Motorsport Games Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
MSGM$4.25-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001493152-24-030976
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045867
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 163 previous paragraphs and 157 current paragraphs.
98 unchanged; 46 reworded; 12 added; 16 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Other Income (Expense), net
Current report
Other Comprehensive Income (Loss)
Current report
Net (Loss) Income Attributable to Non-Controlling Interest
Current report
Nine Months Ended September 30, 2024 compared to Nine Months Ended September 30, 2023
Current report
Consolidated revenues were $6.7 million and $5.2 million for 2024 and 2023, respectively, an increase of $1.6 million, or 30.0%, when compared to the prior period.
Current report
Other Comprehensive Income (Loss)
Current report
Net (Loss) Income Attributable to Non-Controlling Interest
Current report
For the nine months ended September 30, 2024, we incurred a net loss of $0.2 million and negative cash flows from operations of $0.7 million. As of September 30, 2024, we had an accumulated deficit of $86.3 million and cash and cash equivalents of $0.8 million, which decreased to $0.5 million as of October 31, 2024. We do not believe that our current capital resources will be sufficient to fund our operations over the next year. Based on our current expected level of operating expenditures and cash and cash equivalents on hand, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements. Historically, we have financed our operations primarily through revenue generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. Management is actively pursuing financing and other strategic plans, however, we do not have any committed sources of financing at this time, and it is uncertain whether any additional funding will be available when we need it on terms that will be acceptable to us, or at all. There can be no assurance that we will be able to raise funds by selling additional securities, which sales, if successful, could dilute the ownership interest of our existing shareholders. The issuance of debt can result in restrictive covenants that limit operations. If funding is not available or not available at terms acceptable to us, we will seek to further reduce overhead costs and our cash obligations in the short term, as needed. In addition, we may look to divest or bring in equity partners for our various divisions and bring in near term capital.
Current report
On October 3, 2024, we implemented additional measures to continue to bring down our year-over-year operating expense through a reduction of our workforce primarily in the United States and the United Kingdom by approximately 23 employees and contractors. The workforce reduction is expected to impact approximately 38% of total employees worldwide. We recorded a restructuring charge related to the workforce reduction, primarily consisting of severance and redundancy costs of approximately $0.2 million. We expect to recognize and pay out the majority of the restructuring charge in the fourth quarter of fiscal year 2024.
Current report
On July 29, 2024, we closed on a registered direct offering transaction with H.C. Wainwright & Co., LLC acting as the exclusive placement agent, which raised $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses. We intend to use the net proceeds from this offering for working capital and general corporate purposes.
Current report
On July 29, 2024, we closed on a registered direct offering transaction with H.C. Wainwright & Co., LLC acting as the exclusive placement agent, which raised $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses. We intend to use the net proceeds from this offering for working capital and general corporate purposes.
Current report
Critical Accounting Estimates
Removed paragraphs (16)
Previous report
On June 3, 2024, NASDAQ notified us that based on our Current Report on Form 8-K filed on May 23, 2024, NASDAQ’s staff has determined that we comply with the minimum stockholders’ equity requirement of at least $2,500,000 for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1).
Previous report
Consolidated revenues were $1.9 million and $1.7 million for 2024 and 2023, respectively, an increase of $0.2 million, or 8.2%, when compared to the prior period.
Previous report
Consolidated cost of revenues was $0.8 million and $0.9 million for 2024 and 2023, respectively, a decrease of $0.1 million, or 10.9%, when compared to the prior period.
Previous report
Esports segment cost of revenues represented 0% and 0.1% of our total 2024 and 2023 cost of revenues, respectively, with no significant change, when compared to the prior period.
Previous report
Esports segment gross profit was negligible in 2024 and 2023. As discussed above, we did not organize LMVS events in Q2 2024 or Q2 2023.
Previous report
Other Comprehensive Loss
Previous report
Net Income (Loss) Attributable to Non-Controlling Interest
Previous report
Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023
Previous report
Consolidated revenues were $4.9 million and $3.5 million for 2024 and 2023, respectively, an increase of $1.4 million, or 41.6%, when compared to the prior period.
Previous report
Consolidated gross profit was $3.5 million and $1.4 million for 2024 and 2023, respectively, an increase of $2.1 million, or 156.5%, when compared to the prior period. Gross profit margin was 70.7% in 2024, compared to 39.0% in 2023.
Previous report
Other Operating Income
Previous report
Other Income (Loss), net
Previous report
Other Comprehensive Gain (Loss)
Previous report
Net Income (Loss) Attributable to Non-Controlling Interest
Previous report
For the six months ended June 30, 2024, we had net income of $0.4 million and negative cash flows from operations of 1.4 million. As of June 30, 2024, we had an accumulated deficit of $86.4 million and cash and cash equivalents of $0.5 million, which increased to $1.3 million as of July 31, 2024. The increase in cash and cash equivalents was primarily due to $0.9 million in net proceeds received from a registered direct offering transaction that closed on July 29, 2024.
Previous report
Critical Accounting Policies and Estimates
Reworded paragraphs (46)
Previous wording
Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”). Our portfolio also includes the KartKraft karting simulation game, as well as Studio 397 B.V. (“Studio397”) and their rFactor 2 realistic racing simulator technology and platform. Our purpose is to make the thrill of motorsports accessible to everyone by creating the highest quality, most sophisticated and innovative experiences for racers, gamers and fans of all ages. Our products and services target a large global motorsport audience.
Current wording
Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”). Our portfolio also includes the KartKraft karting simulation game, as well as Studio 397 B.V. (“Studio397”) and their rFactor 2 realistic racing simulator technology and platform. rFactor 2 also powers F1® Arcade through a partnership with Kindred Concepts. Our purpose is to make the thrill of motorsports accessible to everyone by creating the highest quality, most sophisticated and innovative experiences for racers, gamers and fans of all ages. Our products and services target a large global motorsport audience.
Previous wording
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 June 30, 2024 and 2023, 55.0% and 77.7% of our total revenue, respectively, was generated from sales of our NASCAR racing video games.
Current wording
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.
Previous wording
Due to the uncertainty surrounding our ability to raise funding, and in light of our liquidity position and anticipated future funding requirements, we continue to explore other strategic alternatives and potential options for our business, including, but not limited to, the sale or licensing of certain of our assets in addition to the recent sales of our NASCAR License and Traxion. If any such additional strategic alternative is executed, it is expected it would help to improve our working capital position and reduce overhead expenditures, thereby lowering our expected future cash-burn, and provide some short-term liquidity relief. Nonetheless, even if we are successful in implementing one or more additional strategic alternatives, we will continue to require additional funding and/or further cost reduction measures in order to continue operations, which includes further restructuring of our business and operations. There are no assurances that we will be successful in implementing any additional strategic plans for the sale or licensing of our assets, or any other strategic alternative, which may be subject to the satisfaction of conditions beyond our control.
Current wording
Due to the uncertainty surrounding our ability to raise funding, and in light of our liquidity position and anticipated future funding requirements, we continue to explore other strategic alternatives and potential options for our business, including, but not limited to, the sale or licensing of certain of our assets in addition to the recent sales of our NASCAR License and Traxion, which was our motorsport and racing games community content platform. If any such additional strategic alternative is executed, it is expected it would help to improve our working capital position and reduce overhead expenditures, thereby lowering our expected future cash-burn, and provide some short-term liquidity relief. Nonetheless, even if we are successful in implementing one or more additional strategic alternatives, we will continue to require additional funding and/or further cost reduction measures in order to continue operations, which includes further restructuring of our business and operations. There are no assurances that we will be successful in implementing any additional strategic plans for the sale or licensing of our assets, or any other strategic alternative, which may be subject to the satisfaction of conditions beyond our control.
