Motorsport Games Q3 FY2023 Results. $1.7 million revenue. $3.5 million loss. LeMans Ultimate delay. INDYCAR®️ game suspended. BTCC calls TOCA time.

[KR_EP]

...NASCAR license sold for a pittance. $3.2 million cash in hand. Average monthly net cash burn from operations of approximately $1.1 million. NASCAR limited use of license expires December 31, 2024. In total, 38 more people were laid off, representing 40% of the (remaining) work force, including United Kingdom staff & the entire Australian development team.

The unstoppable force, the immovable (insolvent) object...​

Motorsport Games​

Previously on InstallBase​

Motorsport Games reverse stock split, resignations, restructuring, Q3 results // cash burn baby burn​

Too Long Didn't Race​

Investor Relations (IR)
Financial Year (FY)
January - December​

Motorsport Games Reports First Quarter 2023 Financial Results (May 11, 2023)​

Select Financial Highlights

Revenue: $1.7 million
Net Loss: $5.3 million
Raised Approximately $11.3 Million of Gross Proceeds in 3 Registered Direct Offerings

Cash Flow and Liquidity

As of March 31, 2023, the Company had cash and cash equivalents of approximately $5.8 million.
As of April 30, 2023, the Company’s cash and cash equivalents has reduced further to $4.9 million.
During 2023, the Company had negative cash flows from operations of approximately $5.7 million, representing an average monthly net cash burn from operations of approximately $1.9 million.

Additional Read: well there's my InstallBase post right here.

Motorsport Games Reports Second Quarter 2023 Financial Results (August 21, 2023)​

Select Financial Highlights

Revenue: $1.7 million
Net Loss: $8.2 million
Company recognizing impairment losses of $4.0 million in 2023

Cash Flow and Liquidity

As of June 30, 2023, the Company had cash and cash equivalents of approximately $2.0 million.
As of July 31, 2023, the Company’s cash and cash equivalents has reduced further to $1.4 million.
Company had negative cash flows from operations of approximately $8.9 million, representing an average monthly net cash burn from operations of approximately $1.5 million.

Additional Read: where else than in my InstallBase post right over there yonder.

Motorsport Games Reports Third Quarter 2023 Financial Results (November 7, 2023)​

Select Financial Highlights

Revenue: $1.7 million
Net Loss: $3.5 million
Company recognizing impairment losses of $4.0 million in 2023

Cash Flow and Liquidity

As of September 30, 2023, the Company had cash and cash equivalents of approximately $1.2 million.
As of October 31, 2023, the Company’s cash and cash equivalents has increased to $3.2 million, primarily due to the sale of its NASCAR license as previously announced on October 3, 2023.
During the nine months ended September 30, 2023, the Company had negative cash flows from operations of approximately $10.1 million, representing an average monthly net cash burn from operations of approximately $1.1 million.

Additional Read: why don't you take a seat, cause it's none other than my InstallBase post that you're perusing right now!

“We retain the ability to continue selling the NASCAR game back catalog through to the end of 2024 ahead of an anticipated 2025 game by the new developer, which we believe will offer some revenue stability as we aim to bring new products to market, albeit with this revenue expected to decline over time. Additional cost-saving measures have included the recent closure of our Australian development studio, with corresponding global headcount reductions, and the suspension of the development of our previously planned INDYCAR game, to decrease operating expenses whilst also removing projects that are underperforming or are unlikely to generate revenue.”

“Meanwhile, we are excited to confirm the updated release date of our planned Le Mans Ultimate title, as we anticipate releasing the game on February 20, 2024. This simulation title, created by the team behind the renowned rFactor 2, Studio 397, will look to bring together incredible sportscar machinery with unparalleled physics alongside innovative gameplay features, such as the collaborative asynchronous co-op multiplayer mode. Additionally, the game will feature the RaceControl multiplayer service recently released as an open beta into rFactor 2 to great success, exceeding initial player expectations and driving a recognizable uplift in sales of rFactor 2 content...

...The $5 million reduction in net loss was primarily the result of the Company reducing its marketing, development, and general and administrative spend by $4.6 million, driven in part by actions taken by the Company as part of its previously announced 2022 Restructuring Program. In addition, revenue for 2023 was $1.7 million compared to $1.2 million for 2022, a $0.5 million, or 38.5%, improvement that positively impacted net loss. The increase in revenue was primarily driven by the release of the NASCAR Heat 5 DLC, Next Gen Car Update, in June 2023.

Stephen Hood, Chief Executive Officer of Motorsport Games.​

Liquidity Snakes & Corporate Ladders

• The Company’s Form 10-Q for the period ended September 30, 2023 discloses there is substantial doubt about the Company’s ability to continue as a going concern. Based on the available cash on hand and the Company’s average monthly net cash burn from operations of approximately $1.1 million during the nine months ended September 30, 2023, the Company does not believe it has sufficient liquidity to fund its operations over the next year and that additional funding will be required in order to continue operations.
• In order to address its liquidity short fall, the Company is actively exploring several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions; ii) strategic alternatives for its business, including, but not limited to, the sale or licensing of the Company’s assets in addition to its recent sale of its NASCAR license; and iii) further cost reduction and restructuring initiatives.
• In 2022, the Company announced the 2022 Restructuring Program to reduce its operating costs, which was initially expected to generate annualized cost reductions of approximately $4 million by the end of 2023. Through the period ended September 30, 2023, the Company has made progress by achieving annualized savings of approximately $6.7 million and is continuing efforts to achieve further cost reductions.

Source: Q3 Results Presentation (page 6)

Release Schedule

2023: NASCAR 23
2024: BTCC (British Touring Car Championship)

Suspended without Pay for Party People to Develop Down Under

20XX: IndyCar Series

Exclusive Relationships with Iconic Racing Franchises

- NASCAR - Licensed until 2030 for games
- 24 Hour Le Mans / World Endurance Championship (WEC) - Joint Venture & long-term exclusive gaming and esports license
- IndyCar - Entered into a long-term gaming and esports license partnership with INDYCAR
- British Touring Car Championship (BTCC) -Licensed until 2027 for both games and esports

NASCAR license expires on December 31, 2029; 24 Hour Le Mans / ACO / WEC license expires 10 years starting on the date of the first release of a product; BTCC license expires on December 31, 2026

Source: Investor Presentation | 2023 May (slide 5)

DIAMOND IN THE ROUGH
[Steam] Le Mans Ultimate (Studio 397) {2023.12.xx} {2024.02.20}

I AM A RACE CONTROLLER
[Steam] rFactor 2 (Studio 397) {2013.03.28}​

This week in rFactor 2 Online

Another lost license, this time British Touring Car Championship

BTCC | TOCA terminates BTCC videogame licence with Motorsport Games

British Touring Car Championship official site

www.btcc.net

'BARC (TOCA) Limited – more widely known as ‘TOCA’ – is the rights holder to the British Touring Car Championship (‘BTCC’).

