0001493152-24-045867 | 10-Q | XBRL Viewer

SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES

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

	For the Three and Nine Months
	Ended September 30
	2024		2023
Stock options		97,902		25,486
Warrants		33,574		33,574
		131,476		59,060

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Income Statement [Abstract]
Net loss	$ (573,025)	$ (3,534,132)	$ (168,940)	$ (16,994,206)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,129,750)	520,239	(629,822)	244,700
Comprehensive loss	(1,702,775)	(3,013,893)	(798,762)	(16,749,506)
Comprehensive loss attributable to non-controlling interests	(649,187)	16,689	(1,380,203)	47,201
Comprehensive (loss) income attributable to Motorsport Games Inc.	$ (1,053,588)	$ (3,030,582)	$ 581,441	$ (16,796,707)

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

+ References + Details

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.

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 2024

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 11 – SEGMENT REPORTING

The Company’s principal operating segments coincide with the types of products and services to be sold. The products and services from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the nine months ended September 30, 2024 and 2023 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 September 30, 2024 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the United States, no geographical segments are presented.

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

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

	2024			2023			2024			2023
	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues:
Gaming	$	1,802,946		$	1,693,871		$	6,713,635		$	4,872,184
Esports		-			-			-			290,172
Total Revenues	$	1,802,946		$	1,693,871		$	6,713,635		$	5,162,356

Cost of Revenues:
Gaming	$	716,723		$	831,479		$	2,154,997		$	2,571,627
Esports		-			-			-			374,755
Total Cost of Revenues	$	716,723		$	831,479		$	2,154,997		$	2,946,382

Gross Profit (Loss):
Gaming	$	1,086,223		$	862,392		$	4,558,638		$	2,300,557
Esports		-			-			-			(84,583	)
Total Gross Profit	$	1,086,223		$	862,392		$	4,558,638		$	2,215,974

Loss From Operations:
Gaming	$	(1,906,342	)	$	(2,575,449	)	$	(938,465	)	$	(16,240,025	)
Esports		(25,543	)		(89,346	)		(149,996	)		(449,466	)
Total Loss From Operations	$	(1,931,885	)	$	(2,664,795	)	$	(1,088,461	)	$	(16,689,491	)

Depreciation and Amortization:
Gaming	$	34,898		$	63,332		$	147,206		$	240,947
Esports		12,253			12,282			36,807			36,875
Total Depreciation and Amortization	$	47,151		$	75,614		$	184,013		$	277,822

Interest Expense, net:
Gaming	$	(29,852	)	$	(230,190	)	$	(89,900	)	$	(674,060	)
Esports		-			-			(580	)		-
Total Interest Expense, net	$	(29,852	)	$	(230,190	)	$	(90,480	)	$	(674,060	)

Other Income (Expense), net:
Gaming	$	1,410,125		$	(639,102	)	$	1,090,686		$	393,406
Esports		(21,413	)		(45	)		(80,685	)		(24,061	)
Total Other Income (Expense), net	$	1,388,712		$	(639,147	)	$	1,010,001		$	369,345

Net Loss:
Gaming	$	(547,483	)	$	(3,444,132	)	$	(18,311	)	$	(16,520,070	)
Esports		(25,542	)		(90,000	)		(150,629	)		(474,136	)
Total Net Loss	$	(573,025	)	$	(3,534,132	)	$	(168,940	)	$	(16,994,206	)

	September 30, 2024		December 31, 2023
Total Assets:
Gaming	$	5,344,746	$	7,892,388
Esports		1,628,622		1,866,316
Total Assets	$	6,973,368	$	9,758,704

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

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Share-Based Payment Arrangement [Abstract]

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Finite-Lived Intangible Assets [Line Items]
Intangible assets, Beginning			$ 5,795,807
Amortization			(1,571,504)
Foreign currency translation adjustment			235,345
Intangible assets, net ending	$ 4,459,648		$ 4,459,648
Accumulated amortization weighted average remaining amortization
Accumulated amortization, beginning			$ 5,685,271
Amortization expense	500,000	$ 400,000	1,600,000	$ 1,200,000
Accumulated amortization, ending	7,402,997		7,402,997
Licensing Agreements (Indefinite) [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite intangible assets, net beginning			1,495,515
Indefinite amortization
Indefinite foreign currency translation adjustment			90,096
Indefinite intangible assets, net ending	1,585,611		$ 1,585,611
Indefinite weighted average remaining amortization
Trade Names (Indefinite) [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite intangible assets, net beginning			$ 223,194
Indefinite amortization
Indefinite foreign currency translation adjustment			(4,766)
Indefinite intangible assets, net ending	218,428		$ 218,428
Indefinite weighted average remaining amortization
Licensing Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Finite intangible assets, net beginning			$ 906,166
Finite amortization
Foreign currency translation adjustment
Finite intangible assets, net ending	$ 906,166		$ 906,166
Finite weighted average remaining amortization	3 months 18 days		3 months 18 days
Accumulated amortization, beginning			$ 298,538
Amortization expense			454,500
Foreign currency translation adjustment
Accumulated amortization, ending	$ 753,038		753,038
Software Licenses (Finite) [Member]
Finite-Lived Intangible Assets [Line Items]
Finite intangible assets, net beginning			8,115,937
Finite amortization
Foreign currency translation adjustment			292,159
Finite intangible assets, net ending	$ 8,408,096		$ 8,408,096
Finite weighted average remaining amortization	2 years 9 months 18 days		2 years 9 months 18 days
Accumulated amortization, beginning			$ 4,646,467
Amortization expense			1,117,004
Foreign currency translation adjustment			142,145
Accumulated amortization, ending	$ 5,905,616		5,905,616
Distribution Contracts (Finite) [Member]
Finite-Lived Intangible Assets [Line Items]
Finite intangible assets, net beginning			560,000
Finite amortization
Foreign currency translation adjustment
Finite intangible assets, net ending	$ 560,000		$ 560,000
Finite weighted average remaining amortization
Accumulated amortization, beginning			$ 560,000
Amortization expense
Foreign currency translation adjustment
Accumulated amortization, ending	$ 560,000		560,000
Noncompete Agreements (Finite) [Member]
Finite-Lived Intangible Assets [Line Items]
Finite intangible assets, net beginning			180,266
Finite amortization
Foreign currency translation adjustment			4,078
Finite intangible assets, net ending	$ 184,344		$ 184,344
Finite weighted average remaining amortization
Accumulated amortization, beginning			$ 180,266
Amortization expense
Foreign currency translation adjustment			4,077
Accumulated amortization, ending	$ 184,343		184,343
Accumulated Amortization [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, amortization beginning			(5,685,271)
Amortization			(1,571,504)
Foreign currency translation adjustment			(146,222)
Intangible assets, amortization ending	$ (7,402,997)		$ (7,402,997)
Accumulated amortization weighted average remaining amortization
Amortization expense			$ 1,571,504
Foreign currency translation adjustment			$ 146,222

SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2024

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 September 30, 2024, 2,098 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.

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

The Company issued stock options under its MSGM 2021 Stock Plan during the nine months ended September 30, 2024 and 2023. The majority of the options issued under the MSGM 2021 Stock Plan have time-based vesting schedules, typically vesting ratably over a three-year period. Certain stock option awards differed from this vesting schedule, as well as those made to the Company’s current and former directors that vest on the one-year anniversary of award issuance. All stock options issued under the MSGM 2021 Stock Plan expire 10 years from the grant date.

On January 26, 2024, the compensation committee of the board of directors of the Company approved and authorized the grant of an option award to purchase 46,000 shares of the Company’s Class A common stock to Stephen Hood, the Chief Executive Officer and President of the Company, pursuant to the MSGM 2021 Stock Plan. 11,500 shares underlying the option award vested immediately upon grant and the remaining 34,500 shares underlying the option award will vest in three equal quarterly installments beginning on April 26, 2024. As of September 30, 2024, 34,500 shares of the Company’s Class A common stock granted to Stephen Hood on January 26, 2024, had vested.

The following is a summary of stock-based compensation award activity for the nine months ended September 30, 2024:

	Number of Options
Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2024 (net of forfeitures)		53,371
Granted		46,000
Forfeited, cancelled or expired		(1,469	)
Awards outstanding under the MSGM 2021 Stock Plan as of September 30, 2024 (net of forfeitures)		97,902

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:

	2024		2023		2024		2023
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
General and Administrative	$	24,371	$	86,737	$	103,746	$	632,116
Sales and Marketing		331		6,720		1,803		229,454
Development		2,187		12,067		189		14,490
Stock-based compensation expense	$	26,889	$	105,524	$	105,738	$	876,060

As of September 30, 2024, there was approximately $11,000 of unrecognized stock-based compensation expense which will be recognized over approximately 1 year.