Previous wording
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 88.4% and 84.2% of our total revenue for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, the sale of products for Microsoft Windows via Steam comprised approximately 48.1% and 23.4% of our total revenue, respectively, and the sale of products for mobile platforms comprised approximately 1.8% and 5.2% 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.
Current wording
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.
Previous wording
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 six months ended June 30, 2024, and 2023, approximately 88.4% and 84.2% 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.
Current wording
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.
Previous wording
Gaming segment revenues represented 100% and 99.9% of our total 2024 and 2023 revenues, respectively, increasing by $0.1 million, or 8.2%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to higher digital game sales from the release of Le Mans Ultimate on PC in February 2024.
Current wording
Consolidated revenues, entirely comprised of the Gaming segment, were $1.8 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $0.1 million, or 6.4%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to higher digital game sales from the sale of Le Mans Ultimate released on PC in February 2024.
Previous wording
Esports segment revenues represented 0% and 0.1% of our total 2024 and 2023 revenues, respectively, with no significant change, when compared to the prior period. We did not organize a Le Mans Virtual Series (“LMVS”) event in Q2 2024 or Q2 2023, resulting in no earned sponsorship or events revenue in 2024 and 2023.
Current wording
We did not organize a Le Mans Virtual Series (“LMVS”) event in Q3 2024 or Q3 2023, resulting in no earned sponsorship or events revenue in 2024 and 2023 in our Esports segment.
Previous wording
Gaming segment cost of revenues represented 100% and 99.9% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.1 million, or 10.8%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.1 million reduction in royalty payments, mainly related to our NASCAR titles as a direct result of lower game sales for the franchise compared to the prior period.
Current wording
Consolidated cost of revenues, entirely comprised of the Gaming segment, was $0.7 million and $0.8 million for 2024 and 2023, respectively, a decrease of $0.1 million, or 13.8%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.1 million reduction in royalty payments, mainly related to our NASCAR titles as a direct result of lower game sales for the franchise compared to the prior period.
Previous wording
Gaming segment gross profit was $3.5 million for 2024, compared to $1.4 million for 2023, representing a gross profit margin of 70.7% for 2024 and 45.2% for 2023. The increase in our Gaming segment gross profit of $2.0 million, and corresponding increase in gross profit margin, was primarily due to higher gaming revenues, particularly related to increased digital game revenues as a result of the release of Le Mans Ultimate on PC in February 2024. The increase in gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period..
Current wording
Consolidated gross profit, entirely comprised of the Gaming segment, was $1.1 million and $0.9 million for 2024 and 2023, respectively, an increase of $0.2 million, or 26.0%, when compared to the prior period. Gross profit margin was 60.2% in 2024, compared to 50.9% in 2023. The increase in our Gaming segment gross profit of $0.2 million, and corresponding increase in gross profit margin, was primarily due to higher gaming revenues, particularly related to increased digital game revenues as a result of sales of Le Mans Ultimate released on PC in February 2024. The increase in gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period.
Previous wording
Sales and marketing expenses were $0.2 million and $0.4 million for 2024 and 2023, respectively, representing a $0.2 million, or 52.7%, 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.
Current wording
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.
Previous wording
Development expenses were $0.9 million and $1.8 million for 2024 and 2023, respectively, representing a $0.9 million, or 51.4%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.2 million decrease in external development services, as well as a $0.7 million decrease in payroll as a result of lower headcount, when compared to the prior period.
Current wording
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.
Previous wording
General and administrative (“G&A”) expenses were $1.4 million and $3.2 million for 2024 and 2023, respectively, a decrease of $1.7 million, or 55.2%, when compared to the prior period. The reduction in G&A expenses was primarily driven by a $1.4 million decrease in payroll and employee-related expenses following certain headcount reductions, compared to the prior period, and a $0.1 million reductions in each of office expenses, insurance costs and legal & professional fees.
