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What changed in Motorsport Games Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Motorsport Games Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+246 added−356 removedSource: 10-K (2026-03-10) vs 10-K (2025-03-20)

Top changes in Motorsport Games Inc.'s 2025 10-K

246 paragraphs added · 356 removed · 178 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Products Game Products Portfolio We develop and publish multi-platform racing video games including for game consoles, PCs and mobile platforms through various retail and digital channels, including full-game and DLCs. Our current video game catalog includes the following titles: Game Image Overview Platforms Release Date rFactor 2 rFactor 2 is a realistic racing simulation game.
Biggest changeWe continue to utilize our resources and expertise to enhance the rFactor 2 platform, especially in areas highlighted by the racing community. Our Products Game Products Portfolio We develop and publish racing video games for PCs through various digital channels, including full-game and DLCs.
In addition, laws and regulations relating to user privacy, electronic contracts and communications, mobile communications, data collection, retention, consumer protection, and publishing activities, including production and delivery of content, advertising, localization, and information security have been adopted or are being considered for adoption by many jurisdictions and countries throughout the world.
In addition, laws and regulations relating to user privacy, including children’s data privacy, electronic contracts and communications, mobile communications, data collection, retention, consumer protection, and publishing activities, including production and delivery of content, advertising, localization, and information security have been adopted or are being considered for adoption by many jurisdictions and countries throughout the world.
We make available free of charge through our website copies of these reports as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC. The SEC also maintains a website, www.sec.gov that contains the reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
We make available free of charge through our website copies of these reports as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC. The SEC also maintains a website, sec.gov that contains the reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
A reduction in sales from or loss of these distribution channels would have a material adverse effect on the Company’s results of operations and financial condition. 11 Strategic Licenses and Partnerships 24 Hours of Le Mans On March 15, 2019, we formed Le Mans Esports Series Limited as a joint venture between Motorsport Games and ACO with the primary purpose of carrying on the promotion of and running of an esports event business replicating races of the WEC and the 24 Hours of Le Mans race on an electronic gaming platform.
A reduction in sales from or loss of these distribution channels would have a material adverse effect on the Company’s results of operations and financial condition. 12 Strategic Licenses and Partnerships 24 Hours of Le Mans On March 15, 2019, we formed Le Mans Esports Series Limited as a joint venture between Motorsport Games and ACO with the primary purpose of carrying on the promotion of and running of an esports event business replicating races of the WEC and the 24 Hours of Le Mans race on an electronic gaming platform.
In addition, a continuing industry shift to free-to-play games could result in a reprioritization of our other products by traditional retailers and distributors. 13 In a broad sense, we compete for the leisure time and discretionary spending of consumers with other interactive entertainment companies, as well as with providers of different forms of entertainment, such as film, television, social networking, music and other consumer products.
In addition, a continuing industry shift to free-to-play games could result in a reprioritization of our other products by traditional retailers and distributors. 14 In a broad sense, we compete for the leisure time and discretionary spending of consumers with other interactive entertainment companies, as well as with providers of different forms of entertainment, such as film, television, social networking, music and other consumer products.
These agreements typically limit our use of the third party’s respective intellectual property to specific uses and for specific time periods, in consideration for up-front and recurring royalty payments that are typically based upon our sales of the respective products. 14 We protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions.
These agreements typically limit our use of the third party’s respective intellectual property to specific uses and for specific time periods, in consideration for up-front and recurring royalty payments that are typically based upon our sales of the respective products. 15 We protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions.
Although we did not organize the Le Mans Virtual Series for the 2023/24 or 2024/25 seasons, we currently plan on organizing the 2025/26 Le Mans Virtual Series to commence this year. We also intend to continue exploring opportunities to expand the recurring portion of our esports segment outside of Le Mans.
Although we did not organize the Le Mans Virtual Series for the 2023/24, 2024/25 or 2025/26 seasons, we currently plan on organizing the 2026/27 Le Mans Virtual Series to commence this year. We also intend to continue exploring opportunities to expand the recurring portion of our esports segment outside of Le Mans.
Item 1. Business Company Overview Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including games based on the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”).
Item 1. Business Company Overview Motorsport Games Inc. (“Motorsport”) is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including games based on the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”).
As a result, our reputation and brand may be harmed, we could incur substantial costs, and we could lose both gamers and revenue. Furthermore, the costs of compliance with these laws may increase in the future as a result of changes in interpretation.
As a result, our reputation and brand may be harmed, we could incur substantial costs, and we could lose both gamers and revenue. Furthermore, the costs of compliance with these laws may increase in the future as a result of the adoption of new laws, amendments, and changes in interpretation.
In exchange for the license, the agreement requires us to pay Epic an initial license fee, royalties, support fees and supplemental license fees for additional platforms. During a two-year support period, Epic will use commercially reasonable efforts to provide us with updates to the Unreal Engine 4 and technical support via a licensee forum.
In exchange for the license, the agreement required us to pay Epic an initial license fee, royalties, support fees and supplemental license fees for additional platforms. During a two-year support period, Epic was required to use commercially reasonable efforts to provide us with updates to the Unreal Engine 4 and technical support via a licensee forum.
These laws, including the General Data Protection Regulation and the California Consumer Privacy Act, which have restricted our ability to gather and use data about our users, could harm our business by limiting the products and services we can offer consumers or the manner in which we offer them.
These laws, including the General Data Protection Regulation and the California Consumer Privacy Act, which may restrict our ability to gather and use data about our users, or could harm our business by limiting the products and services we can offer consumers or the manner in which we advertise or offer them.
Our Internet address is www.motorsportgames.com . We regularly file reports with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
We regularly file reports with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Driven Lifestyle is the only holder of shares of the Company’s Class B common stock and does not have any transfer, conversion, registration, or economic rights with respect to such shares of Class B common stock.
Driven Lifestyle is the only holder of shares of the Company’s Class B common stock and does not have any transfer, conversion, registration, or economic rights with respect to such shares of Class B common stock. Our Internet address is motorsportgames.com .
In exchange for such license, we agreed to fund up to €8,000,000 (approximately $8,330,000 as of December 31, 2024) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the license. As of December 31, 2024, we have funded approximately $6.1 million to such development.
In exchange for such license, we agreed to fund up to €8,000,000 (approximately $9,391,000 as of December 31, 2025) as needed for development of the video game products, to be contributed on an as-needed basis during the term of the license. As of December 31, 2025, we have funded approximately $8.8 million for such development.
Our headcount as of December 31, 2024 was 39, made up of 22 full-time employees and 17 contractors, with 30 people in total dedicated to game development, located primarily in the United States of America and Europe. None of our employees were covered by collective bargaining agreements, and we believe that relations with our employees are generally good.
Our headcount as of December 31, 2025 was 44, made up of 26 full-time employees and 18 contractors, with 32 people in total dedicated to game development, located primarily in the United States of America and Europe. None of our employees were covered by collective bargaining agreements, and we believe that relations with our employees are generally good.
Revenues We currently generate revenue primarily by selling our racing video game products for video game consoles, PC, and mobile platforms through various retail and digital channels, including full-game and downloadable content. In addition, we began providing product development services to third parties for the first time in 2022 that included the ongoing support and maintenance of developed software.
Revenues We currently generate revenue primarily by selling our racing video game products for PCs through various digital channels, including full-game and downloadable content, as well as our RaceControl subscription service. In addition, we began providing product development services to third parties for the first time in 2022 that included the ongoing support and maintenance of developed software.
Our esports business generates revenues from sponsorships, advertising and media rights for events and competitions. In addition, should audience patterns continue to grow, we believe the esports business has the potential to generate incremental revenues through the further sale of media rights to the Company’s esports events and competitions, as well as, among other things, merchandising.
If audience patterns continue to grow, we believe the esports business has the potential to generate incremental revenues through the further sale of media rights to our esports events and competitions, as well as, among other things, merchandising.
Other direct marketing efforts include activities on Facebook, Twitter, Twitch, YouTube and other online social networks, online advertising, public relations activity, print and broadcast advertising, coordinated in-store and industry promotions (including merchandising and point of purchase displays), participation in cooperative advertising programs, direct response vehicles, and product sampling through demonstration software distributed through the Internet or the digital online services provided by our partners.
Other direct marketing efforts include activities on Facebook, X (formerly Twitter), Twitch, YouTube and other online social networks, online advertising, public relations activity, broadcast advertising, participation in cooperative advertising programs, and product sampling through demonstration software distributed through the Internet or the digital online services provided by our partners.
In addition, through this joint venture with ACO, we have the right to create and organize esports leagues and events for the Le Mans Esports Series.
In addition, through this joint venture with ACO, we have the right to create and organize esports leagues and events for the Le Mans Esports Series. 10 In January 2021, we completed our initial public offering (“IPO”).
We entered into an agreement to facilitate the Le Mans Esports Series as part of a joint venture with Automobile Club de l’Ouest (“ACO”), the organizer of the 24 Hours of Le Mans endurance race in 2019.
We no longer sell NASCAR games and did not sell any NASCAR games during the year ended December 31, 2025. We entered into an agreement to facilitate the Le Mans Esports Series as part of a joint venture with Automobile Club de l’Ouest (“ACO”), the organizer of the 24 Hours of Le Mans endurance race in 2019.
DLC updates were released in July 2024, September 2024, December 2024 and February 2025. Microsoft Windows via Steam February 20, 2024 We continually evaluate our planned product release schedule and modify the timing of upcoming products based on developments in our business, or if we believe it will result in a better consumer experience.
Microsoft Windows via Steam February 20, 2024 We continually evaluate our planned product release schedule and modify the timing of upcoming products based on developments in our business, or if we believe it will result in a better consumer experience. 11 Esports Partnerships and Franchises We recognize the growing importance and business viability of esports, especially within the racing and motorsport genres.
Product Development and Support We develop and produce our titles using a model in which a group of creative, technical, and production professionals, including among others, designers, producers, programmers, artists, and sound engineers, in coordination with our marketing, finance, analytics, sales, and other professionals, has responsibility for the entire development and production process, including the supervision and coordination of, where appropriate, external resources.
The agreement was effective until terminated under the provisions of the agreement; however, pursuant to the terms of the agreement, we could only actively develop new or existing authorized products during a five-year active development period, which ended on August 11, 2025. 13 Product Development and Support We develop and produce our titles using a model in which a group of creative, technical, and production professionals, including among others, designers, producers, programmers, artists, and sound engineers, in coordination with our marketing, finance, analytics, sales, and other professionals, has responsibility for the entire development and production process, including the supervision and coordination of, where appropriate, external resources.
The latest figures reported from 2024 show Le Mans, which includes the WEC, having a cumulative global audience of 255 million, while the global fanbase for Formula 1 was estimated to be 750 million in 2024.
The latest figures reported from 2024 show Le Mans, which includes the WEC, having a cumulative global audience of 255 million, while the global fanbase for Formula 1 was estimated to be 827 million in 2025. We develop and publish racing video games for personal computers (PCs) through various digital channels, including full-game and downloadable content (“DLC”) .
Microsoft Windows via Steam March 28, 2013 KartKraft KartKraft is a kart racing simulator, which was released in January 2022. Microsoft Windows via Steam January 26, 2022 (full release) Le Mans Ultimate Le Mans Ultimate is the official game of the FIA World Endurance Championship and 24 Hours of Le Mans.
Microsoft Windows via Steam January 26, 2022 (full release) Le Mans Ultimate Le Mans Ultimate is the official game of the FIA World Endurance Championship and 24 Hours of Le Mans. DLC updates were released in July 2024, September 2024, December 2024, February 2025, June 2025, September 2025 and December 2025.
We also are able to sell directly to consumers through various digital platforms. Our products and content are available for consumers to purchase and download at their convenience directly to their video game console, PC, or mobile device through our platform partners, including Microsoft Corporation (“Microsoft”), Sony Interactive Entertainment Inc. (“Sony”), Apple Inc. (“Apple”), Nintendo Co., Ltd.
We also are able to sell directly to consumers through various digital platforms. Our products and content are available for consumers to purchase and download at their convenience directly to their PC through our platform partners, including Steam and Genba.
We are striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games. In 2023, we organized the grand finale of the Le Mans Virtual Series 2022/23, the 24 Hours of Le Mans Virtual event, which had a cumulative total of approximately 8.8 million video views with approximately 27 million minutes watched.
In 2023, we organized the grand finale of the Le Mans Virtual Series 2022/23, the 24 Hours of Le Mans Virtual event, which had a cumulative total of approximately 8.8 million video views with approximately 27 million minutes watched. The 24 Hours of Le Mans Virtual event had a global audience of 5 million across television (TV)/over-the-top (OTT) channels.