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)				3 Months Ended		9 Months Ended
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)	Jul. 29, 2024	Jul. 26, 2024	Dec. 09, 2022	Sep. 30, 2024	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Class of Stock [Line Items]
Common stock voting rights						Holders of Class A and Class B common stock are entitled to one-vote and ten-votes, respectively, for each share held on all matters submitted to a vote of stockholders
Exercise price		$ 0.0001
Transaction fee percentage						7.00%
Fair value of warrants						$ (25,476)	$ (438,148)
Offering price		2.17
Aggregate gross proceeds	7.00%
Issuance of common stock				$ 884,051	$ 10,571,534
Pre Funded Warrant [Member]
Class of Stock [Line Items]
Offering price		2.1699
Series A Warrants and the Series B Warrants [Member]
Class of Stock [Line Items]
Exercise price		$ 2.17
Securities Purchase Agreement [Member]
Class of Stock [Line Items]
Sale of stock transaction		(i) 351,928 shares (the “Shares”) of the Company’s Class A common stock, $0.0001 par value (the “Class A common stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 108,902 shares of Class A common stock, and (iii) in a concurrent private placement, Series A warrants (the “Series A Warrants”) to purchase up to 460,830 shares of Class A common stock and Series B warrants (the “Series B Warrants,” and collectively with the Series A Warrants, the “Purchase Warrants”) to purchase up to 460,830 shares of Class A common stock (the “July 2024 Offerings”).
Securities Purchase Agreement [Member] \| July 2024 Offerings [Member]
Class of Stock [Line Items]
Gross proceeds		$ 1,000,000.0
Wainwright Warrants [Member]
Class of Stock [Line Items]
Fair value of warrants						$ 10,000.00
704 Games Company [Member]
Class of Stock [Line Items]
Warrants outstanding term				10 years		10 years		10 years
Shares of common stock				4,000		4,000		4,000
Exercise price				$ 93.03		$ 93.03		$ 93.03
Warrants intrinsic value				$ 0		$ 0
Warrants, remaining term						12 months
Common Class A [Member]
Class of Stock [Line Items]
Common stock shares outstanding				3,183,558		3,183,558		2,722,728
Percentage of aggregate number of shares of common stock placed in each offering						6.00%
Common stock, per share				$ 0.0001		$ 0.0001		$ 0.0001
Common Class A [Member] \| Securities Purchase Agreement [Member]
Class of Stock [Line Items]
Number of shares stock issued		351,928
Common stock, per share		$ 0.0001
Common Class A [Member] \| Securities Purchase Agreement [Member] \| July 2024 Offerings [Member]
Class of Stock [Line Items]
Number of shares stock issued		460,830
Common Class A [Member] \| Securities Purchase Agreement [Member] \| Pre Funded Warrants [Member]
Class of Stock [Line Items]
Number of shares stock issued		108,902
Common Class A [Member] \| Securities Purchase Agreement [Member] \| Series A Warrants [Member]
Class of Stock [Line Items]
Number of shares stock issued		460,830
Common Class A [Member] \| Alumni Capital LP [Member] \| Stock Purchase Commitment Agreement [Member]
Class of Stock [Line Items]
Issuance of common stock, shares			2,000,000			175,167
Issuance of common stock						$ 657,850
Common Class B [Member]
Class of Stock [Line Items]
Common stock shares outstanding				700,000		700,000		700,000
Common stock, per share				$ 0.0001		$ 0.0001		$ 0.0001

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2024

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	September 30,		December 31,
	2024		2023
Accrued royalties	$	156,443	$	217,868
Accrued professional and consulting fees		119,778		110,008
Accrued development costs		36,833		32,214
Accrued taxes		68,533		40,000
Accrued payroll and severance		313,333		500,522
Deferred revenue		278,573		270,845
Loss contingency reserves		167,803		545,920
Accrued other		87,534		173,938
Total	$	1,228,830	$	1,891,315

SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2024

Segment Reporting [Abstract]

SCHEDULE OF SEGMENT REPORTING INFORMATION

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

	2024			2023			2024			2023
	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues:
Gaming	$	1,802,946		$	1,693,871		$	6,713,635		$	4,872,184
Esports		-			-			-			290,172
Total Revenues	$	1,802,946		$	1,693,871		$	6,713,635		$	5,162,356

Cost of Revenues:
Gaming	$	716,723		$	831,479		$	2,154,997		$	2,571,627
Esports		-			-			-			374,755
Total Cost of Revenues	$	716,723		$	831,479		$	2,154,997		$	2,946,382

Gross Profit (Loss):
Gaming	$	1,086,223		$	862,392		$	4,558,638		$	2,300,557
Esports		-			-			-			(84,583	)
Total Gross Profit	$	1,086,223		$	862,392		$	4,558,638		$	2,215,974

Loss From Operations:
Gaming	$	(1,906,342	)	$	(2,575,449	)	$	(938,465	)	$	(16,240,025	)
Esports		(25,543	)		(89,346	)		(149,996	)		(449,466	)
Total Loss From Operations	$	(1,931,885	)	$	(2,664,795	)	$	(1,088,461	)	$	(16,689,491	)

Depreciation and Amortization:
Gaming	$	34,898		$	63,332		$	147,206		$	240,947
Esports		12,253			12,282			36,807			36,875
Total Depreciation and Amortization	$	47,151		$	75,614		$	184,013		$	277,822

Interest Expense, net:
Gaming	$	(29,852	)	$	(230,190	)	$	(89,900	)	$	(674,060	)
Esports		-			-			(580	)		-
Total Interest Expense, net	$	(29,852	)	$	(230,190	)	$	(90,480	)	$	(674,060	)

Other Income (Expense), net:
Gaming	$	1,410,125		$	(639,102	)	$	1,090,686		$	393,406
Esports		(21,413	)		(45	)		(80,685	)		(24,061	)
Total Other Income (Expense), net	$	1,388,712		$	(639,147	)	$	1,010,001		$	369,345

Net Loss:
Gaming	$	(547,483	)	$	(3,444,132	)	$	(18,311	)	$	(16,520,070	)
Esports		(25,542	)		(90,000	)		(150,629	)		(474,136	)
Total Net Loss	$	(573,025	)	$	(3,534,132	)	$	(168,940	)	$	(16,994,206	)

	September 30, 2024		December 31, 2023
Total Assets:
Gaming	$	5,344,746	$	7,892,388
Esports		1,628,622		1,866,316
Total Assets	$	6,973,368	$	9,758,704

STOCKHOLDERS’ EQUITY (Tables)

9 Months Ended

Sep. 30, 2024

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

Pay vs Performance Disclosure - USD ($)	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($)	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure [Table]
Net Income (Loss)	$ 9,827	$ (3,563,507)	$ 1,101,442	$ (17,092,562)

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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SHARE-BASED COMPENSATION (Details Narrative) - USD ($)		9 Months Ended
SHARE-BASED COMPENSATION (Details Narrative) - USD ($)	Jan. 26, 2024	Sep. 30, 2024	Jan. 12, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unrecognized stock based compensation expense		$ 11,000
Compensation expense period		1 year
Board of Directors Chairman [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Option award vested, shares	11,500
Option award expected vested, shares	34,500
MSGM 2021 Stock Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share based compensation expiring period		10 years
Common Class A [Member] \| Board of Directors Chairman [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Option award expected vested, shares		34,500
Common Class A [Member] \| MSGM 2021 Stock Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares available for issuance		2,098	100,000
Class A Common Stock [Member] \| MSGM 2021 Stock Plan [Member] \| Chief Executive Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of options, granted	46,000

SCHEDULE OF ESTIMATED AGGREGATE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS (Details) - Finite-Lived Intangible Assets [Member]	Sep. 30, 2024 USD ($)
Impairment Effects on Earnings Per Share [Line Items]
2024 (remaining period)	$ 522,112
2025	916,468
2026	914,839
2027	126,073
2028	54,773
Thereafter	121,344
Estimated aggregate amortization expense	$ 2,655,609

SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY (Details) - MSGM 2021 Stock Plan [Member]	9 Months Ended
	Sep. 30, 2024 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of options, outstanding, beginning	53,371
Number of options, granted	46,000
Number of options, forfeited, cancelled or expired	(1,469)
Number of options, outstanding, ending	97,902

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.

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Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2024

SCHEDULE OF STOCK-BASED COMPENSATION OPTIONS ACTIVITY

The following is a summary of stock-based compensation award activity for the nine months ended September 30, 2024:

	Number of Options
Awards outstanding under the MSGM 2021 Stock Plan as of January 1, 2024 (net of forfeitures)		53,371
Granted		46,000
Forfeited, cancelled or expired		(1,469	)
Awards outstanding under the MSGM 2021 Stock Plan as of September 30, 2024 (net of forfeitures)		97,902

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:

	2024		2023		2024		2023
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
General and Administrative	$	24,371	$	86,737	$	103,746	$	632,116
Sales and Marketing		331		6,720		1,803		229,454
Development		2,187		12,067		189		14,490
Stock-based compensation expense	$	26,889	$	105,524	$	105,738	$	876,060

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2024

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 September 30, 2024 and for the three and nine months ended September 30, 2024. The Company’s results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related disclosures as of December 31, 2023 and 2022 and for the years then ended which are included in the 2023 Form 10-K.

Use of Estimates

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

The Company’s significant estimates used in these condensed consolidated financial statements include, but are not limited to, revenue recognition criteria, including allowances for returns and price protection, offering periods for deferred net revenue, valuation allowance of deferred income taxes, the recognition and disclosure of contingent liabilities, and stock-based compensation valuation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates.

Reclassifications

Certain reclassifications of prior period amounts have been made to conform to the presentation of these unaudited condensed consolidated financial statements. These reclassifications had no effect on prior periods’ net income (loss).

Non-controlling Interests

Non-controlling interests represent the portion of net assets in consolidated subsidiaries that are not attributable, directly or indirectly, to the Company. The net assets of the shared entities are attributed to the controlling and non-controlling interests based on the terms of the governing contractual arrangements. For the joint venture with Automobile Club de l’Ouest discussed in Note 9 – Commitments and Contingencies, the Company further determined the hypothetical liquidation at book value method (“HLBV Method”) to be the appropriate method for attributing net assets to the controlling and noncontrolling interests as this method most closely mirrors the economics of the governing contractual arrangement. Under the HLBV Method, the Company allocates recorded income (loss) to each investor based on the change, during the reporting period, of the amount of net assets each investor is entitled to under the governing contractual arrangements in a liquidation scenario.

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

Correction of an Immaterial Error in Previously Issued Financial Statements

The Company has revised the presentation of net income (loss) attributable to the non-controlling interest in the joint venture with Automobile Club de l’Ouest discussed in Note 9 – Commitments and Contingencies, to correct an immaterial error in the presentation of related the non-controlling interest. This correction decreased net loss and comprehensive loss attributable to non-controlling interests, increased net loss and comprehensive loss attributable to Motorsport Games, Inc. by $73,468 and increased net loss per Class A common share attributable to Motorsport Games Inc. by $0.03 for the three months ended September 30, 2023. This correction also decreased net loss and comprehensive loss attributable to non-controlling interests, increased net loss and comprehensive loss attributable to Motorsport Games, Inc. by $330,552 and increased net loss per Class A common share attributable to Motorsport Games Inc. by $0.13 for the nine months ended September 30, 2023. Furthermore, this correction decreased stockholders’ deficit attributable to non-controlling interests and decreased stockholders’ equity attributable to Motorsport Games Inc. by $411,535 as of December 31, 2023.

Recently Issued Accounting Standards

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

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280). The new guidance improves reportable segment disclosures primarily through enhanced disclosures about significant segment expenses and by requiring current annual disclosures to be provided in interim periods. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The new guidance is to be applied retrospectively to all prior periods presented unless impracticable to do so. As the guidance requires only additional disclosure, there will be no effects of this standard on the Company’s financial position, results of operations or cash flows.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied on a prospective basis with retrospective application permitted. As the guidance requires only additional disclosure, there will be no effects of this standard on the Company’s financial position, results of operations or cash flows.