Current wording
General and administrative (“G&A”) expenses were $1.9 million and $1.5 million for 2024 and 2023, respectively, an increase of $0.4 million, or 27.5%, when compared to the prior period. The increase in G&A expenses was primarily driven by a $0.4 million increase in legal & professional fees, compared to the prior period.
Previous wording
Other income, net was $0.1 million for 2024, compared to other income, net of $0.7 million in 2023, a decrease of $0.6 million compared to the prior period. Other income, net of $0.1 million for 2024 was primarily comprised of miscellaneous income arising from foreign currency gains incurred remeasuring transactions denominated in a currency other than U.S. dollars and rental income.
Current wording
Other income (expense), net was $1.4 million for 2024, compared to ($0.6) million in 2023, an increase of $2.0 million compared to the prior period. Other income, net of $1.4 million for 2024 was primarily comprised of foreign currency gains incurred remeasuring transactions denominated in a currency other than U.S. dollars.
Previous wording
Other comprehensive loss was $0.1 million for 2024 compared to $0.2 million in 2023. The $0.1 million decrease was primarily due to activity in our U.K. and Netherlands subsidiaries and represents unrealized foreign currency translation adjustments.
Current wording
Other comprehensive loss was $1.1 million for 2024 compared to other comprehensive income of $0.5 million in 2023. The variance was primarily due to activity in our U.K. and Netherlands subsidiaries and represents unrealized foreign currency translation adjustments.
Previous wording
Net loss attributable to non-controlling interest was $0.3 million in 2024 compared to net income of $0.01 million for 2023. The increase was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Current wording
Net (loss) income attributable to non-controlling interest was ($0.6) million in 2024 compared to $0.03 million for 2023. The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Previous wording
In this section, references to 2024 refer to the six months ended June 30, 2024 and references to 2023 refer to the six months ended June 30, 2023.
Current wording
In this section, references to 2024 refer to the nine months ended September 30, 2024 and references to 2023 refer to the nine months ended September 30, 2023.
Previous wording
Gaming segment revenues represented 100.0% and 91.6% of total 2024 and 2023 revenues, respectively, increasing by $1.7 million, or 54.5%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to $1.7 million in higher digital game sales due to the release of Le Mans Ultimate on PC in February 2024.
Current wording
Gaming segment revenues represented 100.0% and 94.4% of total 2024 and 2023 revenues, respectively, increasing by $1.8 million, or 37.8%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to $2.3 million in higher digital game sales due to sales of Le Mans Ultimate released on PC in February 2024, offset by $0.3 million and $0.2 million in lower revenues for NASCAR and rFactor2 titles, respectively.
Previous wording
Esports segment revenues represented 0.0% and 8.4% of our total 2024 and 2023 revenues, respectively, decreasing by $0.3 million, or (100.0)%, when compared to the prior period. The decrease in Esports segment revenue was due to us not organizing a LMVS event in 2024, resulting in no earned sponsorship or events revenue in 2024.
Current wording
Esports segment revenues represented 0.0% and 5.6% of our total 2024 and 2023 revenues, respectively, decreasing by $0.3 million, or 100.0%, when compared to the prior period. The decrease in Esports segment revenue was due to us not organizing a LMVS event in 2024, resulting in no earned sponsorship or events revenue in 2024.
Previous wording
Consolidated cost of revenues were $1.4 million and $2.1 million for 2024 and 2023, respectively, a decrease of $0.7 million, or 32.0%, when compared to the prior period.
Current wording
Consolidated cost of revenues were $2.2 million and $2.9 million for 2024 and 2023, respectively, a decrease of $0.8 million, or 26.9%, when compared to the prior period.
Previous wording
Gaming segment cost of revenues represented 100.0% and 82.3% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.3 million, or 17.3%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.4 million reduction in royalty payments, which was partially offset by a $0.1 million increase in amortization costs.