It features mixed class road racing with realistic dynamics, an immersive sound environment, and stunning graphics, that are perfect for top-level esports and a rich single-player experience. Content updates were released in 2022 and 2023, as well as the rFactor 2: RaceControl multiplayer update in October 2023.
Our current video game catalog includes the following titles: Game Image Overview Platforms Release Date rFactor 2 rFactor 2 is a realistic racing simulation game. It features mixed class road racing with realistic dynamics, an immersive sound environment, and stunning graphics, that are perfect for top-level esports and a rich single-player experience.
No other distributor accounted for 10% or more of our revenues in those periods. For the years ended December 31, 2024 and 2023, sales through these three distribution channels accounted for approximately 77% and 89% of our accounts receivable, respectively. No other distributor accounted for 10% or more of our accounts receivable in those periods.
For the year ended December 31, 2024, sales through three of our main distribution channels accounted for approximately 86% of our consolidated revenues and approximately 77% of our accounts receivable as of December 31, 2024.
We develop and publish multi-platform racing video games including for game consoles, personal computers (PCs) and mobile platforms through various retail and digital channels, including full-game and downloadable content (“DLC”) . We have obtained the official licenses to develop multi-platform games for the 24 Hours of Le Mans race and the WEC.
We have obtained the official licenses to develop multi-platform games for the 24 Hours of Le Mans race and the WEC. On February 20, 2024, we released Le Mans Ultimate on PC in early access.
Due to our modified pro duct release schedule, we recognized minimal revenue from sales of physical gaming products for the years ended December 31, 2024 and 2023. Customer Concentration For the years ended December 31, 2024 and 2023, sales through our three main distribution channels accounted for approximately 86% and 83% of our consolidated revenues, respectively.
Customer Concentration For the year ended December 31, 2025, sales through one of our main distribution channels accounted for approximately 64% of our consolidated revenues and approximately 47% of our accounts receivable as of December 31, 2025.
The 24 Hours of Le Mans Virtual event had a global audience of 5 million across television (TV)/over-the-top (OTT) channels. We continue to leverage esports competitions to bring wider awareness and engagement to our gaming products, while creating inspiring event spectacles for our viewers.
Although we did not organize any esport events during 2025 and 2024, we intend to leverage esports competitions to bring wider awareness and engagement to our gaming products, while creating inspiring event spectacles for our viewers.
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Additionally, we had a limited non-exclusive right and license to, among other things, sell our NASCAR games and DLCs that were in our product portfolio through December 31, 2024. For fiscal years 2024 and 2023, 52% and 72% of our total revenue, respectively, was generated from sales of our NASCAR racing video games.
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Le Mans Ultimate is the official game of the WEC and 24 Hours of Le Mans, and is the first officially licensed and dedicated 24 Hours of Le Mans video game release in over twenty years. On July 22, 2025, we released Le Mans Ultimate Version 1.0.
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Due to the uncertainty surrounding our ability to raise funding, and in light of our liquidity position and anticipated future funding requirements, we continue to explore other strategic alternatives and potential options for our business, including, but not limited to, the sale or licensing of certain of our assets and/or a merger in addition to the past sales of our NASCAR License and Traxion, which was our motorsport and racing games community content platform.
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This milestone marks the completion of the title’s Early Access phase and ushers in a new era of continued development and expansion for the official game of the FIA World Endurance Championship and the 24 Hours of Le Mans.
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If any such additional strategic alternative is executed, it is expected it would help to improve our working capital position and reduce overhead expenditures, thereby lowering our expected future cash-burn, and provide some short-term liquidity relief.
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Content updates were released in 2022 and 2023, as well as the rFactor 2: RaceControl multiplayer update in October 2023. Microsoft Windows via Steam March 28, 2013 KartKraft KartKraft is a kart racing simulator, which was released in January 2022.
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Nonetheless, even if we are successful in implementing one or more additional strategic alternatives, we will continue to require additional funding and/or further cost reduction measures in order to continue operations, which includes further restructuring of our business and operations.
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During the years ended December 31, 2025 and 2024, we did not generate any revenue from our esports business. Prior to 2024, our esports business generated revenues from sponsorships, advertising and media rights for events and competitions.
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There are no assurances that we will be successful in implementing any additional strategic plans for the sale or licensing of our assets, or any other strategic alternative, which may be subject to the satisfaction of conditions beyond our control.
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In May 2020, we entered into a multi-year licensing agreement to use certain licensed intellectual property for motorsports and/or racing video gaming products related to, themed as, or containing the British Touring Car Championship (the “BTCC”), on consoles and mobile applications, esports series and esports events.
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In October 2023, BARC (TOCA) Limited, the exclusive promoter of the BTCC, delivered notice to the Company terminating the BTCC license agreement, effective as of November 3, 2023.
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As a result, we no longer have the right to develop and publish the video games for the BTCC racing series or to create and organize its esports leagues and events. 9 In January 2021, we completed our initial public offering (“IPO”).
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We continue to utilize our resources and expertise to enhance the rFactor 2 platform, especially in areas highlighted by the racing community. In July 2021, we entered into certain license agreements to use certain licensed intellectual property for motorsports and/or racing video gaming products and esports events related to, themed as, or containing the INDYCAR racings series.
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In November 2023, INDYCAR, LLC delivered notice to the Company terminating the INDYCAR license agreements, effective immediately. As a result, we no longer have the right to develop and publish the video games for the INDYCAR racing series or to create and organize its esports leagues and events .
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The sale of our NASCAR License and the termination of our BTCC License and INDYCAR License has impacted our long-term product release schedule as we will no longer be producing NASCAR, BTCC and INDYCAR titles moving forward.
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As we continue to evaluate the cost saving initiatives and explore other strategic alternatives and potential options for our business, including, but not limited to, the sale or licensing of certain of our assets, further adjustments to our product roadmap may be required. 10 Esports Partnerships and Franchises We recognize the growing importance and business viability of esports, especially within the racing and motorsport genres.
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(“Nintendo”), Google and Steam. Our physical gaming products have historically been sold through a distribution network with an exclusive partner who specializes in the distribution of games through mass-market retailers (e.g., Target, Wal-Mart), consumer electronics stores (e.g., Best Buy), discount warehouses, game specialty stores (e.g., GameStop), and other online retail stores (e.g., Amazon).
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The agreement is effective until terminated under the provisions of the agreement; however, pursuant to the terms of the agreement, we can only actively develop new or existing authorized products during a five-year active development period, which terminates on August 11, 2025. 12 Arrangements with Console Manufacturers Under the terms of agreements entered into separately with Sony, Microsoft, Nintendo and their affiliates, we are authorized to develop and distribute disc-based and digitally-delivered software products and services compatible with PlayStation, Xbox and Switch consoles, respectively.
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Under these agreements with Sony, Microsoft and Nintendo, we have the non-exclusive right to use, for the specified term and in a designated territory, technology that is owned or licensed by them to publish our games on their respective consoles.
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With respect to our digitally delivered products and services, the console manufacturers pay us either a wholesale price or a royalty percentage on the revenue they derive from their sales of our products and services.
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Our transactions for packaged goods products are made pursuant to individual purchase orders, which are accepted on a case-by-case basis by Sony, Microsoft and Nintendo (or their designated replicators), as the case may be. For packaged goods products, we pay the console manufacturers a per-unit royalty for each unit manufactured.
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Many key commercial terms of our relationships with Sony, Microsoft and Nintendo, such as manufacturing terms, delivery times, policies and approval conditions, are determined unilaterally, and are subject to change by the console manufacturers.
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The license agreements also require us to indemnify the console manufacturers for any loss, liability and expense resulting from any claim against the console manufacturer regarding our games and services, including any claims for patent, copyright or trademark infringement brought against the console manufacturer.
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Each license may be terminated by the console manufacturer or shall terminate if a breach or default by us is not cured after we receive written notice from the console manufacturer, or if we become insolvent. The console manufacturers are not obligated to enter into license agreements with us for any future consoles, products or services.
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In November 2022, the Company amended its certificate of incorporation to effectuate a reverse split of the issued and outstanding shares of Class A common stock and Class B common stock at a ratio of 1-for-10.
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Shares underlying outstanding equity-based awards were proportionately decreased and the respective per share exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. There was no change in the par value of the Class A common stock and Class B common stock as a result of the reverse stock split.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo regain compliance with the Stockholders’ Equity Requirement, we plan to negotiate and implement equity financing transactions and negotiate a reduction or extinguishment of our purchase commitment liabilities; provided that there can be no assurances that such financing transactions and reductions of our purchase commitment liabilities will be consummated or that they will achieve their intended effects. 39 Any delisting of our Class A common stock from NASDAQ, including as a result of our inability to regain compliance with the Stockholders’ Equity Requirement, could adversely affect our ability to attract new investors, reduce the liquidity of our outstanding shares of Class A common stock, reduce our ability to raise additional capital, reduce the price at which our Class A common stock trades, result in negative publicity and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders.
Biggest changeOur market capitalization could fall below $5 million due to a decrease in our stock price. 37 Any delisting of our Class A common stock from Nasdaq, including as a result of our inability to maintain compliance with the Stockholders’ Equity Requirement, could adversely affect our ability to attract new investors, reduce the liquidity of our outstanding shares of Class A common stock, reduce our ability to raise additional capital, reduce the price at which our Class A common stock trades, result in negative publicity and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders.
The risks we face in connection with acquisitions include: ● diversion of management time and focus from operating our business; ● coordination of technology, research and development and sales and marketing functions; ● transition of the acquired company’s users to our website and mobile applications; ● retention of employees from the acquired company; ● cultural challenges associated with integrating employees from the acquired company into our organization; ● integration of the acquired company’s accounting, management information, human resources and other administrative systems; ● the need to implement or improve controls, policies and procedures at a business that prior to the acquisition may have lacked effective controls, policies and procedures; 37 ● potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect on our operating results; ● known and unknown liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, and tax liabilities; and ● litigation or other claims resulting from the acquisition of the company, including claims from terminated employees, consumers, former stockholders, or other third parties.
The risks we face in connection with acquisitions include: ● diversion of management time and focus from operating our business; ● coordination of technology, research and development and sales and marketing functions; ● transition of the acquired company’s users to our website and mobile applications; ● retention of employees from the acquired company; ● cultural challenges associated with integrating employees from the acquired company into our organization; ● integration of the acquired company’s accounting, management information, human resources and other administrative systems; ● the need to implement or improve controls, policies and procedures at a business that prior to the acquisition may have lacked effective controls, policies and procedures; 35 ● potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect on our operating results; ● known and unknown liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, and tax liabilities; and ● litigation or other claims resulting from the acquisition of the company, including claims from terminated employees, consumers, former stockholders, or other third parties.
The success and profitability, as well as the expansion, of our international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as: ● the inability to offer certain games in certain foreign countries; ● recruiting and retaining talented and capable management and employees in foreign countries; ● challenges caused by distance, language and cultural differences; ● developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets; ● competition from local game makers with intellectual property rights and significant market share in those markets and with a better understanding of local player preferences; ● utilizing, protecting, defending and enforcing our intellectual property rights; ● negotiating agreements with local distribution platforms that are sufficiently economically beneficial to us and protective of our rights; ● the inability to extend proprietary rights in our brand, content or technology into new jurisdictions; ● implementing alternative payment methods for virtual items in a manner that complies with local laws and practices and protects us from fraud; ● compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content and consumer protection, including, but not limited to, the United States Federal Trade Commission Act, various state consumer protection and video game control laws, and the United Kingdom’s Office of Fair Trading’s 2014 principles relating to in-app purchases in free-to-play games that are directed toward children 16 and under; ● compliance with anti-bribery laws, including the Foreign Corrupt Practices Act in the United States and the Bribery Act 2010 in the United Kingdom; ● credit risk and higher levels of payment fraud; ● currency exchange rate fluctuations; ● protectionist laws and business practices that favor local businesses in some countries; ● potentially adverse tax consequences due to changes in the tax laws of the U.S. or the foreign jurisdictions in which we operate; ● political, economic and social instability, including acts of war, such as the ongoing wars between Russia and Ukraine (as discussed further below) and between Israel and Hamas; ● public health crises, such as the COVID-19 pandemic, which can result in varying impacts to our employees, players, vendors and commercial partners internationally; 31 ● work stoppages or other changes in labor conditions; ● higher costs associated with doing business internationally; and ● trade and tariff restrictions.