In May 2020, TOCA entered into an agreement with Motorsport Gaming US LLC – an entity more widely known as ‘Motorsport Games’.

That agreement exclusively licensed Motorsport Games to produce interactive video gaming products relating to the British Touring Car Championship.

It is with regret that TOCA now advise that it has been forced to terminate that agreement forthwith, due to ongoing fundamental breaches of the agreement by Motorsport Games. Having been given sufficient latitude to rectify those contractual breaches, unfortunately Motorsport Games has failed to do so.

In order to protect the reputation and intellectual property of the BTCC, including those of its participants and partners, TOCA had been left with no option but to terminate the agreement and immediately withdraw all licensed BTCC rights that were provided to Motorsport Games under that agreement.

TOCA is aware that this news will come as a huge disappointment to our hundreds of thousands of fans, many of whom were eagerly anticipating the release of a new BTCC game… and we very much share that frustration, due to Motorsport Games being unable to fulfil its contractual commitments.'

BTCC has every right to do the above (SEC Filing mentions the annual license fee of $800,000 still being owed by Motorsport Games). But its a crying shame as Studio 397 is an ideal choice, having already created many of the cars & tracks. Still don't understand why its parent company failed to take the bull by the horns & lead its recovery. Such a waste of racing human potential.

Motorsport Network Appoints Mike Spinelli, Travis Okulski As Group Editorial Leaders​

NEW YORK, November 1, 2023 – Motorsport Network, the leading independent global digital media platform in motorsport and automotive, today announced the hiring of Mike Spinelli as Head of Content and Travis Okulski as Editorial Director, Automotive. Spinelli will work on brand extensions across the Motorsport Network portfolio, including Motorsport.com and Autosport, while Okulski will focus on Motor1, InsideEVs, and RideApart. Both hires come as part of the recent acquisition and investment in Motorsport Network by GMF Capital to expand the presence and scope of these titles.

Still going about its business, mostly recently making the following hires plus you see mention of investment from GMF Capital, so why allow Motorsport Games to go from bad to worse?

Indycar game suspends development, and it looks like Penske can't get MSG to hand over the rights?

Motorsport Games suspends development of IndyCar game

The decision Penske Entertainment didn’t want to make with its beleaguered video game vendor was made for it on Tuesday when Motorsport Games announced, “the suspension of the development of our pr…

racer.com

“Significant work and collaboration has gone into the development of our title with Motorsport Games,” Penske Entertainment said in a statement. “We’re disappointed they do not have the resources to continue development. We’ll announce next steps in due course.”

Buried on page 4 of the Q3 Financial report is the following, not sure how credible it is or if INDYCAR will play along or take its ball home with it as BTCC has done. The mention of traxion is vague has yet to be updated, saw one staff writer mention on social media they were among those affected, don't wish to slow down to view the car crash by prying in their personal affairs or any of the developers impacted so I'll wait to see what formal statements are made in the days & weeks to follow. Why they couldn't transfer it over to its parent company, late edit: Driven Lifestyle Group LL, the (con) artist formerly known Motorsport Network LLC., to join its line up is beyond me as with so many other things about this whole damn car crashing thing.

Forward-Looking Statements

(v) the Company’s plans to pivot its Traxion media website to build a truly inclusive ecosystem within the racing segment
(vi) the Company’s plans to identify opportunities to resume development of its INDYCAR title elsewhere within the business following the closing of its Australian studio;

 

[ILikeFeet]

I'm wonder if Penske is gonna try to make a claim on the assets MSG already developed. wouldn't be surprised if halting development on the game is grounds to terminate the licensing, but Penske might want something more...

now that iRacing has NASCAR, can we get an IMSA game too?

 

[KR_EP]

Late edit on the article to fix a typo, it is $800,000 not £800,00 outstanding, added a link to the SEC Filing (page 2, last sentence) in the OP. Will keep an eye on the Motorsport Games IR page for any new SEC filings submitted. As mentioned in the previous thread, this story warrants a full investigation to really comprehend. Shall continue to read the Studio 397 forums too.

I'm wonder if Penske is gonna try to make a claim on the assets MSG already developed. wouldn't be surprised if halting development on the game is grounds to terminate the licensing, but Penske might want something more...

now that iRacing has NASCAR, can we get an IMSA game too?

Good question & yes to IMSA. Any company interested in the INDYCAR license ought to investigate buying existing assets, maybe reconstitute the Australian development team in a new entity. Would need to know how far along it is, whether or not they could finish INDYCAR game by themselves, or assist iRacing/Monster Games in doing so. For example how Straight4 Studios has signed a strategic partnership with Reiza Studios. Thinking about it, Straight 4 Studios would be an ideal choice a new BTCC title using work by Studio 397 or its own. It has a publishing deal with PLAION & continues to recruit former staff from Slightly Mad Studio & new recruits from further afield for GTR Revival. Blog entries & the company newsletter are worth a look here. It also turns out the news of the rights being withdrawn hasn't escaped Ian Bell's attention either as he raised the prospect, if only in passing of GTRevival including licensed DLC. BARC: I'm listening.gif

​

Quick question. How much would you all like a BTCC total DLC, all cars, tracks and drivers for GTRevival?​

​

I'm very pleased to announce that my old friend Andy Garton is joining Straight4 effective immediately. Andy was my second ever 'employee' about 24 years ago and has been instrumental in all of our best work. Welcome back mate!​

Companies buy pre-made assets & other materials from UNREAL & Unity stores all the time. I don't pretend to know how it would be done in practice for any game in development let alone one that is licensed. Depends on whether they're using middleware or propriety tech, as we saw with the statement issued by Studio 397 after it was claimed RENNSPORT used its physics code without permission. But let's end on a positive note, here's the release date trailer for Le Mans Ultimate. All 19, make that 12 seconds of it! Looks suitably Le Mansy Mind.

