
Common stock, value	269	117
Common Class B [Member]
Stockholders’ Equity:
Common stock, value	$ 70	$ 70

SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2023

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 March 31,
	2023			2022
Revenues:
Gaming	$	1,439,217		$	2,958,388
Esports		290,138			363,401
Total Revenues	$	1,729,355		$	3,321,789

Cost of Revenues:
Gaming	$	874,839		$	1,404,007
Esports		373,897			609,799
Total Cost of Revenues	$	1,248,736		$	2,013,806

Gross Profit (Loss):
Gaming	$	564,378		$	1,554,381
Esports		(83,759	)		(246,398	)
Total Gross Profit	$	480,619		$	1,307,983

Loss From Operations:
Gaming	$	(5,105,373	)	$	(15,044,421	)
Esports		(306,016	)		(558,929	)
Total Loss from Operations	$	(5,411,389	)	$	(15,603,350	)

Depreciation and Amortization:
Gaming	$	85,118		$	107,483
Esports		12,236			8,588
Total Depreciation and Amortization	$	97,354		$	116,071

Interest Expense, net:
Gaming	$	(199,120	)	$	(201,596	)
Esports		-			-
Total Interest Expense, net	$	(199,120	)	$	(201,596	)

Other (Expense) Income, Net:
Gaming	$	368,244		$	(157,123	)
Esports		(16,927	)		(4,976	)
Total Other (Expense) Income, net	$	351,317		$	(162,099	)

Net Loss:
Gaming	$	(4,936,249	)	$	(15,403,140	)
Esports		(322,943	)		(563,905	)
Total Net Loss	$	(5,259,192	)	$	(15,967,045	)

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

	March 31, 2023		December 31, 2022
Total Assets:
Gaming	$	20,026,416	$	16,315,359
Esports		2,071,396		2,582,433
Total Assets	$	22,097,812	$	18,897,792

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net loss	$ (5,259,192)	$ (15,967,045)
Other comprehensive loss:
Foreign currency translation adjustments	(78,588)	(125,245)
Comprehensive loss	(5,337,780)	(16,092,290)
Comprehensive loss attributable to non-controlling interests	(194,563)	(888,721)
Comprehensive loss attributable to Motorsport Games Inc.	$ (5,143,217)	$ (15,203,569)

- Definition

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

- Definition

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

+ References

+ Details

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023. The Company’s results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related disclosures as of December 31, 2022 and 2021 and for the years then ended which are included in the 2022 Form 10-K.

Effective on November 10, 2022, the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10. Fractional shares of common stock resulting from the reverse stock split were settled in cash. Shares underlying outstanding equity-based awards were proportionately decreased and the respective per share exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. All shares of common stock, equity-based awards, and per share information presented in the condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all periods presented.

The Company has revised the presentation of accounts payable and other non-current liabilities in the statement of cash flow as of March 31, 2022, to correct an immaterial error in the presentation of those statement of cash flow line items.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s significant estimates used in these consolidated financial statements include, but are not limited to, revenue recognition criteria, including allowances for returns and price protection, as well as current expected credit losses, valuation allowance of deferred income taxes, valuation of acquired companies and equity method investments, the recognition and disclosure of contingent liabilities, goodwill and intangible assets impairment testing, and stock-based compensation valuation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates.

Recently Issued Accounting Standards

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

Adoption of Accounting Pronouncements

On January 1, 2023, the Company adopted ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses” (“ASU 2019-11”), issued by the Financial Accounting Standards Board (the “FASB”) in November 2019. ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument”, issued by the FASB in June 2016. ASU 2016-13, as amended by ASU 2019-11, requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally require a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”) revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies with annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. 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). Upon adoption, this guidance did not have a material impact on the condensed consolidated financial statements.

On January 1, 2023, the Company adopted ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) – Accounting for Convertible instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), issued by the FASB in August 2020. The amendments affect entities that issue convertible instruments, as well as contracts in an entity’s own equity. For convertible instruments, the instruments primarily affected are those issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements in ASU 202-06. These amendments improve US GAAP by eliminating certain accounting models, therefore, simplifying the accounting for convertible instruments, and reducing complexity for preparers and practitioners, as well as improving the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, these amendments enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. ASU 2020-06 simplifies the settlement assessment by removing the requirements (1) to consider whether the contract would be settled in registered shares, (2) to consider whether collateral is required to be posted, and (3) to assess shareholder rights. These amendments also affect the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. These amendments improve US GAAP by simplifying the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and improving inconsistency in the accounting for some contracts as derivatives while accounting for economically similar contracts as equity. Additionally, the amendments in ASU 2020-06 affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This guidance is effective for smaller reporting companies with annual periods beginning after December 15, 2023, including the interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years after December 15, 2020, 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). Entities may also elect to adopt the amendments using the fully retrospective method of transition, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings in the first comparative period presented. Upon adoption, this guidance did not have a material impact on the condensed consolidated financial statements.

Significant Accounting Policies

There have been no material changes to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2022, as included in the 2022 Form 10-K, except as disclosed in this note.

Fair Value Measurements

The Company accounts for its assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the fair-value hierarchy below. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.

	●	Level 1 – Quoted prices for identical instruments in active markets;
	●	Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
	●	Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company’s liability-classified warrants are measured at fair value on a recurring basis, with subsequent changes in fair value recognized in earnings. Certain assets, including long-lived assets, right of use assets, goodwill, indefinite-lived intangible assets, and purchase commitments are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments using fair value measurements with unobservable inputs are classified as Level 3. Other financial instruments, including cash and cash equivalents, accounts receivable, prepaid and other assets, accounts payable, accrued expenses, and other current liabilities are carried at cost, which approximate their fair values due to their short-term nature.

Stock Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 - Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 - Derivatives and Hedging (“ASC 815”). The Company’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Allowances for Returns and Price Protection

The Company may permit product returns from, or grant price protection to, its customers under certain conditions. Price protection represents the Company’s practice of providing channel partners with a credit allowance to lower their wholesale price on a particular game unit that they have not resold to customers. The amount of the price protection for permanent markdowns is the difference between the original wholesale price and the new reduced wholesale price. Credits are also given for short-term promotions that temporarily reduce the wholesale price.

Allowances for returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protections that may occur with distributors and retailers (“channel partners”). See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Accounts Receivable in the 2022 Form 10-K for additional details.

When evaluating the adequacy of allowances for returns and price protection, the Company analyzes the following: historical credit allowances, current sell-through of channel partners’ inventory of the Company’s products, current trends in retail and the video game industry, changes in customer demand, acceptance of products, and other related factors. In addition, the Company monitors the volume of sales to its channel partners and their inventories, as substantial overstocking in the distribution channel could result in higher-than-expected returns or higher price protection in subsequent periods.

The Company recognized an expense of approximately $0.3 million and $0.2 million for sales returns and price protections as a reduction of revenues for the three months ended March 31, 2023 and 2022, respectively.

Deferred Revenue

The Company’s deferred revenue, or contract liability, is classified as current and is included within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets (Also refer Note 4 – Accrued Expenses and Other Current Liabilities). Revenue collected in advance of the event is recorded as deferred revenue until the event occurs. Development and coding revenues are also recorded as deferred revenue until the Company’s performance obligation is performed.

Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $0.3 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

Net Loss Per Common Share

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

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

For the Three Months Ended

March 31,

2023 2022

Stock options 47,967 96,984

Warrants 33,574 -

81,541 96,984

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)				3 Months Ended
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)	Mar. 31, 2023	Dec. 09, 2022	Nov. 10, 2022	Mar. 31, 2023	Dec. 31, 2022
Class of Stock [Line Items]
Voting rights				Holders of Class A and Class B common stock are entitled to one-vote and ten-votes, respectively, for each share held on all matters submitted to a vote of stockholders
Reverse stock split ratio			the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10
Transaction fee percentage				7.00%
Stock issued during period value new issues				$ 10,571,534
Stock Purchase Commitment Agreement [Member] \| HC2 Holding Mermber [Member]
Class of Stock [Line Items]
Stock issued during period value new issues				1,302,676
Wainwright Warrants [Member]
Class of Stock [Line Items]
Fair value of warrants				$ 500,000
704 Games Company [Member]
Class of Stock [Line Items]
Shares of common stock	4,000			4,000
Stock option exercise price increase	$ 93.03			$ 93.03
704 Games Company [Member] \| Warrant [Member]
Class of Stock [Line Items]
Remaining life of years				2 years 7 months 6 days
Common Class A [Member]
Class of Stock [Line Items]
Common stock shares outstanding	2,698,934			2,698,934	1,183,808
Percentage of aggregate number of shares of common stock placed in each offering				6.00%
Stock issued during period value new issues	$ 657,850
Common Class A [Member] \| IPO [Member]
Class of Stock [Line Items]
Issuance of common stock, shares		2,000,000
Common Class A [Member] \| IPO [Member] \| Additional Shares For Underwriters [Member]
Class of Stock [Line Items]
Issuance of common stock, shares	175,167
Common Class B [Member]
Class of Stock [Line Items]
Common stock shares outstanding	700,000			700,000	700,000

Cover - shares	3 Months Ended
Cover - shares	Mar. 31, 2023	May 11, 2023
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	001-39868
Entity Registrant Name	Motorsport Games Inc.
Entity Central Index Key	0001821175
Entity Tax Identification Number	86-1791356
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	5972 NE 4th Avenue
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33137
City Area Code	(305)
Local Phone Number	507-8799
Title of 12(b) Security	Class A common stock, $0.0001 par
Trading Symbol	MSGM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Information, Former Legal or Registered Name	Not Applicable
Common Class A [Member]
Entity Common Stock, Shares Outstanding		2,698,934
Common Class B [Member]
Entity Common Stock, Shares Outstanding		700,000

SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

NOTE 8 – SHARE-BASED COMPENSATION

On January 12, 2021, in connection with its initial public offering, Motorsport Games established the Motorsport Games Inc. 2021 Equity Incentive Plan (the “MSGM 2021 Stock Plan”). The MSGM 2021 Stock Plan provides for the grant of options, stock appreciation rights, restricted stock awards, performance share awards and restricted stock unit awards, and initially authorized 100,000 shares of Class A common stock to be available for issuance. As of March 31, 2023, 47,264 shares of Class A common stock were available for issuance under the MSGM 2021 Stock Plan. Shares issued in connection with awards made under the MSGM 2021 Stock Plan are generally issued as new issuances of Class A common stock.

In conjunction with the Company’s initial public offering, the Company granted an aggregate of 33,063 shares of Class A common, with an aggregate grant date fair value of $661,266. These shares were primarily awarded to a third-party consultant, with a portion allocated to the Company’s former Chief Executive Officer and three of its former directors. 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.

The majority of the options issued under the MSGM 2021 Stock Plan have time-based vesting schedules, typically vesting ratably over a three-year period. Certain stock option awards differed from this vesting schedule, notably awards made to the Company’s former Chief Executive Officer in conjunction with the Company’s initial public offering that vested immediately, as well as those made to the Company’s former directors that vested on the one-year anniversary of award issuance. All stock options issued under the MSGM 2021 Stock Plan expire 10 years from the grant date.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

The following is a summary of stock-based compensation award activity for the three months ended March 31, 2023:

	Number of Options
Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2023 (net of forfeitures)		74,285
Forfeited, cancelled or expired		(21,549	)
Awards outstanding under the MSGM 2021 Stock Plan as of March 31, 2023 (net of forfeitures)		52,736

On April 4, 2023, the Company granted an aggregate of 26,316 stock option awards under the MSGM 2021 Stock Plan to its directors with a grant date fair value of approximately $0.1 million. Refer to Note 12 – Subsequent Events for further information.

Stock-Based Compensation

The following table summarizes stock-based compensation expense resulting from equity awards included in the Company’s condensed consolidated statements of operations:

	2023			2022
	For the Three Months Ended March 31,
	2023			2022
General and Administrative	$	19,426		$	16,394
Sales and Marketing		239,717			302,007
Development		(9,910	)		34,629
Stock-based compensation expense	$	249,233		$	353,030

As of March 31, 2023, there was approximately $0.7 million of unrecognized stock-based compensation expense which will be recognized over approximately 2.0 years.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in various routine legal proceedings incidental to the ordinary course of its business. The Company believes that the outcome of all pending legal proceedings in the aggregate is not reasonably likely to have a material adverse effect on the Company’s business, prospects, results of operations, financial condition and/or cash flows, except as otherwise disclosed below. In light of the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other things, the size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular period. Litigation or other legal proceedings, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in our favor, is likely to divert significant resources from our core business, including distracting our management personnel from their normal responsibilities.

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

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

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

On February 11, 2021, HC2 Holdings 2 Inc. (now known as Innovate 2) and Continental General Insurance Company, former minority stockholders of 704Games, filed a complaint (the “HC2 and Continental Complaint”) in the U.S. District Court for the District of Delaware against the Company, the Company’s Chief Executive Officer and Executive Chairman, the Company’s Chief Financial Officer, and the manager of Motorsport Network. The complaint was later amended and added Leo Capital Holdings LLC as an additional plaintiff and the controller of Motorsport Network as an additional individual defendant. The complaint alleges, among other things, purported misrepresentations and omissions concerning 704Games’ financial condition made in connection with the Company’s purchase of these minority shareholders’ interest in 704Games in August and October 2021. The complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder; Section 20(a) of the Exchange Act; Section 20A of the Exchange Act; breach of the Company’s obligations under the Stockholders’ Agreement dated August 14, 2018; fraudulent inducement; breach of fiduciary duties; and unjust enrichment. The plaintiffs seek, among other things, damages from the defendants, jointly and severally, based on the alleged difference between the fair market value of the shares of common stock of 704Games on the date of plaintiffs’ sale and the purchase price that was paid, as well as punitive damages and other relief. In May 2021, the Company, along with the other defendants, filed a motion to dismiss the plaintiffs’ complaint. On March 28, 2022, the court entered an order denying the motion to dismiss.

On January 11, 2023, in connection with the HC2 and Continental Complaint, the Company, along with other defendants, entered into a settlement agreement with one of the plaintiffs, Continental, to settle the claims made by Continental against the defendants and the claims made by the defendants against Continental. Under the terms of the settlement agreement, the Company is obligated to pay the sum of $1.1 million to Continental. The Company paid an initial payment of approximately $0.1 million on January 17, 2023, and is obligated to make payments of no less than approximately $40,000 every 30 days after the initial payment date until the settlement amount of $1.1 million is paid in full. As of March 31, 2023, all required payments under the settlement agreement have been made. As of March 31, 2023 and December 31, 2022, the Company has accrued $0.9 million and $1.1 million, respectively in other current liabilities as it relates to this case. The Company continues to defend its position with the remaining plaintiffs, the outcome of which is uncertain at this time. Refer to Note 4 – Accrued Expenses and Other Current Liabilities.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Commitments

On January 25, 2021, the Company entered into an amendment (the “Le Mans Amendment”) to the Le Mans Esports Series Ltd joint venture agreement, which resulted in an increase of the Company’s ownership interest in the Le Mans Esports Series Ltd joint venture from 45% to 51%. Additionally, through certain multi-year licensing agreements that were entered into in connection with the Le Mans Amendment, the Company secured the rights to be the exclusive video game developer and publisher for the 24 Hours of Le Mans race and the WEC, as well as the rights to create and organize esports leagues and events for the 24 Hours of Le Mans race, the WEC and the 24 Hours of Le Mans Virtual event. In exchange for certain of these license rights, the Company agreed to fund up to €8,000,000 (approximately $8,700,000 USD as of March 31, 2023) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the applicable license.