Significant Accounting Policies

There have been no material changes to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2023, as included in the 2023 Form 10-K, except as disclosed in this note.

Revenue Recognition

The Company derives revenue principally from sales of its games, and related extra content and services that can be experienced on game consoles, PCs and mobile phones. The Company’s product and service offerings include, but are not limited to, the following:

	●	full games with both online and offline functionality (“Games with Services”), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content (“software license”); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future (“future update rights”); and (3) a hosted connection for online playability (“online hosting”);
	●	extra content related to Games with Services which provides access to additional in-game content;

The Company evaluates and recognizes revenue by:

	●	identifying the contract(s) with the customer;
	●	identifying the performance obligations in the contract;
	●	determining the transaction price;
	●	allocating the transaction price to performance obligations in the contract; and
	●	recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., “transfer of control”).

Online-Enabled Games

Games with Services. The Company’s sales of Games with Services are evaluated to determine whether the software license, future update rights and the online hosting are distinct and separable. Sales of Games with Services are generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting.

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

Since the Company does not sell the performance obligations on a stand-alone basis, the Company considers market conditions and other observable inputs to estimate the stand-alone selling price for each performance obligation. For Games with Services, generally 75 percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the customer. The remaining 25 percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided (over the Estimated Offering Period).

Extra Content. Revenue received from sales of downloadable content are derived primarily from the sale of digital in-game content that are designed to extend and enhance players’ game experience. Sales of extra content are accounted for in a manner consistent with the treatment for the Company’s Games with Services as discussed above, depending upon whether or not the extra content has offline functionality. That is, if the extra content has offline functionality, then the extra content is accounted for similarly to Games with Services (generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting). If the extra content does not have offline functionality, then the extra content is determined to have one distinct performance obligation: the online-hosted service.

Significant Judgments around Revenue Arrangements

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

Determining the transaction price. The transaction price is determined based on the consideration that the Company will be entitled to receive in exchange for transferring its goods and services to the customer. Determining the transaction price often requires judgment, based on an assessment of contractual terms and business practices. It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction. In addition, the transaction price does not include an estimate of the variable consideration related to sales-based royalties. Sales-based royalties are recognized as the sales occur.

Allocating the transaction price. Allocating the transaction price requires that the Company determine an estimate of the relative stand-alone selling price for each distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective, especially in situations where the Company does not sell the performance obligation on a stand-alone basis (which occurs in the majority of transactions). In those situations, the Company determines the relative stand-alone selling price based on various observable inputs using all information that is reasonably available. Examples of observable inputs and information include historical internal pricing data and pricing data from competitors, to the extent the data is available. The results of the Company’s analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation.

Determining the Estimated Offering Period. The offering period is the period in which the Company offers to provide the future update rights and/or online hosting for the game and related extra content sold. Because the offering period is not an explicitly defined period, the Company must make an estimate of the offering period for the service-related performance obligations (i.e., future update rights and online hosting). Determining the Estimated Offering Period is inherently subjective and is subject to regular revision. Generally, the Company considers the average period of time customers are online when estimating the offering period. The Company recognizes revenue for future update rights and online hosting performance obligations ratably on a straight-line basis over this period as there is a consistent pattern of delivery for these performance obligations. Revenue for service-related performance obligations for digitally-distributed games and extra content is recognized over an estimated seven-month period beginning in the month of sale.

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

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. Furthermore, deferred revenue includes payment advances from the Company’s channel partners and sales transactions including future update rights and online hosting performance obligations, which are subject to deferral and recognized over the Estimated Offering Period.

Revenue recognized in the period from amounts included in contract liability at the beginning of the period was approximately $0.3 million and $0.4 million for each of the nine months ended September 30, 2024 and 2023, respectively.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (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 and Nine Months
	Ended September 30
	2024		2023
Stock options		97,902		25,486
Warrants		33,574		33,574
		131,476		59,060

Licensing Agreements

In March 2019, the Company entered into an agreement to facilitate the Le Mans Esports Series as part of a joint venture with Automobile Club de l’Ouest (“ACO”), the organizer of the 24 Hours of Le Mans endurance race. Through the Company’s ownership interest in this joint venture, which was increased to 51% from 45% in January 2021, the Company secured the rights to be the exclusive video game developer and publisher for the 24 Hours of Le Mans race and the FIA World Endurance Championship (the “WEC”), which the 24 Hours of Le Mans race is a part of, for a ten-year period. In addition, through this joint venture with ACO, the Company has the right to create and organize esports leagues and events for the Le Mans Esports Series. The Company acquired a video gaming license (the “Le Mans Gaming License”) and an esports license related to its ownership interest in this joint venture with the ACO.

In 2021, the Company also acquired intangible assets comprising the KartKraft computer video game as well as software, tradename and non-compete agreements related to its acquisition of 100% of the share capital of Studio397 B.V.

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

BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES (Details Narrative) - USD ($)				3 Months Ended						9 Months Ended
	Oct. 03, 2024	Jul. 29, 2024	Mar. 31, 2023	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Oct. 31, 2024	Dec. 31, 2023
Property, Plant and Equipment [Line Items]
Net loss				$ 573,025	$ (2,087,483)	$ 1,683,398	$ 3,534,132	$ 8,200,882	$ 5,259,192	$ 168,940	$ 16,994,206
Net cash provided by used in operating activities										697,479	$ 10,106,011
Retained earnings accumulated deficit				86,340,362						86,340,362			$ 87,441,805
Cash and cash equivalents				$ 750,995						750,995			$ 1,675,210
Average net cash decrease										100,000
Gross proceeds		$ 1,000,000.0
Equity Distribution Agreement [Member] \| Common Class A [Member]
Property, Plant and Equipment [Line Items]
Sale of stock										$ 2,900,000
Equity Distribution Agreement [Member] \| Canaccord Genuity LLC [Member] \| Common Class A [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Sale of stock			$ 10,000,000
Subsequent Event [Member]
Property, Plant and Equipment [Line Items]
Cash and cash equivalents												$ 500,000
Severance and redundancy costs	$ 200,000

SEGMENT REPORTING (Details Narrative) - Segment	9 Months Ended
SEGMENT REPORTING (Details Narrative) - Segment	Sep. 30, 2024	Sep. 30, 2023
Segment Reporting [Abstract]
Number of reportable segments	2	2

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 12 - SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the condensed consolidated financial statements.

On October 3, 2024, the Company implemented additional measures to continue to bring down its year-over-year operating expense through a reduction of the Company’s workforce primarily in the United States and the United Kingdom by approximately 23 employees and contractors. The workforce reduction impacted approximately 23 individuals or 38% of the Company’s employees worldwide. The Company recorded a restructuring charge related to the workforce reduction, primarily consisting of severance and redundancy costs of approximately $0.2 million. The Company expects to recognize and pay out the majority of the restructuring charge in the fourth quarter of fiscal year 2024. The Company further anticipates the implementation of the workforce reduction, including cash payments, will be substantially complete by the end of the fourth quarter of fiscal year 2024, subject to legal requirements in the United States and the United Kingdom, which may extend this process beyond the fourth quarter of fiscal year 2024 in certain cases. The charges that the Company expects to incur are subject to a number of assumptions, including legal requirements in primarily the United States and the United Kingdom jurisdictions, and the actual restructuring charge may differ materially from the amount disclosed above.

On October 4, 2024, the Company issued a press release announcing that the Board of Directors has authorized management to consider strategic alternatives to maximize shareholder value, including a potential sale or merger of the Company seeking funding that would allow it to deliver on viable opportunities including bringing Le Mans Ultimate to Sony PlayStation and Microsoft Xbox gaming consoles.

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Allowances for doubtful accounts receivable	$ 0	$ 450,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Class A [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	3,183,558	2,722,728
Common stock, shares outstanding	3,183,558	2,722,728
Common Class B [Member]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	7,000,000	7,000,000
Common stock, shares issued	700,000	700,000
Common stock, shares outstanding	700,000	700,000

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

3 Months Ended

9 Months Ended

Sep. 30, 2024

Sep. 30, 2023

Sep. 30, 2024

Sep. 30, 2023

Income Statement [Abstract]

Revenues

$ 1,802,946

$ 1,693,871

$ 6,713,635

$ 5,162,356

Cost of revenues

716,723

831,479

2,154,997

2,946,382

Gross profit

1,086,223

862,392

4,558,638

2,215,974

Operating expenses:

Sales and marketing [1]

^[1]

175,532

358,120

631,467

1,411,318

Development [2]

^[2]

848,528

1,566,839

2,780,630

5,751,741

Impairment of intangible assets

4,004,627

General and administrative [3]

^[3]

1,946,897

1,526,614

5,548,989

7,459,957

Depreciation and amortization

47,151

75,614

184,013

277,822

Total operating expenses

3,018,108

3,527,187

9,145,099

18,905,465

Gain from settlement of license liabilities

3,248,000

Other operating income

250,000

Loss from operations

(1,931,885)

(2,664,795)

(1,088,461)

(16,689,491)

Interest expense

(29,852)

(230,190)

(90,480)

(674,060)

Other income (expense), net

1,388,712

(639,147)

1,010,001

369,345

Net loss

(573,025)

(3,534,132)

(168,940)

(16,994,206)

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

(582,852)

29,375

(1,270,382)

98,356

Net income (loss) attributable to Motorsport Games Inc.

$ 9,827

$ (3,563,507)

$ 1,101,442

$ (17,092,562)

Net income (loss) attributable to Class A common stock per share:

Basic

$ 0.00

$ (1.31)

$ 0.39

$ (6.73)

Diluted

$ 0.00

$ (1.31)

$ 0.39

$ (6.73)

Weighted-average shares of Class A common stock outstanding:

Basic

3,024,366

2,720,328

2,823,274

2,538,863

Diluted

3,024,366

2,720,328

2,823,274

2,538,863

[1]	Includes related party expenses of $0 and $0 for the three months ended September 30, 2024 and 2023, respectively, and $0 and $17,076 for the nine months ended September 30, 2024 and 2023, respectively.
[2]	Includes related party expenses of $0 and $15,439 for the three months ended September 30, 2024 and 2023, respectively, and $0 and $46,361 for the nine months ended September 30, 2024 and 2023, respectively.
[3]	Includes related party expenses of $37,500 and $116,530 for the three months ended September 30, 2024 and 2023, respectively, and $188,772 and $298,190 for the nine months ended September 30, 2024 and 2023, respectively.