​

 

[KR_EP]

Why they couldn't transfer it over to its parent company, late (litigious) edit: Driven Lifestyle Group LL, the (con) artist formerly known Motorsport Network LLC., to join its line up is beyond me as with so many other things about this whole damn car crashing thing.

Why indeed. Against my better judgement, decided to slow down & take a closer at this car crash after all - to which I say, now that I know how the silly sim sausage is made, I'm going Aston Martin green vegan. All I wanted was a new TOCA, maybe another NASCAR or two. Don't worry about reading everything, just skim through the SEC Filing & keep on moving pal.

Quarterly report which provides a continuing view of a company's financial position
November 7, 2023
(SEC Filings, Motorsport Games)
TLDR?
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 consolidated financial statements were issued.

On October 3, 2023, the Company, 704Games and iRacing entered into an Assignment and Assumption Agreement (the “iRacing Agreement”), whereby 704Games sold and transferred its NASCAR licensed rights under that certain Second Amended and Restated Distribution and License Agreement, by and between 704Games and NASCAR Team Properties (“NTP”) (the “NASCAR License”), to iRacing. As consideration for the sale and assignment of the NASCAR License and all rights related thereto, which was approved by NTP, iRacing paid $5 million to 704Games on October 3, 2023 (the “Closing Date”). In addition, iRacing is obligated under the iRacing Agreement to pay 704Games an additional (i) $0.5 million payable six months after the Closing Date and (ii) $0.5 million payable on the earlier of (a) when all NASCAR games have been removed by 704Games from its various Business Platforms (as defined in the iRacing Agreement), or (b) December 31, 2024, provided that all NASCAR games have been removed by 704Gamesfrom its various Business Platforms, and in any event, no earlier than one year after the Closing Date. iRacing also assumed all liabilities that accrue under the NASCAR License following the date of the iRacing Agreement (the “Assumed Liabilities”), but did not assume any liabilities of 704Games or its affiliates, whether relating to the NASCAR License or otherwise, other than the Assumed Liabilities. Pursuant to the iRacing Agreement, 704Games cannot develop, create or license any new content related to NASCAR games other than ordinary course of business “patches” and the Company’s planned NASCAR Heat 5 2022 Season downloadable content (“DLC”). Furthermore, 704Games has agreed that it will not restrict, limit or impede, directly or indirectly, iRacing from obtaining any additional licenses from NASCAR, including, but not be limited to, any racetracks, race cars, race car drivers or any NASCAR branded racing teams.

On October 3, 2023, 704Games entered into a Consent to Assignment and Assumption of, and Releases (the “NASCAR Consent”) with NTP and iRacing with respect to the transactions contemplated by the iRacing Agreement. Pursuant to the NASCAR Consent, as a condition to NTP’s consent to the iRacing Agreement, 704Games paid NTP an amount consisting of (i) the remaining portion of the minimum annual guarantee under the NASCAR License for 2023 in the amount of $656,115, and (ii) a prepaid, mutually agreed upon reduced amount of the minimum annual guarantee under the NASCAR License for 2024 in the amount of $598,000 (together, the “NASCAR Consent Payment”). The NASCAR Consent Payment was paid from the proceeds 704Games received from iRacing upon the closing of the transactions contemplated by the iRacing Agreement.

On October 3, 2023, 704Games entered into a new Limited License Agreement with NTP (the “NASCAR New Limited License”). Pursuant to the NASCAR New Limited License, NTP granted 704Games a limited non-exclusive right and license to manage, support, operate, distribute, provide operational sell-off marketing (including sales incentives and promotions) and sell the Licensed Products (as defined in the NASCAR New Limited License), which generally consist of NASCAR games and DLCs that are currently in the Company’s product portfolio, through December 31, 2024. The sell-off marketing (including sales incentives and promotions) will be subject to NTP’s prior written approval, which approval will not be unreasonably withheld. 704Games may, at its option, distribute the Licensed Products for sale to consumers and retail outlet directly, directly via the internet subject to the limitations in the NASCAR New Limited License and/or via distributors on a regional (i.e., country-by-country) basis. In consideration of the rights granted in the NASCAR New Limited License, 704Games is obligated to pay NTP a royalty as a percentage of Net Sales (as defined in the NASCAR New Limited License) of Licensed Products, subject to prepayment by 704Games of the NASCAR Consent Payment.

The NASCAR New Limited License does not grant 704Games any right to create, make and/or sell any new product as the NASCAR New Limited License is solely intended to allow 704Games to continue supporting the Licensed Products created pursuant to the original NASCAR License through December 31, 2024.

On October 14, 2023, the Company, along with other defendants (collectively the “Defendants”), entered into a settlement agreement with Leo Capital in connection with the HC2 and Continental Complaint disclosed in Note 9 – Commitments and Contingencies, 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 is obligated 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.

On October 29, 2023, the Company determined to restructure its business and implement additional measures to continue lower operating expenses through the closure of its Australian development studio and the resulting reduction of the Company’s workforce primarily in Australia and the United Kingdom by approximately 40 employees. The workforce reduction is expected to impact approximately 40% of the Company’s employees worldwide. The Company expects to record a restructuring charge related to the workforce reduction, primarily consisting of severance and redundancy costs, in a preliminary estimated range of $0.4 million to $0.5 million. The Company expects to recognize and pay out the majority of the restructuring charge in the fourth quarter of fiscal year 2023. 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 2023. The workforce reduction is subject to legal requirements primarily in Australia and the United Kingdom, which may extend this process beyond the fourth quarter of fiscal year 2023 in certain cases, and the actual restructuring charge may differ materially from the estimated range disclosed above. As a consequence of the reductions, we determined it was necessary to suspend the development of our previously planned INDYCAR title until such time we are able to secure additional funding and capable resources to be able to deliver a high-quality INDYCAR video game title.