Epic License Agreement

On August 11, 2020, the Company entered into a licensing agreement with Epic Games International (“Epic”) for worldwide licensing rights to Epic’s proprietary computer program known as the Unreal Engine 4. Pursuant to the agreement, upon payment of the initial license fee described below, the Company was granted a nonexclusive, non-transferable and terminable license to develop, market and sublicense (under limited circumstances and subject to conditions of the agreement) certain products using the Unreal Engine 4 for its next generation of games.

The Company will pay Epic a license fee royalty payment equal to 5% of product revenue, as defined in the licensing agreement. During the three months ended March 31, 2023, the Company paid royalties to Epic of approximately $32,000 under the agreement. Pursuant to the terms of the agreement, the Company has the right to actively develop new or existing authorized products during a 5-year period ending on August 11, 2025.

Minimum Royalty Guarantees

The Company is required to make certain minimum royalty guarantee payments to third-party licensors, arising primarily from its NASCAR, INDYCAR and BTCC licenses, Le Mans Video Gaming License and Le Mans Esports License. These minimum royalty guarantee payments apply throughout the duration of the licensing agreements, which expire between fiscal years ending December 31, 2026 and 2032, and give rise to a commitment of approximately $28.3 million, in the aggregate, for the duration of these arrangements. The Company paid $0.1 million in cash payments to comply with the license agreements’ minimum royalty guarantees during the three months ended March 31, 2023, and expects to pay further $2.4 million during the remainder of fiscal year ending December 31, 2023.

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Allowances for doubtful accounts receivable	$ 2,532,383	$ 2,252,383
Other Receivable, after Allowance for Credit Loss, Current, Related and Nonrelated Party Status [Extensible Enumeration]	Related Party [Member]	Related Party [Member]
Other Liability, Current, Related and Nonrelated Party Status [Extensible Enumeration]	Related Party [Member]	Related Party [Member]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	100,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Class A [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	2,698,934	1,183,808
Common stock, shares outstanding	2,698,934	1,183,808
Common Class B [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares issued	700,000	700,000
Common stock, shares outstanding	700,000	700,000

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

3 Months Ended

Mar. 31, 2023

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	March 31,		December 31,
	2023		2022
Accrued royalties	$	465,244	$	274,085
Accrued professional and consulting fees		726,224		720,470
Accrued development costs		207,861		172,164
Accrued taxes		49,659		149,842
Accrued payroll		319,604		372,358
Deferred revenue		50,026		311,945
Loss contingency reserves		924,307		1,100,000
Accrued other		240,503		315,560
Total	$	2,983,428	$	3,416,424

STOCKHOLDERS’ EQUITY

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Class A and B Common Stock

As of March 31, 2023, the Company had 2,698,934 shares of Class A common stock and 700,000 shares of Class B common stock outstanding. Holders of Class A and Class B common stock are entitled to one-vote and ten-votes, respectively, for each share held on all matters submitted to a vote of stockholders.

704Games Warrants

As of March 31, 2023 and December 31, 2022, 704Games has outstanding 10-year warrants to purchase 4,000 shares of common stock at an exercise price of $93.03 per share that were issued on October 2, 2015. As of March 31, 2023, the warrants had no intrinsic value and a remaining life of 2.6 years.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Registered Direct Offerings and the Wainwright Warrants

On February 1, February 2 and February 3, 2023, the Company completed three separate registered direct offerings (the “Offerings”) priced at-market under NASDAQ rules with H.C. Wainwright & Co., LLC acting as the exclusive placement agent for each transaction (the “Agent”). In connection with the Offerings, the Company paid the Agent a transaction fee equal to 7.0% of the aggregate gross proceeds from each offering, non-accountable expenses and certain other closing fees. In addition, the Company granted warrants to the Agent (or its designees) to purchase shares of the Company’s Class A common stock equal to 6.0% of the aggregate number of shares of Class A common stock placed in each Offering (collectively, the “Wainwright Warrants”). The Offerings are summarized as follows:

	Offering Date	Shares Issued		Gross Proceeds		Net Proceeds		Warrants Issued		Warrant Strike Price		Warrant Term
Registered direct offering 1	February 1, 2023		183,020	$	3.9 million	$	3.6 million		10,981	$	26.75	5 years
Registered direct offering 2	February 2, 2023		144,366	$	3.4 million	$	3.1 million		8,662	$	29.375	5 years
Registered direct offering 3	February 3, 2023		232,188	$	4.0 million	$	3.7 million		13,931	$	21.738	5 years

As of March 31, 2023, the Wainwright Warrants were assessed to have a fair value of approximately $0.5 million and deemed to be liability-classified awards, which were recorded within other non-current liabilities on the unaudited condensed consolidated balance sheet.

The Company utilized a Black-Scholes Option Pricing Model to determine the fair value of the Wainwright Warrants. The Black-Scholes model requires management to make a number of key assumptions, including expected volatility, expected term, and risk-free interest rate. The risk-free interest rate is estimated using the rate of return on U.S. treasury notes with a life that approximates the expected term. The expected term assumption used in the Black-Scholes model represents the period of time that the Wainwright Warrants are expected to be outstanding and is estimated using the contractual term of the Wainwright Warrants. As of March 31, 2023, the Wainwright Warrants had no intrinsic value.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Stock Purchase Commitment Agreement

During the three months ended March 31, 2023, the Company issued 175,167 shares of the Company’s Class A common stock, with a fair value of $657,850, to Alumni Capital LP (“Alumni Capital”). The shares were sold pursuant to a stock purchase commitment agreement, that was entered into on December 9, 2022 with Alumni Capital (the “Alumni Purchase Agreement”). Under the Alumni Purchase Agreement, the Company may sell Alumni Capital up to $2,000,000 of shares of the Company’s Class A common stock, subject to certain restrictions, through the commitment period expiring December 31, 2023. As of March 31, 2023, the remaining commitment amount under the Alumni Purchase Agreement amounted to $1,302,676.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

SCHEDULE OF SEGMENT REPORTING INFORMATION (Details) - USD ($)

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Dec. 31, 2022

Revenue from External Customer [Line Items]

Total Revenues

$ 1,729,355

$ 3,321,789

Total Cost of Revenues

^[1]

1,248,736

2,013,806

Total Gross Profit

480,619

1,307,983

Total Loss From Operations

(5,411,389)

(15,603,350)

Total Depreciation and Amortization

97,354

116,071

Total Interest Expense, net

(199,120)

(201,596)

Total Other (Expense) Income, net

351,317

(162,099)

Total Net Loss

(5,259,192)

(15,967,045)

Total assets

22,097,812

$ 18,897,792

Gaming [Member]

Revenue from External Customer [Line Items]

Total Revenues

1,439,217

2,958,388

Total Cost of Revenues

874,839

1,404,007

Total Gross Profit

564,378

1,554,381

Total Loss From Operations

(5,105,373)

(15,044,421)

Total Depreciation and Amortization

85,118

107,483

Total Interest Expense, net

(199,120)

(201,596)

Total Other (Expense) Income, net

368,244

(157,123)

Total Net Loss

(4,936,249)

(15,403,140)

Total assets

20,026,416

16,315,359

Esports [Member]

Revenue from External Customer [Line Items]

Total Revenues

290,138

363,401

Total Cost of Revenues

373,897

609,799

Total Gross Profit

(83,759)

(246,398)

Total Loss From Operations

(306,016)

(558,929)

Total Depreciation and Amortization

12,236

8,588

Total Interest Expense, net

Total Other (Expense) Income, net

(16,927)

(4,976)

Total Net Loss

(322,943)

$ (563,905)

Total assets

$ 2,071,396

$ 2,582,433

[1]	Includes related party costs of $0 and $6,228 for the three months ended March 31, 2023 and 2022, respectively.