Current wording
Gaming segment cost of revenues represented 100.0% and 87.3% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 16.2%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.7 million reduction in royalty & license payments, which was partially offset by a $0.3 million increase in amortization costs.
Previous wording
Esports segment cost of revenues represented 0.0% and 17.7% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 100.0%, when compared to the prior period. As explained above, we did not organize a LMVS event in 2024.
Current wording
Esports segment cost of revenues represented 0.0% and 12.7% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 100.0%, when compared to the prior period. As explained above, we did not organize an LMVS event in 2024.
Previous wording
Consolidated gross profit was $1.1 million and $0.9 million for 2024 and 2023, respectively, an increase of $0.2 million, or 27.2%, when compared to the prior period. Gross profit margin was 59.0% in 2024, compared to 50.2% in 2023.
Current wording
Consolidated gross profit was $4.6 million and $2.2 million for 2024 and 2023, respectively, an increase of $2.3 million, or 105.7%, when compared to the prior period. Gross profit margin was 67.9% in 2024, compared to 42.9% in 2023.
Previous wording
Gaming segment gross profit was $1.1 million for 2024, compared to $0.9 million for 2023, representing a gross profit margin of 59.0% for 2024 and 50.2% for 2023. The increase in our Gaming segment gross profit of $0.2 million, and corresponding increase in gross profit margin, was primarily due to higher gaming revenues, particularly related to increased digital game revenues as a result of the release of Le Mans Ultimate on PC in February 2024. The increase in gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period.
Current wording
Gaming segment gross profit was $4.6 million for 2024, compared to $2.3 million for 2023, representing a gross profit margin of 67.9% for 2024 and 47.2% for 2023. The increase in our Gaming segment gross profit of $2.3 million, and corresponding increase in gross profit margin, was primarily due to higher gaming revenues, particularly related to increased digital game revenues as a result of the release of Le Mans Ultimate on PC in February 2024. The increase in gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period.
Previous wording
Esports segment gross profit was $0.0 million for 2024, compared to a loss of $0.1 million for 2023, representing a gross profit margin of 0.0% and a loss of 29.1% for 2024 and 2023, respectively.
Current wording
Esports segment gross profit was $0 million for 2024, compared to a loss of $0.1 million for 2023, representing a gross profit margin of 0.0% and a loss of 29.1% for 2024 and 2023, respectively.
Previous wording
Sales and marketing expenses were $0.5 million and $1.1 million for 2024 and 2023, respectively, representing a $0.6 million, or 56.7% decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $0.6 million reduction in payroll and employee-related expenses as a result of lower headcount, when compared to the prior period.
Current wording
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.
Previous wording
Development expenses were $1.9 million and $4.2 million for 2024 and 2023, respectively, representing a $2.3 million, or 53.8%, decrease when compared to the prior period. The reduction in development expense was primarily driven by a $2.4 million reduction in payroll and employee related expenses expense as a result of lower headcount when compared to the prior period, partially offset by a $0.1 million increase in software and hosting fees incurred to support our ongoing development efforts.
Current wording
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.
Previous wording
G&A expenses were $3.6 million and $5.9 millionfor 2024 and 2023, respectively, a decrease of $2.3 million, or 39.3%, when compared to the prior period. The reduction in G&A expense was primarily driven by a $1.5 million reduction in payroll and employee-related expenses, including travel expenses, due to lower headcount period over period, a $0.4 million reduction in insurance costs and a $0.6 million reduction in stock compensation costs. This was partially offset by a $0.2 million increase in litigation fees.
Current wording
G&A expenses were $5.5 million and $7.5 millionfor 2024 and 2023, respectively, a decrease of $1.9 million, or 25.6%, when compared to the prior period. The reduction in G&A expense was primarily driven by a $1.3 million reduction in payroll and employee-related expenses due to lower headcount period over period, a $0.5 million reduction in severance and insurance costs, respectively, as well as a $0.2 million reduction in rent and office expense. This was partially offset by a $0.6 million increase in legal and professional fees.