On October 26, 2023, BARC delivered notice to the Company terminating the BTCC License Agreement. The termination of the BTCC License Agreement was effective as of November 3, 2023. As a result, the Company no longer has the right to develop and publish the video games for the BTCC racing series or to create and organize its esports leagues and events. Following the termination of the BTCC License Agreement, all outstanding royalties payable and other sums payable by the Company to BARC, became due and payable. As of the date of this Report, approximately $0.8 million was due to BARC. (page 29)

As of September 30, 2023, we have a total headcount of 90 people, made up of 88 full-time employees, including 62 dedicated to game development. Our headcount numbers as of September 30, 2023, reflect that we have ceased our development operations in Russia effective September 2022, as a result of the Ukraine-Russia conflict and as such, we do not expect the Company’s development operations to have significant exposure to changes in circumstances arising from the Ukraine-Russia conflict. On October 29, 2023, we made a decision to further restructure our business, which resulted in the closure of our Australian development studio and a reduction of our global workforce primarily in Australia and the United Kingdom by approximately 40 employees. See “—Restructuring Initiatives” below for additional information. (page 30)

Reverse Psychology TLDR​

Concentration of Sales:

Our NASCAR products have historically accounted for the majority of our revenue. However, we have worked to diversify our product offerings and revenue from other sources by introducing titles such as KartKraft, rFactor 2 and the 24 Hours of Le Mans Virtual esports event to our portfolio of product offerings and thereby reducing our dependency on the NASCAR franchise as our substantially sole source of revenue. For example, revenues associated with our NASCAR franchise accounted for approximately 70.9% and 60.5% of our total revenue for the nine months ended September 30, 2023 and 2022, respectively. Following the sale of our NASCAR License and the execution of the NASCAR New Limited License, which allows us to sell our NASCAR games and DLCs that are currently in our product portfolio through December 31, 2024, we anticipate the amount of revenue to be generated by our existing NASCAR products to decline over time. (page 32)

Digital Business:

Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs. All of our titles that are available through retailers as packaged goods products are also available through direct digital download. For the nine months ended September 30, 2023, and 2022, approximately 86.9% and 68.0%, respectively, of our revenue from sales of video games for game consoles and PCs, net of sales reserves, was through digital channels. [paging @enpleinjour ] We believe this trend of increasing direct digital downloads is primarily due to benefits relating to convenience and accessibility that digital downloads provide. In addition, as part of our digital business strategy, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases and extra content. (page 32)

Results of Operations​

Three Months Ended September 30, 2023 compared to Three Months Ended September 30, 2022

Gaming segment revenues represented approximately 100% and 85.3% of our total 2023 and 2022 revenues, respectively, increasing by $0.7 million, or 62.4%, when compared to the prior period. The increase in Gaming segment revenues in 2023 when compared to 2022 was primarily due to higher digital game sales and downloadable content (“DLC”) sales of $0.7 million, driven by improved NASCAR product sales following the release of the NASCAR Heat 5: Next Gen Update DLC in June 2023.

[This part will tickle the fancy of @ILikeFeet ] Esports segment revenues represented approximately 0% and 14.7% of our total 2023 and 2022 revenues, respectively, decreasing by $0.2 million, or 100%, when compared to the prior period. The decrease in Esports segment revenues in 2023 was primarily driven by lower sponsorship revenues from the Le Mans Virtual Series which has not yet commenced its 2023-24 season. Esports segment revenues for 2022 consisted of sponsorship revenues from the Le Mans Virtual Series 2022-23 season, which commenced in September 2022. (page 34)

Sales and Marketing
Sales and marketing expenses were $0.4 million and $1.4 million for 2023 and 2022, respectively, representing a $1.0 million, or 75.1%, decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $0.6 million reduction in external marketing expense, as well as a $0.4 million reduction in payroll and employee related expenses as a result of lower headcount when compared to the prior period. (page 36)

Development
Development expenses were $1.6 million and $2.6 million for 2023 and 2022, respectively, representing a $1.1 million, or 40.4%, decrease when compared to the prior period. The reduction in development expense was primarily driven by a $0.6 million reduction in payroll expense, as a result of lower headcount when compared to the prior period, as well as a $0.5 million reduction in external development expense driven by ongoing cost rationalization measures, partially offset by a $0.1 million increase in hosting fees incurred to support our ongoing development efforts. (page 36)

General and Administrative
General and administrative (“G&A”) expenses were $1.5 million and $4.0 million for 2023 and 2022, respectively, a decrease of $2.5 million, or 61.9%, when compared to the prior period. The reduction in G&A expense was primarily driven by a $1.2 million reduction in legal and professional costs, due to the settlement of litigation in 2022 that did not repeat in 2023, a $0.5 million reduction in payroll and employee related expenses due to lower headcount period over period, a $0.3 million reduction in insurance costs, and a decrease of $0.2 million in stock-based compensation expense. (page 36)

Interest Expense
Interest expense was $0.2 million for both 2023 and 2022. Interest expense primarily consists of ongoing non-cash interest accretion of our INDYCAR and BTCC license liabilities. (page 36)

Nine Months Ended September 30, 2023 compared to Nine Months Ended September 30, 2022

Revenue
Consolidated revenues were $5.2 million and $6.6 million for 2023 and 2022, respectively, a decrease of $1.4 million, or 21.2%, when compared to the prior period.

Gaming segment revenues represented 94.4% and 90.7% of our total 2023 and 2022 revenues, respectively, decreasing by $1.1 million, or 18%, when compared to the prior period. The decrease in Gaming segment revenues was primarily due to a $0.6 million decrease in digital and mobile game sales and a $0.7 million decrease in retail sales, both of which were primarily driven by lower volumes of sales and less favorable pricing. The change in digital and mobile game sales was primarily driven by a $0.4 million reduction in NASCAR title sales on PC, consoles and mobile platforms, and a $0.2 million decrease in rFactor 2 and KartKraft title sales on PC. The reduction in retail game sales of $0.7 million was due to lower retail sales of our NASCAR titles in 2023 when compared to the same period in 2022.

In addition to the decrease in revenue generated by game sales, revenue earned through the development of simulation platforms for third-parties was $0.5 million lower in 2023 compared to 2022. The lower period over period revenues were partially offset by a $0.8 million reduction in sales allowances recognized in 2023, when compared to 2022.