RELATED PARTY TRANSACTIONS (Details Narrative)		3 Months Ended		12 Months Ended
RELATED PARTY TRANSACTIONS (Details Narrative)	Mar. 23, 2023 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Mar. 31, 2023 EUR (€)	Sep. 08, 2022 USD ($)
Related Party Transaction [Line Items]
Line of credit		$ 12,000,000		$ 12,000,000		$ 12,000,000
Payment to related parties		100,000	$ 100,000	800,000
Due from related parties		8,700,000			€ 8,000,000
Due to related parties		$ 167,860		$ 4,589,211
Other Liability, Current, Related and Nonrelated Party Status [Extensible Enumeration]		Related Party [Member]		Related Party [Member]	Related Party [Member]
New Services Agreement [Member]
Related Party Transaction [Line Items]
Monthly fee payment	$ 17,500	$ 52,500
Related Parties [Member]
Related Party Transaction [Line Items]
Incurred expenses		100,000	$ 0
Due from related parties		200,000		$ 200,000
Due to related parties		$ 100,000
Other Liability, Current, Related and Nonrelated Party Status [Extensible Enumeration]		Related Party [Member]			Related Party [Member]

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member] Common Class A [Member]	Common Stock [Member] Common Class B [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Parent [Member]	Noncontrolling Interest [Member]	Total
Beginning balance at Dec. 31, 2021	$ 116	$ 70	$ 75,652,853	$ (37,988,326)	$ (945,375)	$ 36,719,338	$ 1,262,665	$ 37,982,003
Beginning balance, shares at Dec. 31, 2021	1,163,590	700,000
Stock-based compensation			353,030			353,030		353,030
Stock-based compensation, shares	3,769
Other comprehensive loss					(125,245)	(125,245)	(59,293)	(184,538)
Net loss				(15,137,617)		(15,137,617)	(829,428)	(15,967,045)
Ending balance at Mar. 31, 2022	$ 116	$ 70	76,005,883	(53,125,943)	(1,070,620)	21,809,506	373,944	22,183,450
Ending balance, shares at Mar. 31, 2022	1,167,359	700,000
Beginning balance at Dec. 31, 2022	$ 117	$ 70	76,446,061	(73,979,131)	(933,406)	1,533,711	369,687	1,903,398
Beginning balance, shares at Dec. 31, 2022	1,183,808	700,000
Issuance of common stock	$ 74		10,571,460			10,571,534		10,571,534
Issuance of common stock, shares	734,741
Issuance of common stock for extinguishment of related party loan	$ 78		3,948,488			3,948,566		3,948,566
Issuance of common stock for extinguishment of related party loan, shares	780,385
Stock-based compensation			249,233			249,233		249,233
Stock-based compensation, shares
Other comprehensive loss					(78,588)	(78,588)	(36,318)	(114,906)
Net loss				(5,100,947)		(5,100,947)	(158,245)	(5,259,192)
Ending balance at Mar. 31, 2023	$ 269	$ 70	$ 91,215,242	$ (79,080,078)	$ (1,011,994)	$ 11,123,509	$ 175,124	$ 11,298,633
Ending balance, shares at Mar. 31, 2023	2,698,934	700,000

SCHEDULE OF STOCK BASED COMPENSATION EXPENSE (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 249,233	$ 353,030
General and Administrative Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	19,426	16,394
Selling and Marketing Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	239,717	302,007
Research and Development Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ (9,910)	$ 34,629

RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2023

RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

In addition to the $12 million Line of Credit, which is discussed in Note 5 – Related Party Loans, from time to time, Motorsport Network, and other related entities pay for Company expenses on the Company’s behalf. During the three months ended March 31, 2023 and 2022, the Company incurred expenses of approximately $0.1 million and $0, respectively, that were paid by Motorsport Network on its behalf and are reimbursable by the Company to Motorsport Network. During both the three months ended March 31, 2023 and 2022, approximately $0.1 million was paid to related parties in settlement of related party payables.

The Company has regular related party receivables and payables outstanding as of March 31, 2023 and December 31, 2022. Specifically, the Company owed approximately $0.2 million to its related parties as a related party payable and was due approximately $0.1 million from its related parties as a related party receivable as of March 31, 2023. As of December 31, 2022, the Company owed approximately $0.8 million to its related parties as a related party payable and was due approximately $0.2 million from its related parties as a related party receivable.

Backoffice Services Agreement

On March 23, 2023 (but effective as of January 1, 2023), the Company entered into a new Backoffice Services Agreement with Motorsport Network (the “Backoffice Services Agreement”), following the expiration of the Company’s prior services agreement with Motorsport Network. Pursuant to the Backoffice Services Agreement, Motorsport Network will provide accounting, payroll and benefits, human resources and other back-office services on a full-time basis to support the Company’s business functions. The term of the Backoffice Services Agreement is 12-months from the effective date. The term will automatically renew for successive 12-month terms unless either party provides written notice of nonrenewal at least 30 days prior to the end of the then current term. The Backoffice Services Agreement may be terminated by either party at any time with 60 days prior notice. Pursuant to the Backoffice Services Agreement, the Company is required to pay a monthly fee to Motorsport Network of $17,500. For the three months ended March 31, 2023, the Company incurred $52,500 in fees in connection with the Backoffice Service Agreement, presented in general and administrative expenses with the condensed consolidated statements of operations.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
-Section 50
-Paragraph 5
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-URI https://asc.fasb.org//1943274/2147480990/946-20-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147480990/946-20-50-6

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Subparagraph (c)
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-Subparagraph (e)
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147483326/850-10-50-1

+ Details

CONCENTRATIONS (Tables)

3 Months Ended

Mar. 31, 2023

Customer Concentration Risk [Member]

Concentration Risk [Line Items]

SCHEDULE OF CONCENTRATIONS

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended March 31,
Customer	2023			2022
Customer A		-*	%		15.3	%
Customer B		29.3	%		24.1	%
Customer C		27.2	%		18.2	%
Customer D		27.7	%		16.8	%
Total		84.2	%		74.4	%

*	Less than 10%.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Customer	March 31, 2023			December 31, 2022
Customer A		-*	%		50.5	%
Customer B		29.0	%		11.2	%
Customer C		40.3	%		15.2	%
Customer D		18.7	%		13.1	%
Total		88.0	%		90.0	%

Supplier Concentration Risk [Member]

Concentration Risk [Line Items]

SCHEDULE OF CONCENTRATIONS

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended March 31,
Supplier	2023			2022
Supplier A		20.6	%		19.0	%
Supplier B		*	%		14.8	%
Supplier C		*	%		11.3	%
Total		20.6	%		45.1	%

*	Less than 10%.

SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY (Details) - MSGM 2021 Stock Plan [Member]	3 Months Ended
	Mar. 31, 2023 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of options, outstanding, beginning	74,285
Number of options, forfeited, cancelled or expired	(21,549)
Number of options, outstanding, ending	52,736

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 718
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Income Statement [Abstract]

Revenues

$ 1,729,355

$ 3,321,789

Cost of Revenue

^[1]

1,248,736

2,013,806

Gross profit

480,619

1,307,983

Operating expenses:

Selling and Marketing Expense

^[2]

618,410

1,688,449

Research and Development Expense

^[3]

2,397,134

2,404,338

General and Administrative Expense

^[4]

2,779,110

3,423,153

Impairment of goodwill

4,788,268

Impairment of intangible assets

4,491,054

Depreciation and amortization

97,354

116,071

Total operating expenses

5,892,008

16,911,333

Loss from operations

(5,411,389)

(15,603,350)

Interest expense

(199,120)

(201,596)

Other income (expense), net

351,317

(162,099)

Net loss

(5,259,192)

(15,967,045)

Less: Net loss attributable to non-controlling interest

(158,245)

(829,428)

Net loss attributable to Motorsport Games Inc.

$ (5,100,947)

$ (15,137,617)

Net loss attributable to Class A common stock per share:

Basic and diluted

$ (2.33)

$ (12.97)

Weighted-average shares of Class A common stock outstanding:

Basic and diluted

2,192,155

1,166,816

[1]	Includes related party costs of $0 and $6,228 for the three months ended March 31, 2023 and 2022, respectively.
[2]	Includes related party expenses of $17,076 and $0 for the three months ended March 31, 2023 and 2022, respectively.
[3]	Includes related party expenses of $15,488 and $22,606 for the three months ended March 31, 2023 and 2022, respectively.
[4]	Includes related party expenses of $92,045 and $22,886 for the three months ended March 31, 2023 and 2022, respectively.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2023

Payables and Accruals [Abstract]

SCHEDULE OF ACCRUED EXPENSES

Accrued expenses and other current liabilities consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	March 31,		December 31,
	2023		2022
Accrued royalties	$	465,244	$	274,085
Accrued professional and consulting fees		726,224		720,470
Accrued development costs		207,861		172,164
Accrued taxes		49,659		149,842
Accrued payroll		319,604		372,358
Deferred revenue		50,026		311,945
Loss contingency reserves		924,307		1,100,000
Accrued other		240,503		315,560
Total	$	2,983,428	$	3,416,424

INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 3 – INTANGIBLE ASSETS

Licensing Agreements

The Company has license agreements with various entities related to the development of video games and the organization and facilitation of esports events, including BARC (TOCA) Limited (“BARC”) with respect to the British Touring Car Championship (the “BTCC”), and INDYCAR LLC (“INDYCAR”) with respect to the INDYCAR SERIES. As of March 31, 2023, the Company had a remaining liability in connection with these licensing agreements of approximately $0.8 million and $3.3 million, which is included in purchase commitments and other non-current liabilities, respectively, on the condensed consolidated balance sheets.

Motorsport Games Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements

Intangible Assets

The following is a summary of intangible assets as of March 31, 2023:

SCHEDULE OF INTANGIBLE ASSETS

	Licensing Agreements (Finite)		Licensing Agreements (Indefinite)			Software Licenses (Finite)		Distribution Contracts (Finite)		Trade Names (Indefinite)		Non-Compete Agreements (Finite)		Accumulated Amortization			Total
Balance as of January 1, 2023	$	7,198,363	$	1,546,645		$	8,656,842	$	560,000	$	212,185	$	243,243	$	(5,057,048	)	$	13,360,230
Amortization expense		-		-			-		-		-		-		(439,640	)		(439,640	)
FX translation adjustments		27,507		(4,353	)		72,920		-		500		2,054		(11,157	)		87,471
Balance as of March 31, 2023	$	7,225,870	$	1,542,292		$	8,729,762	$	560,000	$	212,685	$	245,297	$	(5,507,845	)	$	13,008,061

Weighted average remaining amortization period at March 31, 2023		4.7		-			4.1		-		-		1.0		-			-

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Accumulated amortization of intangible assets consists of the following:

	Licensing Agreements (Finite)		Software Licenses (Finite)		Distribution Contracts (Finite)		Non-Compete Agreements (Finite)		Accumulated Amortization
Balance as of January 1, 2023	$	1,146,010	$	3,212,135	$	560,000	$	138,903	$	5,057,048
Amortization expense		56,562		362,710		-		20,368		439,640
Foreign currency translation adjustment		1,876		8,069		-		1,212		11,157
Balance as of March 31, 2023	$	1,204,448	$	3,582,914	$	560,000	$	160,483	$	5,507,845

Estimated aggregate amortization expense of intangible assets for the next five years and thereafter is as follows:

For the Years Ended December 31,	Total
2023 (remaining period)	$	1,318,924
2024		1,652,026
2025		1,568,894
2026		1,322,107
2027		482,338
Thereafter		1,702,871
	$	8,047,160

Amortization expense related to intangible assets was approximately $0.4 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively. Within intangible assets is approximately $1.5 million of licensing agreements that are not presently subject to amortization. These non-amortizing licensing agreements will begin amortizing upon release of the first title under the respective license agreement.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 12 - SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the consolidated financial statements were issued.

On April 4, 2023, the Company granted 26,316 stock option awards under the MSGM 2021 Stock Plan to its board of directors with a grant date fair value of approximately $0.1 million. The options vest ratably over a three-year term and expire 10 years from the grant date. Also refer to Note 8 – Share-Based Compensation.

RELATED PARTY LOANS

3 Months Ended

Mar. 31, 2023

Related Party Loans

RELATED PARTY LOANS

NOTE 5 – RELATED PARTY LOANS

On April 1, 2020, the Company entered into a promissory note (the “$12 million Line of Credit”) with the Company’s majority stockholder, Motorsport Network, that provides the Company with a line of credit of up to $10 million at an interest rate of 10% per annum, the availability of which is dependent on Motorsport Network’s available liquidity. On November 23, 2020, the Company and Motorsport Network entered into an amendment to the $12 million Line of Credit, effective in 2020, pursuant to which the availability under the $12 million Line of Credit was increased from $10 million to $12 million, with no changes to the other terms. The $12 million Line of Credit does not have a stated maturity date and is payable upon demand at any time at the sole and absolute discretion of Motorsport Network. The Company may prepay the $12 million Line of Credit in whole or in part at any time or from time to time without penalty or charge. In the event the Company or any of its subsidiaries consummates certain corporate events, including any capital reorganization, consolidation, joint venture, spin off, merger or any other business combination or restructuring of any nature, or if certain events of default occur, the entire principal amount and all accrued and unpaid interest will be accelerated and become payable.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

