Thank you, and welcome to Motorsport Games second quarter 2023 earnings conference call and webcast. On today's call is Motorsport Games’ Chief Executive Officer, Stephen Hood; and Chief Financial Officer, Jason Potter. By now, everyone should have access to the company's second quarter 2023 earnings press release filed today after market close. This is available on the Investor Relations section of Motorsport Games's 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, 2023 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 2023 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 Stephen Hood, Chief Executive Officer of Motorsport Games. Stephen?

I extend my gratitude to all participants for joining this conference call today. The preceding quarter has been marked by an intense period of activity conducted discreetly behind the scenes. Our focus has encompassed a comprehensive evaluation of our projects, processes, corporate culture, and objectives. This endeavor aligns with the strategic direction I emphasized upon my return in April. During the initial phase, we implemented strategic measures aimed at streamlining our satellite studios, accelerating the simplification of our organizational structure for the 2022 Restructuring Plan, and instilling a heightened sense of purpose throughout the organization. Consequently, I am pleased to report the successful completion, preparation, and subsequent market launch of a highly anticipated update for our NASCAR Heat 5 product titled the Next Gen Car Update, accessible on Xbox, PlayStation, and PC platforms. This upgrade has significantly surpassed our expectations, having sold over 34,000 units to date. This performance suggests the potential for it to become our top-grossing DLC by year's end, underscoring the enduring appeal of our NASCAR product offerings, despite the natural aging of the product line. Additionally, we released an update for our Nintendo Switch NASCAR Rivals, which introduced local multiplayer functionality. This enhancement is expected to foster greater social interaction and renew interest in the product. During this period, I have undertaken a comprehensive assessment of the company's current standing, competitive positioning, and areas for enhancement. Our forward-looking opportunities are intrinsically influenced by our financial resource and operational capacity in the present context. A pragmatic reevaluation of the business was sorely needed and critical to our future. Consequently, we have prioritized the cultivation of commercial considerations across all sectors and functions. Our decision-making process now rigorously assesses projects and investments based on realistically term potential, even when the returns are indirect and contribute to revenue generation. Activities that seem unlikely to sustain themselves or propel our business forward are subject to discount scrutiny and possible termination. Our media objective centers on resolving our cash flow needs, mitigating expenditure, and rightsizing the organization for sustainable operations. We are actively exploring diverse avenues to chart our path forward and have retained a positive outlook on implementing the necessary adjustments. Notably, initiatives such as those centered around our rFactor 2 technology present a pathway to sustainability and expansion. Recent collaborations, including the F1 Arcade project with Kindred and our planned proprietary Le Mans game unveiled in conjunction with the ACO at the Centennial Le Mans event on June 5, showcase a multi-revenue opportunity that capitalizes on our strength without overextending our resources. Our ongoing investment in versatile multi-format technology geared towards mainstream games, particularly those played in living rooms and on game consoles, remains part of our future roadmap, and we are investigating a variety of paths to accelerate our entry into that market. We believe this will open the door to exciting master deal titles that diverge from traditional motorsport licenses. This approach will be complemented by our ownership of both the game and the ecosystem, a synergy that we anticipate can position us to provide a superior experience for our consumers. Through rate control, previously known under its code name competition system, this platform is designed to empower us to cater to a broader spectrum of players, taking accessible, professional, and sociable racing experiences—a segment we believe to be underserved. This broadening of our reach is something I expect to forge ahead with over the coming months. Now I invite Jason Potter, Chief Financial Officer of Motorsport Games, to delve into the financial results for the second quarter of 2023.