Esports segment revenues represented 5.6% and 9.3% of our total 2023 and 2022 revenues, respectively, decreasing by $0.3 million, or 52.5%, when compared to the prior period. The change in Esports segment revenue was due to $0.3 million lower sponsorship revenue from the Le Mans Virtual Series, during 2023 due to the timing of the commencement of the 2023-24 season compared to the 2022-23 season, as discussed above. (page 37)

Sales and Marketing

Sales and marketing expenses were $1.4 million and $4.7 million for 2023 and 2022, respectively, representing a $3.3 million, or 69.8% decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $2.1 million reduction in external marketing expense, as well as a $1.2 million reduction in payroll and employee related expenses as a result of lower headcount when compared to the prior period.

Development

Development expenses were $5.8 million and $7.7 million for 2023 and 2022, respectively, representing a $2.0 million, or 25.5%, decrease when compared to the prior period. The reduction in development expense was primarily driven by a $1.7 million reduction in payroll and employee related expenses expense as a result of lower headcount when compared to the prior period and a $0.5 million decrease in development consulting expenses, partially offset by a $0.2 million increase in hosting fees incurred to support our ongoing development efforts.

General and Administrative

G&A expenses were $7.5 million and $10.8 million for 2023 and 2022, respectively, a decrease of $3.3 million, or 30.8%, when compared to the prior period. The reduction in G&A expense was primarily driven by a $1.6 million reduction in legal and professional costs, primarily due to the settlement of litigation in 2022 that did not repeat in 2023, a $1.2 million reduction in payroll and employee related expenses, including travel expenses, due to lower headcount period over period, a $0.7 million reduction in insurance costs and a $0.2 million reduction in software and subscription costs. This was partially offset by a $0.6 million increase in severance costs, driven by the departure of the Company’s former Chief Executive Officer in 2023. (page 39)

Yes - you read that right, severance costs for those primarily responsible for this horrible situation is greater than the $0.4 - $0.5 million cost for laying off 40% of the remaining staff.
Interest Expense

Interest expense was $0.7 and $0.6 million for 2023 and 2022, respectively, primarily from ongoing non-cash interest accretion of our INDYCAR and BTCC license liabilities, as well interest expense relating to deferred purchase consideration in respect of our acquisition of Studio 397. (page 40)

Promissory Note Line of Credit

On April 1, 2020, the Company entered into a promissory note (the “$12 million Line of Credit”) with the Company’s majority stockholder, Driven Lifestyle, that provided the Company with a line of credit of up to $10 million at an interest rate of 10% per annum, the availability of which is dependent on Driven Lifestyle’s available liquidity. On November 23, 2020, the Company and Driven Lifestyle entered into an amendment to the $12 million Line of Credit, effective in 2020, pursuant to which the availability under the $12 million Line of Credit was increased from $10 million to $12 million, with no changes to the other terms. The $12 million Line of Credit does not have a stated maturity date and is payable upon demand at any time at the sole and absolute discretion of Driven Lifestyle, and any principal and accrued interest owed will be accelerated and become immediately payable in the event the Company consummates certain corporate events, such as a capital reorganization. The Company may prepay the $12 million Line of Credit in whole or in part at any time or from time to time without penalty or charge. Additionally, see “Risk Factors – Risks Related to Our Financial Condition and Liquidity - Limits on our borrowing capacity under the $12 million Line of Credit may affect our ability to finance our operations” in Part I, Item 1A of the 2022 Form 10-K.

On September 8, 2022, the Company entered into a support agreement with Driven Lifestyle (the “Support Agreement”) pursuant to which Driven Lifestyle issued approximately $3 million (the “September 2022 Cash Advance”) to the Company in accordance with the $12 million Line of Credit. Additionally, the Support Agreement modified the $12 million Line of Credit such that, among other things, until June 30, 2024, Driven Lifestyle would not demand repayment of the September 2022 Cash Advance or other advances under the $12 million Line of Credit, unless certain events occurred, as prescribed in the Support Agreement, such as the completion of a new financing arrangement or the Company generates positive cash flows from operations, among others. All principal and accrued interest owed on the $12 million Line of Credit were exchanged for equity following the completion of two debt-for-equity exchange agreements with Driven Lifestyle on January 30, 2023 and February 1, 2023, relieving the Company of approximately $3.9 million in owed principal and unpaid interest in exchange for an aggregate of 780,385 shares of the Company’s Class A common stock. See Note 5 – Related Party Loans in our condensed consolidated financial statements in this Report for further information. As of September 30, 2023, the balance due to Driven Lifestyle under the $12 million Line of Credit was $0.

As of September 30, 2023, the $12 million Line of Credit remains in place. However, the Company believes that there is a substantial likelihood that Driven Lifestyle will not fulfill any future borrowing requests, and therefore does not view the $12 million Line of Credit as a viable source for future liquidity needs. (page 44)

The parent company wants 10% interest from its publicly listed subsidiary but refuses to invest? Another one bails. Without cause. Both the former CEO & Driven Lifestyle should pay the money they siphoned out of Motorsport Games back & stop firing staff. Quoting more passages as future reference, by all means skip through & follow the red text for my reactions.

On November 3, 2023, Jason Potter resigned as our Chief Financial Officer, effective as of November 8, 2023. Effective November 8, 2023, Stanley Beckley has been appointed as our Interim Chief Financial Officer. Prior to Mr. Potter’s tenure as our Chief Financial Officer, we had other individuals, including Dmitry Kozko, our former Chief Executive Officer, John Delta, a member of our board of directors, and Jonathan New serve in an Interim Chief Financial Officer or Chief Financial Officer capacity, as applicable, since January 2020. Additionally, on April 14, 2023, the Company’s board of directors determined to terminate Mr. Kozko’s employment with the Company as its Chief Executive Officer without “Cause” (as such term is defined in Mr. Kozko’s employment agreement) effective as of April 19, 2023. (page 51)

Still TLDR?

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS​

...our belief [is] that if we are ultimately unable to satisfy our capital requirements, we would likely need to dissolve and liquidate our assets under the bankruptcy laws or otherwise; our belief that there is a substantial likelihood that Driven Lifestyle Group LLC (“Driven Lifestyle”), formerly known as Motorsport Network, LLC, will not fulfill our future borrowing requests under the $12 million Line of Credit (page 1)

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

Risks and Uncertainties

Liquidity and Going Concern
The Company continues to explore additional funding in the form of potential Capital Financing and has entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which the Company may issue and sell shares of its Class A common stock having an aggregate offering price of up to $10 million...

