Thank you for standing by and welcome to the First Quarter 2021 Conference Call and Webcast for Motorsport Games Inc. On today’s call are Dmitry Kozko, Executive Chairman and Chief Executive Officer; Stephen Hood, President; and Jon New, Chief Financial Officer. By now, everyone should have access to the company’s first quarter earnings press release filed today after market closed. 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 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. Please refer to today’s press release and the company’s filings with the SEC, including the company’s Annual Report on the Form 10-K for the year ended December 31, 2020 and the company’s quarterly report on Form 10-Q for the period ended March 31, 2021 for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied any forward looking statements made today. In today’s conference call, we will refer to the certain non-GAAP financial measures such as adjusted EBITDA as we discussed the first quarter 2021 financial results. You will find a historical reconciliation of these non-GAAP measures to our actual GAAP results included in the press release issued earlier today. We do not provide a reconciliation for adjusted EBITDA on a forward-looking basis, because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is now available without unreasonable effort due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to certain acquisition-related expenses and stock-based compensation expenses as such adjustments have not yet occurred or out of our control and are cannot be reasonably predicted. And accordingly, we are unable to address the probable significance of the unavailable information. And now, I would like to turn this call over to Dmitry Kozko, Chief Executive Officer of Motorsport Games.

Hello, everyone. It’s a pleasure to be speaking with you as we report another successful quarter for Motorsport Games. Please check out our investor video posted on our landing page of our website. We hope this video gives you a sense of the energy and excitement inherent in everything that we do here at Motorsport Games, while quickly illustrating our key milestones in the quarter. Before I dive into details, I want to say a quick thank you to our shareholders, including many new investors we have met in the past few months. Thank you for taking the time to learn our story and to follow us on this amazing journey. So, all of our new shareholders, let me quickly reiterate who we are and what drives us. We are an award winning, leading racing game developer, publisher and an e-sport ecosystem provider of official motorsport racing series throughout the world. Our mission at Motorsport Games is simple. We create and spread the joy through racing games, starting with our exclusive access to our parent company’s 55 million monthly active users and beyond. We achieved this mission by developing and publishing great racing games and immersive e-sport experiences, all of the world’s most iconic races in brands, who trust us with their valuable IP and often in the long-term partnerships like we have with NASCAR. There are one of several iconic brands that we work with today, including ACO, which represents 24 hours of Le Mans and the British Touring Car Championship. And we are just getting started. I am proud of our team and the progress we are making towards the launch of NASCAR NXT and building Motorsport Games into a world class interactive entertainment company. And we are truly world class as we are operating 24/7 across continents,…

Thank you, Dmitry and hello everyone. I am Stephen Hood, President of Motorsport Games. We are pleased to announce the great development strides we are making this quarter, especially for our new flagship franchise game, NASCAR NXT. Our major reworking of the NASCAR franchise enters closing stages of development as NASCAR NXT enters Beta. The game will then enter a final significant development period prior to product hardening and submission to platform holders for testing and certification. Due to our recent acquisition of Studio 397, NASCAR NXT will include their leading racing simulation technology. rFactor 2 brings real life physics to our development toolbox that we can integrate into the game and develop in a much more efficient way. We are working around the clock and anticipate launch for our new NASCAR franchise in the back half of the third quarter this year. But we are not stopping there. We are bringing NASCAR to the Nintendo Switch platform, which remains on track for our release later this year. A platform not yet reached by Motorsport Games will add useful exposure and revenues to our NASCAR franchise and paved the way for possible future franchise entry into the Nintendo market. We are also continuing to build on NASCAR Heat Mobile using our expanded development team, with ongoing quality of life improvements and our recently prioritized upcoming 2021 content update, which should broaden the appeal of the product and appease existing fans and new fans alike. Additional titles around the NASCAR license remain in development within our portfolio and include Match 3 and Nintendo Switch products. We continue to work at pace to grow our fan base across multiple consoles and platforms to drive the joy of racing games to our fans wherever they may play. As you know, we had our…

Thank you, Stephen. We are pleased to welcome everyone to our 2021 first quarter earnings conference call. For the first quarter of 2021, revenues were $2.5 million as compared to $3.2 million in the first quarter of 2020. The year-over-year decrease reflects lower sales on our console games, and to a lesser extent, a reduction in mobile revenues. The NASCAR Heat 4 game was released in September 2019 that was 2 months later in the respective calendar year compared to the release of NASCAR Heat 5 in July of 2020. This resulted in higher sales of NASCAR Heat 4 during the first quarter of 2020 as compared to sales of NASCAR Heat 5 during the first quarter of 2021 since the majority of sales from a new release occur closest to the release date. Gross profit was $1.7 million for the first quarter, which was a decrease of 22% compared to the prior year first quarter gross profit of $2.2 million. Gross profit margin was 68% of revenues in the first quarter of 2021 compared to 67% of revenues in the prior year period. The decrease in gross margin dollars is primarily due to the reduction in revenues partially offset by the increased percentage of digital sales versus physical units. Digital has higher margin. Operating expenses were $17.1 million for the first quarter of 2021 compared to $2.3 million for the first quarter of 2020. The first quarter includes expenses of $2.9 million associated with our IPO, $9.1 million in non-cash stock-based compensation relating to the IPO, and $300,000 in expenses related to acquisition activity in the quarter. As a result, adjusted EBITDA was negative $2.8 million for the 3 months ended March 31, 2021 versus negative $0.07 million in the prior year period. The quarter-over-quarter change reflects the increase in staffing, marketing and game development to support new brands and new platform options for our upcoming games. Let me finish by touching on our financial expectations looking ahead. We remain confident in our full year guidance, which is $22.5 million in revenue and adjusted EBITDA negative $7.3 million. With the anticipated release of NASCAR NXT in the back half of third quarter this year, launch-related revenues are expected to spread over the third and fourth quarters. We remain comfortable with our full year revenue forecast of $22.5 million. Thank you for joining us today. And now, let’s go to questions. Operator?

[Operator Instructions] Our first question comes from the line of Michael Graham with Canaccord. You may proceed with your question.

Thank you and thanks for all the updates guys. Just wanted to start with one question on the NASCAR NXT launch, we have always expected it to come in Q3, so your comments are consistent with that? Just wondering if you can give us a little color on why the second half of the quarter makes the most sense for that launch? And also, along with that, just wondering if maybe, Stephen appreciated your comments on some of the game qualities and features, but if there is anything you can share about the level of DLC that you expect this first launch to have would be interesting to us? And then I have a follow-up. Thanks.

Thank you, Mike, for the question. It’s Dmitry. The reason is historically with NASCAR Heat 2, 3 and 4 we have seen great results from launching these annual NASCAR game releases in the month of September. So, for the NASCAR NXT, we are on target to launch in the second half of Q3 and as we continue to look at data points that will help us make this potentially the most successful NASCAR title yet in our company history. So we still remain very comfortable with our full year guidance of 22.5 and now are getting into more specific on the timing. And Stephen, would you take the second part of the question?

Sure. I can pick up on the DLC. So yes, certainly the plan is to inject. Probably the easiest way to describe it is a greater variety of DLC content into NASCAR NXT. So, one of the key reasons for wanting to rebuild the technology platform and do all the work that we have been putting into NASCAR NXT over the last couple of years is to prepare the platform for new DLC in the future instead of just paint schemes being injected into a product that we already know is incredibly popular amongst our audience. There are additional content opportunities around new schemes and themes for UI, personalizing the products that were more possibly adding additional cars into the package into the future. So, these kind of drivable components are of even more value than what we have seen in the NASCAR Heat franchise prior. So, I certainly believe that the door is opened for a greater variety and we will get a lot stronger than that. And over time, it’s one of the key reasons for changing the framework in NASCAR NXT. We own all of this technology, we know how it operates and we can react to the market and the interests and demands of players and inject different types of DLC into NASCAR NXT and the games of tomorrow.

Okay, that’s helpful and good color. So, thank you for that. And then the other one I just wanted to ask, Dmitry is you are getting some good momentum in terms of e-sports viewership and events. And I just wonder if you can share a little bit regarding how you are thinking about the potential for eventually moving from sponsorship revenue to streaming rights, is that something that is becoming a little more sort of in the near-term, as you are thinking about the evolution of the strategy for your e-sports business?

So there is a couple of things there, Mike. So first of all, we are super excited with the acquisition of rFactor 2, because that enables us an additional revenue stream in the e-sports sector as we create these bespoke opportunities with the rights holder. I will give you one example. We have created e-sports activities with Formula E last year, but we are only able to create a moderate amount of revenue from such because we did not have a dedicated game title, which will allow us to collect a game type of revenue stream. Now, with rFactor 2 platform being fully ours and under our control, we are able to create these events and look for more revenue streams and just sponsorships such as these e-sports as a service and it’s now more of a platform play, and we can derive games related revenue. But to your other point, absolutely as we continue to compound the audience, and we see as we go from season on season, for example, in our NASCAR e-sports activities, we have grown our audience about four-fold from season one to season two. And we are here to engage on season three later this year. And similar results have been monitored, as we did with Le Mans e-sports. So, as we continue to increase this overall viewership, and aggregate this viewership between the different e-sports series, that compounding effect becomes an attractable offering for immediate rights opportunity. So yes, we do believe that that is going to be something that we will be able to derive opportunity sooner than we were perhaps discussing at the beginning of the year. But it’s not something we are counting for. Right now, we are just super excited about the fact that we could derive in revenue from these e-sport opportunities that we do not have a dedicated game title for yet.

Super. Okay. Thanks so much. I will go back in the queue. Thanks, guys.

[Operator Instructions] Our next question comes from one of Mike Hickey with Benchmark Company. You may proceed with your question.

Hi, Dmitry, Jon and Stephen. Congrats on the quarter guys. Excited to hear the continued development of NASCAR NXT. Jon, I guess, just curious on 2Q, if you are comfortable with consensus, I think last quarter, you gave a view, not just on the year before quarter, so I am not sure if you are going to give any more visibility on your current quarter or your comfort level of consensus?

We are still comfortable with the Q2 as it’s out there.

Nice, good. Also lot of deals here, obviously your headcounts increasing, curious what your total developer headcount is today after doing all these deals, where do you think it will trend? And then broadly speaking, just I guess those obviously to make you how you think about the importance of culture, maintain culture, growing the culture within your development studios, offices spread out globally. Now how you think about managing issues like crunch. They are associated sort of pretty ambitious, games. Thanks, guys.

Thanks Mike, for those questions. So, we are as of 3/31, had 122 headcount, majority of that to be more specific 84 of that is our development resource, which is exciting, because that nearly increased from our last quarter reported numbers, our development capability by almost 30%. And we continue to organically attract high level talent that are super passionate about creating and publishing racing games. And that helps speak to the culture which I will definitely give it to Stephen to touch on. And the fact that we are able to open more global presence allows us to have this growth in geographical areas where such high level talent exist, being that we are now such a wide footprint. So, no longer do we have to look in sort of restricted or smaller geographical areas like U.S., UK, and let’s say Eastern Europe, as we had presented before. But now with Australia, that opens up another opportunity. And this talent is surfacing all across the globe. So, we are ready continuing to not only organically attract, but we are also excited about teams like digital sales coming in, and the capabilities that they bring, especially in a highly growth area, like mobile platform.

So yes, I think Dmitry you put it very well. I mean, mentioning that people are super passionate, that is – that goes a very long way to impacting and reducing the need for crunch. People are putting their hearts and souls into these products, because it’s something that they enjoy to do. This is a hobby as much as their work, many of these specialists that we have engaged and employed around the world. And it’s been incredibly exciting to watch the growth of NASCAR NXT as the team has been built, as the effort has been put into the product. I think crunch, which is an industry wide challenge for many large operations in this day and age, I think is mitigated through very careful planning and the culture of the company, which is one giant family that operates across multiple studios around the world. There are many new ideas and processes that are applied to most board games outlook. And when we talk about growing the development headcount, people automatically imagine that we are hiring countless engineers to work on these projects. But an important part of the headcount increase is the production team the planning team that organize not only NASCAR NXT, but the other products like Le Mans and British Touring Car are already in development. And appropriate planning does go a very long way to mitigating crunch. So, I believe that we have the right culture, the right planning in place, and the right headcount to comfortably manage the projects of today and tomorrow, and I am very positive about that.

Thank you. You also mentioned Dmitry in your prepared comments that you continue to seek additional racing IP and it looks like you brought in Gérard to help you and of course, you have the Motorsport network, as well. But just curious, you could double click on how aggressive you will be for additional IP, already you got a bunch of it. And then last question, when we look at the fiscal year ‘22, can you give us any visibility on the amount of games and if we should expect a second game from a major racing compete? Thanks guys.

Thanks Mike. So as you rightfully noted, and as we set out on our vision, from the very beginning of time, even pre-IPO, right is we do want to hold a portfolio of racing games that are wide as possible for our racing fans, regardless of where they are in the global footprint. That means we would have a portfolio that carries multiple racing disciplines. And that’s why we are so excited with KartKraft for example, adding an additional racing discipline. And as I was saying in my remarks is that we can’t wait to pair that with one of the world class IPs. So, you will see some organic growth coming from us taking these types of disciplines pairing with IP as we continue to seek others. And a platform such as rFactor 2 not only gives us a leap forward with technological advances and the quality standards that our products carry, but also gives confidence to those IP holders of the level of quality of product we are able to bring with essentially their name on it. So that does continue to help us. Gérard Neveu is somebody that helps us deliver that message, as he understands deeply the industry, as he has been there and develops similar global footprint with World Endurance Championship, and he was integral in our 24 hour, Le Mans virtual event as well. As we continue to talk to other race series these IP holders, he helps us translate their needs into what we could create from our products and e-sport experiences. So, we are super excited. And with additional access that Motorsport network provides sort of validation and an audience access, we couldn’t be more excited that opportunity to scale our portfolio of racing games to a most notable one to cast sort of the widest possible net to any racing fan around the world is much nearer than it was before for us.

Nice, did you give – did you see what your ‘22 pipeline would look like if you have another major racing at the major time periods?

So 2022, as we set out when we announced our British Touring Car Championship license that were obtained last year, that is the game that is slated to come out. So, we look to create an e-sport opportunity with British Touring Car Championship later this year, and a product would release in 2022. So, everything is still on schedule. And as Stephen has reported in his remarks, we are super excited to have completed all the tracks laser scans, which obviously adds sort of an insight of how detailed we approach each one of these race series, and look forward to launching it next year on time.

Nice. Maybe one last one for me maybe when you look at kart I guess, we add Mario to kart you have arguably the biggest racing game in the world. And so when you look at the kart, they see game tech is there any sort of novel licensing opportunities, you think of adding the mix to expand the market potential of that game?

Thank you for highlighting the fact that karting is definitely very fun and accessible and understood across multiple generations. You might have heard me speak before, when I highlight the fact that when kids, for example, go to theme parks, karting is one of those attractions that presents there. And that is because it’s fun. And we believe those are some of the characteristics of the example like Mario Kart that translate into this virtual world. We are downloading multiple opportunities of the type of IP we would pair KartKraft with. And we want to make sure that once we do, we continue to deliver the fun aspect of karting across the world, but also address another captive fan base, as we like to do with each one of our license games. That captive fan base allows us to have a foundation audience that then helps us spread sort of the excitement around these products that we launch. So, we look forward to pairing it with the right IP and sort of starting that snowball effect in karting as well, just as we have done with NASCAR and set out to do with other franchises in our portfolio.

That’s great. Thank you. Best of luck.

Thank you.

Our next question comes from one of Franco Granda with D.A. Davidson. You may proceed with your question.

Good afternoon, everyone. Thanks for taking my questions. I have got two on mobile gaming. So, you have been talking about creating new games in mobile that span different categories. You have mentioned just Match 3 do you think the current team is large enough to look to expand this portfolio?

Thank you, Franco for the questions. So, short answer is yes. But we continue to expand that team capability. For example, we do have one mobile product in market today, that’s NASCAR Heat Mobile. And that has its mobile team attached to it. However, we continue to attract high level talent, high level I mean by experience. And with this anticipated acquisition of digital sales, that expands that team, not just organically, but through such sort of hire, if you may. So, once we pair our current team with digital tails, we do believe we would have capabilities to expand the young NASCAR franchise. And we are happy that digital tails actually brings an additional racing discipline alongside with their mobile experience and capabilities. So, it’s another license and another captive fan base that we could extend and expand upon. But to your point of mobile development capabilities, we continue to grow that just similarly as we have done for the console and PC side, which we are now we are able to expand from sort of a single franchise of NASCAR into multiple franchises. That’s why you are able to see our progress in BTCC and others that are in our pipeline.

Yes, fair enough. Thank you for the color. And then I guess a similar line of questioning. Obviously, mobile market is just if you call it as quite different from the console PC market. And it could be affected by other headwinds, right. Right now we are seeing everyone talking about the effect that IDFA is having on the mobile gaming industry. So, as you look at the different dynamics, do you think you can have a larger emphasis as you kind of build out that portfolio in terms of as it relates to M&A really, or I guess how much time are you spending looking at M&A opportunities for this space, I know you used off that as a macro hires there?

So, we are currently focused on launching NASCAR NXT. And we currently have two other exclusive licenses, the BTCC and the Le Mans that would go on alongside that, and we are developing console and PC products. That historically has been the core revenue driver for us. So, we want to make sure that we expand that opportunity as much as possible. Mobile historically has been a smaller portion of our overall revenue. However, that proves to be the largest growth sector. So, to answer your question in a slightly different way, our focus continues to be console and PC, on the score franchises that we currently have, which means that we won’t be spending as much time thinking about mobile M&A opportunities, as we are on how to perfect and better our console and PC products, to so that we are able to constantly create an exciting pipeline of content. And like Stephen touched on and I believe Mike Graham’s questions was something we could evolve into a more of a live ops model, right, or games as a service. So, that would be a growth opportunity and more of a focus, more so than seeking out additional mobile studios. But let me not discount, should opportunity present itself and it makes sense and it expands our racing disciplines perhaps further, we will definitely explore such.

Good. Thank you.

Thank you.

[Operator Instructions] Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn this call back over to Mr. Dmitry Kozko for closing remarks.

One more time, thank you everyone for joining us today. We are very excited about the rest of the year and launching the most anticipated NASCAR game title yet in the history of our company. And in addition to the several other priorities we have across our iconic IP e-sports and traction platform. So thank you again for joining us.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your evening.