The success and profitability, as well as the expansion, of our international operations are subject to numerous risks and uncertainties, many of which are outside of our control, such as: ● the inability to offer certain games in certain foreign countries; ● recruiting and retaining talented and capable management and employees in foreign countries; ● challenges caused by distance, language and cultural differences; ● developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets; ● competition from local game makers with intellectual property rights and significant market share in those markets and with a better understanding of local player preferences; ● utilizing, protecting, defending and enforcing our intellectual property rights; ● negotiating agreements with local distribution platforms that are sufficiently economically beneficial to us and protective of our rights; ● the inability to extend proprietary rights in our brand, content or technology into new jurisdictions; ● implementing alternative payment methods for virtual items in a manner that complies with local laws and practices and protects us from fraud; ● compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content and consumer protection, including, but not limited to, the United States Federal Trade Commission Act, various state consumer protection and video game control laws, and the United Kingdom’s Office of Fair Trading’s 2014 principles relating to in-app purchases in free-to-play games that are directed toward children 16 and under; ● compliance with anti-bribery laws, including the Foreign Corrupt Practices Act in the United States and the Bribery Act 2010 in the United Kingdom; ● credit risk and higher levels of payment fraud; ● currency exchange rate fluctuations; ● protectionist laws and business practices that favor local businesses in some countries; ● potentially adverse tax consequences due to changes in the tax laws of the U.S. or the foreign jurisdictions in which we operate; ● political, economic and social instability, including acts of war, such as the ongoing wars between Russia and Ukraine (as discussed further below) and between Israel and Hamas; ● public health crises, such as a pandemic, which can result in varying impacts to our employees, players, vendors and commercial partners internationally; 29 ● work stoppages or other changes in labor conditions; ● higher costs associated with doing business internationally; and ● trade and tariff restrictions.
In particular, while we are an emerging growth company, we are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); we are exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; we are subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and we are not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved. 36 In addition, while we are an emerging growth company, we can take advantage of an extended transition period for complying with new or revised accounting standards.
In particular, while we are an emerging growth company, we are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); we are exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; we are subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and we are not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved. 34 In addition, while we are an emerging growth company, we can take advantage of an extended transition period for complying with new or revised accounting standards.
We plan to derive significant revenues from the distribution of certain of our future products on third-party mobile and web platforms, such as the Apple App Store, Steam, the Google Play Store, and Facebook. These platforms may also serve as significant online distribution platforms for, and/or provide other services critical for the operation of, a number of our games.
We plan to derive significant revenues from the distribution of certain of our future products on third-party mobile and web platforms, such as the Apple App Store, Steam, and the Google Play Store. These platforms may also serve as significant online distribution platforms for, and/or provide other services critical for the operation of, a number of our games.
Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any: ● breach of their duty of loyalty to us or our stockholders; ● act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; ● unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or ● transactions for which the directors derived an improper personal benefit. 40 These limitations of liability will not apply to liabilities arising under the federal or state securities laws and will not affect the availability of equitable remedies such as injunctive relief or rescission.
Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any: ● breach of their duty of loyalty to us or our stockholders; ● act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; ● unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or ● transactions for which the directors derived an improper personal benefit. 38 These limitations of liability will not apply to liabilities arising under the federal or state securities laws and will not affect the availability of equitable remedies such as injunctive relief or rescission.
An event that results in the disruption or degradation of any of our critical business functions or information technology systems and harms our ability to conduct normal business operations or causes a decrease in consumer demand for our products and services could materially impact our reputation and brand, financial condition and operating results. 32 Risks Related to Our Relationship with Driven Lifestyle Driven Lifestyle controls a significant portion of our Class A common stock and all of our Class B common stock and therefore has the ability to exert significant control over the direction of our business, which could prevent other stockholders from influencing significant decisions regarding our business plans and other matters.
An event that results in the disruption or degradation of any of our critical business functions or information technology systems and harms our ability to conduct normal business operations or causes a decrease in consumer demand for our products and services could materially impact our reputation and brand, financial condition and operating results. 30 Risks Related to Our Relationship with Driven Lifestyle Driven Lifestyle controls a significant portion of our Class A common stock and all of our Class B common stock and therefore has the ability to exert significant control over the direction of our business, which could prevent other stockholders from influencing significant decisions regarding our business plans and other matters.
In addition, our continued growth depends, in part, on our ability to respond to constant changes in the esports gaming industry, including rapid technological evolution, continued shifts in gamer trends and demands, frequent introductions of new games and titles and the constant emergence of new industry standards and practices.
In addition, our continued growth of our esports business depends, in part, on our ability to respond to constant changes in the esports gaming industry, including rapid technological evolution, continued shifts in gamer trends and demands, frequent introductions of new games and titles and the constant emergence of new industry standards and practices.
We plan to continue to generate a portion of our revenues from advertising and sponsorship during our esports events as online viewership of our esports gaming offerings expand. Our revenues from advertising and sponsorship partly depend on the continual development of the online advertising industry and advertisers’ willingness to allocate budgets to online advertising in the esports gaming industry.
We plan to continue to generate a portion of our revenues from advertising and sponsorship during our esports events as online viewership of our esports gaming offerings expand. Our revenues from advertising and sponsorship will partly depend on the continual development of the online advertising industry and advertisers’ willingness to allocate budgets to online advertising in the esports gaming industry.
If the online advertising and sponsorship market does not continue to grow, or if we are unable to capture and retain a sufficient share of that market, our ability to increase our current level of advertising and sponsorship revenue and our profitability and prospects may be materially and adversely affected.
If the online advertising and sponsorship market does not grow, or if we are unable to capture and retain a sufficient share of that market, our ability to increase our current level of advertising and sponsorship revenue and our profitability and prospects may be materially and adversely affected.
Natural disasters, cyber-incidents, weather events, wildfires, power disruptions, telecommunications failures, public health outbreaks, such as the COVID-19 pandemic, failed upgrades of existing systems or migrations to new systems, acts of terrorism, acts of war, including the ongoing wars between Russia and Ukraine and between Israel and Hamas, geopolitical and social turmoil or other events could cause outages, disruptions and/or degradations of our infrastructure, including our or our partners’ information technology and network systems, a failure in our ability to conduct normal business operations, or the closure of public spaces in which players engage with our games and services.
Natural disasters, cyber-incidents, weather events, wildfires, power disruptions, telecommunications failures, public health outbreaks, such as a pandemic, failed upgrades of existing systems or migrations to new systems, acts of terrorism, acts of war, including the ongoing wars between Russia and Ukraine and between Israel and Hamas, geopolitical and social turmoil or other events could cause outages, disruptions and/or degradations of our infrastructure, including our or our partners’ information technology and network systems, a failure in our ability to conduct normal business operations, or the closure of public spaces in which players engage with our games and services.
We also could be required to stop offering, distributing or supporting our products, our gaming platform or other features or services, including esports events, which incorporate the affected intellectual property rights, redesign products, features or services to avoid infringement, or obtain a license, all of which could be costly and harm our business. 29 In addition, many patents have been issued that may apply to potential new modes of delivering, playing or monetizing interactive entertainment software products and services, such as those offered on our gaming platform or that we would like to offer in the future.
We also could be required to stop offering, distributing or supporting our products, our gaming platform or other features or services, including esports events, which incorporate the affected intellectual property rights, redesign products, features or services to avoid infringement, or obtain a license, all of which could be costly and harm our business. 27 In addition, many patents have been issued that may apply to potential new modes of delivering, playing or monetizing interactive entertainment software products and services, such as those offered on our gaming platform or that we would like to offer in the future.
If we fail to satisfy our obligations under agreements with third-party developers and licensors, the agreements may be terminated or modified in ways that are burdensome to us, and have a material adverse effect on our business, financial condition and operating results. 21 Our business depends in part on the success and availability of platforms and mass media channels developed by third parties and our ability to develop commercially successful content, products, and services for those platforms.
If we fail to satisfy our obligations under agreements with third-party developers and licensors, the agreements may be terminated or modified in ways that are burdensome to us, and have a material adverse effect on our business, financial condition and operating results. 19 Our business depends in part on the success and availability of platforms and mass media channels developed by third parties and our ability to develop commercially successful content, products, and services for those platforms.
We currently advertise through a blend of direct and indirect advertising channels, including through activities on Facebook, Twitter, Twitch, YouTube and other online social networks, online advertising, public relations activity, print and broadcast advertising, coordinated in-store and industry promotions (including merchandising and point of purchase displays), participation in cooperative advertising programs, direct response vehicles, and product sampling through demonstration software distributed through the Internet or the digital online services provided by our partners.
We currently advertise through a blend of direct and indirect advertising channels, including through activities on Facebook, X (formerly Twitter), Twitch, YouTube and other online social networks, online advertising, public relations activity, print and broadcast advertising, coordinated in-store and industry promotions (including merchandising and point of purchase displays), participation in cooperative advertising programs, direct response vehicles, and product sampling through demonstration software distributed through the Internet or the digital online services provided by our partners.
Adverse economic, market and geopolitical conditions, such as a prolonged U.S. or international general economic downturn, whether or not caused by the COVID-19 pandemic or geopolitical issues, including the ongoing wars between Russia and Ukraine and between Israel and Hamas, could result in further periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, which would also reduce consumer spending.
Adverse economic, market and geopolitical conditions, such as a prolonged U.S. or international general economic downturn, whether or not caused by a pandemic or geopolitical issues, including the ongoing wars between Russia and Ukraine and between Israel and Hamas, could result in further periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, which would also reduce consumer spending.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. 41 There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings.
The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. 39 There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings.
Moreover, as a result of the disclosure of information in the public filings we make, our business operations, operating results and financial condition will become more visible, including to competitors and other third parties. 43 In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.
Moreover, as a result of the disclosure of information in the public filings we make, our business operations, operating results and financial condition will become more visible, including to competitors and other third parties. 41 In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.
If these technologies fail, or otherwise become unavailable, or we cannot maintain our relationships with the technology providers and we cannot find suitable alternatives, our financial condition and operating results may be adversely affected. 30 Our international operations are subject to increased challenges and risks. Attracting players in international markets is a critical element of our business strategy.
If these technologies fail, or otherwise become unavailable, or we cannot maintain our relationships with the technology providers and we cannot find suitable alternatives, our financial condition and operating results may be adversely affected. 28 Our international operations are subject to increased challenges and risks. Attracting players in international markets is a critical element of our business strategy.
In the future, we expect this trend to continue with a relatively limited number of franchises producing a disproportionately high percentage of our revenues and profits. 20 Our ability to acquire and maintain licenses to intellectual property, especially for racing series, affects our revenue and profitability. Competition for these licenses may make them more expensive and increase our costs.
In the future, we expect this trend to continue with a relatively limited number of franchises producing a disproportionately high percentage of our revenues and profits. 18 Our ability to acquire and maintain licenses to intellectual property, especially for racing series, affects our revenue and profitability. Competition for these licenses may make them more expensive and increase our costs.
There can be no assurance that our products will be sufficiently successful so that we can recoup these costs or make a profit on these products. 18 Additionally, the amount of lead time and cost involved in the development of high-quality products is increasing due to growing technical complexities and higher expectations from consumers.
There can be no assurance that our products will be sufficiently successful so that we can recoup these costs or make a profit on these products. 17 Additionally, the amount of lead time and cost involved in the development of high-quality products is increasing due to growing technical complexities and higher expectations from consumers.
Moreover, the costs of compliance may continue to increase when more content is made available on our platform as a result of our growing base of gamers, which may adversely affect our results of operations. 26 Additionally, we currently generate, and intend to generate in the future, revenue through offering advertising within certain of our franchises.
Moreover, the costs of compliance may continue to increase when more content is made available on our platform as a result of our growing base of gamers, which may adversely affect our results of operations. 24 Additionally, we currently generate, and intend to generate in the future, revenue through offering advertising within certain of our franchises.
For example, these companies may favor our competitors over us due to our relationship with Driven Lifestyle and to avoid indirectly supporting Driven Lifestyle. 34 Our inability to resolve in a manner favorable to us any potential conflicts or disputes that arise between us and Driven Lifestyle or its subsidiaries with respect to our past and ongoing relationships may adversely affect our business and prospects.
For example, these companies may favor our competitors over us due to our relationship with Driven Lifestyle and to avoid indirectly supporting Driven Lifestyle. 32 Our inability to resolve in a manner favorable to us any potential conflicts or disputes that arise between us and Driven Lifestyle or its subsidiaries with respect to our past and ongoing relationships may adversely affect our business and prospects.
We may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO, though we may cease to be an emerging growth company earlier under certain circumstances, including if (i) we have $1.235 billion or more in annual revenue in any fiscal year, (ii) we become a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act; or (iii) we issue more than $1.0 billion of non- convertible debt over a three-year period.