SCHEDULE OF SEGMENT REPORTING INFORMATION (Details) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Segment Reporting Information [Line Items]
Total Revenues	$ 1,802,946			$ 1,693,871			$ 6,713,635	$ 5,162,356
Total Cost of Revenues	716,723			831,479			2,154,997	2,946,382
Total Gross Profit	1,086,223			862,392			4,558,638	2,215,974
Total Loss From Operations	(1,931,885)			(2,664,795)			(1,088,461)	(16,689,491)
Total Depreciation and Amortization	47,151			75,614			184,013	277,822
Total Interest Expense, net	(29,852)			(230,190)			(90,480)	(674,060)
Total Other Income (Expense), net	1,388,712			(639,147)			1,010,001	369,345
Total Net Loss	(573,025)	$ 2,087,483	$ (1,683,398)	(3,534,132)	$ (8,200,882)	$ (5,259,192)	(168,940)	(16,994,206)
Total Assets	6,973,368						6,973,368		$ 9,758,704
Gaming [Member]
Segment Reporting Information [Line Items]
Total Revenues	1,802,946			1,693,871			6,713,635	4,872,184
Total Cost of Revenues	716,723			831,479			2,154,997	2,571,627
Total Gross Profit	1,086,223			862,392			4,558,638	2,300,557
Total Loss From Operations	(1,906,342)			(2,575,449)			(938,465)	(16,240,025)
Total Depreciation and Amortization	34,898			63,332			147,206	240,947
Total Interest Expense, net	(29,852)			(230,190)			(89,900)	(674,060)
Total Other Income (Expense), net	1,410,125			(639,102)			1,090,686	393,406
Total Net Loss	(547,483)			(3,444,132)			(18,311)	(16,520,070)
Total Assets	5,344,746						5,344,746		7,892,388
Esports [Member]
Segment Reporting Information [Line Items]
Total Revenues								290,172
Total Cost of Revenues								374,755
Total Gross Profit								(84,583)
Total Loss From Operations	(25,543)			(89,346)			(149,996)	(449,466)
Total Depreciation and Amortization	12,253			12,282			36,807	36,875
Total Interest Expense, net							(580)
Total Other Income (Expense), net	(21,413)			(45)			(80,685)	(24,061)
Total Net Loss	(25,542)			$ (90,000)			(150,629)	$ (474,136)
Total Assets	$ 1,628,622						$ 1,628,622		$ 1,866,316

SCHEDULE OF CALCULATION WEIGHTED AVERAGE DILUTIVE COMMON SHARES (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	131,476	59,060	131,476	59,060
Share-Based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	97,902	25,486	97,902	25,486
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	33,574	33,574	33,574	33,574

SCHEDULE OF ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Accrued royalties	$ 156,443	$ 217,868
Accrued professional and consulting fees	119,778	110,008
Accrued development costs	36,833	32,214
Accrued taxes	68,533	40,000
Accrued payroll and severance	313,333	500,522
Deferred revenue	278,573	270,845
Loss contingency reserves	167,803	545,920
Accrued other	87,534	173,938
Total	$ 1,228,830	$ 1,891,315

Cover - $ / shares	9 Months Ended
Cover - $ / shares	Sep. 30, 2024	Nov. 14, 2024
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--12-31
Entity File Number	001-39868
Entity Registrant Name	Motorsport Games Inc.
Entity Central Index Key	0001821175
Entity Tax Identification Number	86-1791356
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	5972 NE 4th Avenue
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33137
City Area Code	(305)
Local Phone Number	507-8799
Title of 12(b) Security	Class A common stock, $0.0001 par
Trading Symbol	MSGM
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Information, Former Legal or Registered Name	Not Applicable
Entity Listing, Par Value Per Share	$ 0.0001
Common Class A [Member]
Entity Common Stock, Shares Outstanding		3,183,558
Common Class B [Member]
Entity Common Stock, Shares Outstanding		700,000

CONCENTRATIONS

9 Months Ended

Sep. 30, 2024

Risks and Uncertainties [Abstract]

CONCENTRATIONS

NOTE 10 – CONCENTRATIONS

Customer Concentrations

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended September 30,						Nine Months Ended September 30,
Customer	2024			2023			2024			2023
Customer B		22.9	%		25.1	%		21.4	%		25.5	%
Customer C		17.7	%		28.7	%		19.6	%		28.6	%
Customer D		43.2	%		19.8	%		45.8	%		24.0	%
Customer E		-*			10.4	%		-*			-*
Total		83.8	%		84.0	%		86.78	%		78.1	%

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	September 30, 2024			December 31, 2023
Customer B		30.7	%		32.1	%
Customer C		22.4	%		34.3	%
Customer D		27.9	%		22.3	%
Total		81.0	%		88.7	%

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

Supplier Concentrations

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

SCHEDULE OF CONCENTRATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Supplier

2024

2023

2024

2023

Supplier A

62.3

22.2

*	Less than 10%.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2024

RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

In addition to the $12 million Line of Credit, the Company had other related party receivables and payables outstanding as of September 30, 2024 and December 31, 2023. Specifically, the Company owed approximately $19,000 and $0.1 million to its related parties as a related party payable as of September 30, 2024 and December 31, 2023, respectively. During each of the nine months ended September 30, 2024 and 2023, approximately $0.2 million, respectively, was paid to related parties in settlement of related party payables. The Company’s corporate headquarters, located in Miami, Florida and consisting of approximately 2,000 square feet of office space, are owned by Driven Lifestyle.

On May 3, 2024 (but effective as of October 1, 2023), the Company entered into a new lease agreement with Lemon City Group, LLC, an entity controlled by Driven Lifestyle, for approximately 800 square feet of storage space located in Miami, Florida. The term of the lease was initially nine months, with a commencement date of October 1, 2023, consistent with the Company’s initial date of occupancy, and expiring on June 30, 2024, terminable with a 60-day written notice with no penalty. The base rent from the lease commencement date through June 30, 2024 was fixed at approximately $1,800 per month. The Company extended the lease for five additional months at the same terms through November 30, 2024.

Backoffice Services Agreement

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

On August 8, 2024 (but effective as of July 1, 2024), the Company amended its Backoffice Services Agreement with Driven Lifestyle (the “Amended Backoffice Services Agreement”). Pursuant to the Amended Backoffice Services Agreement, Driven Lifestyle will provide office space, 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 Amended 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 Amended Backoffice Services Agreement may be terminated by either party at any time with 60 days prior notice. Pursuant to the Amended Backoffice Services Agreement, the Company is required to pay a monthly fee to Driven Lifestyle of $12,500.

For the three and nine months ended September 30, 2024, the Company incurred $37,500 and $142,500, respectively, in fees in connection with the Backoffice Services Agreement, which is presented in general and administrative expenses within the condensed consolidated statements of operations.

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.

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

9 Months Ended

Sep. 30, 2024

Non-controlling Interests

Basis of Presentation

Basis of Presentation

Use of Estimates

Use of Estimates

Reclassifications

Reclassifications

Non-controlling Interests

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

Correction of an Immaterial Error in Previously Issued Financial Statements

Correction of an Immaterial Error in Previously Issued Financial Statements

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Significant Accounting Policies

Significant Accounting Policies

Revenue Recognition

Revenue Recognition

	●	full games with both online and offline functionality (“Games with Services”), which generally includes (1) the initial game delivered digitally or via physical disc at the time of sale and typically provide access to offline core game content (“software license”); (2) updates on a when-and-if-available basis, such as software patches or updates, and/or additional free content to be delivered in the future (“future update rights”); and (3) a hosted connection for online playability (“online hosting”);
	●	extra content related to Games with Services which provides access to additional in-game content;

The Company evaluates and recognizes revenue by:

	●	identifying the contract(s) with the customer;
	●	identifying the performance obligations in the contract;
	●	determining the transaction price;
	●	allocating the transaction price to performance obligations in the contract; and
	●	recognizing revenue as each performance obligation is satisfied through the transfer of a promised good or service to a customer (i.e., “transfer of control”).

Online-Enabled Games

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

Significant Judgments around Revenue Arrangements

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

Deferred Revenue

Deferred Revenue

Net Income (Loss) Per Common Share

Net Income (Loss) Per Common Share

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

	For the Three and Nine Months
	Ended September 30
	2024		2023
Stock options		97,902		25,486
Warrants		33,574		33,574
		131,476		59,060