Thank you, Stephen, and good evening, everyone. As in previous earnings calls, I won't be offering any forward-looking guidance today. Instead, I will focus on providing an update on our financial results and highlights from the second quarter of 2023. Revenues were $1.7 million, down $0.3 million or 13% when compared to the same period in the prior year. Less favorable pricing and volume of digital and mobile game sales lowered revenues on our super development acceleration platform to third parties and resulted in lower revenues from esports sponsorships. The primary drivers of the reduction in revenues were partially offset by lower sales allowances and reserves when compared to Q2 2022. The net loss for the quarter was $8.2 million, an increase of $0.7 million when compared to the same period in the prior year. The change in net loss was primarily driven by a noncash asset impairment loss of $4 million recognized in the second quarter of 2023, which was partially offset by a $2.2 million reduction in marketing, development, general, and administrative expenses, as well as a $0.4 million fair value gain and change in the recurring value of certain liability-classified warrants, along with favorable foreign currency gains. Consequently, EPS in the quarter was negative $3.02 compared to negative $6.34 for the same period in the prior year. The reduction in overhead spend was partly driven by actions taken under the company's 2022 restructuring program, which has helped us lower overhead costs by approximately $4.5 million on an annualized basis as of June 30, 2023, exceeding our target of $4 million in annualized savings by the end of December 31, 2023. These savings were achieved through changes in global headcount, reducing certain overhead expenditures, and improvements in our internal processing. We are reporting an adjusted EBITDA loss of $2.7 million for the second quarter of '23 compared to an adjusted EBITDA loss of $6 million for the same period in the prior year. The improvements in adjusted EBITDA loss reflect similar dynamics we've discussed in relation to the change in loss for the period compared to the previous quarter. On a year-to-date basis, revenues were $3.5 million, down $1.9 million when compared to the same period in the prior year, primarily due to the same factors discussed in relation to the quarterly performance. Net loss was $13.5 million for the year-to-date period compared to $23.5 million in the same period in the prior year. Year-to-date adjusted EBITDA was $6.9 million, down from $11.5 million for the same period last year. Noncash asset impairment losses of $4 million and $9.4 million for the six months ended June 30, 2023 and '22 respectively account for a significant portion of the difference between net loss and adjusted EBITDA for the respective periods. EPS loss for the year-to-date period was $5.42 compared to $19.32 for the same period in the prior year. Moving on to liquidity. This continues to be a key area of focus for the company. As of June 30, 2023, we had cash and cash equivalents of $2 million, down from $5.8 million as of March 31, 2023. Net cash used in operations for the six months ended June 30, 2023 is approximately $8.9 million, representing an average monthly net cash burn of $1.5 million, down $0.1 million when compared to the average monthly cash burn of $1.6 million through the year ended December 31, 2022. As of July 31, 2023, our cash and cash equivalents position reduced by $0.6 million to $1.4 million, which we believe is insufficient to fund our operations for the remainder of 2023, indicating that additional funding will be required to continue operations. In order to address this liquidity shortfall, we are actively exploring several options, including additional funding in the form of potential equity and/or debt financing arrangements or similar transactions, strategic alternatives for our business including the sale or licensing of our assets, and asset cost reduction and restructuring initiatives. Thank you all for your time. And now I will turn the call back to Stephen for closing remarks.

In closing, I would like to thank our shareholders for their ongoing support. Thank you for joining us today. And now let's go to questions.

And our first question comes from the line of Jason Tilchen with Canaccord Genuity. Please proceed.

Good afternoon. And thanks for taking the question. I was hoping maybe you could spend a minute just talking about as you're building out the racing franchise, in particular, the Le Mans game that's coming out this December, what are some of the characteristics that you think are going to differentiate either from a future perspective, from a visual perspective, these titles from some of the other racing games that are out there? Thanks.

Hi Jason, it's Stephen here. Very good question, one that I'm excited to answer. I think when you're looking at the racing market, typically, developers look at the on-track action, by which I mean driving a vehicle around a track or through an environment. And of course, that's a key focus. But in order for us to, in my mind, positively differentiate, we're looking at what are the motivations for people to play racing games? And how do you positively differentiate in that market? One of the weaknesses of recent games today is the inability of developers to get a number of people on track at the same time to participate in a race. In the real world, your motivation is having a career working your way up the ladder. In the living room or home, in a normal kind of course of life, there are many challenges that get in the way of gaming. And racing requires everybody to be very prepared and very ready at a very specific time when the race begins. That is a problem for mass market appeal. So Le Mans, in particular, tackles this by allowing people to participate in a team with friends at a time that is convenient for them. Because if you think about one of the key distinctions of Endurance racing at Le Mans, it's about 18 fighting against others using a single vehicle. There are multiple drivers in the car, which entails driver swaps. We think that's a very interesting mechanic that enables groups of friends to play together in a racing game on the same team, whereas most racing games demand that everybody competes against one another. It's dog-eat-dog; only one person can win. In our world, in Le Mans, in Endurance racing, a team of friends or acquaintances or partners or whatever the combination ends up being can succeed together. That is a hugely positive distinction in the racing market, one that aligns well with Endurance racing. It's really about the team ethics. If you think about a lot of positively received games today, like team titles, you play in a squad, you play in a team. That does not exist in typical racing games. Le Mans will change that. It also involves an asynchronous mode that enables people to take turns and pass the baton between one another. We think it's a very distinct offering that our consumers have started to pick up on. We haven't really gone into any detail about this so far; we've started teasing it. But the reception is very positive, and we think it's a major differentiator that positions us accordingly.

Great. That's really helpful. And then just one going back to the cash position. The cash burn, I think in Q1, you mentioned was about $1.5 million. And then just doing the math here, the monthly burn in July was about $600,000. Can you just talk about if there were any decisions that have been made given where the cash position is? And is that why the burden was slower in July? Or what should we expect for sort of the next few months relative to the timing of a potential decision on what path to go down in terms of solving the liquidity situation? Thank you.