We may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO (December 31, 2026), though we may cease to be an emerging growth company earlier under certain circumstances, including if (i) we have $1.235 billion or more in annual revenue in any fiscal year, (ii) we become a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act; or (iii) we issue more than $1.0 billion of non- convertible debt over a three-year period.
In addition, a continuing industry shift to free-to-play games could result in a reprioritization of our other products by traditional retailers and distributors. 22 We are subject to risks associated with operating in a rapidly developing industry and a relatively new market. Many elements of our business are unique, evolving and relatively unproven.
In addition, a continuing industry shift to free-to-play games could result in a reprioritization of our other products by traditional retailers and distributors. 20 We are subject to risks associated with operating in a rapidly developing industry and a relatively new market. Many elements of our business are unique, evolving and relatively unproven.
In addition, competitors with large portfolios and popular games typically have greater influence with platform providers, retailers, distributors and other customers who may, in turn, provide more favorable support to those competitors’ games. 23 Further, the esports gaming industry generally is highly competitive.
In addition, competitors with large portfolios and popular games typically have greater influence with platform providers, retailers, distributors and other customers who may, in turn, provide more favorable support to those competitors’ games. 21 Further, the esports gaming industry generally is highly competitive.
Any failure on our part to comply with these laws or the application of these laws in an unanticipated manner may harm our business and result in penalties or significant legal liability. 25 Certain of our business models could be subject to new laws or regulations or evolving interpretations of existing laws and regulations.
Any failure on our part to comply with these laws or the application of these laws in an unanticipated manner may harm our business and result in penalties or significant legal liability. 23 Certain of our business models could be subject to new laws or regulations or evolving interpretations of existing laws and regulations.
Failure to successfully manage these risks in the development and implementation of new products or services could have a material adverse effect on our business, financial condition and operating results. 28 Failure to adequately protect our intellectual property, technology and confidential information could harm our business and operating results.
Failure to successfully manage these risks in the development and implementation of new products or services could have a material adverse effect on our business, financial condition and operating results. 26 Failure to adequately protect our intellectual property, technology and confidential information could harm our business and operating results.
Conversely, if we overestimate the amount of server capacity required by our business, we may incur additional operating costs. 27 Because of the importance of our online business to our revenues and results of operations, our ability to access adequate Internet bandwidth and online computational resources to support our business is critical.
Conversely, if we overestimate the amount of server capacity required by our business, we may incur additional operating costs. 25 Because of the importance of our online business to our revenues and results of operations, our ability to access adequate Internet bandwidth and online computational resources to support our business is critical.
There can be no assurance that our efforts to prevent or minimize these unauthorized or fraudulent transactions will be successful. 24 The success of our business relies on our marketing and branding efforts, and these efforts may not be accepted by consumers to the extent we planned.
There can be no assurance that our efforts to prevent or minimize these unauthorized or fraudulent transactions will be successful. 22 The success of our business relies on our marketing and branding efforts, and these efforts may not be accepted by consumers to the extent we planned.
If we cannot manage our growth effectively, our business could be harmed, and our results of operations and financial condition could be materially and adversely affected. 35 Impairment of our intangible assets has had, and in the future could have, a material adverse impact on our results of operations.
If we cannot manage our growth effectively, our business could be harmed, and our results of operations and financial condition could be materially and adversely affected. 33 Impairment of our intangible assets has had, and in the future could have, a material adverse impact on our results of operations.
We plan to continue to generate a portion of our revenues from advertising and sponsorship during our esports events. If we fail to attract more advertisers and sponsors to our gaming platform, tournaments or competitions, our revenues may be adversely affected.
We plan to generate a portion of our revenues from advertising and sponsorship during our esports events. If we fail to attract advertisers and sponsors to our gaming platform, tournaments or competitions, our revenues may be adversely affected.
Moreover, if we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example as a result of the COVID-19 pandemic or the current labor supply constraints affecting many industries, we may not be able to release titles according to our schedule and at budgeted costs.
Moreover, if we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example as a result of a pandemic or labor supply constraints affecting many industries, we may not be able to release titles according to our schedule and at budgeted costs.
As of December 31, 2024, we had intangible assets, net of $3.4 million. We are required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) to review our intangible assets when events or changes in circumstances indicate the carrying value may not be recoverable.
As of December 31, 2025, we had intangible assets, net of $3.8 million. We are required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) to review our intangible assets when events or changes in circumstances indicate the carrying value may not be recoverable.
However, for as long as we are an emerging growth company or a non-accelerated filer, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b).
However, for as long as we are an emerging growth company or a smaller reporting company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b).
Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises, or the loss of any franchise, could negatively impact our business.
Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises, or the loss of any franchise, especially our two main distributors, could negatively impact our business.
These laws, including the General Data Protection Regulation and the California Consumer Privacy Act, which have restricted our ability to gather and use data about our users, could harm our business by limiting the products and services we can offer consumers or the manner in which we offer them.
These laws, including the General Data Protection Regulation and the California Consumer Privacy Act, may restrict our ability to gather and use data about our users, and could harm our business by limiting the products and services we can offer consumers or the manner in which we advertise and offer them.
Our business relies upon our ability to cultivate and grow an active gamer community, and our ability to successfully monetize such community, including, for example, through tournament fees, subscriptions for our esports gaming services, and advertising and sponsorship opportunities.
Our esport business will rely upon our ability to cultivate and grow an active gamer community, and our ability to successfully monetize such community, including, for example, through tournament fees, subscriptions for our esports gaming services, and advertising and sponsorship opportunities.
In connection with the audit of our consolidated financial statements for the year ended December 31, 2024, we identified certain material weaknesses in our internal control over financial reporting that continue to exist.
In connection with the audit of our consolidated financial statements for the years ended December 31, 2025 and 2024, we identified certain material weaknesses in our internal control over financial reporting that continue to exist.
Developing and integrating new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve. We cannot assure you that we will succeed in any of these aspects or that the esports gaming industry will continue to grow as rapidly as it has in the past.
Developing and integrating new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve. We cannot assure you that we will succeed in any of these aspects or that the esports gaming industry will generate revenue in the future or grow.
A data security breach of one of our vendors or business partners could cause reputational harm to them and/or negatively impact our credibility to our gamer community. We depend on servers and Internet bandwidth to operate our games and digital services with online features.
A data security breach of one of our vendors or business partners could cause reputational harm to them and/or negatively impact our credibility to our gamer community as well as subject us to significant legal and financial exposure. We depend on servers and Internet bandwidth to operate our games and digital services with online features.
Even if we do secure additional Capital Financing, our liquidity position may continue to be insufficient to satisfy our future capital requirements if our anticipated level of revenues is not achieved because of, for example, decreased sales of our products due to the disposition of key assets, such as the sale of our NASCAR License, further changes in our product roadmap and/or our inability to deliver new products for our various other licenses; less than anticipated consumer acceptance of our offering of products and events; less than effective marketing and promotion campaigns, decreased consumer spending in response to weak economic conditions or weakness in the overall electronic games category; adverse changes in foreign currency exchange rates; decreased sales of our products and events as a result of increased competitive activities by our competitors; changes in consumer purchasing habits, such as the impact of higher energy prices on consumer purchasing behavior; retailer inventory management or reductions in retailer display space; less than anticipated results from our existing or new products or from its advertising and/or marketing plans; or if our expenses, including, without limitation, for marketing, advertising and promotions, product returns or price protection expenditures, exceed the anticipated level of expenses.
Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all of our assets. 16 Even if we do secure additional Capital Financing, our liquidity position may be insufficient to satisfy our future capital requirements if our anticipated level of revenues is not achieved because of, for example, decreased sales of our products due to the disposition of key assets, further changes in our product roadmap and/or our inability to deliver new products for our various other licenses; less than anticipated consumer acceptance of our offering of products and events; less than effective marketing and promotion campaigns, decreased consumer spending in response to weak economic conditions or weakness in the overall electronic games category; adverse changes in foreign currency exchange rates; decreased sales of our products and events as a result of increased competitive activities by our competitors; changes in consumer purchasing habits, such as the impact of higher energy prices on consumer purchasing behavior; less than anticipated results from our existing or new products or from its advertising and/or marketing plans; or if our expenses, including, without limitation, for marketing, advertising and promotions, or product returns, exceed the anticipated level of expenses.
We depend on a relatively small number of franchises for a significant portion of our revenues and profits. We follow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises, including our NASCAR products, which have historically accounted for the majority of our revenue.
We depend on a relatively small number of franchises for a significant portion of our revenues and profits. We follow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises, including our Le Mans Ultimate franchise, which now accounts for the majority of our revenue.
Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows.
Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows. The shutdown of the U.S. federal government may adversely affect our business.
An extended interruption of service could materially adversely affect our business, financial condition and operating results. See “—Risks Related to Our Business and Industry—A significant disruption in service on our website or platforms could damage our reputation and result in a loss of traffic and visitors, which could harm our business, brand, operating results and financial condition” for additional information.
An extended interruption of service could materially adversely affect our business, financial condition and operating results. See the risk factor titled “A significant disruption in service on our website or platforms could damage our reputation and result in a loss of traffic and visitors, which could harm our business, brand, operating results and financial condition” for additional information.
For example, if our games or services, such as our creation and organization of esports leagues and events, do not function as consumers expect, whether because they fail to function as advertised or otherwise, our sales may suffer, as was the case with our NASCAR 21: Ignition game as discussed above.
For example, if our games or services, such as our creation and organization of esports leagues and events, do not function as consumers expect, whether because they fail to function as advertised or otherwise, our sales may suffer.
The material weaknesses identified relate to (i) our failure to design and maintain effective monitoring procedures and controls to evaluate the effectiveness of our individual control activities and (ii) a lack of sufficient number of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely.
The material weaknesses identified relate to (i) our failure to design and maintain effective monitoring procedures and controls to evaluate the effectiveness of our individual control activities; (ii) a lack of sufficient number of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely; and (iii) documentation of certain complex accounting analyses and significant accounting positions that were not contemporaneously reviewed independently of the preparer.
This makes our products particularly sensitive to general economic conditions and economic cycles as consumers are generally more willing to make discretionary purchases, including purchases of products like ours, during periods in which favorable economic conditions prevail.
We believe that consumer spending is influenced by general economic conditions and the availability of discretionary income. This makes our products particularly sensitive to general economic conditions and economic cycles as consumers are generally more willing to make discretionary purchases, including purchases of products like ours, during periods in which favorable economic conditions prevail.
If, however, Driven Lifestyle does not dispose of its DL Initial Class A Shares, it could remain our controlling stockholder for an extended period of time or indefinitely. Driven Lifestyle’s interests may not be the same as, or may conflict with, the interests of our other stockholders.
If, however, Driven Lifestyle does not dispose of its DL Initial Class A Shares, it could remain our controlling stockholder for an extended period of time or indefinitely.
Driven Lifestyle currently owns all of the shares of our Class B common stock and 1,480,385 shares of our Class A common stock, which together represents approximately 83.28% of the combined voting power of both classes of our common stock as of March 20, 2025.
Driven Lifestyle currently owns all of the shares of our Class B common stock and 1,214,699 shares of our Class A common stock, which together represents approximately 66.0% of the combined voting power of both classes of our common stock as of March 6, 2026.
There are currently no commitments in place for future financing and there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. 16 If we raise additional funds through future issuances of equity (including preferred stock) or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock, including, without limitation, in respect of the payment of dividends and the payment of liquidating distributions.
If we raise additional funds through future issuances of equity (including preferred stock) or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock, including, without limitation, in respect of the payment of dividends and the payment of liquidating distributions.
We may be required to record non-cash impairment charges during any period in which we determine that our intangible assets are impaired, which has had, and in the future could have, a material adverse impact on our results of operations. For example, for the year ended December 31, 2023, we recorded impairment of intangible assets of $4.0 million.
We may be required to record non-cash impairment charges during any period in which we determine that our intangible assets are impaired, which has had, and in the future could have, a material adverse impact on our results of operations. We have identified material weaknesses in our internal control over financial reporting.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. 15 Risks Related to Our Financial Condition and Liquidity We have incurred significant losses since our inception, and we expect to continue to incur losses for the foreseeable future.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
If one or more of such analysts downgrade our securities, or otherwise report on us unfavorably, or discontinue coverage of us, the market price and market trading volume of our Class A common stock could be negatively affected. The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
We anticipate having limited analyst coverage and we may continue to have inadequate analyst coverage in the future. If one or more of such analysts downgrade our securities, or otherwise report on us unfavorably, or discontinue coverage of us, the market price and market trading volume of our Class A common stock could be negatively affected.