Licensing Agreements

Licensing Agreements

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
Balance at Dec. 31, 2022	$ 117	$ 70	$ 76,446,061	$ (72,978,210)	$ (933,406)	$ 2,534,632	$ (631,234)	$ 1,903,398
Balance, shares at Dec. 31, 2022	1,183,808	700,000
Stock-based compensation			249,233			249,233		249,233
Other comprehensive income (loss)					(78,588)	(78,588)	(36,318)	(114,906)
Net income (loss)				(5,316,966)		(5,316,966)	57,774	(5,259,192)
Issuance of common stock	$ 74		10,571,460			10,571,534		10,571,534
Issuance of common stock, shares	734,741
Issuance of common stock for extinguishment of related party debt	$ 78		3,948,488			3,948,566		3,948,566
Issuance of common stock for extinguishment of related party debt, shares	780,385
Balance at Mar. 31, 2023	$ 269	$ 70	91,215,242	(78,295,176)	(1,011,994)	11,908,411	(609,778)	11,298,633
Balance, shares at Mar. 31, 2023	2,698,934	700,000
Balance at Dec. 31, 2022	$ 117	$ 70	76,446,061	(72,978,210)	(933,406)	2,534,632	(631,234)	1,903,398
Balance, shares at Dec. 31, 2022	1,183,808	700,000
Net income (loss)								(16,994,206)
Balance at Sep. 30, 2023	$ 269	$ 70	91,842,069	(90,070,772)	(688,706)	1,082,930	(584,033)	498,897
Balance, shares at Sep. 30, 2023	2,720,328	700,000
Balance at Mar. 31, 2023	$ 269	$ 70	91,215,242	(78,295,176)	(1,011,994)	11,908,411	(609,778)	11,298,633
Balance, shares at Mar. 31, 2023	2,698,934	700,000
Stock-based compensation			521,303			521,303		521,303
Stock-based compensation, shares	21,394
Other comprehensive income (loss)					(196,951)	(196,951)	(2,151)	(199,102)
Net income (loss)				(8,212,089)		(8,212,089)	11,207	(8,200,882)
Balance at Jun. 30, 2023	$ 269	$ 70	91,736,545	(86,507,265)	(1,208,945)	4,020,674	(600,722)	3,419,952
Balance, shares at Jun. 30, 2023	2,720,328	700,000
Stock-based compensation			105,524			105,524		105,524
Other comprehensive income (loss)					520,239	520,239	(12,686)	507,553
Net income (loss)				(3,563,507)		(3,563,507)	29,375	(3,534,132)
Balance at Sep. 30, 2023	$ 269	$ 70	91,842,069	(90,070,772)	(688,706)	1,082,930	(584,033)	498,897
Balance, shares at Sep. 30, 2023	2,720,328	700,000
Balance at Dec. 31, 2023	$ 269	$ 70	91,923,311	(87,441,805)	(1,850,216)	2,631,629	(541,925)	2,089,704
Balance, shares at Dec. 31, 2023	2,722,728	700,000
Stock-based compensation			68,191			68,191		68,191
Stock-based compensation, shares
Other comprehensive income (loss)					580,233	580,233	(62,905)	517,328
Net income (loss)				(1,284,690)		(1,284,690)	(398,708)	(1,683,398)
Balance at Mar. 31, 2024	$ 269	$ 70	91,991,502	(88,726,495)	(1,269,983)	1,995,363	(1,003,538)	991,825
Balance, shares at Mar. 31, 2024	2,722,728	700,000
Balance at Dec. 31, 2023	$ 269	$ 70	91,923,311	(87,441,805)	(1,850,216)	2,631,629	(541,925)	2,089,704
Balance, shares at Dec. 31, 2023	2,722,728	700,000
Net income (loss)								(168,940)
Balance at Sep. 30, 2024	$ 315	$ 70	92,913,054	(86,340,362)	(2,480,038)	4,093,039	(1,922,128)	2,170,911
Balance, shares at Sep. 30, 2024	3,183,558	700,000
Balance at Mar. 31, 2024	$ 269	$ 70	91,991,502	(88,726,495)	(1,269,983)	1,995,363	(1,003,538)	991,825
Balance, shares at Mar. 31, 2024	2,722,728	700,000
Stock-based compensation			10,658			10,658		10,658
Other comprehensive income (loss)					(80,305)	(80,305)	19,419	(60,886)
Net income (loss)				2,376,306		2,376,306	(288,823)	2,087,483
Balance at Jun. 30, 2024	$ 269	$ 70	92,002,160	(86,350,189)	(1,350,288)	4,302,022	(1,272,942)	3,029,080
Balance, shares at Jun. 30, 2024	2,722,728	700,000
Stock-based compensation			26,889			26,889		26,889
Other comprehensive income (loss)					(1,129,750)	(1,129,750)	(66,334)	(1,196,084)
Net income (loss)				9,827		9,827	(582,852)	(573,025)
Issuance of common stock	$ 46		884,005			884,051		884,051
Issuance of common stock, shares	460,830
Balance at Sep. 30, 2024	$ 315	$ 70	$ 92,913,054	$ (86,340,362)	$ (2,480,038)	$ 4,093,039	$ (1,922,128)	$ 2,170,911
Balance, shares at Sep. 30, 2024	3,183,558	700,000

SUBSEQUENT EVENTS (Details Narrative) $ in Millions	Oct. 03, 2024 USD ($)
Subsequent Event [Member]
Subsequent Event [Line Items]
Severance cost	$ 0.2

COMMITMENTS AND CONTINGENCIES (Details Narrative)													3 Months Ended		9 Months Ended
COMMITMENTS AND CONTINGENCIES (Details Narrative)	May 17, 2024	Apr. 12, 2024 USD ($)	Nov. 22, 2023 USD ($)	Nov. 08, 2023 USD ($)	Oct. 16, 2023 USD ($)	Oct. 14, 2023 USD ($)	Jan. 17, 2023 USD ($)	Jan. 11, 2023 USD ($)	Jul. 21, 2022 USD ($)	Apr. 22, 2022 USD ($)	Apr. 20, 2021 USD ($)	May 29, 2020 USD ($)	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 EUR (€)	Jan. 15, 2023 USD ($)	Dec. 15, 2022 USD ($)	Jul. 31, 2022 USD ($)	Jul. 19, 2022	Jan. 25, 2021	Aug. 11, 2020
Loss Contingencies [Line Items]
Fund for research													$ 8,952,000		$ 8,952,000		€ 8,000,000
Earned royalties													19,000		19,000
Gain from settlement of license liabilities															3,248,000
Studio 397 B.V. [Member]
Loss Contingencies [Line Items]
Voting interest acquired											100.00%
Deferred payment											$ 12,800,000
Studio 397 B.V. [Member] \| Deferred Payment [Member]
Loss Contingencies [Line Items]
Deferred payment									$ 1,000,000	$ 1,000,000
Contingent consideration liability to be paid									$ 3,200,000	$ 3,200,000	$ 3,200,000		600,000		600,000			$ 150,000	$ 100,000	$ 330,000
letter agreements, description									pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $3.2 million to $1 million with the remaining $2.2 million to be settled in installments of: $330,000 to be paid on July 31, 2022; for the period August 15, 2022, through December 15, 2022 monthly installments of $100,000; and for the period beginning on January 15, 2023, monthly installments of $150,000 until the remaining Deferred Payment amount is satisfied.	pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $3.2 million to $1 million with the remaining $2.2 million to be settled in installments of: $330,000 to be paid on July 31, 2022; for the period August 15, 2022, through December 15, 2022 monthly installments of $100,000; and for the period beginning on January 15, 2023, monthly installments of $150,000 until the remaining Deferred Payment amount is satisfied.
Remaining consideration									$ 2,200,000	$ 2,200,000
Contingent consideration interest													$ 300,000		300,000
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%
Assignment and Assumption Agreement [Member] \| Leo Capital [Member]
Loss Contingencies [Line Items]
Litigation settlement amount					$ 200,000	$ 200,000
Licensing Agreement [Member]
Loss Contingencies [Line Items]
License fee royalty percentage																							5.00%
BTCC License Agreement [Member] \| Two Equal Installments Each [Member]
Loss Contingencies [Line Items]
Payments to Acquire Intangible Assets												$ 100,000
BARC Settlement Agreement [Member]
Loss Contingencies [Line Items]
Payments to Acquire Intangible Assets		$ 225,000
Gain from settlement of license liabilities															600,000
Royalty percentage		50.00%
INDYCAR License Agreement [Member]
Loss Contingencies [Line Items]
Gain from settlement of license liabilities															$ 2,500,000
Liquidating damage claim amount				$ 2,900,000
Settlement payments description	the Company and INDYCAR agreed that the Company’s liabilities under the Prior License Agreements, including any and all royalties and/or any other sums or liabilities of any kind whatsoever were forgiven by INDYCAR and discharged in their entirety in consideration of the Company’s payment to INDYCAR of $250,000 on the date of the INDYCAR Agreement and $150,000 within 30 days following the date of execution of the INDYCAR Agreement. The INDYCAR Agreement became effective upon satisfaction of (i) the Company’s payment to INDYCAR of $250,000 on the date of the INDYCAR Agreement and (ii) the Company’s payment of $150,000 to INDYCAR within 30 days following the date of execution of the INDYCAR Agreement. Both $250,000 and $150,000 were paid to INDYCAR by the Company in May 2024
Letter Agreement [Member]
Loss Contingencies [Line Items]
Interest rate																					15.00%
Continental [Member]
Loss Contingencies [Line Items]
Litigation settlement amount							$ 1,100,000	$ 1,100,000
Litigation settlement, expense							100,000
Payments of litigation settlement							$ 40,000
Hallmark Settlement [Member]
Loss Contingencies [Line Items]
Litigation settlement payment			$ 1,750,000

INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Oct. 03, 2023	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Paid for the assignment	$ 5.0
Notes payable	$ 0.5
Amortization of Intangible Assets		$ 0.5	$ 0.4	$ 1.6	$ 1.2

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)		3 Months Ended		9 Months Ended
	Dec. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2021	Jan. 25, 2021
Net income loss		$ 9,827	$ (3,563,507)	$ 1,101,442	$ (17,092,562)
Decreased net loss per share, Diluted		$ 0.00	$ (1.31)	$ 0.39	$ (6.73)
Revenue recognized				$ 300,000	$ 400,000
Studio 397 B.V. [Member]
Ownership percentage						100.00%
LeMans Esports Series Ltd [Member] \| Maximum [Member]
Ownership percentage							51.00%
LeMans Esports Series Ltd [Member] \| Minimum [Member]
Ownership percentage							45.00%
Common Class A [Member]
Net income loss			$ 73,468		$ 330,552
Decreased stockholders equity	$ 411,535
Common Class A [Member] \| Revision of Prior Period, Error Correction, Adjustment [Member]
Decreased net loss per share, Diluted			$ 0.03		$ 0.13

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 750,995	$ 1,675,210
Accounts receivable, net of allowances of $0 and $450,000 as of September 30, 2024 and December 31, 2023, respectively	893,893	735,839
Prepaid expenses and other current assets	712,497	1,106,848
Total Current Assets	2,357,385	3,517,897
Property and equipment, net	94,345	247,693
Operating lease right of use assets	61,990	197,307
Intangible assets, net	4,459,648	5,795,807
Total Assets	6,973,368	9,758,704
Current liabilities:
Accounts payable	2,598,949	813,659
Accrued expenses and other current liabilities	1,228,830	1,891,315
Purchase commitments	896,647	4,656,538
Operating lease liabilities (current)	32,612	153,015
Total Current Liabilities	4,770,976	7,592,243
Operating lease liabilities (non-current)	25,859	45,659
Other non-current liabilities	5,622	31,098
Total Liabilities	4,802,457	7,669,000
Commitments and contingencies (Note 9)
Stockholders’ Equity:
Preferred stock, $0.0001 par value; authorized 1,000,000 and 1,000,000 shares; and none issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
Additional paid-in capital	92,913,054	91,923,311
Accumulated deficit	(86,340,362)	(87,441,805)
Accumulated other comprehensive loss	(2,480,038)	(1,850,216)
Total Stockholders’ Equity Attributable to Motorsport Games Inc.	4,093,039	2,631,629
Non-controlling interest	(1,922,128)	(541,925)
Total Stockholders’ Equity	2,170,911	2,089,704
Total Liabilities and Stockholders’ Equity	6,973,368	9,758,704
Common Class A [Member]
Stockholders’ Equity:
Common stock, value	315	269
Common Class B [Member]
Stockholders’ Equity:
Common stock, value	70	70
Related Party [Member]
Current liabilities:
Due to related parties	$ 13,938	$ 77,716