Hi Jason, this is Jason. Thanks for the question. So you're right, the cash burn on net cash flow from operations is a little bit lower in July when compared to the other two months in the quarter. And we did see, on average, just for the three months, net cash from operations dropped about $1.1 million a quarter versus the $1.5 million for the year-to-date. As you are probably aware, there is always some lumpiness to our cash flows in terms of timing of minimum royalty guaranteed payments and the like. And so what you see in Q2 is some of those payments falling due earlier in the quarter, which drove up a slightly higher cash burn within a particular month and we're now and then gaining some upside from that in July as things started to smooth out. Also, I think you're seeing the benefits from—we're starting to see some of the benefit from the 2022 shortfall program where we've realized about $4.9 million in annualized savings. And so that's starting to filter through into our cash position. And so yes, we're starting to see a little bit of upside for that.

Great. Thank you very much.

Our next question comes from the line of Michael Kupinski with Noble Capital Markets. Please proceed.

Thank you. I have a couple of questions here. In terms of Heat 5 and the launch of the DLC in the quarter, was that something that was planned because I didn't seem to have that on my radar screen, and that was something that was a surprise to me. Can you talk a little bit about that decision and mainly because I thought that NASCAR Ignition was going to kind of replace Heat 5 and that you were no longer going to be investing in that particular game given the product cycle? Can you just kind of give us your thoughts about that? And then also what the implications are for NASCAR Ignition given that you've launched the DLC for Heat 5?

Hi Michael, it's Stephen. Good question. The NASCAR Heat 5 DLC, the Next Gen Car Update, was actually partially completed back in the tail-end of last year. So on my return to the company in April, a few short months ago, I was looking through what we had in the product pipeline, and it struck me that a near-complete content update for a well-regarded, if legacy, title of NASCAR Heat 5, which many people still favor, was near complete. We took the decision to continue development of that content update, which didn't tax us a great deal; it just required some additional coordination across the business to push that live. We also took that decision in consultation with NASCAR, who were keen to see the back catalog remain vibrant. It didn't take a huge amount of effort or resource to finish up, but it made sense to complete it and put it into the hands of gamers, and that was very well received, as you heard me comment on the huge uptake. So there's a clear affinity and love in the NASCAR gaming community for the Heat franchise; it has a good reputation. This piece of DLC was a good addition by multiple games, I'm sure. Following that, NASCAR Ignition was designed to take over the mantle of the Heat franchise, and we don't see the two conflicting with one another right now. Players have remained very loyal to the Heat games; they still pick up those titles, and it made sense to serve a title that remains vibrant with a piece of DLC that was near ready.

Seems like a brilliant move. Can you talk a little bit about going back to your cash burn? Is it possible that you can provide a roadmap for investors when you expect to swing towards cash flow positive? I mean, I know that there's a number of titles that are coming out but kind of give us your thoughts of when that might be?

Yes. That's something that we're undergoing at the moment, doing a broad review across the business, looking at which titles are in production, how far they are into development, the cash needs of those products, their viability, and their likely return on revenues. That is something we've been taking on for a while now, and I think we're very close to understanding what our potential opportunities are. That needs to be discussed further internally with our Board, and for the benefit of the business, we will provide a number of options to the Board before we progress. But I returned with a great deal of optimism, and I think there are several assets and opportunities in licenses and products that are in development. When I mentioned products, it's not just the core game products; we also have other services in development. We're keen to see these go live because they will complement any games and experiences we launch. When I talk about the ecosystem, it's about not just delivering the game, but having an ecosystem that enables players to come together, enjoy the entertainment experience, while providing the business with further opportunities to monetize that audience and drive additional revenue from our gaming audience. All of that is coming to fruition. We're going to be very careful and selective about where we go next with the objective of making the business sustainable and viable for the future. So we track lightly. But I think in the next quarter, we will resolve all outstanding conversations, and we will very firmly know where we are headed and what the upside is.

Going back to my previous question, are there things in the vault, so to speak, that you can launch that you're contemplating or moving forward with that maybe outside of the Le Mans and other titles that you're planning on publishing that there are other things like Heat 5 with the DLC that you might be able to launch inexpensively and generate a favorable return on?

Well, I think there are a number of opportunities. Clearly, nothing comes for free, and we have to be very considered about where we invest our resources going forward. The products that we do allow to continue will undergo a comprehensive review. I think we've got a good idea of where we need to be in the near, medium, and long term. My view is that there are many opportunities. I made reference to doing mass market targeting for home consoles, being in the living room. We're ultimately trying to provide an entertainment experience. People tend to believe that racing games exist primarily in a PC-niche market. However, I see a vibrant opportunity there. We know that if we can open the doors and reach a mainstream gamer interested in vehicles, cars, and driving—let alone racing—we will stand a chance of reaching additional consumers and driving additional revenues. There are numerous opportunities; we just need to settle on which of those we will pursue. I am particularly interested in near-term projects. I don't wish to invest significantly in things that will take years to come to fruition. Some exciting opportunities are available that we need to validate.

Thank you. That's all I have.

Thank you. There are no further questions at this time. I'd like to turn the call back to management for closing comments.

Thank you very much for everybody's time today. I appreciate the questions, and thank you very much for your participation in this call. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.