Motorsport Games Q3 FY24 Results. $1.8 million revenue. $0.6 net loss. Online subscription "should go live next month".

[KR_EP]

motorsport GAMES​

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

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

January 1 - December 31, 2024
Motorsport Games Q1 FY24 Results. $3.0 million revenue. $1.7 million net loss. Le Mans Ultimate sold 79,000 copies in Q1.
Motorsport Games Q2 FY24 Results. $1.9 million revenue. $2.1 million net income. Accelerate plans for Le Mans Ultimate on console.​

Spoiler: Too Long, Didn't Race.

January 1 - December 31, 2023
Q1? Computer says No.
Q2? Computer says Hell No!

Motorsport Games Q3 FY2023 Results. $1.7 million revenue. $3.5 million loss. LeMans Ultimate delay. INDYCAR game suspended. BTCC calls TOCA time.
Motorsport Games Q4 & Full Year CY2023 Results. $1.1 million net profit in Q4. $14.3 million net loss FY2023. Le Mans Ultimate sold 55,000 in 10 days.​

We don't talk about this car crash of an original thread.
Motorsport Games reverse stock split, resignations, restructuring, Q3 results // cash burn baby burn​

14 NOV MOTORSPORT GAMES REPORTS THIRD QUARTER 2024 FINANCIAL RESULTS​

“The business has continued to take useful strides in Q3 2024 with further product updates, business streamlining and in the assessment of undertaking of the previously announced “strategic alternatives” remarked Stephen Hood, President and Chief Executive Officer of Motorsport Games.

“Our second downloadable content (DLC) offering for Le Mans Ultimate completed the 2024 Hypercar grid whilst a free update to all players has enabled new gameplay opportunities that capture the spirit of Le Mans. An innovative co-op mode allows players to compete alongside their friends at a time convenient to them and save states have been added to the Race Weekend mode, adding a new dimension to the single player experience designed to enable more players to enjoy our offering in an increasingly busy market. Players can expect another major uplift in the game next month with the release of the first GT3 cars, a hotly requested content update available as a mix of DLC which includes a free car alongside new game functionality that is sure to further boost the vitality of what has been a strong opening 2024 for Le Mans Ultimate.”

Select Financial Highlights (Q3 FY2024)

Revenue: $1.8 million
Net Loss: $ 0.6 million

Cash Flow and Liquidity

As of September 30, 2024, the Company had cash and cash equivalents of approximately $0.8 million.
As of October 31, 2024, the Company’s cash and cash equivalents has decreased to $0.5 million.
During the nine months ended September 30, 2024, the Company had negative cash flows from operations of approximately $0.7 million, representing an average monthly net cash burn from operations of approximately $0.1 million.

Third Quarter 2024 Business Update

• Net income attributable to Motorsport Games Inc. of $0.1 million in Q3 2024 compared to a net loss of $3.6 million in Q3 2023, an improvement of $3.6 million.
• Net income attributable to Class A common stock was $0.00 per share in Q3 2024, compared to a net loss per share of $1.31 in Q3 2023.
• Released Le Mans Ultimate Innovate Co-op Game Mode, Save & Load System and 2024 Pack 2 DLC in September 2024.
• Raised $1.0 million in gross proceeds from an RDO transaction in July 2024.

Additional information:

Q3 Earning Slides
Q3 Earnings Release

Still very much in a holding pattern since the announcement last month that it was exploring strategic alternatives, meanwhile the clock keeps ticking on the NASCAR license & its back catalogue.

Stephen Hood continued “From a business perspective, the work to turn the business around has not stopped. We are pleased to see an improvement in several key financial performance indicators, highlighting that the business is now in a stable position for the next phase of growth. We recently announced that Motorsport Games is considering “strategic alternatives” and the Motorsport Games board of directors and I are in the process of reviewing the options available to us with a view to improve our long-term funding needs in order to produce the great game experiences we have proved that we can offer under our new business structure. The number of expressions of interest received serves to reinforce our belief in the opportunities ahead.”