SCHEDULE OF STOCK BASED COMPENSATION EXPENSE (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 26,889	$ 105,524	$ 105,738	$ 876,060
General and Administrative Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	24,371	86,737	103,746	632,116
Selling and Marketing Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	331	6,720	1,803	229,454
Research and Development Expense [Member]
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 2,187	$ 12,067	$ 189	$ 14,490

RELATED PARTY LOANS (Details Narrative) - USD ($)			9 Months Ended
RELATED PARTY LOANS (Details Narrative) - USD ($)	Feb. 01, 2023	Jan. 30, 2023	Sep. 30, 2024	Dec. 31, 2023	Sep. 08, 2022
Defined Benefit Plan Disclosure [Line Items]
Liine of credit			$ 12,000,000	$ 12,000,000	$ 12,000,000
Principal and accrued interest payments	$ 3,900,000	$ 3,900,000
Line of credit current			0	$ 0
Common Class A [Member]
Defined Benefit Plan Disclosure [Line Items]
Debt conversion, shares issued	780,385	780,385
Support Agreement [Member]
Defined Benefit Plan Disclosure [Line Items]
Liine of credit					$ 3,000,000
Majority Shareholder [Member]
Defined Benefit Plan Disclosure [Line Items]
Liine of credit			$ 12,000,000
Interest rate			10.00%

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

The carrying value as of the balance sheet date of the current and noncurrent portions of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

SCHEDULE OF CONCENTRATIONS (Details)

3 Months Ended

9 Months Ended

12 Months Ended

Sep. 30, 2024

Sep. 30, 2023

Sep. 30, 2024

Sep. 30, 2023

Dec. 31, 2023

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

22.90%

25.10%

21.40%

25.50%

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

30.70%

32.10%

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

17.70%

28.70%

19.60%

28.60%

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

22.40%

34.30%

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

43.20%

19.80%

45.80%

24.00%

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

27.90%

22.30%

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

^[1]

10.40%

^[1]

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

83.80%

84.00%

86.78%

78.10%

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

81.00%

88.70%

Goodwill and Intangible Assets Disclosure [Abstract]

^[1]

62.30%

^[1]

22.20%

[1]	Less than 10%.

INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2024

INTANGIBLE ASSETS

NOTE 3 – INTANGIBLE ASSETS

In October 2023, the Company sold its NASCAR licensed rights under that certain Second Amended and Restated Distribution and License Agreement with NASCAR Team Properties (the “NASCAR License”) to iRacing.com Motorsport Simulations, LLC (“iRacing”). As consideration for such sale and assignment of the NASCAR License and all rights related thereto (the “Assignment”), iRacing paid the Company $5.0 million at closing of the transactions contemplated by the Assignment. In addition, iRacing is obligated under the Assignment to pay the Company an additional (i) $0.5 million payable on the date that is six months following such closing, which was paid by iRacing in April 2024 and (ii) $0.5 million on the earlier of such date when all NASCAR games have been removed by the Company from the websites, smart phone applications or other digital portal engaging in sales or providing access to the NASCAR games, including without limitation Xbox, PlayStation and Switch and all other domain names, web addresses and websites used by the Company in the its business (collectively, the “Business Platforms”), or December 31, 2024, provided that all NASCAR games have been removed by the Company from the Business Platforms, and in any event, no earlier than such date that is one year following the closing of the Assignment.

Intangible Assets

The following is a summary of intangible assets as of September 30, 2024:

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, 2024	$	906,166	$	1,495,515	$	8,115,937	$	560,000	$	223,194		$	180,266	$	(5,685,271	)	$	5,795,807
Amortization expense		-		-		-		-		-			-		(1,571,504	)		(1,571,504	)
Foreign currency translation adjustments		-		90,096		292,159		-		(4,766	)		4,078		(146,222	)		235,345
Balance as of September 30, 2024	$	906,166	$	1,585,611	$	8,408,096	$	560,000	$	218,428		$	184,344	$	(7,402,997	)	$	4,459,648

Weighted average remaining amortization period at September 30, 2024		0.3		-		2.8		-		-			-		-			-

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, 2024	$	298,538	$	4,646,467	$	560,000	$	180,266	$	5,685,271
Amortization expense		454,500		1,117,004		-		-		1,571,504
Foreign currency translation adjustment		-		142,145		-		4,077		146,222
Balance as of September 30, 2024	$	753,038	$	5,905,616	$	560,000	$	184,343	$	7,402,997

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

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

For the Years Ended December 31,	Total
2024 (remaining period)	$	522,112
2025		916,468
2026		914,839
2027		126,073
2028		54,773
Thereafter		121,344
	$	2,655,609

Amortization expense related to intangible assets was approximately $0.5 million and $0.4 million for the three months ended September 30, 2024 and 2023, respectively, and amortization expense related to intangible assets was approximately $1.6 million and $1.2 million for the nine months ended September 30, 2024 and 2023, respectively.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2024

Payables and Accruals [Abstract]

SCHEDULE OF ACCRUED EXPENSES

Accrued expenses and other current liabilities consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	September 30,		December 31,
	2024		2023
Accrued royalties	$	156,443	$	217,868
Accrued professional and consulting fees		119,778		110,008
Accrued development costs		36,833		32,214
Accrued taxes		68,533		40,000
Accrued payroll and severance		313,333		500,522
Deferred revenue		278,573		270,845
Loss contingency reserves		167,803		545,920
Accrued other		87,534		173,938
Total	$	1,228,830	$	1,891,315

RELATED PARTY TRANSACTIONS (Details Narrative)				3 Months Ended	9 Months Ended
RELATED PARTY TRANSACTIONS (Details Narrative)	Jul. 01, 2024 USD ($)	May 03, 2024 ft²	Mar. 23, 2023 USD ($)	Sep. 30, 2024 USD ($) ft²	Sep. 30, 2024 USD ($) ft²	Jun. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Dec. 31, 2023 USD ($)	Sep. 08, 2022 USD ($)
Related Party Transaction [Line Items]
Long-Term Line of Credit				$ 12,000,000	$ 12,000,000			$ 12,000,000	$ 12,000,000
Proceeds from (Repayments of) Related Party Debt					$ 200,000		$ 200,000
Area of land \| ft²				2,000	2,000
New Services Agreement [Member]
Related Party Transaction [Line Items]
Rent per month			$ 17,500	$ 37,500	$ 142,500
Backoffice Services Agreement [Member]
Related Party Transaction [Line Items]
Rent per month	$ 12,500
Lemon City Group Llc [Member]
Related Party Transaction [Line Items]
Area of land \| ft²		800
Lease expiration		The term of the lease was initially nine months, with a commencement date of October 1, 2023, consistent with the Company’s initial date of occupancy, and expiring on June 30, 2024, terminable with a 60-day written notice with no penalty
Rent per month						$ 1,800
Related Party [Member]
Related Party Transaction [Line Items]
Other Receivables				$ 19,000	$ 19,000			$ 100,000

SCHEDULE OF REGISTERED DIRECT OFFERINGS AND WAINWRIGHT WARRANTS (Details) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2024 USD ($) $ / shares shares
Registered Direct Offering 1 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 01, 2023
Shares Issued \| shares	183,020
Warrant Strike Price \| $ / shares	$ 26.75
Gross proceeds \| $	$ 3.9
Net Proceeds \| $	$ 3.6
Warrants issued \| shares	10,981
Warrants Term	5 years
Registered Direct Offering 2 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 02, 2023
Shares Issued \| shares	144,366
Warrant Strike Price \| $ / shares	$ 29.375
Gross proceeds \| $	$ 3.4
Net Proceeds \| $	$ 3.1
Warrants issued \| shares	8,662
Warrants Term	5 years
Registered Direct Offering 3 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Offering Date	Feb. 03, 2023
Shares Issued \| shares	232,188
Warrant Strike Price \| $ / shares	$ 21.738
Gross proceeds \| $	$ 4.0
Net Proceeds \| $	$ 3.7
Warrants issued \| shares	13,931
Warrants Term	5 years

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities:
Net loss	$ (168,940)	$ (16,994,206)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment of intangible assets		4,004,627
Loss on disposal of property and equipment		7,661
Gain from settlement of license liabilities	(3,248,000)
Depreciation and amortization	1,755,517	1,512,630
Purchase commitment and license liability interest accretion	65,109	621,780
Stock-based compensation	105,738	876,060
Changes in the fair value of stock warrants	(25,476)	(438,148)
Sales return and price protection reserves		280,000
Changes in assets and liabilities:
Accounts receivable	(148,163)	822,477
Due from related parties	(25)	(190,652)
Operating lease liabilities	(4,601)	(23,694)
Prepaid expenses and other assets	411,347	83,338
Accounts payable	1,839,933	(1,046,204)
Due to related parties	(65,250)	2,884
Other non-current liabilities	(65,109)
Accrued expenses and other liabilities	(1,149,559)	375,436
Net cash used in operating activities	(697,479)	(10,106,011)
Cash flows from investing activities:
Purchase of property and equipment	(25,145)	(26,798)
Net cash used in investing activities	(25,145)	(26,798)
Cash flows from financing activities:
Repayments of purchase commitment liabilities	(50,000)	(700,000)
Payment of license liabilities		(262,500)
Issuance of common stock from stock purchase commitment agreement		644,750
Issuance of common stock from registered direct offerings	884,051	10,404,784
Net cash provided by financing activities	834,051	10,087,034
Effect of exchange rate changes on cash and cash equivalents	(1,035,642)	248,811
Net (decrease) increase in cash and cash equivalents	(924,215)	203,036
Total cash and cash equivalents at beginning of the period	1,675,210	979,306
Total cash and cash equivalents at the end of the period	750,995	1,182,342
Cash paid during the year for:
Interest	25,371	405,690
Non-cash investing and financing activities:
Shares issued to Driven Lifestyle Group LLC for extinguishment of related party loan		3,948,566
Extinguishment of Driven Lifestyle Group LLC related party loan for Class A shares		(3,948,566)
Issuance of warrants in connection with registered direct offerings		$ 39,852

INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

SCHEDULE OF ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS

The following is a summary of intangible assets as of September 30, 2024:

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, 2024	$	906,166	$	1,495,515	$	8,115,937	$	560,000	$	223,194		$	180,266	$	(5,685,271	)	$	5,795,807
Amortization expense		-		-		-		-		-			-		(1,571,504	)		(1,571,504	)
Foreign currency translation adjustments		-		90,096		292,159		-		(4,766	)		4,078		(146,222	)		235,345
Balance as of September 30, 2024	$	906,166	$	1,585,611	$	8,408,096	$	560,000	$	218,428		$	184,344	$	(7,402,997	)	$	4,459,648

Weighted average remaining amortization period at September 30, 2024		0.3		-		2.8		-		-			-		-			-

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, 2024	$	298,538	$	4,646,467	$	560,000	$	180,266	$	5,685,271
Amortization expense		454,500		1,117,004		-		-		1,571,504
Foreign currency translation adjustment		-		142,145		-		4,077		146,222
Balance as of September 30, 2024	$	753,038	$	5,905,616	$	560,000	$	184,343	$	7,402,997

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, 2024	$	298,538	$	4,646,467	$	560,000	$	180,266	$	5,685,271
Amortization expense		454,500		1,117,004		-		-		1,571,504
Foreign currency translation adjustment		-		142,145		-		4,077		146,222
Balance as of September 30, 2024	$	753,038	$	5,905,616	$	560,000	$	184,343	$	7,402,997

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
2024 (remaining period)	$	522,112
2025		916,468
2026		914,839
2027		126,073
2028		54,773
Thereafter		121,344
	$	2,655,609

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Litigation

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

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

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

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

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

On February 11, 2021, HC2 Holdings 2 Inc. (now known as Innovate 2) (“Innovate”) and Continental General Insurance Company (“Continental”), former minority stockholders of 704Games, filed a complaint (the “HC2 and Continental Complaint”) in the U.S. District Court for the District of Delaware against the Company, the Company’s former Chief Executive Officer and Executive Chairman, the Company’s former Chief Financial Officer, and the manager of Driven Lifestyle. The complaint was later amended and added Leo Capital Holdings LLC (“Leo Capital”) as an additional plaintiff and the controller of Driven Lifestyle as an additional individual defendant. The complaint alleges, among other things, purported misrepresentations and omissions concerning 704Games’ financial condition made in connection with the Company’s purchase of these minority shareholders’ interest in 704Games in August and October 2020. The complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder; Section 20(a) of the Exchange Act; Section 20A of the Exchange Act; breach of the Company’s obligations under the Stockholders’ Agreement dated August 14, 2018; fraudulent inducement; breach of fiduciary duties; and unjust enrichment. The plaintiffs alleged, among other things, damages from the defendants, jointly and severally, based on the alleged difference between the fair market value of the shares of common stock of 704Games on the date of plaintiffs’ sale and the purchase price that was paid, as well as punitive damages and other relief. In May 2021, the Company, along with the other defendants, filed a motion to dismiss the plaintiffs’ complaint. On March 28, 2022, the court entered an order denying the motion to dismiss.

On January 11, 2023, in connection with the HC2 and Continental Complaint, the Company, along with other defendants, entered into a settlement agreement with one of the plaintiffs, Continental, to settle the claims made by Continental against the defendants and the claims made by the defendants against Continental. Under the terms of the settlement agreement, the Company agreed 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 was 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 was paid in full. As of September 30, 2024, all required payments under the settlement agreement with Continental have been made.

On October 14, 2023, the Company, along with other defendants, reached and executed a settlement agreement with Leo Capital in connection with the HC2 and Continental Complaint, which settles the claims made by Leo Capital against the defendants, as well as the claims made by the defendants against Leo Capital. Under the terms of the settlement agreement, the Company agreed to pay the sum of $0.2 million to Leo Capital. The Company paid the full $0.2 million settlement on October 16, 2023, as required by terms of the settlement agreement.

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

In respect of Innovate, the Company believes that the plaintiff’s allegations are without merit and the Company intends to continue to vigorously defend its position to the fullest extent permitted by law. Given the litigation is ongoing, the outcome of the litigation remains uncertain at this time. As such, the Company does not believe it is probable a settlement will be reached, nor can any such settlement amount be reasonably estimable, and has not recognized a settlement liability in respect of the remaining plaintiff.

On July 28, 2023, Wesco Insurance Company (“Wesco”) filed a complaint in state court in Florida against the Company, as well as the other defendants involved in the litigation related to the HC2 and Continental Complaint (the “Underlying Action”). The Company had previously submitted the Underlying Action for coverage under a management liability policy issued by Hallmark Specialty Insurance Company (“Hallmark”) and an excess policy with Wesco (the “Wesco Policy”). Wesco’s complaint seeks declaratory relief to determine Wesco’s obligations to the defendants under an excess policy of insurance issued to the Company by Wesco for the Underlying Action. Wesco claims that there is no coverage afforded to the defendants for the Underlying Action under the Wesco Policy. The Company disagrees with and disputes Wesco’s position regarding coverage for the Underlying Action under the Wesco Policy and plans to defend its position.

On November 22, 2023, the Company entered into an insurance policy and claims release with Hallmark (the “Hallmark Settlement”) related to a previously submitted Underlying Action for coverage under a management liability policy issued by Hallmark. Under the terms of the Hallmark Settlement, Hallmark agreed to pay $1.75 million, which was fully paid by Hallmark within 30 days of execution of the Hallmark Settlement.

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 $8,952,000 USD as of September 30, 2024) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the applicable license. The Company is obligated to pay ACO an annual royalty payment beginning from the time of the launch of the first video game product and continuing through each anniversary thereof for the term of the license. Further, pursuant to the Le Mans Amendment, the Company has a right to priority distribution of profits to recoup the additional funding and royalty payments made by the Company under the Le Mans Gaming License. See Note 3 – Intangible Assets for additional information.

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 nine months ended September 30, 2024, the Company paid royalties to Epic of approximately $19,000 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.

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

License Commitments

On May 29, 2020, the Company secured a licensing agreement (the “Prior BTCC License Agreement”) with BARC (TOCA) Limited (“BARC”), the exclusive promoter of the British Touring Car Championship (the “BTCC”). Pursuant to the Prior BTCC License Agreement, the Company was granted an exclusive license (the “BTCC License”) to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the BTCC, on consoles, PC and mobile applications, esports series and esports events (including the Company’s esports platform). In exchange for the BTCC License, the Prior BTCC License Agreement required the Company to pay BARC an initial fee in two equal installments of $100,000 each, both of which were made prior to their respective due dates. Following the initial fee, the Prior BTCC License Agreement also required the Company to pay royalties, including certain minimum annual guarantees, on an ongoing basis to BARC and to meet certain product distribution, marketing and related milestones, subject to termination penalties. On October 26, 2023, BARC delivered notice to the Company terminating the Prior BTCC License Agreement. The termination of the Prior BTCC License Agreement was effective as of November 3, 2023. On April 12, 2024, the Company entered into a settlement agreement (the “BARC Settlement Agreement”) with BARC for settlement of the remaining liability in connection with the Prior BTCC License. Pursuant to the BARC Settlement Agreement, the Company and BARC, without admitting any liabilities, agreed that the Prior BTCC License Agreement was terminated without any liabilities and that any and all royalties and/or any other sums whatsoever were forgiven by BARC and discharged in their entirety in consideration of (i) the Company’s one-time payment of $225,000 to BARC and (ii) the Company and BARC entering, effective as of April 12, 2024, into a new License Agreement to use certain licensed intellectual property related to, themed as, or containing the British Touring Car Championship (the “New BTCC License Agreement). Pursuant to the BARC Settlement Agreement, the Company recognized a gain of $0.6 million which is included in gain from settlement of license liabilities on the condensed consolidated statements of operations for the nine months ended September 30, 2024.

On April 12, 2024, the Company and BARC entered into the New BTCC License Agreement. Pursuant to the New BTCC License Agreement, BARC granted the Company a non-exclusive license to use the “British Touring Car Championship,” “BTCC” and (insofar only as this is included in the title of the British Touring Car Championship) certain title sponsor logos, the title “British Touring Car Championship,” “BTCC” and other related intellectual property rights described in the New BTCC License Agreement (collectively, the Licensed IP”) for the official Licensed IP downloadable content purchased for the rFactor 2 video game digitally sold and distributed through the Steam store (including, but not limited to purchases through Licensee’s RaceControl storefront) (the “Products”), including the Products’ development, manufacturing, marketing, publicity, advertisement, promotion, distribution, publicizing, broadcasting, streaming, making available and/or selling worldwide, continued commercial exploitation of the Products, including the right to use, modify and improve the Products developed using the Licensed IP. As consideration for the license under the New BTCC License Agreement, the Company will be obligated to pay BARC an annual royalty in the amount of 50% of Adjusted Gross Annual Sales (as defined in the New BTCC License Agreement) of official Company’s downloadable Products purchased for the rFactor 2 video game digitally sold and distributed through the Steam store during the term of the New BTCC License Agreement. The term of the New BTCC License Agreement expires on December 31, 2026. The New BTCC License Agreement further provides that, during the term of New BTCC License Agreement, the Company and BARC agree to negotiate in good faith the options for the Company to develop an official British Touring Car Championship video game and one or more esports competitions based upon the British Touring Car Championship.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

On July 13, 2021, the Company entered into a license agreement with INDYCAR LLC (“INDYCAR”) pursuant to which INDYCAR granted the Company a license to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the INDYCAR SERIES (the “INDYCAR Gaming License”). The INDYCAR Gaming License was a long-term agreement, in connection with which the parties intended to form an exclusive relationship for the development of video games to be the official video games of the INDYCAR SERIES. Additionally, the Company and INDYCAR entered into a license agreement pursuant to which the Company was granted a license to use certain licensed intellectual property for motorsports and/or racing esports events related to, themed as, or containing the INDYCAR SERIES (including the rFactor 2 platform) (the “INDYCAR Esports License” and together with the INDYCAR Gaming License, the “INDYCAR Licenses”). Upon execution of the INDYCAR Gaming License, the Company recorded a liability and a related intangible asset equal to the present value of the minimum royalty payments due under the agreement. The license intangible asset was impaired during 2023 as discussed further in Note 3 – Intangible Assets in the audited consolidated financial statements for the year ended December 31, 2023, as included in the 2023 Form 10-K. On November 8, 2023, INDYCAR delivered notice to the Company terminating the INDYCAR Licenses. The termination of the INDYCAR Licenses was effective as of November 8, 2023. The notice also demanded, among other things, certain liquidated damages in accordance with the INDYCAR license agreements amounting to approximately $2.9 million related to certain minimum payments due under such license agreements.

