BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
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Jun. 30, 2026 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management’s opinion, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of June 30, 2026 and for the three and six months ended June 30, 2026. The Company’s results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the operating results for the full year ending December 31, 2026 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related disclosures as of December 31, 2025 and 2024 and for the years then ended which are included in the 2025 Form 10-K.
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| Use of Estimates | Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
Motorsport Games Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements
The Company’s significant estimates used in these condensed consolidated financial statements include, but are not limited to, revenue recognition criteria, offering periods for deferred net revenue, valuation allowance of deferred income taxes, and stock-based compensation valuation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates.
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| Revisions and Reclassifications | Revisions and Reclassifications
Certain reclassifications of prior period amounts have been made to conform to the presentation of these condensed consolidated financial statements. Deferred revenue is now separately presented from accrued expenses and other current liabilities on the accompanying condensed consolidated statements of cash flows. In addition, the Company has revised the statement of cash flow for the six months ended June 30, 2025 to revise the presentation of net cash used in financing activities to include payment on notes payable that was previously included in cash flows from operating activities. As a result, net cash provided by operating activities increased by $0.3 million and net cash provided by financing activities decreased by $0.3 million during the six months ended June 30, 2025. These reclassifications had no effect on the prior period’s results of operations.
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| Warrant Classification and Correction of Immaterial Error | Warrant Classification and Correction of Immaterial Error
During the quarter ended June 30, 2026, the Company completed and documented its evaluation of the settlement provisions contained in its outstanding warrants, including the provisions applicable upon a fundamental transaction, and concluded that all of the Company’s outstanding warrants are equity-classified instruments under ASC 815-40.
In connection with that evaluation, the Company determined that the February 2023 warrants, which had been presented as liabilities and remeasured at fair value through earnings since issuance, should have been classified within equity from issuance, and that their prior presentation was an error. The Company evaluated the error under SEC Staff Accounting Bulletin Nos. 99 and 108 and concluded that it was not material to any previously issued annual or interim financial statements. The Company corrected the error through an adjustment to increase the additional paid-in capital by $477,902 and increase the accumulated deficit by the same amount on the December 31, 2025 condensed consolidated balance sheet, representing the issuance-date fair value of the warrants and the approximate amount of the cumulative net remeasurement gains recognized in prior periods. This adjustment has also been reflected in the opening line of the statements of changes in stockholders’ equity as of January 1, 2026 and 2025. Such correction had no impact on net equity. The warrant liability was removed from the condensed consolidated balance sheet as of June 30, 2026 through a nominal adjustment to earnings. As a result, the February 2023 warrants are no longer remeasured and are permanently reflected in stockholders’ equity.
The Series A, Series B and Placement Agent warrants issued in July 2024 are equity-classified instruments recorded within additional paid-in capital and are not remeasured. The description of these warrants as liability-classified in the Company’s Form 10-Q for the quarter ended March 31, 2026 was an error in disclosure that had no effect on any recognized amount in any period and is corrected by this report. On April 23, 2026, stockholders approved the exercisability of these warrants; the warrants became exercisable on that date, and the shares issuable upon exercise are included in the computation of diluted earnings per share from that date to the extent dilutive.
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| Fair Value Measurements / Stock Options and Warrants | Fair Value Measurements / Stock Options and Warrants
The Company has recorded certain board of director compensation arrangements, which may be paid in the future in cash or equity instruments, within noncurrent liabilities. Such liabilities are measured at estimated fair value on a recurring basis, with subsequent changes in fair value recognized in earnings.
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 – Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815 – Derivatives and Hedging (“ASC 815”). The Company’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding. The Company has evaluated the settlement provisions contained in its outstanding warrants, including the provisions applicable upon a fundamental transaction, and concluded that all of the Company’s outstanding warrants are equity-classified. See Note 7 – Stockholders’ Equity for additional information.
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| Recently Issued Accounting Standards | Recently Issued Accounting Standards
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.
On January 1, 2026, the Company prospectively adopted ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which introduced a practical expedient to simplify how entities estimate credit losses on short-term receivables and contract assets under the Current Expected Credit Losses model. The adoption of ASU 2025-05 did not have a material impact on the condensed consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for annual periods beginning with the year ending December 31, 2027 and for interim periods thereafter. The new standard permits early adoption and can be applied prospectively or retrospectively. The Company is currently evaluating the timing, method and impact of its adoption of ASU 2024-03.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which modernizes the accounting for internal-use software. ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. ASU 2025-06 will be effective for the Company’s interim and annual 2028 reporting periods, with early adoption permitted. The Company is currently evaluating the timing, method and impact of its adoption of ASU 2025-06.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which clarifies interim disclosure requirements and the applicability of Topic 270. The guidance will be effective for interim periods beginning January 1, 2028. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2025-11 to have a material impact on its condensed consolidated financial statements.
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| Significant Accounting Policies | Significant Accounting Policies
There have been no material changes to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2025, as included in the 2025 Form 10-K, other than as described above. |