For the years ended December 31, 2024 and 2023, revenues associated with our NASCAR franchise accounted for approximately 52% and 72% of our total revenue, respectively. For the years ended December 31, 2024 and 2023, sales through our three main distribution channels accounted for approximately 86% and 83% of our consolidated revenues, respectively.
For the years ended December 31, 2025 and 2024, revenues associated with our Le Mans Ultimate franchise accounted for approximately 78% and 34% of our total revenue, respectively. For the years ended December 31, 2025 and 2024, sales through our two main distribution channels accounted for approximately 86% and 46% of our consolidated revenues, respectively.
Driven Lifestyle currently controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the NASDAQ Listing Rules.
Our stockholders will not have the same protections afforded to stockholders of other companies that are subject to such requirements. Driven Lifestyle currently controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the NASDAQ Listing Rules.
Risks Related to Ownership of Our Class A Common Stock Our Class A common stock may be delisted from NASDAQ, which could affect the market price and liquidity of our Class A common stock.
Outcomes from these audits could have an adverse effect on our operating results and financial condition. 36 Risks Related to Ownership of Our Class A Common Stock Our Class A common stock may be delisted from Nasdaq, which could affect the market price and liquidity of our Class A common stock.
Because Driven Lifestyle’s interests may differ from ours or from those of our other stockholders, actions that Driven Lifestyle takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our Class A common stock.
Because Driven Lifestyle’s interests may differ from ours or from those of our other stockholders, actions that Driven Lifestyle takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our Class A common stock. 31 We are a “controlled company” within the meaning of the NASDAQ rules and, as a result, qualify for and may rely on exemptions from certain corporate governance requirements of NASDAQ.
Accordingly, as a result of our financial condition, we will need to engage in equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”) to secure additional funds to continue our existing business operations and to fund our obligations.
We may need to engage in equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”) to secure additional funds to continue our existing business operations and to fund our obligations. Other than the line of credit that we entered into with Citibank, N.A.
If these estimates or assumptions are incorrect, it could have a material adverse effect on our results of operations or financial condition.
The preparation of our financial statements requires us to make estimates and assumptions affecting the reported amounts of our assets, liabilities, revenues and expenses. If these estimates or assumptions are incorrect, it could have a material adverse effect on our results of operations or financial condition.
In particular, our esports business and prospects depend on the continuing development of live streaming of competitive esports gaming. The market for esports and amateur online gaming competitions is relatively new and rapidly developing and is subject to significant challenges.
The market for esports and amateur online gaming competitions is relatively new and rapidly developing and is subject to significant challenges.
If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. 42 If securities industry analysts cease to publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our Class A common stock could be negatively affected.
If securities industry analysts cease to publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our Class A common stock could be negatively affected. The trading market for our Class A common stock will be influenced in part by any research reports that securities industry analysts publish about us.
We will require additional capital to meet our financial obligations, and this capital might not be available on acceptable terms or at all. We expect to continue to incur losses for the foreseeable future as we continue to incur significant expenses.
Risks Related to Our Financial Condition and Liquidity We may require additional capital to meet our financial obligations, and this capital might not be available on acceptable terms or at all.
No other distribution channel accounted for 10% or more of our revenues in those periods. For the years ended December 31, 2024 and 2023, sales through our three main distribution channels accounted for approximately 77% and 89% of our accounts receivable, respectively. No other distribution channel accounted for 10% or more of our accounts receivable in those periods.
Two other distribution channels accounted for 40% of our revenues for the year ended December 31, 2024. For the years ended December 31, 2025 and 2024, sales through our two main distribution channels accounted for approximately 76% and 45% of our accounts receivable, respectively.
Our business is subject to economic, market and geopolitical conditions, which are beyond our control. In particular, o ur product purchases are predominately driven by discretionary spending by consumers. We believe that consumer spending is influenced by general economic conditions and the availability of discretionary income.
Declines in consumer spending and other adverse changes in economic, market and geopolitical conditions could have a material adverse effect on our business, financial condition and operating results. Our business is subject to economic, market and geopolitical conditions, which are beyond our control. In particular, o ur product purchases are predominately driven by discretionary spending by consumers.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. General Risk Factors Our results of operations and financial condition are subject to management’s accounting judgments and estimates, as well as changes in accounting policies.
In addition, the Citibank Credit Agreement imposes certain limits on our ability to pay dividends. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Financial statements prepared in accordance with U.S. GAAP typically require the use of good faith estimates, judgments and assumptions that affect the reported amounts. The preparation of our financial statements requires us to make estimates and assumptions affecting the reported amounts of our assets, liabilities, revenues and expenses.
General Risk Factors Our results of operations and financial condition are subject to management’s accounting judgments and estimates, as well as changes in accounting policies. Financial statements prepared in accordance with U.S. GAAP typically require the use of good faith estimates, judgments and assumptions that affect the reported amounts.
In addition, we may be subject to audits of our income, sales and other transaction taxes in various jurisdictions. Outcomes from these audits could have an adverse effect on our operating results and financial condition. 38 We may not successfully manage the transitions associated with certain of our executive officers, which could have an adverse impact on us.
In addition, we may be subject to audits of our income, sales and other transaction taxes in various jurisdictions.
As of December 31, 2024, our stockholders’ equity was $1,226,002. In accordance with NASDAQ rules, we had until January 6, 2025 to submit a plan to the NASDAQ Staff to regain compliance with the Stockholders’ Equity Requirement, which plan we submitted by such date.
As of December 31, 2024, our stockholders’ equity was $1,226,002. On April 15, 2025, we received a letter from the Nasdaq Staff stating that based on our Form 8-K filed with the SEC on April 14, 2025, Nasdaq had determined that we complied with the Stockholders’ Equity Requirement.
In addition to such rights, the Sellers would further be entitled to retain any payments that we make pursuant to the Settlement Agreement. Our business is partly dependent on our ability to enter into successful software development arrangements with third parties.
For example, as discussed elsewhere in this Report, our BTCC license agreement and INDYCAR license agreements were terminated by the respective licensors, effective November 2023. Our business is partly dependent on our ability to enter into successful software development arrangements with third parties.
Removed
Accordingly, our financial condition raises substantial doubt regarding our ability to continue as a going concern. We incurred a net loss of $3.0 million and negative cash flows from operations of $2.8 million for the year ended December 31, 2024.
Added
References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Removed
As of December 31, 2024, we had an accumulated deficit of $91.8 million and cash and cash equivalents of $0.9 million. For the year ended December 31, 2024, we experienced an average net cash burn from operations of approximately $0.2 million per month.
Added
(the “Citibank Line of Credit”), there are currently no commitments in place for future financing and there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all.
Removed
We expect to continue to have a net cash outflow from operations for the foreseeable future as we continue to develop our product portfolio and invest in developing new video game titles. As a result of our financial condition, management has concluded that there is substantial doubt in our ability to continue as a going concern.
Added
In addition, there can be no assurance that we will be able to comply with the covenants that we are required to comply with in order to access the Citibank Line of Credit.
Removed
The reports of our independent registered public accountants on our financial statements as of and for the years ended December 31, 2024 and 2023 also include explanatory language describing the existence of substantial doubt about our ability to continue as a going concern. There have been no adjustments to the accompanying financial statements to reflect this uncertainty.
Added
Restrictions under the Credit Agreement with Citibank may affect our ability to finance our operations. The Credit Agreement (as defined below) with Citibank (as defined below) and related documents require us to abide by certain restrictive covenants, including covenants related to conducting our business and maintaining certain levels of cash flow and fixed charges.
Removed
See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” of this Report and Note 1 – Business Organization, Nature of Operations and Risks and Uncertainties in our consolidated financial statements for additional information.
Added
To the extent we require additional funding while any borrowing remains outstanding under the Citibank Promissory Note (as defined below), we will therefore be limited in the types of fundraising transactions that we are able to pursue in compliance with the Credit Agreement.
Removed
If we are unable to satisfy our capital requirements, we could be required to adopt one or more of the following alternatives: ● delaying the implementation of or revising certain aspects of our business strategy; ● further reducing or delaying the development and launch of new products and events; ● further reducing or delaying capital spending, product development spending and marketing and promotional spending; ● selling additional assets or operations; ● seeking additional loans from third parties; ● further reducing other discretionary spending; ● entering into financing agreements on unattractive terms; ● entering into other strategic alternatives such as collaborations or mergers; and/or ● significantly curtailing or discontinuing operations or dissolving and liquidating our assets under the bankruptcy laws or otherwise.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs of the date of this Report, we are not aware of any risks from cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. 44 Governance The Board of Directors, along with its Audit Committee , oversees the management of cybersecurity risks and receives quarterly reports from management on the detection and remediation of cybersecurity incidents, as well as on material security risks and vulnerabilities.
Biggest changeAs of the date of this Report, we are not aware of any risks from cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. 42 Governance The Board of Directors, along with its Audit Committee , oversees the management of cybersecurity risks and receives quarterly reports from management on the detection and remediation of cybersecurity incidents, as well as on material security risks and vulnerabilities.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Miami, Florida and currently consists of approximately 2,000 square feet of office space. We also lease an office in Silverstone, England. Both offices are used by our Gaming and Esports operating segments.
Biggest changeItem 2. Properties Our corporate headquarters is located in Miramar, Florida and currently consists of approximately 300 square feet of office space. We also lease an office in Silverstone, England. Both offices are used by our Gaming and Esports operating segments.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePlan Category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price per share of outstanding options, warrants and rights (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by stockholders 97,366 $ 61.83 2,634 Equity compensation plans not approved by stockholders 21,394 4.32 - Total 118,760 2,634 Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2024 other than as reported in our Current Reports on Form 8-K filed with the SEC.
Biggest changePlan Category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price per share of outstanding options, warrants and rights (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by stockholders 96,828 $ 61.76 - Equity compensation plans not approved by stockholders 21,394 4.32 - Total 118,222 - Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2025 other than as reported in our Current Reports on Form 8-K filed with the SEC.
Equity Compensation Plan Table The following table summarizes our equity compensation plan information as of December 31, 2024. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders.
Equity Compensation Plan Table The following table summarizes our equity compensation plan information as of December 31, 2025. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders.
Purchases of Equity Securities We did not purchase any shares of our Class A common stock during the quarter ended December 31, 2024.
Purchases of Equity Securities We did not purchase any shares of our Class A common stock during the quarter ended December 31, 2025.
There is no public trading market for our Class B common stock. Holders As of March 20, 2025, there were approximately 10 holders of record of our Class A common stock and one holder of record of our Class B common stock.
There is no public trading market for our Class B common stock. Holders As of March 10, 2026, there were approximately 12 holders of record of our Class A common stock and one holder of record of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs we continue to evaluate the cost saving initiatives and explore other strategic alternatives and potential options for our business, including, but not limited to, the sale or licensing of certain of our assets, further adjustments to our product roadmap may be required. 48 Hardware Platforms We derive most of our revenue from the sale of products made for PCs and video game consoles manufactured by third parties, such as Sony Interactive Entertainment Inc.’s (“Sony”) PlayStation and Microsoft Corporation’s (“Microsoft”) Xbox consoles, which comprised approximately 45% and 62% of our total revenue for the years ended December 31, 2024 and 2023, respectively.
Biggest changeOur recent product releases include: Title Release Date and Platform Le Mans Ultimate February 20, 2024, available on PC Le Mans Ultimate – 2024 DLC Pack 1 July 23, 2024, available on PC Le Mans Ultimate – 2024 DLC Pack 2 September 24, 2024, available on PC Le Mans Ultimate – 2024 DLC Pack 3 December 10, 2024, available on PC Le Mans Ultimate – 2024 DLC Pack 4 February 25, 2025, available on PC Le Mans Ultimate – 2024 DLC Pack 5 June 10, 2025, available on PC Le Mans Ultimate – Version 1.0 Release July 22, 2025, available on PC Le Mans Ultimate – ELMS Pack 1 and Version 1.1 Release September 23, 2025, available on PC Le Mans Ultimate – ELMS Pack 2 and Version 1.2 Release December 9, 2025, available on PC We continually evaluate our planned product release schedule and modify the timing of upcoming products based on developments in our business, or if we believe it will result in a better consumer experience. 45 Hardware Platforms In the past, we derived most of our revenue from the sale of products made for PCs and video game consoles manufactured by third parties, such as Sony Interactive Entertainment Inc.’s (“Sony”) PlayStation and Microsoft Corporation’s (“Microsoft”) Xbox consoles, which comprised approximately 2% and 45% of our total revenue for the years ended December 31, 2025 and 2024, respectively.
GAAP and does not purport to be an alternative to revenue, income/loss from operations, net loss, or cash flows from operations or as a measure of liquidity or any other performance measure derived in accordance with U.S. GAAP.