...As of September 30, 2023, the Company had an aggregate of $2.9 million available for future sales under its ATM program. However, due to the Company’s present liquidity position and required future funding requirements, any funds raised via the ATM program would not be sufficient to satisfy its ongoing liquidity requirements and further potential Capital Financing would be required, in conjunction to the other options being explored by the Company. Further, there can be no assurance the Company will be able to obtain funds via the ATM program, should it choose to sell shares under the ED Agreement, nor can there be any other assurance that the Company can secure additional funding in the form of equity and/or debt financing on commercially acceptable terms, if at all, to satisfy its future needed liquidity and capital resources. (page 11)

As the Company continues to address its liquidity constraints, the Company may need to make further adjustments to its product roadmap in order to reduce operating cash burn. Additionally, the Company continues to seek to improve its liquidity through maintaining and enhancing cost control initiatives, such as those that it expects to achieve through its previously announced organizational restructuring program (the “2022 Restructuring Program”), as well as the closure of its Australian development studio. The Company plans to continue evaluating the structure of its business for additional changes in order to improve both its near-term and long-term liquidity position, as well as create a healthy and sustainable Company from which to operate.

If the Company is unable to satisfy its capital requirements, it could be required to adopt one or more of the following alternatives:

	●	delaying the implementation of or revising certain aspects of the Company’s business strategy;
	●	further reducing or delaying the development and launch of new products and events;
	●	further reducing or delaying capital spending, product development spending and marketing and promotional spending;
	●	selling additional assets or operations;
	●	seeking additional capital contributions and/or loans from Driven Lifestyle Group LLC (“Driven Lifestyle”), the Company’s other affiliates and/or third parties;
	●	further reducing other discretionary spending;
	●	entering into financing agreements on unattractive terms; and/or
	●	significantly curtailing or discontinuing operations.

There can be no assurance that the Company would be able to take any of the actions referred to above because of a variety of commercial or market factors, including, without limitation, market conditions being unfavorable for an equity or debt issuance or similar transactions, additional capital contributions and/or loans not being available from Driven Lifestyle or affiliates and/or third parties, or that the transactions may not be permitted under the terms of the Company’s various debt instruments then in effect, such as due to restrictions on the incurrence of debt, incurrence of liens, asset dispositions and related party transactions. In addition, such actions, if taken, may not enable the Company to satisfy its capital requirements if the actions that the Company is able to consummate do not generate a sufficient amount of additional capital. (page 12)

FUCK THIS​

Even if the Company does secure additional Capital Financing, if the anticipated level of revenues are not achieved because of, for example, decreased sales of the Company’s products due to the disposition of key assets, such as the sale of its NASCAR License, further changes in the Company’s product roadmap and/or the Company’s inability to deliver new products for its various other licenses; less than anticipated consumer acceptance of the Company’s offering of products and events; less than effective marketing and promotion campaigns, decreased consumer spending in response to weak economic conditions or weakness in the overall electronic games category; adverse changes in foreign currency exchange rates; decreased sales of the Company’s products and events as a result of increased competitive activities by the Company’s competitors; changes in consumer purchasing habits, such as the impact of higher energy prices on consumer purchasing behavior; retailer inventory management or reductions in retailer display space; less than anticipated results from the Company’s existing or new products or from its advertising and/or marketing plans; or if the Company’s expenses, including, without limitation, for marketing, advertising and promotions, product returns or price protection expenditures, exceed the anticipated level of expenses, the Company’s liquidity position may continue to be insufficient to satisfy its future capital requirements. If the Company is ultimately unable to satisfy its capital requirements, it would likely need to dissolve and liquidate its assets under the bankruptcy laws or otherwise. (page 13)

FUCK THAT​

NOTE 3 – INTANGIBLE ASSETS​

Licensing Agreements

As of September 30, 2023, the Company had license agreements with various entities related to the development of video games and the organization and facilitation of esports events, including BARC (TOCA) Limited (“BARC”) with respect to the British Touring Car Championship (the “BTCC”), and INDYCAR LLC (“INDYCAR”) with respect to the INDYCAR SERIES. As of September 30, 2023, the Company had a remaining liability in connection with these licensing agreements of approximately $0.8 million and $3.5 million, which is included in purchase commitments and other non-current liabilities, respectively, on the unaudited condensed consolidated balance sheets.

On October 26, 2023, BARC delivered notice to the Company terminating the BTCC License Agreement (as defined in Note 9). The termination of the BTCC License Agreement was effective as of November 3, 2023. Refer to Note 12 – Subsequent Events for further details. (page 17)

Impairment

The Company identified triggering events as of June 30, 2023, that indicated certain finite-lived intangible assets were at risk of impairment and as such, performed a quantitative impairment assessment to determine the recoverability of those finite-lived intangible assets.

The primary trigger for the impairment review was the Company’s decision to explore strategic alternatives, including, but not limited to, the sale or licensing of the Company’s assets (the “Strategic Initiatives”), and that failure to consummate any such transaction would likely result in the Company being unable to comply with certain requirements of certain of its video game licenses. No further indicators of impairment were identified as of September 30, 2023. As a result of the quantitative impairment assessment, the Company determined the fair value of certain licensing agreements, software and non-compete agreements were lower than their respective carrying values and recorded an impairment loss of approximately $4.0 million during the nine months ended September 30, 2023.

The Company determined the fair value of the finite-lived intangible assets subject to assessment using either a discounted cash flow valuation model or a cost to recreate valuation model, depending on the nature of the asset. The identified impairment losses were primarily driven by a reduction in expected future cash flows, driven by the triggering event factors discussed above. The principal assumptions used in the discounted cash flow valuation model were forecasted cash flows and the expected proceeds from the sale of certain assets should the Company be successful in its Strategic Initiatives, while the principal assumptions used in the cost to recreate valuation model were production hours, cost per hour and technological obsolescence. The Company considers these assumptions to be judgmental and subject to risk and uncertainty, which could result in further changes in subsequent periods.

