Thank you, and welcome to Motorsport Games Second Quarter 2022 Earnings Conference Call and Webcast. On today's call is Dmitry Kozko, Motorsport Games Executive Chairman and CEO; and Jon New, its Chief Financial Officer. By now, everyone should have access to the company's second quarter 2022 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games' website at www.motorsportgames.com. During the course of this call, management may make forward-looking statements within the meaning of the U.S. federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Except as required by law, the company undertakes no obligation to update any forward-looking statements made on this call or to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to today's press release and the company's filings with the SEC, including its most recent quarterly report on Form 10-Q for the quarter ended June 30, 2022. For a detailed discussion of certain risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. In today's conference call, we will refer to certain non-GAAP financial measures such as adjusted EBITDA as we discuss the second quarter 2022 financial results. You will find a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures as well as other related disclosures in the press release issued earlier today. And now I'd like to turn the call over to Dmitry Kozko, Chief Executive Officer of Motorsport Games.

Thank you, everyone, for joining us on our Q2 2022 earnings call. I'd like to start today with a quick reminder that we are a product-driven business. Our products include creating official racing games and esports experiences under some of the world's most valuable motorsport brands like NASCAR, INDYCAR, 24 Hours of Le Mans, BTCC, and others. Therefore, our efforts and resources are prioritized to go towards providing racing fans with great experiences. We believe we made good progress with product releases in Q2 and development of our future product releases in upcoming quarters. In Q2, we released our anticipated next-gen console upgrade to all NASCAR 21: Ignition holders, even allowing users with new and previous generation consoles like PS4 and PS5 to play together via cross-gen capability, all while continuing to bring quality of life improvements to our 2021 NASCAR game, while we continue to work on our 2022 and 2023 versions. Our rFactor 2 platform continues to deliver predictable and exciting quarterly content drops and allows us to use our expanding rFactor 2 platform to conduct our own esports events like Formula Pro Series. These steady content releases bring official licensed content such as cars and tracks to our fan base while allowing us to create on-track activations at INDYCAR and recently announced BTCC events throughout the year. These on-track activations not only allow our fans to try rFactor 2 and its licensed INDYCAR or BTCC content but also provide us valuable hands-on fan feedback that helps us progress on the development of both the official INDYCAR and BTCC game. We plan to be at five to ten more races this year between NASCAR, INDYCAR, and BTCC events. As a reminder, our official INDYCAR game is slated to launch on all major platforms on time in 2023 and our official BTCC games on all major platforms in 2024. Back to our NASCAR franchise for a minute. We have a pretty packed content and game release schedule for the upcoming months. We are bringing a 2022 season update to our NASCAR 21 console game as well as the addition of 2022 teams and drivers to our current NASCAR mobile game and maybe even one of our older Heat titles. Also, we are launching a brand-new NASCAR 22 game for the Nintendo Switch in Q4 that we're pretty excited about. Our previous Switch game was highly rated, and we are thrilled to continue to bring NASCAR to the Nintendo Switch platform on a similar annual release schedule as we do for our other mass-market consoles like Xbox, PlayStation, and of course, PC via Steam. Look out for more details about NASCAR 2022 for the Nintendo Switch in just the upcoming days. Our product roadmap remains largely on schedule. The only potential change at this point is the timing of our next car craft release on one of the major consoles. It was originally planned for a 2022 release date. However, this will likely move into 2023 due to potential opportunities we're exploring with the first-party platforms and their potential interest in an exclusive title release next year. We continue to recruit and hire development talent across our worldwide studios while exploring cost-saving opportunities in other areas. Liquidity remains a concern and area of focus for the management team, and we continue to explore all our available finance options. For now, let me pass it on to Jon to go over our financial results.