Previous wording
Impairment of finite-lived intangible assets was $0.0 million and $4.0 million in 2024 and 2023, respectively. The trigger for the impairment in 2023 was our decision to explore strategic alternatives and potential options for our business, resulting in a probable likelihood of the sale of certain licensing rights that would result in our inability to comply with the terms of a licensing agreement by the end of the year and the resulting reduction in expected future revenues.
Current wording
Impairment of finite-lived intangible assets was $0 million and $4.0 million in 2024 and 2023, respectively. The trigger for the impairment in 2023 was our decision to explore strategic alternatives and potential options for our business, resulting in a probable likelihood of the sale of certain licensing rights that would result in our inability to comply with the terms of a licensing agreement by the end of the year and the resulting reduction in expected future revenues.
Previous wording
Other operating income was $0.3 million for 2024, compared to $0.1 million for 2023, an increase of $0.2 million compared to the prior period. Other operating income of $0.3 million for 2024 relates to the gain from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024.
Current wording
Other operating income was $0.3 million for 2024, compared to $0 million for 2023, an increase of $0.3 million compared to the prior period. Other operating income of $0.3 million for 2024 relates to the gain from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024.
Previous wording
Interest expense was $0.1 million and 0.4 millionfor 2024 and 2023 primarily from non-cash interest accretion of our INDYCAR and BTCC license liabilities, which were both fully settled in Q2 2024.
Current wording
Interest expense was $0.1 million and $0.7 millionfor 2024 and 2023 primarily from non-cash interest accretion of our INDYCAR and BTCC license liabilities, which were both fully settled in Q2 2024.
Previous wording
Other income (loss), net was $(0.4) million for 2024, compared to $0.9 million for 2023, a decrease of $1.3 million compared to the prior period. Other loss, net of $0.4 million for 2024 was primarily comprised of $0.5 million in miscellaneous losses arising from foreign currency gains incurred remeasuring transactions denominated in a currency other than U.S. dollars, offset by $0.1 million in rental income.
Current wording
Other income, net was $1.0 million for 2024, compared to $0.4 million for 2023, an increase of $0.6 million compared to the prior period. Other income, net of $1.0 million for 2024 was primarily comprised of $0.9 million in foreign currency gains arising from remeasuring transactions denominated in a currency other than U.S. dollars and $0.1 million in rental income.
Previous wording
Other comprehensive gain was $0.5 million for 2024, compared to other comprehensive loss of $0.3 million in 2023. The $0.8 million increase in other comprehensive loss was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.
Current wording
Other comprehensive loss was $0.6 million for 2024, compared to other comprehensive income of $0.2 million in 2023. The $0.8 million increase in other comprehensive loss was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.
Previous wording
Net loss attributable to non-controlling interest was $0.7 million for 2024 compared to net income of $0.1 million in 2023. The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Current wording
Net (loss) income attributable to non-controlling interest was $(1.3) million for 2024 compared to $0.1 million in 2023. The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Previous wording
Adjusted EBITDA, a measure used by management to assess our operating performance, is defined as EBITDA, which is net income (loss) plus interest expense, depreciation and amortization, less income tax benefit (if any), adjusted to exclude: (i) acquisition-related expenses; (ii) gain from settlement of license liabilities (iii) impairment of intangible assets; and (iv) stock-based compensation expenses.
Current wording
Adjusted EBITDA, a measure used by management to assess our operating performance, is defined as EBITDA, which is net loss plus interest expense, depreciation and amortization, less income tax benefit (if any), adjusted to exclude: (i) gain from settlement of license liabilities (ii) impairment of intangible assets; (iii) loss contingency expense and (iv) stock-based compensation expenses.