The impairment loss is presented as impairment of intangible assets in the unaudited condensed consolidated statements of operations and comprehensive loss. (page 17)

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

	Total
2023 (remaining period)	$379,619
2024	$1,480,475
2025	$1,343,999
2026	$1,097,212
2027	$346,277
2028	$278,396
Thereafter	$1,373,048
	$6.299,026

Amortization expense related to intangible assets was approximately $0.4 million and $0.4 million for the three months ended September 30, 2023 and 2022, and amortization expense related to intangible assets was approximately $1.2 million and $1.3 million for the nine months ended September 30, 2023 and 2022. Within intangible assets is approximately $1.5 million of licensing agreements that are not presently subject to amortization. These non-amortizing licensing agreements will begin amortizing upon release of the first title under the respective license agreement. (page 19)

FUCK THOSE TOO​

NOTE 5 – RELATED PARTY LOANS

On April 1, 2020, the Company entered into a promissory note (the “$12 million Line of Credit”) with the Company’s majority stockholder, Driven Lifestyle, that provided the Company with a line of credit of up to $10 million at an interest rate of 10% per annum, the availability of which is dependent on Driven Lifestyle’s available liquidity. On November 23, 2020, the Company and Driven Lifestyle entered into an amendment to the $12 million Line of Credit, effective in 2020, pursuant to which the availability under the $12 million Line of Credit was increased from $10 million to $12 million, with no changes to the other terms. The $12 million Line of Credit does not have a stated maturity date and is payable upon demand at any time at the sole and absolute discretion of Driven Lifestyle, and any principal and accrued interest owed will be accelerated and become immediately payable in the event the Company consummates certain corporate events, such as a capital reorganization. The Company may repay the $12 million Line of Credit in whole or in part at any time or from time to time without penalty or charge. (page 19)

On September 8, 2022, the Company entered into a support agreement with Driven Lifestyle (the “Support Agreement”) pursuant to which Driven Lifestyle issued approximately $3 million (the “September 2022 Cash Advance”) to the Company in accordance with the $12 million Line of Credit. Additionally, the Support Agreement modified the $12million Line of Credit such that, among other things, until June 30, 2024, Driven Lifestyle would not demand repayment of the September 2022 Cash Advance or other advances under the $12 million Line of Credit, unless certain events occurred, as prescribed in the Support Agreement, such as the completion of a new financing arrangement or the Company generates positive cash flows from operations, among others. All principal and accrued interest owed on the $12 million Line of Credit were exchanged for equity following the completion of two debt-for-equity exchange agreements with Driven Lifestyle on January 30, 2023 and February 1, 2023, relieving the Company of approximately $3.9 million in owed principal and unpaid interest in exchange for an aggregate of 780,385 shares of the Company’s Class A common stock.

As of September 30, 2023, the $12 million Line of Credit remains in place. However, the Company believes that there is a substantial likelihood that Driven Lifestyle will not fulfill any future borrowing requests, and therefore does not view the $12 million Line of Credit as a viable source for future liquidity needs.

As of September 30, 2023 and December 31, 2022, the balance due to Driven Lifestyle under the $12 million Line of Credit was $0 and $3,670,000, respectively, as well as unpaid accrued related party interest of $0 and $96,667, respectively. These amounts are presented as due to related parties in the unaudited condensed consolidated balance sheets. (page 20)

NOTE 6 – RELATED PARTY TRANSACTIONS​

In addition to the $12 million Line of Credit, which is discussed in Note 5 – Related Party Loans, from time to time, Driven Lifestyle, and other related entities pay for Company expenses on the Company’s behalf. During the nine months ended September 30, 2023 and 2022, the Company incurred expenses of approximately $0.3 million and $0.1million, respectively, that were paid by Driven Lifestyle on its behalf and are reimbursable by the Company to Driven Lifestyle. During the nine months ended September 30, 2023 and 2022, approximately $1.1 million and $0.1 million, respectively, was paid to related parties in settlement of related party payables. The Company received cash advances of $0.2 million and $0 from Driven Lifestyle during the nine months ended September 30, 2023 and 2022, respectively.

The Company has regular related party receivables and payables outstanding as of September 30, 2023 and December 31, 2022. Specifically, the Company owed approximately $0.2 million to its related parties as of September 30, 2023. As of December 31, 2022, the Company owed approximately $4.6 million to its related parties as a related party payable and was due approximately $0.2 million from its related parties as a related party receivable. (page 20)

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. For the nine months ended September 30, 2023, the Company incurred $157,500 in fees in connection with the Backoffice Services Agreement, and $52,500 for the three months ended September 30, 2023, presented in general and administrative expenses within the unaudited condensed consolidated statements of operations. (page 20)

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. As of September 30, 2023, the remaining commitment amount under the Alumni Purchase Agreement amounted to $1,302,676.

On April 4, 2023, the Company granted an aggregate of 26,316 stock option awards under the MSGM 2021 Stock Plan to its directors with a grant date fair value of approximately $0.1 million, which will fully vest on the one-year anniversary of the award issuance date. Additionally, on June 9, 2023, the Company granted 21,394 restricted shares of Class A Common Stock outside of the MSGM 2021 Stock Plan, with a grant fair value of approximately $30,000, to a consultant pursuant to a consultancy agreement entered into in February 2023. These restricted shares of Class A Common Stock will fully vest on the one-year anniversary of the date of the consultancy agreement. There were no stock option awards or restricted shares of Class A Common Stock granted during the three months ended September 30, 2023.

NOTE 9 – COMMITMENTS AND CONTINGENCIES​

Litigation

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 2021. The complaint asserts claims under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 thereunder; Section 20(a) of the Exchange Act; Section 20A of the Exchange Act; breach of the Company’s obligations under the Stockholders’ Agreement dated August 14, 2018; fraudulent inducement; breach of fiduciary duties; and unjust enrichment. The plaintiffs seek, among other things, damages from the defendants, jointly and severally, based on the alleged difference between the fair market value of the shares of common stock of 704Games on the date of plaintiffs’ sale and the purchase price that was paid, as well as punitive damages and other relief. In May 2021, the Company, along with the other defendants, filed a motion to dismiss the plaintiffs’ complaint. On March 28, 2022, the court entered an order denying the motion to dismiss.

On January 11, 2023, in connection with the HC2 and Continental Complaint, the Company, along with other defendants, entered into a settlement agreement with one of the plaintiffs, Continental, to settle the claims made by Continental against the defendants and the claims made by the defendants against Continental. Under the terms of the settlement agreement, the Company was obligated to pay the sum of $1.1 million to Continental. The Company paid an initial payment of approximately $0.1 million on January 17, 2023, and 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, 2023, all required payments under the settlement agreement with Continental have been made.