Thank you, Dmitry. I'd like to share summary financial highlights for the second quarter of 2022. Revenues for Q2 2022 were $2 million compared to $2.2 million for Q2 2021. The $200,000 or 10% quarter-over-quarter decrease reflects $300,000 lower gaming sales and $100,000 increase in esports revenues, primarily from the 24 Hours of Le Mans esports event held in January 2022. Q2 2022 net loss was $7.5 million compared to Q2 2021 net loss of $6 million. The $1.5 million increase in net loss was primarily due to $900,000 increase in Q2 2022 development expenditures, $800,000 increase in sales and marketing spend, $600,000 in foreign currency losses, $200,000 decrease in gross profit, $200,000 increase in interest, $100,000 increase in impairment of intangibles, and $100,000 in depreciation and amortization. The increases in Q2 2022 expenses were partially offset by a $1.4 million reduction in general and administrative expenses. That was driven primarily by a $1.1 million payment made in Q2 2021 for the settlement of certain stock appreciation rights that did not repeat in Q2 2022. Q2 2022 adjusted EBITDA loss was $4.9 million compared to Q2 2021 adjusted EBITDA loss of $3.7 million. The $1.2 million increase in Q2 2022 adjusted EBITDA loss was primarily driven by the same factors as the increased Q2 2022 net loss. Revenues were $5.3 million and $4.7 million for the six months ended June 30, 2022, and 2021, respectively. That's an increase of $600,000 or 13% period-over-period. For the six months ended June 30, 2022, revenues from our Gaming segment increased $200,000 or 5% to $4.9 million compared to $4.7 million for the six months ended June 30, 2021. Revenues from our Esport segment increased by $400,000 for the six months ended June 30, 2022, when compared to revenues for the six months ended June 30, 2021. The increase in our Gaming segment revenues compared to the 2021 period was primarily due to a $700,000 in higher game sales and an increase of $600,000 in additional revenues earned through the development of simulation platforms using our rFactor 2 platform for third parties. These increases were primarily offset by $1.1 million in retail pricing concessions. The increase in our Esport segment revenues was primarily driven by the 24 Hours of Le Mans esports event held in January 2022. We see continued revenue from our back catalog, and we also see that there is a revenue tail stretching out several years from launch with our back catalog product offerings. The net loss for the six months ended June 30, 2022, was $23.5 million compared to the six months ended June 30, 2021, net loss of $20 million, a $3.5 million increase in net loss was primarily due to $9.4 million increase in goodwill and intangible asset impairment, noncash; a $2 million increase in development expenditures; a $1.5 million increase in sales and marketing spend; a $1.4 million decrease in equity method investment income; a $900,000 increase in foreign currency losses; $600,000 lower gross profit; and $200,000 in higher interest expense. This was offset by $12.7 million of lower general and administrative expenses and $1.4 million of lower equity method income. For the six months ended June 30, 2022, adjusted EBITDA loss was $10.5 million compared to $6.5 million adjusted EBITDA loss for the six months ended June 30, 2021. The $4 million increase in adjusted EBITDA loss was primarily driven by the same factors as the increased net loss for the six months ended June 30, 2022, compared to the six months ended June 30, 2021. We expect to experience operating losses for the foreseeable future as we continue to incur expenses to develop new game franchises. The company's existing cash on hand is insufficient to fund its current operations for the next 12 months. We are currently seeking debt and/or equity financing. We also have the ability to modify our product roadmap to decrease the short and/or long-term need for working capital. As Dmitry said, our priority is to continue rolling out fun, well-performing, revenue-generating games for racing fans worldwide while managing our liquidity. Thank you for joining us today. And now let's go to questions.

I have two. The first one is, just wondering on the expansion pack that's coming in September, is there any details that you can share about some additional features that maybe could be coming with that? And then on the NASCAR Ignition title for next year, is there any better sense of the timing of that? And any update on the development progress there?

Jason, thanks for the question. So we are planning to announce some of the details about our 2022 season expansion pack relatively shortly here. We're still slating September/October time for that release. We hope that with that release, we will be able to bring people back into our NASCAR 21: Ignition game and kind of rejuvenate their interest since the game has been essentially fixed for some of the really irritating issues that some folks experienced during the launch period. So we're really looking forward to it and more details will be announced really soon here. And as far as the timing of our 2023 release, we are currently slated to release that during summertime, continuing to bring our efforts to bring that title closer to the beginning of the NASCAR season. That one will be a rebuild. It is something we've been currently working on. It is a shared platform, our shared Motorsport Games common engine that we've been working on diligently here which will be shared amongst our other racing franchises like INDYCAR, Le Mans, and BTCC. And as I mentioned, it is slated as right now to be released around the summer next year.