On September 8, 2022, the Company entered into a support agreement with Motorsport Network (the “Support Agreement”) pursuant to which Motorsport Network issued approximately $3 million (the “September 2022 Cash Advance”) to the Company in accordance with the $12 million Line of Credit, the proceeds of which the Company is using for general corporate purposes and working capital. In the Support Agreement, Motorsport Network and the Company terminated the Side Letter Agreement dated September 4, 2020 and agreed that until June 30, 2024, Motorsport Network would not demand repayment of the September 2022 Cash Advance or other advances under the $12 million Line of Credit unless and until such time that any of the following shall occur or exist: (i) the Company enters into a new financing arrangement (whether debt, equity or otherwise) under which the Company is then able to draw or provides the Company with available cash in excess of amounts required in the Company’s reasonable judgment to run its operations in the ordinary course of business; (ii) the Company generates from operations available cash in excess of amounts required in the Company’s reasonable judgment to run its operations in the ordinary course of business; or (iii) the Company’s independent auditors issue an unqualified opinion on its financial statements and the Company’s repayment of the advances, in whole or in part, would not otherwise cause the independent auditor to issue a going concern qualified opinion. Upon the occurrence of any of the foregoing events, the Company shall prepay on such date principal amount of the September 2022 Cash Advance and other advances under the $12 million Line of Credit then outstanding in an amount equal to such available excess cash or, in the case of (iii) above, the amount that would not cause the Company’s independent auditor to issue a going concern qualified opinion, together with interest accrued but unpaid on the unpaid September 2022 Cash Advance and other advances, which repayment obligation shall continue until all such advances under the $12 million Line of Credit are paid in full. The entire aggregate principal amount of the September 2022 Cash Advance and the other advances under the $12 million Line of Credit, together with interest accrued but unpaid thereon, shall also become immediately and automatically due and payable, and the $12 million Line of Credit shall immediately and automatically terminate, in each case without any action required by Motorsport Network, if (i) the Company experience an event of default under any other debt instrument, agreement or arrangement; or (ii) any final judgment or final judgments for the payment of money in excess (net of amounts covered by third-party insurance with insurance carriers who have not disclaimed liability with respect to such judgment or judgments) of $500,000 or its foreign currency equivalent is entered against the Company or any subsidiary and is not discharged and either (a) an enforcement proceeding has been commenced by any creditor upon such judgment or decree or (b) there is a period of 60 days following the entry of such judgment or decree during which such judgment or decree is not discharged, waived or the execution thereof stayed and, in the case of (b), such default continues for 60 consecutive days.

On January 30, 2023, the Company entered into a debt-for-equity exchange agreement with Motorsport Network, where the Company issued to Motorsport Network 338,983 shares of the Company’s Class A common stock with an approximate fair market value of $1 million, representing a portion of the Company’s outstanding debt (including the principal and unpaid interest) under the $12 million Line of Credit. On February 1, 2023, the Company entered into a second debt-for-equity exchange agreement with Motorsport Network, where the Company issued to Motorsport Network 441,402 shares of the Company’s Class A common stock with an approximate fair market value of $2.9 million, representing the Company’s remaining debt outstanding (including the principal and unpaid interest) under the $12 million Line of Credit. The shares of the Company’s Class A common stock issued to Motorsport Network on January 30, 2023 and February 1, 2023 under the debt-for-equity exchange agreements were issued in consideration for the cancellation of all amounts outstanding under the $12 million Line of Credit.

Given the state of the financial markets, the Company continues to assess its exposure to any potential non-performance by Motorsport Network and believes that there is a substantial likelihood that Motorsport Network may not fulfill the Company’s future borrowing requests.

As of March 31, 2023 and December 31, 2022, the balance due to Motorsport Network under the $12 million Line of Credit was $0 and $3,670,000, respectively, as well as unpaid accrued related party interest of $0 and $96,667, respectively.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS (Details)	Mar. 31, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2023 (remaining period)	$ 1,318,924
2024	1,652,026
2025	1,568,894
2026	1,322,107
2027	482,338
Thereafter	1,702,871
Estimated aggregate amortization expense	$ 8,047,160

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (5,259,192)	$ (15,967,045)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment of intangible assets		4,491,054
Loss on impairment of goodwill		4,788,268
Loss on disposal of property and equipment	1,016
Depreciation and amortization	502,357	577,514
Purchase commitment and license liability interest accretion	157,661
Non-cash lease expense		70,701
Stock-based compensation	249,233	353,030
Sales return and price protection reserves	280,000	234,240
Changes in assets and liabilities:
Accounts receivable	630,272	2,497,895
Due from related parties	140,358
Operating lease liabilities	(5,893)	(60,211)
Prepaid expenses and other assets	(225,562)	(541,640)
Accounts payable	(1,331,386)	(1,187,721)
Due to related parties	(473,021)
Other non-current liabilities	(33,720)	37,705
Accrued expenses and other liabilities	(315,824)	(882,896)
Net cash used in operating activities	(5,683,701)	(5,589,106)
Cash flows from investing activities:
Purchase of property and equipment	(15,057)	(101,004)
Net cash used in investing activities	(15,057)	(101,004)
Cash flows from financing activities:
Advances from related parties		148,152
Repayments of purchase commitment liabilities	(250,000)
Payment of license liabilities	(87,500)
Issuance of common stock from stock purchase commitment agreement	644,694
Issuance of common stock from registered direct offerings	10,404,840
Net cash provided by financing activities	10,712,034	148,152
Effect of exchange rate changes on cash and cash equivalents	(198,026)	89,553
Net increase (decrease) in cash and cash equivalents	4,815,250	(5,452,405)
Total cash and cash equivalents at beginning of the period	979,306	17,819,640
Total cash and cash equivalents at the end of the period	5,794,556	12,367,235
Cash paid during the year for:
Interest	9,508
Non-cash investing and financing activities:
Shares issued to Motorsport Network LLC for extinguishment of related party loan	(3,948,566)
Extinguishment of Motorsport Network LLC related party loan for Class A shares	3,948,566
Issuance of warrants in connection with registered direct offerings	$ 478,000

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Intangible assets, amortization beginning	$ (5,057,048)
Intangible assets, Beginning	13,360,230
Amortization expense	(439,640)
FX translation adjustments	87,471
Intangible assets, amortization ending	(5,507,845)
Intangible assets, ending	$ 13,008,061
Weighted average remaining amortization
Accumulated amortization, beginning	$ 5,057,048
Amortization expense	400,000	$ 500,000
Accumulated amortization, ending	5,507,845
Licensing Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	7,198,363
Intangible assets, amortization beginning	(1,146,010)
Amortization expense
FX translation adjustments	27,507
Intangible assets, net ending	7,225,870
Intangible assets, amortization ending	$ (1,204,448)
Weighted average remaining amortization	$ 4.7
Accumulated amortization, beginning	$ 1,146,010
Amortization expense	56,562
Amortization of intangible assets foreign currency translation adjusments	1,876
Accumulated amortization, ending	1,204,448
Licensing Agreements (Indefinite) [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	1,546,645
Amortization expense
FX translation adjustments	(4,353)
Intangible assets, net ending	$ 1,542,292
Weighted average remaining amortization
Software [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	$ 8,656,842
Intangible assets, amortization beginning	(3,212,135)
Amortization expense
FX translation adjustments	72,920
Intangible assets, net ending	8,729,762
Intangible assets, amortization ending	$ (3,582,914)
Weighted average remaining amortization	$ 4.1
Accumulated amortization, beginning	$ 3,212,135
Amortization expense	362,710
Amortization of intangible assets foreign currency translation adjusments	8,069
Accumulated amortization, ending	3,582,914
Distribution Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	560,000
Intangible assets, amortization beginning	(560,000)
Amortization expense
FX translation adjustments
Intangible assets, net ending	560,000
Intangible assets, amortization ending	$ (560,000)
Weighted average remaining amortization
Accumulated amortization, beginning	$ 560,000
Amortization expense
Amortization of intangible assets foreign currency translation adjusments
Accumulated amortization, ending	560,000
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	212,185
Amortization expense
FX translation adjustments	500
Intangible assets, net ending	$ 212,685
Weighted average remaining amortization
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net beginning	$ 243,243
Intangible assets, amortization beginning	(138,903)
Amortization expense
FX translation adjustments	2,054
Intangible assets, net ending	245,297
Intangible assets, amortization ending	$ (160,483)
Weighted average remaining amortization	$ 1.0
Accumulated amortization, beginning	$ 138,903
Amortization expense	20,368
Amortization of intangible assets foreign currency translation adjusments	1,212
Accumulated amortization, ending	160,483
Accumulated Amortization [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, amortization beginning	(5,057,048)
Amortization expense	(439,640)
FX translation adjustments	(11,157)
Intangible assets, amortization ending	$ (5,507,845)
Weighted average remaining amortization
Accumulated amortization, beginning	$ 5,057,048
Amortization expense	439,640
Amortization of intangible assets foreign currency translation adjusments	11,157
Accumulated amortization, ending	$ 5,507,845