Previous wording
Adjusted EBITDA (the “Non-GAAP Measure”) is not a financial measure defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Reconciliations of the Non-GAAP Measure to net income (loss), its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below. We use the Non-GAAP Measure to manage our business and evaluate our financial performance, as Adjusted EBITDA eliminates items that affect comparability between periods that we believe are not representative of our core ongoing operating business. Additionally, we believe that using the Non-GAAP Measure is useful to our investors because it enhances investors’ understanding and assessment of our normalized operating performance and facilitates comparisons to prior periods and our competitors’ results (who may define Adjusted EBITDA differently).
Current wording
Adjusted EBITDA (the “Non-GAAP Measure”) is not a financial measure defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Reconciliations of the Non-GAAP Measure to net loss, its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below. We use the Non-GAAP Measure to manage our business and evaluate our financial performance, as Adjusted EBITDA eliminates items that affect comparability between periods that we believe are not representative of our core ongoing operating business. Additionally, we believe that using the Non-GAAP Measure is useful to our investors because it enhances investors’ understanding and assessment of our normalized operating performance and facilitates comparisons to prior periods and our competitors’ results (who may define Adjusted EBITDA differently).
Previous wording
We have historically financed our operations primarily through cash generated from operations, advances from Driven Lifestyle pursuant to the $12 million Line of Credit (as defined below) and through sales of our equity securities.
Current wording
We have historically financed our operations primarily through cash generated from operations and through sales of our equity securities.
Previous wording
For the six months ended June 30, 2024, we experienced an average net cash burn from operations of approximately $0.2 million per month, and while we have taken measures to reduce our costs, we expect to continue to have a net cash outflow from operations for the foreseeable future as we continue to develop our product portfolio and invest in developing new video game titles. Based on our cash and cash equivalents position and our average cash burn, we do not believe we have sufficient cash on hand to fund our operations over the next year and that additional funding will be required in order to continue operations.
Current wording
For the nine months ended September 30, 2024, we experienced an average net cash burn from operations of approximately $0.1 million per month, and while we have taken measures to reduce our costs, we expect to continue to have a net cash outflow from operations for the foreseeable future as we continue to develop our product portfolio and invest in developing new video game titles. Based on our cash and cash equivalents position and our average cash burn, we do not believe we have sufficient cash on hand to fund our operations over the next year and that additional funding will be required in order to continue operations.
Previous wording
In order to address its liquidity shortfall, we continue to explore several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”); ii) other strategic alternatives for its business, including, but not limited to, the sale or licensing of our assets in addition to the recent sales of our NASCAR License and Traxion; and iii) cost reduction and restructuring initiatives, each of which is described more fully below.
Current wording
In order to address our liquidity shortfall, we continue to explore several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”); ii) other strategic alternatives for our business, including, but not limited to, the sale or licensing of our assets in addition to the recent sales of our NASCAR License and Traxion; and iii) cost reduction and restructuring initiatives, each of which is described more fully below.
Previous wording
We continue to explore additional funding in the form of potential Capital Financing and in March 2023 entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which we may issue and sell shares of its Class A common stock having an aggregate offering price of up to $10 million (subject to compliance with the limitations set forth in the SEC’s “baby shelf” rules). Subject to the terms and conditions of the ED Agreement, the Sales Agent may sell shares by any method deemed to be an “at-the-market” (“ATM”) offering as defined in Rule 415 under the Securities Act of 1933, as amended. During the three and six month ended June 30, 2024, we did not sell any shares of Class A common stock pursuant to the terms of the ED Agreement. At the time we filed an initial prospectus supplement in connection with the offering of our shares of Class A common stock pursuant to the ED Agreement, the aggregate market value of the shares of Class A common stock eligible for sale under the initial prospectus supplement was approximately $2.9 million, which was based on the limitations of such offerings under SEC Regulations. No sales were made pursuant to the ED Agreement during the quarter ended June 30, 2024. On July 26, 2024, we filed a prospectus supplement terminating the continuous offering, although the ED Agreement remains in effect. However, due to our present liquidity position and required future funding requirements, even if we filed another prospectus supplement to reinstate the continuous offering pursuant to the ED Agreement and raised the maximum amount available for future sales via its ATM program, such proceeds would not be sufficient to satisfy its ongoing liquidity requirements and further potential Capital Financing would be required, in conjunction to the other options we are exploring. Further, there can be no assurance we will be able to obtain funds via our ATM program, should we choose to sell shares under the ED Agreement, nor can there be any other assurance that we can secure additional funding in the form of equity and/or debt financing on commercially acceptable terms, if at all, to satisfy our future needed liquidity and capital resources.
