GOODWILL

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

NOTE 4 – GOODWILL

The carrying amount of goodwill attributable to our Gaming and Esports reporting units and the changes in such balances during the nine months ended September 30, 2022 were as follows: 

	Games			Esports			Total
Balance as of January 1, 2022	$	4,802,882		$	64,583		$	4,867,465
Impairment of Goodwill		(4,723,685	)		(64,583	)		(4,788,268	)
Foreign exchange		(79,197	)		-			(79,197	)
Balance as of September 30, 2022	$	-		$	-		$	-

The Company identified triggering events as of March 31, 2022 that indicated its goodwill associated with the acquisition of Studio397 B.V. (“Studio397”) was at risk of impairment and as such, performed a quantitative impairment assessment to determine whether the fair value of the associated reporting unit exceeded its fair value. The primary triggers for the impairment review were changes made to Motorsport Games’ product roadmap during the three months ended March 31, 2022, which resulted in changes to the scope and timing of certain product releases, as well as changes in the value of Motorsport Games’ market capitalization which had reduced significantly subsequent to December 31, 2021, the date of the last impairment assessment.

As a result of the March 31, 2022 interim impairment assessment, the Company determined the carrying value of its Gaming reporting unit exceeded its fair value and the associated goodwill was fully impaired. Impairment losses of approximately $4.8 million have been recorded during the nine months ended September 30, 2022, reducing the carrying value of the Company’s goodwill to $0. As such, no further impairment assessments have been completed subsequent to the March 31, 2022 interim assessment.

The Company determined the fair value of the Gaming reporting unit using a discounted cash flow valuation model. The impairment loss was primarily driven by a reduction in expected future revenues, following changes to the Company’s product roadmap, as well as a higher discount rate applied in the valuation model. The principal assumptions used in the discounted cash flow valuation model were forecasted revenues and weighted average cost of capital (i.e., the discount rate).

The impairment loss is presented as impairment of goodwill in the condensed consolidated statements of operations.