GAAP and does not purport to be an alternative to revenue, income/loss from operations, net income (loss), or cash flows from operations or as a measure of liquidity or any other performance measure derived in accordance with U.S. GAAP.
We expect to derive the vast majority of our revenues via Steam during the next twelve months. The success of our business is dependent upon consumer acceptance of video game console/PC platforms and continued growth in the installed base of these platforms.
We expect to derive the vast majority of our revenues via Steam and Genba during the next twelve months. The success of our business is dependent upon consumer acceptance of video game console/PC platforms and continued growth in the installed base of these platforms.
This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Report, including in the “Business” section and “Risk Factors” above, the remainder of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) or the consolidated financial statements and related notes. 46 Our Business Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”).
This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Report, including in the “Business” section and “Risk Factors” above, the remainder of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) or the consolidated financial statements and related notes. 44 Our Business Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”).
For contracts with customers where revenues are generated via the Apple’s App Store or Google’s Play Store, we have determined that we are the principal and, as a result, we report revenues on a gross basis, with mobile platform fees included within cost of revenues. 61 Valuation of Finite-Lived Intangible Assets and Other Long-Lived Assets We review our finite-lived assets for impairment whenever events or changes in circumstances indicate, based on recent and projected cash flow performance and remaining useful lives, that the carrying value of these assets may not be fully recoverable.
For contracts with customers where revenues are generated via the Apple’s App Store or Google’s Play Store, we have determined that we are the principal and, as a result, we report revenues on a gross basis, with mobile platform fees included within cost of revenues. 56 Valuation of Finite-Lived Intangible Assets and Other Long-Lived Assets We review our finite-lived assets for impairment whenever events or changes in circumstances indicate, based on recent and projected cash flow performance and remaining useful lives, that the carrying value of these assets may not be fully recoverable.
Promissory Note Line of Credit On April 1, 2020, we entered into a promissory note (the “$12 million Line of Credit”) with an affiliated entity, Driven Lifestyle, that provided us with a line of credit of up to $10 million (which was subsequently increased to $12 million pursuant to an amendment executed in November 2020) at an interest rate of 10% per annum, the availability of which is dependent on Driven Lifestyle’s available liquidity.
Lines of Credit On April 1, 2020, we entered into a promissory note (the “$12 million Line of Credit”) with an affiliated entity, Driven Lifestyle, that provided us with a line of credit of up to $10 million (which was subsequently increased to $12 million pursuant to an amendment executed in November 2020) at an interest rate of 10% per annum, the availability of which was dependent on Driven Lifestyle’s available liquidity.
Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements. 60 While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that certain of these policies and estimates are deemed critical, as they require management’s highest degree of judgment, estimates and assumptions.
Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements. 55 While our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements, we believe that certain of these policies and estimates are deemed critical, as they require management’s highest degree of judgment, estimates and assumptions.
It further includes review of variable consideration such as discounts, sales returns, price protection, and rebates, which is estimated at the time of the transaction Allocating the transaction price requires us to determine an estimate of the relative stand-alone selling price for each distinct performance obligation.
It further includes review of variable consideration such as discounts and sales returns, which is estimated at the time of the transaction Allocating the transaction price requires us to determine an estimate of the relative stand-alone selling price for each distinct performance obligation.
Sales and Marketing Sales and marketing expenses are primarily composed of salaries, benefits and related taxes of our in-house marketing teams, advertising, marketing, and promotional expenses, including fees paid to social media platforms, Driven Lifestyle and other websites where we market our products.
Sales and Marketing Sales and marketing expenses are primarily composed of salaries, benefits and related taxes of our in-house marketing teams, advertising, marketing, and promotional expenses, including fees paid to social media platforms and other websites where we market our products.
Our analysis of recently issued accounting standards are more fully described in our consolidated financial statements (Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements for the years ended December 31, 2024 and 2023).
Our analysis of recently issued accounting standards are more fully described in our consolidated financial statements (Note 2 – Summary of Significant Accounting Policies in our consolidated financial statements for the years ended December 31, 2025 and 2024).
Management believes that an understanding of these trends and drivers provides important context for our results for the fiscal years ended December 31, 2024 and 2023, as well as our future prospects.
Management believes that an understanding of these trends and drivers provides important context for our results for the fiscal years ended December 31, 2025 and 2024, as well as our future prospects.
The reduction in sales and marketing expenses was primarily driven by a $0.9 million reduction in payroll and employee-related expense as a result of lower headcount, as well as a $0.1 million reduction in software expenses, when compared to the prior year.
The reduction in sales and marketing expenses was primarily driven by a $0.1 million reduction in payroll and employee-related expense as a result of lower headcount, when compared to the prior year.
Although we did not organize the Le Mans Virtual Series for the 2023/24 or 2024/25 seasons, we currently plan on organizing the 2025/26 Le Mans Virtual Series to commence this year. We also intend to continue exploring opportunities to expand the recurring portion of our esports segment outside of Le Mans.
Although we did not organize the Le Mans Virtual Series for the 2023/24, 2024/25 or 2025/26 seasons, we currently plan on organizing the 2026/27 Le Mans Virtual Series to commence this year. We also intend to continue exploring opportunities to expand our esports segment outside of Le Mans.
Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA, a measure used by management to assess our operating performance, is defined as EBITDA, which is net loss plus interest expense, depreciation and amortization, less income tax benefit (if any), adjusted to exclude: (i) gain from settlement of license liabilities (ii) gain on sale of NASCAR License (iii) impairment of intangible assets; (iv) loss contingency expense and (v) stock-based compensation expenses.
Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA, a measure used by management to assess our operating performance, is defined as EBITDA, which is net income (loss) plus interest expense, depreciation and amortization, less income tax benefit (if any), adjusted to exclude: (i) gain from settlement of license liabilities and other agreements; (ii) gain from sale of gaming licenses; (iii) impairment of intangible assets; (iv) loss contingency expense; and (v) stock-based compensation expenses.
We develop and publish multi-platform racing video games including for game consoles, personal computers (PCs) and mobile platforms through various retail and digital channels, including full-game and downloadable content (“DLC”). We have obtained the official licenses to develop multi-platform games for the 24 Hours of Le Mans race and the WEC.
We develop and publish racing video games for personal computers (PCs) through various digital channels, including full-game and downloadable content (“DLC”). We have obtained the official licenses to develop multi-platform games for the 24 Hours of Le Mans race and the WEC.
Results of Operations Year Ended December 31, 2024 compared to Year Ended December 31, 2023 In this section, references to 2024 refer to the fiscal year ended December 31, 2024 and references to 2023 refer to the fiscal year ended December 31, 2023.
Results of Operations Year Ended December 31, 2025 compared to Year Ended December 31, 2024 In this section, references to 2025 refer to the fiscal year ended December 31, 2025 and references to 2024 refer to the fiscal year ended December 31, 2024.
Recurring Revenue Sources Our business model includes revenue that we deem recurring in nature, which historically consisted primarily of revenue from our annualized NASCAR video game racing franchise for game consoles, PC, and mobile platforms.
Recurring Revenue Sources Our business model includes revenue that we deem recurring in nature, which historically consisted primarily of revenue from our annualized NASCAR video game racing franchise for game consoles, PC, and mobile platforms, as well as our RaceControl subscription service.
Cash Flows From Investing Activities Net cash provided by investing activities for the year ended December 31, 2024 was $1.2 million, which was primarily attributable to $1.0 million in proceeds from the sale of the Company’s NASCAR License and $0.2 million from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024.
The net cash provided by investing activities during the year ended December 31, 2024 was primarily attributable to $1.0 million in proceeds from the sale of the Company’s NASCAR License and $0.2 million from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024. 53 Cash Flows From Financing Activities Net cash provided by financing activities during the year ended December 31, 2025 and 2024 was $1.1 million and $0.8 million, respectively.
The $12 million Line of Credit does not have a stated maturity date and is payable upon demand at any time at the sole and absolute discretion of Driven Lifestyle, and any principal and accrued interest owed will be accelerated and become immediately payable in the event we consummate certain corporate events, such as a capital reorganization.
The $12 million Line of Credit did not have a stated maturity date and was payable upon demand at any time at the sole and absolute discretion of Driven Lifestyle, and any principal and accrued interest owed would be accelerated and become immediately payable in the event we consummated certain corporate events, such as a capital reorganization.
Adjusted EBITDA (the “Non-GAAP Measure”) is not a financial measure defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Reconciliations of the Non-GAAP Measure to net loss, its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below.
Adjusted EBITDA (the “Non-GAAP Measure”) is not a financial measure defined by U.S. GAAP. Reconciliations of the Non-GAAP Measure to net income (loss), its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below.
Cash flows provided by financing activities during the year ended December 31, 2024 were primarily attributable to $0.9 million raised in connection with shares sold in the July 2024 Offerings, offset by a $0.1 million payment for purchase commitments.
Cash flows provided by financing activities for the year ended December 31, 2024 were primarily attributable to $0.9 million raised in connection with shares sold in our registered direct offering, offset by a $0.1 million payment for purchase commitments.
In addition, as part of our digital business strategy, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases and extra content. 49 Esports We are striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games as well as on behalf of third-party racing game developers and publishers.
In addition, as part of our digital business strategy, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases and extra content. 46 Esports We intend to generate future revenue from organizing and facilitating esports tournaments, competitions, and events for our licensed racing games as well as on behalf of third-party racing game developers and publishers.
However, we have worked to diversify our product offerings and revenue from other sources by introducing titles such as KartKraft, rFactor 2, Le Mans Ultimate and the 24 Hours of Le Mans Virtual esports event to our portfolio of product offerings and thereby reducing our dependency on the NASCAR franchise as our substantially sole source of revenue.
However, we have worked to diversify our product offerings and revenue from other sources by introducing titles such as Le Mans Ultimate to our portfolio of product offerings and thereby reducing our dependency on the NASCAR franchise as our substantially sole source of revenue.
There can be no assurance that we will be able to raise funds by selling additional securities, which sales, if successful, could dilute the ownership interest of our existing shareholders. The issuance of debt can result in restrictive covenants that limit operations.
There can be no assurance that we will be able to raise funds by selling additional securities, which sales, if successful, could dilute the ownership interest of our existing shareholders.
The Series A Warrants will expire five and one-half years following the Stockholder Approval Date and the Series B Warrants will expire 18 months following the Stockholder Approval Date. We also issued to the designees of H.C.
The Series A Warrants will expire five and one-half years following the Stockholder Approval Date and the Series B Warrants will expire 18 months following the Stockholder Approval Date. H.C.
Following the sale of our NASCAR License and as we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the recurring portion of our business, including through the planned introduction of new annualized sports franchise games, such as with Le Mans.
Following the sale of our NASCAR License and as we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the recurring portion of our business, including through subscriptions.
Cost of revenues for our Gaming segment is also comprised of merchant fees, disk manufacturing costs, packaging costs, web hosting costs, shipping costs, warehouse costs, distribution fees to distribute products to retail stores, mobile platform fees associated with our mobile revenue (for transactions in which we are acting as the principal in the sale to the end customer) and amortization of certain acquired license agreements and other intangible assets acquired through our various acquisitions.
Cost of revenues in 2024 from our Gaming segment is also comprised of merchant fees, disk manufacturing costs, packaging costs, shipping costs, warehouse costs, distribution fees to distribute products to retail stores, and mobile platform fees associated with our mobile revenue (for transactions in which we are acting as the principal in the sale to the end customer).
Development Development expenses were $3 .4 million and $7.2 million for 2024 and 2023, respectively, representing a decrease of $ 3.9 million, or 5 3.3 %, when compared to the prior year.
Development Development expenses were $1.8 million and $3.4 million for 2025 and 2024, respectively, representing a decrease of $ 1.6 million, or 47.9%, when compared to the prior year.
All of our titles that are available through retailers as packaged goods products are also available through direct digital download. For the years ended December 31, 2024 and 2023, approximately 88% of our revenue from sales of video games for game consoles and PCs was through digital channels.
All of our titles are available through direct digital download. For the year ended December 31, 2025, substantially all of our revenue from sales of video games for PCs was through digital channels. For the year ended December 31, 2024, approximately 88% of our revenue from sales of video games for game consoles and PCs was through digital channels.
If funding is not available or not available at terms acceptable to us, we will seek to further reduce overhead costs and our cash obligations in the short term, as needed. In addition, we may look to divest or bring in equity partners for our various divisions and bring in near term capital.
If funding is not available or not available at terms acceptable to us, we will seek to further reduce overhead costs and our cash obligations in the short term, as needed.