Current wording
In March 2023, we entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which we may issue and sell shares of its Class A common stock having an aggregate offering price of up to $10 million (subject to compliance with the limitations set forth in the SEC’s “baby shelf” rules). Subject to the terms and conditions of the ED Agreement, the Sales Agent may sell shares by any method deemed to be an “at-the-market” (“ATM”) offering as defined in Rule 415 under the Securities Act of 1933, as amended. During the three and nine months ended September 30, 2024, we did not sell any shares of Class A common stock pursuant to the terms of the ED Agreement. At the time we filed an initial prospectus supplement in connection with the offering of our shares of Class A common stock pursuant to the ED Agreement, the aggregate market value of the shares of Class A common stock eligible for sale under the initial prospectus supplement was approximately $2.9 million, which was based on the limitations of such offerings under SEC Regulations. On July 26, 2024, we filed a prospectus supplement terminating the continuous offering, although the ED Agreement remains in effect. However, due to our present liquidity position and required future funding requirements, even if we filed another prospectus supplement to reinstate the continuous offering pursuant to the ED Agreement and raised the maximum amount available for future sales via our ATM program, such proceeds would not be sufficient to satisfy our ongoing liquidity requirements and further potential Capital Financing would be required, in conjunction to the other options we are exploring. Further, there can be no assurance we will be able to obtain funds via our ATM program, should we choose to sell shares under the ED Agreement, nor can there be any other assurance that we can secure additional funding in the form of equity and/or debt financing on commercially acceptable terms, if at all, to satisfy our future needed liquidity and capital resources.
Previous wording
Net cash used in operating activities for the six months ended June 30, 2024 and 2023 was $1.4 million and $8.9 million, respectively. The net cash used in operating activities for the six months ended June 30, 2024 was primarily a result of cash used to generate net income of $0.4 million, adjusted for net non-cash adjustments of $2.0 million and $0.2 million of cash provided by changes in the levels of operating assets and liabilities. Net cash used in operating activities for the six months ended June 30, 2023 was primarily a result of cash used to fund a net loss of $13.5 million, adjusted for net non-cash adjustments of $6.0 million and $1.4 million of cash used by changes in the levels of operating assets and liabilities.
Current wording
Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $0.7 million and $10.1 million, respectively. The net cash used in operating activities for the nine months ended September 30, 2024 was primarily a result of cash used to fund a net loss of $0.2 million, adjusted for net non-cash adjustments of $1.3 million and $0.8 million of cash provided by changes in the levels of operating assets and liabilities. Net cash used in operating activities for the nine months ended September 30, 2023 was primarily a result of cash used to fund a net loss of $17.0 million, adjusted for net non-cash adjustments of $6.9 million.
Showing the first 40 of 46 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
As explained above, we did not organize a LMVS event in Q3 2024 or Q3 2023.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Other operating income of $0.3 million for 2024 entirely relates to the gain from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024.
Previous report — wording carried elsewhere
Gain from Settlement of License Liabilities
Previous report — wording carried elsewhere
Gain from settlement of license liabilities of $3.2 million for 2024 is primarily comprised of a $2.5 million gain stemming from a Settlement and License Agreement with INDYCAR LLC executed on May 17, 2024 and a gain of $0.6 million related to the Settlement Agreement with BARC (TOCA) LIMITED, the exclusive promoter of the British Touring Car Championship on April 12, 2024.