Great, that's very helpful. I have another question. You mentioned that you're still looking into funding options, both debt and equity. Do you have any idea about the timeline for making that decision? Additionally, in the press release, you mentioned potential cost control measures or adjustments to the product roadmap. I'm curious if there's anything specific at the top of the priority list if either of those situations arise.

Sure. Addressing our liquidity concerns is a top priority for the management team and the company right now. There are still multiple options available, but we haven't made any decisions yet; we'll announce anything as soon as we do. We are eager to share that with the market. Regarding cost-cutting initiatives, we are evaluating various G&A expenses and identifying vendors we can do without to ensure we continue to invest in product development, which remains our highest priority. Our focus will be on product releases and the quality of those products. For anything outside of that, we will seek all possible cost-cutting opportunities to maintain a lean operation.

Dmitry, you mentioned that you've taken some costs out of the business, particularly in G&A. And I was just wondering, can you give us an idea of what the current burn rate per month might be for the company?

I'm going to let Jon unmute.

Mike, yes, you can look at our cash flow and you can see that operating cash flow is $12 million for the six months. So that's pretty consistent. So you're dealing with $2 million a month burn there and coming down slightly through reductions. So call it $2 million for the six months a month.

Got you. Okay. And then, Dmitry, if you can just talk a little bit about just following up on the previous caller's question. You have a promissory note with Motorsport Network based on available liquidity. Do you know what their available liquidity might be at this point? Do they have this $12 million?

Thanks, Mike, for the question. So while the $12 million line of credit from Motorsport Network remains in existence. Given the current state of the global financial markets, we assessed the risk of exposure to nonperformance of this lender. And at this time, we're really not relying on this line as a potential source of liquidity. As we believe that there might be a substantial likelihood that any funding request by us will not be necessarily fulfilled for the foreseeable future.

Got you. And then in terms of the available options, then, what do you see as the best available option at this point? It sounds like you're continuing to keep your title rollouts pretty consistent with what you had before. Do you feel comfortable then that there are other available funding options? Or do you think that it's more likely that maybe some of the timing of the titles might slip a little bit as you kind of look at the product roadmap and the liquidity issues?

We continue to prioritize our product release schedule and anything and all types of investments that are related to us delivering the products and quality products on time. Therefore, so far, you don't see any of these material changes to our product release cycle. Our financing options are continuing to be explored. We haven't made a decision as to which one. And I would like to do this relatively quickly just to make sure that we'll continue to invest in additional opportunities that we want to explore. And right now, those, let's call it, additional auxiliary opportunities are not something we could explore until we improve our liquidity position. So therefore, I'd like to really come to a resolution here relatively quickly.

Got you. Additionally, you could seek partners regarding some of the products and their rollouts. What options do we have for finding partners for specific products and product rollouts?

Correct. That is a viable option that we're exploring. We have had conversations with some brand partners who could potentially be in the publisher type of role for some of our selected titles. We have not come to any sort of decisions. We're continuing to explore that as an additional option and see if us partnering with somebody not only helps us with the distribution and reach for some of our titles, which would be kind of qualification #1 we would look for from a publishing partner, but also could potentially improve our liquidity position if there's some upfront or other types of customary arrangements that could become available. But nothing has been settled yet. Those discussions are active and we continue to explore any and all of those types of opportunities.

Dmitry, I think the main concern for some investors is that another company might come in and potentially buy us at the current valuation, which looks quite attractive. At this time, you're not looking to sell the company because you believe there is substantial upside with these products as they are released, likely generating significant value for shareholders. I would like to know your thoughts on the potential for interest from others in purchasing the entire company right now.

Priority for us is to deliver great products to our fan base, right? We have not created enough products for each one of our franchises to really sort of showcase what we're capable of. Some of that ability will be showcased next year when we have at least three more franchises in the market. So it's not just NASCAR, but we'll have NASCAR, INDYCAR, and Le Mans. I think only at a point in time where we have multiple franchises in the market are we able to showcase efficiencies and economies of scale on what our Motorsport Games engine is able to deliver, and that, of course, could potentially translate into our financial results. Only then do I think we could have meaningful conversations with strategics to give us something that could be considered a fair market value. If we're looking at our current market cap, I'm not sure that potentially reflects that right now, but that is just a personal opinion.

And it looks like we have reached the end of the question-and-answer session. This also means we have come to the end of our conference call today. You may disconnect your lines at this time. Thank you for your participation.