Meanwhile the clock keeps ticking on the NASCAR license & its back catalogue sales with Traxion.gg reporting 55.6% sales from NASCAR titles in Q3. Plus there is still an outstanding final payment of $0.6 for the acquisition of Studio 397 but I've not had a chance to confirm via the SEC Filings. Will look to do so later. Studio 397 did hold an rFactor 2 Steam Daily Deal during late August. Mentioned in the previous thread, Q4 2024 will be interesting to watch how much revenue is generated from NASCAR games before delisting December 31, 2024.

As for how Motorsport Games intends to generate additional revenue, during the earnings call, Stephen Hood advised the subscription service "should go live next month". Overtake.gg notes the Race Control subscription for both rFactor 2 & Le Mans Ultimate will involve Online Championships. Expect we'll see an official announcement during the next few weeks. However I'm not sure on the number of people who intend to subscribe or how it'll work in practise when both games have a split user-base due to a bewildering rFactor 2 store & the Le Mans Ultimate 2024 Season Pass with the option to buy DLC packs. Perhaps it'll be a case of host rules and/or being able to play online with additional cars & tracks without ownership when you subscribe. No idea!

 

[KR_EP]

No update on the Race Control subscription plans yet so will review the SEC filing from November 14, 2024 plus point out a couple recent ones to watch out for from the past week. It does confirm the still very high percentages of sales from NASCAR titles showing why Motorsport Games does need to find alternative sources of revenue after December 31, 2024.

NOV 14, 2024​

10-Q​

Quarterly report which provides a continuing view of a company's financial position​

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…

…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.

(page 15)​

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.

(page 16)​

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.

(page 18)​

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.

(page 20)​

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.

(page 21)​

On October 3, 2023, we sold our NASCAR licensed rights under that certain Second Amended and Restated Distribution and License Agreement with NASCAR Team Properties (“NTP”) (the “NASCAR License”) to iRacing.com Motorsport Simulations, LLC. Prior to the sale of our NASCAR License, we had been the official video game developer and publisher for the NASCAR video game racing franchise and had the exclusive right to create and organize esports leagues and events for NASCAR using our NASCAR racing video games, in each case, subject to certain limited exceptions. Concurrently with the sale of our NASCAR License, we entered into an agreement with NTP pursuant to which we have a limited non-exclusive right and license to, among other things, sell our NASCAR games and DLCs that are currently in our product portfolio through December 31, 2024 (the “NASCAR New Limited License”). For the three months ended September 30, 2024 and 2023, 55.6% and 77.9% of our total revenue, respectively, was generated from sales of our NASCAR racing video games.

(page 24)​

Hardware Platforms

We derive most of our revenue from the sale of products made for PCs and video game consoles manufactured by third parties, such as Sony Interactive Entertainment Inc.’s (“Sony”) PlayStation and Microsoft Corporation’s (“Microsoft”) Xbox consoles, which comprised approximately 50.6% and 66.1% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the sale of products for Microsoft Windows via Steam comprised approximately 47.1% and 22.4% of our total revenue, respectively, and the sale of products for mobile platforms comprised approximately 2.0% and 4.9% of our total revenue, respectively. The success of our business is dependent upon consumer acceptance of video game console/PC platforms and continued growth in the installed base of these platforms. When new hardware platforms are introduced, such as those released by Sony and Microsoft in November 2020, demand for interactive entertainment used on older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest generation of Sony and Microsoft consoles provide “backwards compatibility” (i.e., the ability to play games for the previous generation of consoles), which could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products.

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 each of the nine months ended September 30, 2024, and 2023, approximately 86.8% and 86.9% of our revenue from sales of video games for game consoles and PCs was through digital channels. 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 26)​

Results of Operations​

Three Months Ended September 30, 2024 compared to Three Months Ended September 30, 2023

Sales and Marketing expenses were $0.2 million and $0.4 million for 2024 and 2023, respectively, representing a $0.2 million, or 51.0%, decrease when compared to the prior period. The reduction in sales and marketing expenses was primarily driven by a $0.2 million reduction in payroll and employee-related expense as a result of lower headcount, when compared to the prior period.

Development expenses were $0.9 million and $1.6 million for 2024 and 2023, respectively, representing a $0.7 million, or 45.8%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.6 million decrease in payroll as a result of lower headcount, as well as a $0.1 million decrease in external development services, when compared to the prior period.

(pages 29-30)​

Nine Months Ended September 30, 2024 compared to Nine Months Ended September 30, 2023

Sales and Marketing expenses were $0.6 million and $1.4 million for 2024 and 2023, respectively, representing a $0.8 million, or 55.3% decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $0.7 million reduction in payroll and employee-related expenses as a result of lower headcount, and a $0.1 million decrease in software and travel expenses, when compared to the prior period.

Development expenses were $2.8 million and $5.8 million for 2024 and 2023, respectively, representing a $3.0 million, or 51.7%, decrease when compared to the prior period. The reduction in development expense was primarily driven by a $2.0 million reduction in payroll and employee-related expenses expense as a result of lower headcount, as well as a decrease in $1.0 million in external development, when compared to the prior period.

(page 32)​

Item 1A. Risk Factors​

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

We follow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises, including our NASCAR products, which have historically accounted for the majority of our revenue. For the years ended December 31, 2023 and 2022, revenues associated with our NASCAR franchise accounted for approximately 71.6% and 62.9% of our total revenue, respectively. Revenues associated with our NASCAR franchise accounted for approximately 52.6% and 70.9% of our total revenue for the nine months ended September 30, 2024 and 2023, 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 and to cease after December 31, 2024.

(page 42)​

We could be subject to unanticipated adverse effects arising from our inability to fully repay Luminis International B.V. and Technology In Business B.V., the sellers of Studio 397 B.V. (“Studio397”), relating to our acquisition of 100% of the share capital of Studio397 in April 2021.

On April 20, 2021 we 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 a cash payment at closing and payments due at a later date. To date, we have not paid all of the payments due subsequent to the closing. Pursuant to the terms of agreements that we entered into, we are required to pay interest on the amounts owed but unpaid. The remaining balance owed as of September 30, 2024, was $0.6 million with unpaid accrued interest of $0.3 million. As security for payment of the amounts owed, we pledged stock of Studio397, the voting rights of which the seller could request to be transferred to it thirty days after such nonpayment.

(page 44)​

Included this last one because a thought occurred, namely that outstanding payments could mean a Studio397 management buyout is still on the cards. Another (remote) possibility is the previous owners (Luminis International B.V. and Technology In Business B.V.) regaining ownership. But a divestment to Studio397, which could secure additional funding is possible.

NOV 22, 2024​

8-K​

Report of unscheduled material events or corporate event​

NASDAQ listing was resolved earlier in the year after the deal reached with INDYCAR but now the issue of being delisted from the stock exchange has reappeared, with a January 5, 2025 deadline for Motorsport Games to addressed the criteria mentioned in the 8-K SEC Filing above. Which leads onto the last document, its preliminary but to have a prospectus suggests they are pushing ahead with plans to prepare for additional investment or to outright sell the company to any interested parties. Very much a case of wait & see what happens next.

NOV 25, 2024​

S-3​

Simplified registration form​

 

[ILikeFeet]

the last call went out

To the NASCAR game community!

From December 31, 2024, all NASCAR game titles and their DLC content will no longer be available for purchase on all digital storefronts but will remain available to play after this time. This includes the
@NASCARHeat, @NASCARRivals, and @NASCARignition franchises.

Please lookout for various platform promotions this December to complete your NASCAR console game collection while you can!

We sincerely thank our community for the enthusiasm and support you’ve shown for these games over the years and hope you have enjoyed racing with us.