SEGMENT REPORTING

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 13 – SEGMENT REPORTING

The Company’s principal operating segments coincide with the types of products and services to be sold. The products and services from which revenues are derived are consistent with the reporting structure of the Company’s internal organization. The Company’s two reportable segments for the three and nine months ended September 30, 2022 and 2021 were: (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”); and (ii) the organization and facilitation of esports tournaments, competitions and events for the Company’s licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “Esports segment”). The Company’s chief operating decision-maker has been identified as the Company’s Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon the Company’s management organization structure as of September 30, 2022 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed. There are no inter-segment revenue transactions and, therefore, revenues are only to external customers. As the Company primarily generates its revenues from customers in the U.S., no geographical segments are presented.

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

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues:
Gaming	$	1,042,852		$	2,042,322		$	5,943,178		$	6,731,462
Esports		180,290			96,144			610,740			120,063
Total Revenues	$	1,223,142		$	2,138,466		$	6,553,918		$	6,851,525
Cost of revenues:
Gaming	$	540,519		$	848,705		$	2,765,263		$	2,466,572
Esports		62,337			100,434			707,556			170,678
Total Cost of Revenues	$	602,856		$	949,139		$	3,472,819		$	2,637,250
Gross Profit (Loss)
Gaming	$	502,333		$	1,193,617		$	3,177,915		$	4,264,890
Esports		117,953			(4,290	)		(96,816	)		(50,615	)
Total Gross Profit	$	620,286		$	1,189,327		$	3,081,099		$	4,214,275
Loss From Operations
Gaming	$	(6,515,203	)	$	(6,035,516	)	$	(27,952,962	)	$	(26,945,662	)
Esports		(1,037,274	)		(351,981	)		(1,888,280	)		(792,308	)
Total Loss From Operations	$	(7,552,477	)	$	(6,387,497	)	$	(29,841,242	)	$	(27,737,970	)
Depreciation and Amortization
Gaming	$	84,326		$	79,394		$	301,465		$	176,617
Esports		8,377			2,480			25,034			2,480
Total Depreciation and Amortization	$	92,703		$	81,874		$	326,499		$	179,097
Interest Expense, net:
Gaming	$	(244,953	)	$	(160,310	)	$	(638,211	)	$	(311,748	)
Esports		-			-			-			-
Total Interest Expense, net	$	(244,953	)	$	(160,310	)	$	(638,211	)	$	(311,748	)
Gain Attributable to Equity Method Investment:
Gaming	$	-		$	-		$	-		$	1,370,837
Esports		-			-			-			-
Total Gain Attributable to Equity Method Investment	$	-		$	-		$	-		$	1,370,837
Other (Expense) Income, Net:
Gaming	$	(729,158	)	$	(110,192	)	$	(1,496,763	)	$	(27,913	)
Esports		(10,127	)		(630	)		(15,215	)		1,798
Total Other (Expense) Income, net	$	(739,285	)	$	(110,822	)	$	(1,511,978	)	$	(26,115	)
Net Loss:
Gaming	$	(7,489,314	)	$	(6,306,018	)	$	(30,087,936	)	$	(25,914,486	)
Esports		(1,047,401	)		(352,611	)		(1,903,495	)		(790,510	)
Total Net Loss	$	(8,536,715	)	$	(6,658,629	)	$	(31,991,431	)	$	(26,704,996	)

	September 30, 2022		December 31, 2021
Total assets:
Gaming	$	18,461,380	$	47,511,471
Esports		2,293,972		3,191,732
Total assets	$	20,755,352	$	50,703,203

Motorsport Games Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements