Thank you for standing by, and welcome to Motorsport Games Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. On today's call are Dmitry Kozko, Motorsport Games Executive Chairman and CEO; and Jason Potter, Chief Financial Officer. I will now hand it over to Ken Godskind of Motorsport Games.

Thank you, operator. By now, everyone should have access to the company's fourth quarter and full year 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 annual report on Form 10-K for the year ended December 31, 2022, for a detailed discussion of certain of the 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 fourth quarter and full year 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. Dmitry?

Thank you, everyone, for joining us on the call and following our journey. It's no secret, and it's been a tough one for us between the ongoing war in Ukraine that led us to shutting down of our Moscow studio while trying to help those team members that wanted to get out of the country to get out, to overall operational challenges as we continue to focus on improving our liquidity position. But what's amazing is to witness the resilience our team has demonstrated through all of it, as we continue to strive towards making the thrill of Motorsport successful to everyone by creating the highest quality, most sophisticated and innovative experiences for racers, gamers and fans. Since our last few earnings calls, we continue to focus on efficiency and reducing costs where possible without sacrificing the quality of our future games. We're still a product-driven business, thus is crucial to continue to invest in our games and complementary esport programs. As previously announced, we recently completed various equity offerings, including 3 registered direct offerings that resulted in more than $11.3 million in aggregate gross proceeds. Each of these registered direct offerings were structured to comply with the SEC's baby shelf rules in order to maximize the amount available to us under our effective S3 registration statement. We're also able to reach an agreement with our majority shareholder, Motorsport Network, to exchange all of our outstanding debt of nearly 4 million with Motorsport Network into the shares of our common stock. I personally believe this reinforces the commitment that our majority shareholder has in Motorsport Games as well as provide us relief on our balance sheet. Additionally, at the end of January, we received a notice from NASDAQ that we regained compliance for continued NASDAQ listing. I'm proud of how…

Thank you, Dmitry. I would like to share some financial highlights for the fourth quarter and year ended December 31, 2022, starting with Q4 '22 results. Our revenues were $3.8 million compared to $8.2 million in Q4 '21. The $4.4 million or 54% decrease is primarily due to us releasing one new NASCAR game in Q4 '22 compared to 2 new NASCAR games in Q4 '21. Net loss was $4.8 million and $7 million for Q4 '22 and '21, respectively, an improvement of $2.2 million or 31%. The reduction in net losses was primarily attributable to a $1.9 million reduction in sales and marketing expenses, a $0.8 million reduction in development expense, a $3.4 million reduction in cost of revenues which were primarily due to other royalties and production costs, a $0.1 million decrease in impairment losses from our intangible assets and a $0.9 million increase in foreign currency gains. These are partially offset by a $4.4 million decrease in revenues, a $0.1 million increase in expenses relating to ongoing litigation, a $0.2 million increase in general and administrative expenses and a $0.3 million increase in interest accretion expense. Adjusted EBITDA loss for Q4 '22 was $3.5 million compared to an adjusted EBITDA loss of $5.4 million for Q4 '21. The change in adjusted EBITDA loss of $1.9 million was primarily due to the same factors driving the previously discussed change in net loss in Q4 '22 compared to Q4 '21. Turning our attention to the full year results. Revenues were $10.3 million and $15.1 million for the year ended December 31, '22 and '21, respectively, a decrease year-over-year of $4.8 million or 31.5%. Gaming segment revenues decreased by $5.1 million or 35.9% to $9.2 million for the year ended December 31, '22, compared to $14.3 million for the year…

In closing, I want to thank our shareholders for their continuing support and believe in our vision. We went through some tough times as a company, but I'm confident that given the right amount of time, Motorsport Games will thrive and innovate, delivering exciting racing experiences to our fans around the world. Thank you all for joining, and let's go to questions.

[Operator Instructions] And our first question is from Jason Tilchen with Canaccord Genuity.

Congrats on the recent capital raises. I guess the first thing I'm curious about, the cash burn for 2022 per the press release was about $1.6 million per month. And I'm just curious, is it materially different today following some of the cost-cutting measures and the restructuring in December? And then I have a follow-up after that.

Jason, this is Jason Potter. So the cash burn for $1.6 million for 2022, we expect that to remain consistent as we come into 2023. We obviously see some drop-off from the restructuring plan efforts in Q4, but what we're experiencing year-to-date as disclosed with the closing cash position on March 22 is that we're continuing to experience a burn rate in and around $1.6 million.

Okay. Great. And then the second question is, to what extent has the restructuring or the cost-saving measures impacted the release schedule? And I know in the prepared remarks, Dmitry mentioned that the INDYCAR game won't be released this year. Is there any more color on when this year the NASCAR game will be released and the plans for BTCC? Any additional color there would be greatly appreciated.

Thanks, Jason, for the question. So first of all, the cost savings that we implemented from last year, as you will see in our 10-K, they are in full effect just as we projected it to be, with an effect that we previously said that we project effectively $2.5 million of savings annualized in 2022, and that is what we experienced already. That did not have any impact on the development cycle or the launch of the product schedule. The cuts were mostly done outside of the product development expenses. Now as far as NASCAR is concerned for this year, what we mentioned is that we look to bring the 2023 season to pretty much all of the platforms that our products are currently available at. As far as release date for that, we have a lot of historical data that shows us that sometime towards the playoffs part of the season is a good time for us to have our content ready and to bring it to the community. But when we're ready to announce that, we will definitely publicize and showcase where and on which platforms it will be released with.

Great. And if there's time for one more, just curious if there's any color that you could share on how the Ignition 21 content update or the Rivals release performed sort of relative to your expectations and how big of an impact that have on gaming segment revenue for the fourth quarter?

So we're more satisfied with our Rivals release than, obviously, anything that has to do with a 21 Ignition title. I think our move to invest into the community and show them our good faith and also tell them that we take full accountability for the type of release we did in 2021 that was the motive behind the decision of releasing '22 content to the Ignition holders for free. So of course, it's easier to convert somebody when you're giving them something for free. So I cannot say that, that impacted us materially from revenue. That, to us, was an investment back into the community and sort of a small gesture of apology that we understand that we need to hold ourselves to a much higher standard. Now as far as Rivals is concerned, Rivals is a very good release for the Nintendo Switch platform. But of course, the Nintendo Switch installed base is not, at least in the territories where we have the most penetration, is not as significant as the major consoles. So we cannot expect the results similar to PlayStation plus Xbox for us when majority of the sales come here from United States. It did meet our expectation in terms of the sales we derived from there. But of course, never satisfied and trying to continue to bring something more to the community that they would be able to value, therefore, make additional purchase.

Our next question is from Michael Kupinski with NOBLE Financial Capital Markets.

Congratulations, Jason. A couple of things here. If we kind of look at, obviously, INDYCAR being pushed into next year, I was just wondering in terms of the cash investment that you're making right now, are there any other games that might be delayed until 2024 outside of INDYCAR that your release schedules that might slip?

Michael, thank you for the question. So I think one point I would really want to make clear that we touched on in our call is that we really took a step back and took a serious look at the quality of products we deliver, especially when it comes to an INDYCAR product, for the point that, that community hasn't seen a game -- hasn't seen a gaming experience in over a decade. And a lot has changed in the gaming space since the last time there was an INDY gaming type of experience, right, a dedicated one. So we want to make sure that the standard that the INDYCAR community is looking for in their product is surpassed, right? We want to make sure that we exceed their expectation. And our track record with Ignition doesn't show that capability so far. So we essentially have to take even a higher standard to ourselves to make sure that when we do release that game, it starts a proper momentum. So for us, it's an investment for the long run of making a decision, even though we are seeing the game in the proper stage right now -- there is moving cars, there's tracks. There are certain elements that's supposed to be in the game, but we just do not believe that it's up to par for what the community will expect. And we won't allow them, right? And we understand that taking extra time and extra investment into that will ultimately, in a long run, pay off for us. And as far as NASCAR is concerned or other franchises, as you talk about what else could be moving, we're going to be looking at everything with the same exact lens. NASCAR community deserves a great gaming experience. We understand we did not meet nowhere close to our own expectations on the Ignition release, hence, why we continue to sell our previous year titles, and we want to continue to update content around our portfolio there. But as far as taking a decision to launch a game that is a dedicated and exciting experience for the NASCAR or other communities, we're going to hold off on making an official announcements on those release dates until we feel absolutely confident and probably already with some insight from the community or stakeholders that the game is starting to take shape that would impress the rest of the community.

Obviously, the burn rate -- cash burn rate not dropping off indicates that you are making additional investments in the game that probably more than what you would normally anticipate that you would be making at this juncture. I was just wondering in terms of just the road map if funding and how -- obviously, you had a significant improvement in your balance sheet recently, and that's terrific. But as we kind of move forward, what are the options that you might pursue in terms of investment in the game should funding become restrictive?

So let's sort of take for a second a view that a lot of these titles that we're working on, right? Like the Le Mans title, the INDYCAR title and the BTCC experience, those are inaugural experiences, right? So launching the game experience from the beginning is the most heaviest or, let's say, the biggest investment that is required because you're -- essentially you're building the tracks. You're building the car models. You're building a lot of stuff that's necessary as the foundational elements of a great gaming experience, so hence, why you see the burn is reflective of that, right? When we're talking about laser-scanning every INDYCAR track and recreating it to an accuracy that will impress those that will take their virtual car for a spin there, that takes an investment. And that's what we never wanted to slow down. Even though when we talk about reducing expenses as a company, we always looked at other areas outside of our game development budgets where we could do that. And even though you could see the burn rates are staying pretty steadily, I definitely could say that the ratio of where we're investing the money is shifting, and it has started shifting over time. So as the time goes on, of course, as we complete the build of the tracks or others, you could see that we won't necessarily need to recreate the track again, right? So there could be some efficiencies from even development standpoint of view but only after we reach a certain quality metric. Until then, we continue to invest in just gaming experiences to bring it to the highest possible fidelity.

As there are no further questions at this time, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.