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Use of Estimates

Use of Estimates

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adoption of Accounting Pronouncements

Adoption of Accounting Pronouncements

Significant Accounting Policies

Fair Value Measurements

Fair Value Measurements

	●	Level 1 – Quoted prices for identical instruments in active markets;
	●	Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
	●	Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Stock Warrants

Stock Warrants

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Allowances for Returns and Price Protection

Allowances for Returns and Price Protection

The Company may permit product returns from, or grant price protection to, its customers under certain conditions. Price protection represents the Company’s practice of providing channel partners with a credit allowance to lower their wholesale price on a particular game unit that they have not resold to customers. The amount of the price protection for permanent markdowns is the difference between the original wholesale price and the new reduced wholesale price. Credits are also given for short-term promotions that temporarily reduce the wholesale price.

Allowances for returns and price protection are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns and price protections that may occur with distributors and retailers (“channel partners”). See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Accounts Receivable in the 2022 Form 10-K for additional details.

When evaluating the adequacy of allowances for returns and price protection, the Company analyzes the following: historical credit allowances, current sell-through of channel partners’ inventory of the Company’s products, current trends in retail and the video game industry, changes in customer demand, acceptance of products, and other related factors. In addition, the Company monitors the volume of sales to its channel partners and their inventories, as substantial overstocking in the distribution channel could result in higher-than-expected returns or higher price protection in subsequent periods.

The Company recognized an expense of approximately $0.3 million and $0.2 million for sales returns and price protections as a reduction of revenues for the three months ended March 31, 2023 and 2022, respectively.

Deferred Revenue

Deferred Revenue

The Company’s deferred revenue, or contract liability, is classified as current and is included within accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets (Also refer Note 4 – Accrued Expenses and Other Current Liabilities). Revenue collected in advance of the event is recorded as deferred revenue until the event occurs. Development and coding revenues are also recorded as deferred revenue until the Company’s performance obligation is performed.

Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $0.3 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

Net Loss Per Common Share

Net Loss Per Common Share

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

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

	For the Three Months Ended
	March 31,
	2023		2022
Stock options		47,967		96,984
Warrants		33,574		-
		81,541		96,984

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES

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

Organization and Operations

Motorsport Gaming US LLC (“Motorsport Gaming”) was established as a limited liability company on August 2, 2018 under the laws of the State of Florida. On January 8, 2021, Motorsport Gaming converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport Games Inc. (“Motorsport Games” or the “Company”). Upon effecting the corporate conversion on January 8, 2021, Motorsport Games now holds all the property and assets of Motorsport Gaming, and all of the debts and obligations of Motorsport Gaming were assumed by Motorsport Games by operation of law upon such corporate conversion.

Risks and Uncertainties

Liquidity and Going Concern

The Company had a net loss of approximately $5.3 million, negative cash flows from operations of approximately $5.7 million and an accumulated deficit of $79.1 million for the three months ended March 31, 2023. As of March 31, 2023, the Company had cash and cash equivalents of $5.8 million, which was reduced to $4.9 million as of April 30, 2023. The Company expects to continue to incur significant operating expenses and, as a result, will need to grow revenues to reach profitability and positive cash flows. The Company expects to continue to incur losses for the foreseeable future as it continues to develop its product portfolio and invest in developing new video game titles.

The Company’s future liquidity and capital requirements include funds to support the planned costs to operate its business, including amounts required to fund working capital, support the development and introduction of new products, maintain existing titles, and certain capital expenditures. The adequacy of the Company’s available funds generally depends on many factors, including its ability to successfully develop consumer-preferred new products or enhancements to its existing products, continued development and expansion of its esports platform and its ability to enter into collaborations with other companies and/or acquire other companies or technologies to enhance or complement its product and service offerings.

The Company continues to explore additional funding in the form of potential equity and/or debt financing arrangements or similar transactions and consider these to be viable options to support future liquidity needs, provided that such opportunities can be obtained on terms that are commercially competitive and on terms acceptable to the Company. The Company is also seeking to improve its liquidity by achieving cost reductions by maintaining and enhancing cost control initiatives, such as those that it expects to achieve through its previously announced organizational restructuring program (the “2022 Restructuring Program”).

As the Company continues to evaluate incremental funding solutions, it has reevaluated its product roadmap in the first quarter of 2023 and modified the expected timing and scope of certain new product releases. These changes have been made not only to maintain the development of high-quality video game titles, but also to improve the timing of certain working capital requirements and reduce expenditures, thereby decreasing our expected future cash-burn and improve our short-term liquidity needs. If needed, further adjustments could be made that would decrease short-term working capital requirements, while pushing out the timing of expected revenues.

The Company expects to generate additional liquidity through consummating one or more potential equity and/or debt financings or similar transactions, achieving cost reductions by maintaining and enhancing cost control initiatives, such as those that it expects to achieve through the 2022 Restructuring Program, and/or further adjusting its product roadmap to reduce near term need for working capital. If the Company is unable to generate adequate revenue and profit growth, there can be no assurances that such actions will provide the Company with sufficient liquidity to meet its cash requirements as, among other things, its liquidity position can be impacted by a number of factors, including its level of sales, costs and expenditures, economic conditions in the capital markets, especially for technology companies, as well as accounts receivable and sales allowances.

There can be no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all, to satisfy its future needed liquidity and capital resources. If the Company is unable to obtain adequate funds on acceptable terms, it may be required to, among other things, significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

If the Company is unable to satisfy its cash requirements from the sources identified above, it could be required to adopt one or more of the following alternatives:

	●	selling assets or operations;
	●	seeking additional capital contributions and/or loans from Motorsport Network, the Company’s other affiliates and/or third parties; and/or
	●	reducing other discretionary spending.

There can be no assurance that the Company would be able to take any of the actions referred to above because of a variety of commercial or market factors, including, without limitation, market conditions being unfavorable for an equity or debt issuance or similar transactions, additional capital contributions and/or loans not being available from Motorsport Network or affiliates and/or third parties, or that the transactions may not be permitted under the terms of the Company’s various debt instruments then in effect, such as due to restrictions on the incurrence of debt, incurrence of liens, asset dispositions and related party transactions. In addition, such actions, if taken, may not enable the Company to satisfy its cash requirements if the actions that the Company is able to consummate do not generate a sufficient amount of additional capital.