On May 17, 2024, the Company entered into a Settlement Agreement and License with INDYCAR (“the INDYCAR Agreement”). The INDYCAR Agreement resolved any and all disputes between the Company and INDYCAR with respect to the termination of (i) the License Agreement, dated July 13, 2021, by and between INDYCAR and the Company with respect to INDYCAR SERIES racing series related gaming products (the “IndyCar Products License”) and (ii) the License Agreement, dated July 13, 2021, by and between INDYCAR and the Company with respect to INDYCAR SERIES racing series related esports events (the “IndyCar Events License,” together with the IndyCar Products License, the “Prior License Agreements”). Pursuant to the INDYCAR Agreement, subject to the satisfaction of the conditions to the effectiveness of the INDYCAR Agreement, the Company and INDYCAR agreed that the Company’s liabilities under the Prior License Agreements, including any and all royalties and/or any other sums or liabilities of any kind whatsoever were forgiven by INDYCAR and discharged in their entirety in consideration of the Company’s payment to INDYCAR of $250,000 on the date of the INDYCAR Agreement and $150,000 within 30 days following the date of execution of the INDYCAR Agreement. The INDYCAR Agreement became effective upon satisfaction of (i) the Company’s payment to INDYCAR of $250,000 on the date of the INDYCAR Agreement and (ii) the Company’s payment of $150,000 to INDYCAR within 30 days following the date of execution of the INDYCAR Agreement. Both $250,000 and $150,000 were paid to INDYCAR by the Company in May 2024. Pursuant to the INDYCAR Agreement, the Company recognized a gain of $2.5 million which is included in gain from settlement of license liabilities on the condensed consolidated statements of operations for the nine months ended September 30, 2024.

Further, as of the effective date of the INDYCAR Agreement, the Company granted to INDYCAR a royalty-free, perpetual, irrevocable, exclusive, transferable, and sublicensable, right and license throughout the world (the “License”) to use the licensed intellectual property described in the Agreement (the “Licensed Intellectual Property”) for the purpose of developing, marketing, distributing and selling esports series and esports events related to, themed as, or containing the INDYCAR SERIES racing series and/or motorsports and/or racing (including without limitation simulation style) video gaming products related to, themed as or containing the INDYCAR SERIES racing series, on current and future versions of consoles, PCs, smart TVs, mobile applications, gaming subscription services, cloud gaming, cloud streaming, handheld products and other new generation formats. In addition, the Company agreed to provide INDYCAR from the effective date of the INDYCAR Agreement to December 31, 2024, upon request by INDYCAR, with up to 50 hours free-of-charge consulting services to facilitate the transition of the INDYCAR series game development using the Licensed Intellectual Property to the software developer of INDYCAR’s choice.

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

Purchase Commitment Liabilities

On April 20, 2021, the Company acquired 100% of the share capital of Studio 397 B.V. (“Studio397”) from Luminis International B.V. and Technology In Business B.V. (collectively, the “Sellers”). The purchase price originally consisted of (i) $12.8 million paid at closing and (ii) $3.2 million payable April 2022 on the first anniversary of closing, as deferred consideration (the “Deferred Payment”). On April 22, 2022 and July 21, 2022, the Company entered into certain letter agreements with the Sellers pursuant to which, among other things, the Deferred Payment installment amount due to be paid by the Company on the first anniversary of closing was reduced from $3.2 million to $1 million with the remaining $2.2 million to be settled in installments of: $330,000 to be paid on July 31, 2022; for the period August 15, 2022, through December 15, 2022 monthly installments of $100,000; and for the period beginning on January 15, 2023, monthly installments of $150,000 until the remaining Deferred Payment amount is satisfied. The letter agreements also call for 15% interest on the Deferred Payment balance effective on July 19, 2022. The remaining principal balance of the Deferred Payment as of September 30, 2024 was $0.6 million with unpaid accrued interest of $0.3 million.

CONCENTRATIONS (Tables)

9 Months Ended

Sep. 30, 2024

Customer Concentration Risk [Member]

SCHEDULE OF CONCENTRATIONS

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

SCHEDULE OF CONCENTRATIONS

	Three Months Ended September 30,						Nine Months Ended September 30,
Customer	2024			2023			2024			2023
Customer B		22.9	%		25.1	%		21.4	%		25.5	%
Customer C		17.7	%		28.7	%		19.6	%		28.6	%
Customer D		43.2	%		19.8	%		45.8	%		24.0	%
Customer E		-*			10.4	%		-*			-*
Total		83.8	%		84.0	%		86.78	%		78.1	%

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	September 30, 2024			December 31, 2023
Customer B		30.7	%		32.1	%
Customer C		22.4	%		34.3	%
Customer D		27.9	%		22.3	%
Total		81.0	%		88.7	%

Supplier Concentration Risk [Member]

SCHEDULE OF CONCENTRATIONS

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

SCHEDULE OF CONCENTRATIONS

Three Months Ended

September 30,

Nine Months Ended

September 30,

Supplier

2024

2023

2024

2023

Supplier A

62.3

22.2

*	Less than 10%.

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Selling and Marketing Expense [Member]
Related party expenses	$ 0	$ 0	$ 0	$ 17,076
Research and Development Expense [Member]
Related party expenses	0	15,439	0	46,361
General and Administrative Expense [Member]
Related party expenses	$ 37,500	$ 116,530	$ 188,772	$ 298,190

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual [Table]
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

STOCKHOLDERS’ EQUITY

9 Months Ended

Sep. 30, 2024

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Class A and B Common Stock

As of September 30, 2024, the Company had 3,183,558 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 September 30, 2024 and December 31, 2023, 704Games LLC (“704Games”), a wholly-owned subsidiary of Motorsport Games Inc., 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 September 30, 2024, the warrants had no intrinsic value and a remaining life of 12 months.

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 September 30, 2024, the Wainwright Warrants were assessed to have a fair value of approximately $0.01 million and deemed to be liability-classified awards, which were recorded within other non-current liabilities on the unaudited condensed consolidated balance sheets.

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.

July 2024 Securities Purchase Agreement

On July 26, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors. The Purchase Agreement provided for the sale and issuance by the Company of an aggregate of: (i) 351,928 shares (the “Shares”) of the Company’s Class A common stock, $0.0001 par value (the “Class A common stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 108,902 shares of Class A common stock, and (iii) in a concurrent private placement, Series A warrants (the “Series A Warrants”) to purchase up to 460,830 shares of Class A common stock and Series B warrants (the “Series B Warrants,” and collectively with the Series A Warrants, the “Purchase Warrants”) to purchase up to 460,830 shares of Class A common stock (the “July 2024 Offerings”). The Company raised $1.0 million in gross proceeds from the July 2024 Offerings before deducting the placement agent’s fees and other offering expenses, which it intends to use for working capital and general corporate purposes. The Pre-Funded Warrants were exercised on August 13, 2024.

The offering price per Share and accompanying Purchase Warrants (one Series A Warrant and one Series B Warrant) was $2.17 and the offering price per Pre-Funded Warrant and accompanying Purchase Warrants (one Series A Warrant and one Series B Warrant) was $2.1699. Each Pre-Funded Warrant is exercisable immediately for one share of the Company’s Class A common stock at an exercise price of $0.0001 per share and will expire when exercised in full.

The Shares and the Pre-Funded Warrants described above (and the shares of the Company’s Class A common stock issuable upon the exercise of the Pre-Funded Warrants) were offered pursuant to an effective shelf registration statement on Form S-3 (File No. 333-262462) (the “Registration Statement”), a base prospectus included in the Registration Statement at the time it originally became effective (the “Base Prospectus”), and a prospectus supplement, dated July 26, 2024 (the “Prospectus Supplement”), filed with the Securities and Exchange Commission (the “Commission”) on July 29, 2024 pursuant to Rule 424(b)(5) under the Securities Act.

The Series A Warrants and the Series B Warrants both have an exercise price of $2.17 per share. The shares of Class A common stock issuable upon the exercise of the Purchase Warrants are collectively referred to as the “Warrant Shares.” The Purchase Warrants will become exercisable on the effective date of the stockholder approval for the issuance of the shares of Class A common stock issuable upon exercise of the Purchase Warrants (the “Stockholder Approval Date”). The Series A Warrants will expire five and one-half years following the Stockholder Approval Date and the Series B Warrants will expire 18 months following the Stockholder Approval Date. The Purchase Warrants and the Warrant Shares are not being registered under the Securities Act pursuant to the Registration Statement and the Prospectus Supplement. The Purchase Warrants and the Warrant Shares were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. As of September 30, 2024, the Purchase Warrants had not been approved by stockholders.

On July 29, 2024, the Company completed the July 2024 Offerings with H.C. Wainwright & Co., LLC acting as the exclusive placement agent for the transaction (the “Agent”). In connection with the July 2024 Offerings, the Company paid the Agent a transaction fee equal to 7.0% of the aggregate gross proceeds from the offering, non-accountable expenses and certain other closing fees.

Stock Purchase Commitment Agreement

During the nine months ended September 30, 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. The Alumni Purchase Agreement expired on December 31, 2023.

The entire disclosure for equity.

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BUSINESS ORGANIZATION, NATURE OF OPERATIONS, AND RISKS AND UNCERTAINTIES

9 Months Ended

Sep. 30, 2024