Other Comprehensive Income (Loss) Other comprehensive income was $1.1 million for 2024, compared to other comprehensive loss of $1.0 million for 2023. The $2.1 million increase in other comprehensive income was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.
The $3.8 million increase in other comprehensive loss was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.
GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented.
Critical Accounting Policies and Estimates The preparation of 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, contingent assets and liabilities, each as of the date of the financial statements, and revenues and expenses during the periods presented.
The decrease in Gaming segment cost of revenues was primarily driven by a $0.7 million reduction in royalty and licensing fees, mainly related to our NASCAR titles as a direct result of lower game sales for the franchise compared to the prior year, offset by an increase of $0.7 million in amortization.
The decrease in Gaming segment cost of revenues was primarily driven by a decrease in amortization and a reduction in royalty payments, mainly related to our NASCAR titles as a direct result of no significant game sales for the franchise in 2025 compared to the prior period.
On July 29, 2024, we completed a registered direct offering and a concurrent private placement (the “July 2024 Offerings”) with H.C. Wainwright & Co., LLC acting as the exclusive placement agent, which offerings raised approximately $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses.
Other Financing Activity On July 29, 2024, we completed a registered direct offering and a concurrent private placement (the “July 2024 Offerings”) with certain investors, which raised approximately $1.0 million in gross proceeds (the “$1.0 million RDO”) before deducting $0.1 million in placement agent’s fees and other offering expenses.
Concentration of Sales Our NASCAR products have historically accounted for the majority of our revenue.
Concentration of Sales Prior to January 1, 2025, our NASCAR products historically accounted for the majority of our revenue.
Capital Expenditures The nature of our operations do not require significant expenditures on capital assets, nor do we typically enter into significant commitments to acquire capital assets.
Capital Expenditures The nature of our operations do not require significant expenditures on capital assets, nor do we typically enter into significant commitments to acquire capital assets. We do not have material commitments to acquire capital assets as of December 31, 2025. 54 Material Cash Requirements As of December 31, 2025, we did not have any material cash requirements.
Our chief operating decision maker is our Chief Executive Officer (“CEO”), who reviews operating results to make decisions about allocating resources and assessing performance for the entire company.
The management approach considers the internal organization and reporting used by our chief operating decision maker for making operating decisions and assessing performance as the source for determining our reportable segments. Our chief operating decision maker is our Chief Executive Officer (“CEO”), who reviews operating results to make decisions about allocating resources and assessing performance for the entire company.
Other (Expense) Income, net Other expense, net for 2024 was $1.2 million, compared to other income, net of $2.8 million for 2023, a decrease of $4.0 million compared to the prior year.
Other (Expense) Income, net Other income, net was $3.4 million for 2025, compared to other expense of $1.2 million for 2024, an increase of $4.6 million compared to the prior year.
Gaming segment cost of revenues represented 100% and 89.6% of our total 2024 and 2023 cost of revenues, respectively, decreasing by less than $0.1 million, or 0.6%, when compared to the prior year.
Gaming segment cost of revenues represented 96.0% and 90.9% of our total 2025 and 2024 cost of revenues, respectively, decreasing by $0.9 million, or 31.4%, when compared to the prior year.
Net cash used in operating activities for the year ended December 31, 2023 was primarily a result of cash used to fund a net loss of $14.3 million, adjusted for net non-cash adjustments in the amount of $4.2 million and $3.6 million of cash used by changes in the levels of operating assets and liabilities.
The net cash provided by operating activities for the year ended December 31, 2025 was primarily a result of our net income of $6.8 million, adjusted for net non-cash adjustments of $1.8 million and $0.9 million of cash used by changes in the levels of operating assets and liabilities.
For the years ended December 31, 2024 and 2023, the sale of products for Microsoft Windows via Steam comprised approximately 45% and 27% of our total revenue, respectively, and the sale of products for mobile platforms comprised approximately 2% and 4% for the years ended December 31, 2024 and 2023.
For the years ended December 31, 2025 and 2024, the sale of products for Microsoft Windows via Steam comprised approximately 64% and 44% of our total revenue, respectively, and the sale of products via Genba comprised approximately 18% and 1% for the years ended December 31, 2025 and 2024.
Revenues For the Year Ended December 31, Change 2024 2023 $ % Revenues: Gaming $ 8,687,462 $ 6,619,502 $ 2,067,960 31.2 % Esports - 290,172 (290,172 ) (100 )% Total Revenues $ 8,687,462 $ 6,909,674 $ 1,777,788 25.7 % Consolidated revenues were $8.7 million and $6.9 million for 2024 and 2023, respectively, an increase of $1.8 million, or 25.7%, when compared to the prior year. 51 Gaming segment revenues represented 100% and 95.8% of our total 2024 and 2023 revenues, respectively, increasing by $2.1 million, or 31.2%, when compared to the prior year.
Revenues For the Year Ended December 31, Change 2025 2024 $ % Revenues: Gaming $ 11,297,898 $ 8,687,462 $ 2,610,436 30.0 % Esports - - - - % Total Revenues $ 11,297,898 $ 8,687,462 $ 2,610,436 30.0 % Consolidated revenues were $11.3 million and $8.7 million for 2025 and 2024, respectively, an increase of $2.6 million, or 30.0%, when compared to the prior year. 48 Gaming segment revenues represented 100% of our total 2025 and 2024 revenues, respectively, increasing by $2.6 million, or 30.0%, when compared to the prior year.
We intend to use the net proceeds from this offering for working capital and general corporate purposes. 55 We measure our liquidity in a number of ways, including the following: December 31, December 31, 2024 2023 Cash and Cash Equivalents $ 859,271 $ 1,675,210 Working Capital (Deficiency) $ (2,225,300 ) $ (4,074,346 ) For the year ended December 31, 2024, we incurred a net loss of $3.0 million and negative cash flows from operations of approximately $2.8 million.
We measure our liquidity in a number of ways, including the following: December 31, December 31, 2025 2024 Cash and Cash Equivalents $ 4,993,390 $ 859,271 Working Capital (Deficiency) $ 4,221,682 $ (2,225,300 ) For the year ended December 31, 2025, we generated net income of $6.8 million and positive cash flows from operations of approximately $4.1 million.
We may prepay the $12 million Line of Credit in whole or in part at any time or from time to time without penalty or charge.
We were permitted to prepay the $12 million Line of Credit in whole or in part at any time or from time to time without penalty or charge. On November 5, 2025, we terminated the $12 million Line of Credit Agreement pursuant to a Loan Termination Agreement with Driven Lifestyle.
The reduction in development expense was primarily driven by a $2.8 million decrease in payroll as a result of lower headcount, as well as a $1.1 million decrease in external development services, when compared to the prior year.
The reduction in development expense was primarily driven by a $1.1 million capitalization of development costs in 2025, as well as a $0.4 million decrease in external development services, when compared to the prior year. Development expenses in 2024 were charged to expense because technological feasibility was not reached.
The following table provides a reconciliation from net loss to Adjusted EBITDA for the respective periods presented: Year Ended December 31, 2024 Year Ended December 31, 2023 Net loss $ (3,048,071 ) $ (14,323,185 ) Interest expense, net 120,757 772,989 Depreciation and amortization (1) 2,589,437 2,115,430 EBITDA (337,877 ) (11,434,766 ) Loss contingency expenses - 232,359 Gain from settlement of license liabilities (3,248,000 ) - Gain on sale of NASCAR License (500,000 ) (3,037,341 ) Impairment of intangible assets - 4,004,627 Stock-based compensation 152,959 957,302 Adjusted EBITDA $ (3,932,918 ) $ (9,277,819 ) (1) Includes $2,382,785 and $1,716,729 of amortization expenses included in cost of revenues for the years ended December 31, 2024 and 2023, respectively.
The following table provides a reconciliation from net income (loss) to Adjusted EBITDA for the respective periods presented: Year Ended December 31, 2025 Year Ended December 31, 2024 Net income (loss) $ 6,844,897 $ (3,048,071 ) Interest expense, net 18,786 120,757 Depreciation and amortization (1) 1,122,159 2,589,437 EBITDA 7,985,842 (337,877 ) Gain from settlement of license liabilities - (3,248,000 ) Gain on sale of NASCAR License - (500,000 ) Gain from settlement of purchase commitment (175,460 ) - Gain from Settlement Agreement (500,000 ) - Gain from Wesco Settlement Agreement (800,000 ) - Stock-based compensation 789,352 152,959 Adjusted EBITDA $ 7,299,734 $ (3,932,918 ) (1) Includes $1,075,114 and $2,380,785 of amortization expenses included in cost of revenues for the years ended December 31, 2025 and 2024, respectively.
Esports segment cost of revenues represented 0% and 10.4% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 100%, when compared to the prior year. The decrease in Esports segment cost of revenues was due to us not organizing an LMVS event in 2024.
Esports segment cost of revenues represented 4.0% and 9.1% of our total 2025 and 2024 cost of revenues, respectively, decreasing by $0.2 million, or 71.8%, when compared to the prior year. The decrease in Esports segment cost of revenues was primarily driven by a decrease in amortization of our Le Mans license.
However, we believe that there is a substantial likelihood that Driven Lifestyle will not fulfill any future borrowing requests, and therefore we do not view the $12 million Line of Credit as a viable source for future liquidity needs.
Prior to this termination, we believed that there was a substantial likelihood that Driven Lifestyle would not fulfill any future borrowing requests, and therefore did not view the $12 million Line of Credit as a viable source for future liquidity needs. See Note 7 – Related Party Loans in our consolidated financial statements in this Report for further information.
General and Administrative General and administrative (“G&A”) expenses were $6.9 million and $9.4 million for 2024 and 2023, respectively, a decrease of $2.5 million, or 26.5%, when compared to the prior year.
Once technological feasibility was reached in 2025, relevant development costs were capitalized and amortized to cost of revenue over the estimated lives of the products. General and Administrative General and administrative (“G&A”) expenses were $5.1 million and $6.9 million for 2025 and 2024, respectively, a decrease of $1.8 million, or 25.4%, when compared to the prior year.
Operating Expenses For the Year Ended December 31, Change 2024 2023 $ % Operating Expenses: Sales and marketing $ 739,098 $ 1,690,772 $ (951,674 ) (56.3 )% Development 3,378,346 7,237,154 (3,858,808 ) (53.3 )% General and administrative 6,883,468 9,367,030 (2,483,562 ) (26.5 )% Impairment of intangible assets - 4,004,627 (4,004,627 ) (100.0 )% Depreciation and amortization 208,652 398,701 (190,049 ) (47.7 )% Total Operating Expenses $ 11,209,564 $ 22,698,284 $ (11,488,720 ) (50.6 )% Changes in operating expenses are explained in more detail below: Sales and Marketing Sales and marketing expenses were $0.7 million and $1.7 million for 2024 and 2023, respectively, representing a $1 .0 million, or 56 .3 % decrease when compared to the prior year.
Operating Expenses For the Year Ended December 31, Change 2025 2024 $ % Operating Expenses: Sales and marketing $ 624,623 $ 739,098 $ (114,475 ) (15.5 )% Development 1,760,183 3,378,346 (1,618,163 ) (47.9 )% General and administrative 5,132,434 6,883,468 (1,751,034 ) (25.4 )% Depreciation and amortization 47,045 208,652 (161,607 ) (77.5 )% Total Operating Expenses $ 7,564,285 $ 11,209,564 $ (3,645,279 ) (32.5 )% Changes in operating expenses are explained in more detail below: Sales and Marketing Sales and marketing expenses were $0.6 million and $0.7 million for 2025 and 2024, respectively, representing a $0.1 million, or 15.5% decrease when compared to the prior year.
Wainwright & Co., LLC warrants to purchase up to 27,650 shares of Class A common stock (the “Placement Agent Warrants”) as compensation for acting as placement agent in connection with the $1.0 million RDO. As of December 31, 2024, the Purchase Warrants and Placement Agent Warrants have not been approved by stockholders.
Wainwright & Co., LLC (“HCW”) acted as the exclusive placement agent for the July 2024 Offerings, and we issued to its designees warrants to purchase up to 27,650 shares of Class A common stock (the “Placement Agent Warrants”) as compensation.
Cash Flows From Operating Activities Net cash used in operating activities for the years ended December 31, 2024 and 2023 was $2.8 million and $13.7 million, respectively.
Cash Flows From Investing Activities Net cash (used in) provided by investing activities for the years ended December 31, 2025 and 2024 was approximately ($1.1) million and $1.2 million, respectively. The net cash used in investing activities during the year ended December 31, 2025 relates to capitalization of internally-developed software.