Motorsport Games Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements

Even if the Company does secure additional financing, if the anticipated level of revenues are not achieved because of, for example, less than anticipated consumer acceptance of the Company’s offering of products and events; less than effective marketing and promotion campaigns, decreased consumer spending in response to weak economic conditions or weakness in the overall electronic games category; adverse changes in foreign currency exchange rates; decreased sales of the Company’s products and events as a result of increased competitive activities by the Company’s competitors; changes in consumer purchasing habits, such as the impact of higher energy prices on consumer purchasing behavior; retailer inventory management or reductions in retailer display space; less than anticipated results from the Company’s existing or new products or from its advertising and/or marketing plans; or if the Company’s expenses, including, without limitation, for marketing, advertising and promotions, product returns or price protection expenditures, exceed the anticipated level of expenses, the Company’s liquidity position may continue to be insufficient to satisfy its future capital requirements.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The factors described above, in particular the available cash on hand to fund operations over the next year, have raised substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ in Millions		3 Months Ended
	Apr. 04, 2023	Mar. 31, 2023
Subsequent Event [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period		2 years
MSGM 2021 Stock Plan [Member]
Subsequent Event [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period		10 years
MSGM 2021 Stock Plan [Member] \| Subsequent Event [Member]
Subsequent Event [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period	10 years
Board of Directors [Member] \| MSGM 2021 Stock Plan [Member] \| Subsequent Event [Member]
Subsequent Event [Line Items]
Grant date fair value	$ 0.1
Board of Directors [Member] \| MSGM 2021 Stock Plan [Member] \| Restricted Stock [Member] \| Subsequent Event [Member]
Subsequent Event [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross	26,316

CONCENTRATIONS

3 Months Ended

Mar. 31, 2023

Risks and Uncertainties [Abstract]

CONCENTRATIONS

NOTE 10 – CONCENTRATIONS

Customer Concentrations

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended March 31,
Customer	2023			2022
Customer A		-*	%		15.3	%
Customer B		29.3	%		24.1	%
Customer C		27.2	%		18.2	%
Customer D		27.7	%		16.8	%
Total		84.2	%		74.4	%

*	Less than 10%.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Customer	March 31, 2023			December 31, 2022
Customer A		-*	%		50.5	%
Customer B		29.0	%		11.2	%
Customer C		40.3	%		15.2	%
Customer D		18.7	%		13.1	%
Total		88.0	%		90.0	%

* Less than 10%.

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

Supplier Concentrations

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended March 31,
Supplier	2023			2022
Supplier A		20.6	%		19.0	%
Supplier B		*	%		14.8	%
Supplier C		*	%		11.3	%
Total		20.6	%		45.1	%

*	Less than 10%.

RELATED PARTY LOANS (Details Narrative) - USD ($)			3 Months Ended
RELATED PARTY LOANS (Details Narrative) - USD ($)	Feb. 01, 2023	Jan. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 08, 2022	Nov. 23, 2020	Apr. 01, 2020
Liine of credit			$ 12,000,000	$ 12,000,000	$ 12,000,000
Related party, description			(i) the Company enters into a new financing arrangement (whether debt, equity or otherwise) under which the Company is then able to draw or provides the Company with available cash in excess of amounts required in the Company’s reasonable judgment to run its operations in the ordinary course of business; (ii) the Company generates from operations available cash in excess of amounts required in the Company’s reasonable judgment to run its operations in the ordinary course of business; or (iii) the Company’s independent auditors issue an unqualified opinion on its financial statements and the Company’s repayment of the advances, in whole or in part, would not otherwise cause the independent auditor to issue a going concern qualified opinion. Upon the occurrence of any of the foregoing events, the Company shall prepay on such date principal amount of the September 2022 Cash Advance and other advances under the $12 million Line of Credit then outstanding in an amount equal to such available excess cash or, in the case of (iii) above, the amount that would not cause the Company’s independent auditor to issue a going concern qualified opinion, together with interest accrued but unpaid on the unpaid September 2022 Cash Advance and other advances, which repayment obligation shall continue until all such advances under the $12 million Line of Credit are paid in full. The entire aggregate principal amount of the September 2022 Cash Advance and the other advances under the $12 million Line of Credit, together with interest accrued but unpaid thereon, shall also become immediately and automatically due and payable, and the $12 million Line of Credit shall immediately and automatically terminate, in each case without any action required by Motorsport Network, if (i) the Company experience an event of default under any other debt instrument, agreement or arrangement; or (ii) any final judgment or final judgments for the payment of money in excess (net of amounts covered by third-party insurance with insurance carriers who have not disclaimed liability with respect to such judgment or judgments) of $500,000 or its foreign currency equivalent is entered against the Company or any subsidiary and is not discharged and either (a) an enforcement proceeding has been commenced by any creditor upon such judgment or decree or (b) there is a period of 60 days following the entry of such judgment or decree during which such judgment or decree is not discharged, waived or the execution thereof stayed and, in the case of (b), such default continues for 60 consecutive days
Shares issued value			$ 10,571,534
Line of credit current			0	3,670,000
Accrued related party			$ 0	$ 96,667
Support Agreement [Member]
Liine of credit					$ 3,000,000
Debt for Equity Exchange Agreement [Member] \| Class A Common Stock [Member]
Liine of credit		$ 12,000,000
Number of shares issued		338,983
Shares issued value		$ 1,000,000
Secondary Debt For Equity Exchange Agreement [Member] \| Class A Common Stock [Member]
Liine of credit	$ 12,000,000
Number of shares issued	441,402
Shares issued value	$ 2,900,000
Debt for Equity Exchange Agreements [Member]
Liine of credit		$ 12,000,000
Promissory Note [Member]
Liine of credit						$ 12,000,000	$ 12,000,000
Interest rate							10.00%
Promissory Note [Member] \| Maximum [Member]
Line of credit, maximum borrowing capacity						12,000,000	$ 10,000,000
Promissory Note [Member] \| Minimum [Member]
Line of credit, maximum borrowing capacity						$ 10,000,000

STOCKHOLDERS’ EQUITY (Tables)

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS

	Offering Date	Shares Issued		Gross Proceeds		Net Proceeds		Warrants Issued		Warrant Strike Price		Warrant Term
Registered direct offering 1	February 1, 2023		183,020	$	3.9 million	$	3.6 million		10,981	$	26.75	5 years
Registered direct offering 2	February 2, 2023		144,366	$	3.4 million	$	3.1 million		8,662	$	29.375	5 years
Registered direct offering 3	February 3, 2023		232,188	$	4.0 million	$	3.7 million		13,931	$	21.738	5 years

COMMITMENTS AND CONTINGENCIES (Details Narrative)			3 Months Ended
COMMITMENTS AND CONTINGENCIES (Details Narrative)	Jan. 17, 2023 USD ($)	Jan. 11, 2023 USD ($)	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	Mar. 31, 2023 EUR (€)	Dec. 31, 2022 USD ($)	Jan. 25, 2021
Loss Contingencies [Line Items]
Other Liabilities, Current			$ 167,860			$ 4,589,211
Fund for research			8,700,000		€ 8,000,000
Other Commitment				$ 28,300,000
Epic License Agreement [Member]
Loss Contingencies [Line Items]
Royalty expense			32,000
LeMans Esports Series Ltd [Member] \| Minimum [Member]
Loss Contingencies [Line Items]
Ownership percent							45.00%
LeMans Esports Series Ltd [Member] \| Maximum [Member]
Loss Contingencies [Line Items]
Ownership percent							51.00%
Continental [Member]
Loss Contingencies [Line Items]
Litigation Settlement, Amount Awarded to Other Party		$ 1,100,000
Litigation Settlement, Expense	$ 100,000
Litigation Settlement Interest	$ 40,000
Other Liabilities, Current			$ 900,000			$ 1,100,000