The Company has continued to defend its position with the remaining plaintiffs, Leo Capital and Innovate. In respect of Leo Capital’s complaint, the Company believed it was probable a settlement would be reached and that such settlement was reasonably estimable at approximately $0.2 million as of September 30, 2023. Consequently, the Company has recorded and recognized a settlement liability of $0.2 million during the three months ended September 30, 2023. As of October 14, 2023, the Company reached and executed a settlement agreement with Leo Capital for $0.2 million. Refer to Note 12 – Subsequent Events for further details.

In respect of Innovate, the Company continues to defend its position and believes the outcome of such defense remains uncertain at this time. A 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.

As of September 30, 2023, the Company has recorded a settlement liability of $0.9 million, compared to $1.1 million as of December 31, 2023, in respect of the HC2 and Continental Complaint. The liability is recorded in accrued expenses and other liabilities. Refer to Note 4 – Accrued Expenses and Other Current Liabilities for further details.

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 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. (page 24)

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 FIA World Endurance Championship (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 $8,500,000 USD as of September 30, 2023) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the applicable license. (page 25)

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, 2023, the Company did not pay any royalties to Epic 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. (page 25)

Minimum Royalty Guarantees and Other Commitments

The Company is required to make certain minimum royalty guarantee payments to third-party licensors, arising primarily from its INDYCAR and Le Mans Licenses, as well as its former NASCAR License and, as disclosed in more detail in Note 12 – Subsequent Events, its recently terminated BTCC License (as defined below) (collectively the “Video Game Licenses”). These minimum royalty guarantee payments apply throughout the duration of the Video Game Licenses’ agreements, which expire between fiscal years ending December 31, 2026 and 2032, and give rise to a minimum royalty guarantee commitment of $17.4 million for the remaining duration of these arrangements as of September 30, 2023. In addition to the minimum royalty guarantee payments, the Company is obligated by the Video Game Licenses to spend a minimum amount on relevant marketing activities each year, aggregating to $2.4 million across all of the agreements.

On October 3, 2023, the Company completed the sale of its NASCAR License, which relieved the Company of certain obligations – including the minimum royalty guarantee and marketing activity commitments pertaining to the NASCAR License. As a result of this transaction, the Company’s minimum royalty guarantee commitments was reduced from $17.4 million to $11.0 million, and its annual marketing activity commitment was reduced from $2.4 million to $0.4 million per year. Refer to Note 12 – Subsequent Events for further details.

The Company has paid an aggregate of $0.5 million to honor its minimum royalty guarantee commitments during the nine months ended September 30, 2023 and expects to pay an additional $1.3 million during the remainder of 2023 following the sale of its NASCAR License on October 3, 2023. As of September 30, 2023, the Company has not fulfilled any of its minimum marketing obligation for fiscal year 2023. As a result of the sale of its NASCAR License on October 3, 2023, the Company no longer has a minimum marketing obligation for its NASCAR License. Refer to Note 12 – Subsequent Events for further details regarding the sale of the NASCAR License.

On May 29, 2020, the Company secured a licensing agreement with BARC, the exclusive promoter of the BTCC (the “BTCC License Agreement”). Pursuant to the 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 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 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. As of September 30, 2023, the Company had not paid two annual installments amounting to $0.4 million and had a total remaining liability in connection with the BTCC License, inclusive of the unpaid installments, of $0.8 million, which is included in purchase commitments and other non-current liabilities on the unaudited condensed consolidated balance sheets. On October 26, 2023, BARC delivered notice to the Company terminating the BTCC License Agreement. The termination of the BTCC License Agreement was effective as of November 3, 2023. Refer to Note 12 – Subsequent Events for further details. (page 25)

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 balance of the Deferred Payment as of September 30, 2023 was $1.0 million with unpaid accrued interest of $0.2 million. (page 25)

FUCK ALL THESE​

Item 5. Other Information

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 3, 2023, Jason Potter notified the Company of his decision to resign as the Company’s Chief Financial Officer, Secretary and Treasurer, effective November 8, 2023, for personal reasons. Mr. Potter had been serving as the Company’s principal financial officer and principal accounting officer.

In connection with the resignation of Mr. Potter, Stanley Beckley was appointed as the Company’s Interim Chief Financial Officer, effective November 8, 2023. Mr. Beckley will serve as the Company’s principal financial officer and principal accounting officer.

Mr. Beckley, age 41, initially joined Driven Lifestyle Group LLC (formerly Motorsport Network, LLC), the majority stockholder of the Company, in February 2021 as its Chief Accounting Officer – a role he will continue to serve in. (page 52)

...In connection with Mr. Beckley’s appointment as the Company’s Interim Chief Financial Officer, on November 8, 2023, the Company and Mr. Beckley entered into an offer letter (the “Beckley Offer Letter”).

Item 6. Exhibits

10.4

Offer letter for Stanley Beckley, Interim Chief Financial Officer

B. COMPENSATION
The Company will provide you:

	1.	A starting annual salary of $230,000 per year, paid in bi-monthly instalments on the Company’s standard payday;
	2.	$20,000 performance based annual bonus earned on a calendar year basis. In order to earn any bonus compensation, you must continue to be an employee of the Company through the bonus payment date. All bonuses are subject to applicable withholdings and other deductions as required or permitted by law. Annual bonus payments will be made no later than March 31 of the year following the year to which the bonus relates. For example purposes only, any annual discretionary bonus due in respect of fiscal year ending December 31, 2023, will be payable no later than March 31, 2024. You will be first eligible for a bonus payment on March 31, 2024 and the Annual Bonus will be pro-rated based on months served in calendar year ended December 31, 2023, providing you achieve the required performance metrics. The performance metrics used to determine whether the Annual Bonus will be earned and payable will be determined by the Company at a later date;

C. EXPENSES
Your approved expenses associated with business travel and other proper business purposes will be reimbursed in accordance with company expense reimbursement procedures and policies. However, for direct flights longer than 4 hours, you will be entitled to travel business class.

FUCK THIS THING IN PARTICULAR​

 

[ILikeFeet]

Indycar pulled out

IndyCar Terminates Agreement With Motorsport Games - Insider Gaming

The IndyCar game from Motorsport Games is no more as IndyCar has terminated its agreement with the company

insider-gaming.com