Cost of Revenues For the Year Ended December 31, Change 2024 2023 $ % Cost of Revenues: Gaming $ 3,225,750 $ 3,245,740 $ (19,990 ) (0.6 )% Esports - 374,755 (374,755 ) (100.0 )% Total Cost of Revenues $ 3,225,750 $ 3,620,495 $ (394,745 ) (10.9 )% Consolidated cost of revenues were $3.2 million and $3.6 million for 2024 and 2023, respectively, a decrease of $0.4 million, or 10.9%, when compared to the prior year.
Cost of Revenues For the Year Ended December 31, Change 2025 2024 $ % Cost of Revenues: Gaming $ 2,010,140 $ 2,930,635 $ (920,495 ) (31.4 )% Esports 83,170 295,115 (211,945 ) (71.8 )% Total Cost of Revenues $ 2,093,310 $ 3,225,750 $ (1,132,440 ) (35.1 )% Consolidated cost of revenues were $2.1 million and $3.2 million for 2025 and 2024, respectively, a decrease of $1.1 million, or 35.1%, when compared to the prior year.
Starting in 2019, we began generating sponsorship revenues from our production of live and virtual esports events. In early 2022, we also began offering software development services for racing simulators.
Starting in 2019, we began generating sponsorship revenues from our production of live and virtual esports events; however, during 2025 and 2024 we did not generate any revenue for esports events as we did not organize any such events.
As of December 31, 2024, we had an accumulated deficit of $91.8 million and cash and cash equivalents of $0.9 million, which increased to $1.2 million as of February 28, 2025. We do not believe that our current capital resources will be sufficient to fund our operations over the next year.
As of December 31, 2025, we had an accumulated deficit of $84.9 million and cash and cash equivalents of $5.0 million, which increased to $6.0 million as of February 28, 2026. We expect that our cash on hand will fund our operations for at least one year from the date the consolidated financial statements are issued.
Trends and Factors Affecting Our Business Product Release Schedule Our financial results are impacted by the timing of our product releases and the commercial success of those titles.
As of December 31, 2025, we have a total headcount of 44 people, made up of 26 full-time employees and 18 contractors, with 32 people in total dedicated to game development. Trends and Factors Affecting Our Business Product Release Schedule Our financial results are impacted by the timing of our product releases and the commercial success of those titles.
Our product and service offerings included within the esports segment relate primarily to curating esports events. 50 Cost of Revenues Cost of revenues for our Gaming segment is primarily comprised of royalty expenses, which historically has been attributable to our NASCAR License prior to its sale and certain other third parties relating to our NASCAR racing series games.
Our product and service offerings included within the esports segment relate primarily to curating esports events. 47 Cost of Revenues Cost of revenues for our Gaming segment is primarily comprised of royalty expenses, license fees, web hosting costs and amortization of certain acquired license agreements and other intangible assets acquired through our various acquisitions and internally-developed software.
Prior to entering into the BARC Settlement Agreement, we had a total remaining liability in connection with the Prior BTCC License Agreement, inclusive of unpaid installments, of $0.9 million. On May 17, 2024, we entered into a Settlement Agreement and License with INDYCAR (“the INDYCAR Agreement”).
On May 17, 2024, we entered into a Settlement Agreement and License with INDYCAR (“the INDYCAR Agreement”).
Gross Profit For the Year Ended December 31, Change 2024 2023 $ % Gross Profit (Loss): Gaming $ 5,461,712 $ 3,373,762 $ 2,087,950 61 .9 % Esports - (84,583 ) 84,583 (100.0 )% Total Gross Profit $ 5,461,712 $ 3,289,179 $ 2,172,533 66 .1 % Gaming – Gross Profit Margin 62.9 % 51.0 % Esports – Gross (Loss) Profit Margin - % (29.1 )% Total Gross Profit Margin 62.9 % 47.6 % 52 Consolidated gross profit was $5.5 million and $3.3 million for 2024 and 2023, respectively, an increase of $2.2 million, or 66.1%, when compared to the prior year.
Gross Profit (Loss) For the Year Ended December 31, Change 2025 2024 $ % Gross Profit (Loss): Gaming $ 9,287,758 $ 5,756,827 $ 3,530,931 61.3 % Esports (83,170 ) (295,115 ) 211,945 (71.8 )% Total Gross Profit $ 9,204,588 $ 5,461,712 $ 3,742,876 68.5 % Gaming – Gross Profit Margin 82.2 % 66.3 % Esports – Gross Profit Margin NM NM Total Gross Profit Margin 81.5 % 62.9 % NM = not meaningful 49 Consolidated gross profit was $9.2 million and $5.5 million for 2025 and 2024, respectively, an increase of $3.8 million, or 68.5%, when compared to the prior year.
The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture. 54 Liquidity and Capital Resources Liquidity Since our inception and prior to our IPO, we financed our operations primarily through advances from Driven Lifestyle, which were subsequently incorporated into a line of credit provided by Driven Lifestyle pursuant to the $12 million Line of Credit, as described below.
Net Loss Attributable to Non-Controlling Interest Net loss attributable to non-controlling interest was approximately $83,000 and $295,000 for 2025 and 2024, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture. 51 Liquidity and Capital Resources Liquidity After our IPO in 2021, we have financed our operations primarily through cash generated from operations, advances from Driven Lifestyle pursuant to the $12 million Line of Credit and sales of our equity securities.
Esports segment revenues represented 0% and 4.2% of our total 2024 and 2023 revenues, respectively, decreasing by $0.3 million, or 100%, when compared to the prior year. The decrease in Esports segment revenue was due to us not organizing a Le Mans Virtual Series (“LMVS”) event in 2024, resulting in no earned sponsorship or events revenue in 2024.
We did not organize a Le Mans Virtual Series (“LMVS”) event in 2025 or 2024, resulting in no earned sponsorship or events revenue in 2025 and 2024 in our Esports segment.
Cash flows provided by financing activities for the year ended December 31, 2023 were primarily attributable to $0.6 million raised in connection with shares sold under the Alumni Purchase Agreement (as defined below) and $10.4 million raised in connection with shares sold in the Company’s registered direct offerings, partially offset by $0.9 million of payments for purchase commitment liabilities relating to a portion of the deferred installment amount due in connection with our acquisition of Studio397 and $0.3 million of payments for game license liabilities.
Cash flows provided by financing activities during the year ended December 31, 2025 were primarily attributable to $2.3 million raised in connection with shares sold in a private placement offering in April 2025, offset by a $0.8 million payment for purchase commitments and $0.4 million for payment on notes payable.
Prior to entering into the INDYCAR Agreement, we had a total remaining liability in connection with the July 13, 2021 INDYCAR License, inclusive of unpaid installments, of $2.9 million. As a normal part of our business, depending on market conditions, pricing and overall growth strategy, we consider potential acquisitions.
As of December 31, 2025, all amounts due to Luminis under the Settlement Agreement have been paid. As a normal part of our business, depending on market conditions, pricing and overall growth strategy, we consider potential acquisitions.
Other Operating Income Other operating income was $0.8 million for 2024, compared to $3.0 million for 2023, a decrease of $2.2 million compared to the prior year.
Other Operating Income Other operating income was $1.6 million for 2025, compared to $0.8 million for 2024, an increase of $0.8 million compared to the prior period. Other operating income of $1.6 million for 2025 primarily includes $0.8 million from the Wesco Insurance Company settlement, $0.5 million from a settlement agreement with HC2 Holdings 2 Inc.
The increase in Gaming segment revenues was primarily due to $3.0 million in digital game and downloadable content sales relating to sales of Le Mans Ultimate released on PC in February 2024, offset by $0.5 million and $0.4 million in lower revenues for NASCAR and rFactor 2 titles, respectively.
The increase in Gaming segment revenues was primarily due to a $5.8 million increase in 2025 from sales of our Le Mans Ultimate racing title released in February 2024, particularly DLC sales, which were higher compared to 2024, and $1.2 million from RaceControl, offset by a $4.4 million decrease in revenues in 2025 related to NASCAR, a gaming title we are no longer authorized to sell starting in 2025.
Due to our modified pro duct release schedule, we recognized minimal revenue from sales of physical gaming products for the years ended December 31, 2024 and 2023. Digital Business Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs.
Revenues associated with our Le Mans Ultimate franchise accounted for approximately 78% and 34% of our total revenue for the years ended December 31, 2025 and 2024, respectively. We aim to explore ways to capitalize on new trends and diversify our product mix. Digital Business Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs.
If estimated undiscounted future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value. We typically estimate fair value a cost to recreate valuation technique, however the valuation method used will be dependent on the finite-lived intangible asset subject to fair value assessment.
If estimated undiscounted future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value. Development Costs Costs incurred internally in developing a software product to be marketed or sold to external users are charged to expense until technological feasibility has been established for the product.
Depreciation and Amortization Depreciation and amortization expenses were $0.2 million and $0.4 million for 2024 and 2023, respectively, representing a decrease of $0.2 million or 47.7%, when compared to the prior year. The decrease was primarily due to some fixed assets being fully depreciated in 2023.
The decrease was primarily due to some fixed assets being fully depreciated in 2024.
Gross profit margin was 62.9% in 2024, compared to 47.6% in 2023. The increase in our Gaming segment gross profit of $2.4 million, and corresponding increase in gross profit margin, was primarily due to higher gaming revenues, particularly related to increased digital game revenues as a result of the release of Le Mans Ultimate on PC in February 2024.
The increase in our Gaming segment gross profit of $3.5 million, and an increase in gross profit margin, was primarily due to higher revenues and a reduction in amortization and royalty payments, mainly related to our NASCAR titles as a direct result of no significant game sales for the franchise in 2025 compared to the prior period.
We are also striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games. On October 3, 2023, we sold our NASCAR licensed rights under that certain Second Amended and Restated Distribution and License Agreement with NASCAR Team Properties (“NTP”) (the “NASCAR License”) to iRacing.com Motorsport Simulations, LLC.
We are also striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games. On February 20, 2024, we released Le Mans Ultimate on PC in early access.
Other income, net of $2.8 million for 2023 was comprised of $0.8 million in foreign currency gains arising from remeasuring transactions denominated in a currency other than U.S. dollars, $0.7 in insurance reimbursement for litigation, $0.6 million gain due to reduction of license liabilities arising from the termination of the Company’s INDYCAR license in November 2023, $0.5 million gain from the reduction in the fair value of liability settled stock warrants, and $0.2 million in rental income.
Other income, net of $3.4 million for 2025 was primarily comprised of $3.2 million in foreign currency gains arising from remeasuring transactions denominated in a currency and a $0.2 million gain from the Settlement Agreement entered into with Luminis on February 20, 2025.
Esports segment gross profit was $0 million for 2024, compared to a loss of $0.1 million for 2023, representing a gross profit margin of 0.0% and a loss of 29.1% for 2024 and 2023, respectively. As explained above, we did not organize an LMVS event in 2024.
As explained above, we did not organize an LMVS event in 2025 or 2024.
Removed
Prior to the sale of our NASCAR License, we had been the official video game developer and publisher for the NASCAR video game racing franchise and had the exclusive right to create and organize esports leagues and events for NASCAR using our NASCAR racing video games, in each case, subject to certain limited exceptions.
Added
Our purpose is to make the thrill of motorsports accessible to everyone by creating the highest quality, most sophisticated and innovative experiences for racers, gamers and fans of all ages. Our products and services target a large global motorsport audience.
Removed
Concurrently with the sale of our NASCAR License, we entered into an agreement with NTP pursuant to which we had a limited non-exclusive right and license to, among other things, sell our NASCAR games and DLCs that were in our product portfolio through December 31, 2024 (the “NASCAR New Limited License”).
Added
Le Mans Ultimate is the official game of the WEC and 24 Hours of Le Mans, and is the first officially licensed and dedicated 24 Hours of Le Mans video game release in over twenty years. On July 22, 2025, we released Le Mans Ultimate Version 1.0.
Removed
For fiscal years 2024 and 2023, 52% and 72% of our total revenue, respectively, was generated from sales of our NASCAR racing video games.
Added
This milestone marks the completion of the title’s Early Access phase and ushers in a new era of continued development and expansion for the official game of the FIA World Endurance Championship and the 24 Hours of Le Mans.
Removed
On October 26, 2023, BARC (TOCA) Limited (“BARC”), the exclusive promoter of the British Touring Car Championship (the “BTCC”) , delivered notice to the Company terminating the license agreement between the parties relating to the Company’s development of video games and the organization and facilitation of esports events for the BTCC (the “BTCC License”), effective as of November 3, 2023 .
Added
We plan to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases, RaceControl subscription offerings and extra content. Reportable Segments We use the “management approach” in determining reportable operating segments.

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