Motorsport Games Inc.

Previous wording

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. 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. 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”). For the three months ended March 31, 2025 and 2024, 0% and 49% of our total revenue, respectively, was generated from sales of our NASCAR racing video games.

Current wording

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. 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. 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”).

Previous wording

On April 20, 2021 we acquired 100% of the share capital of Studio397 from Luminis International B.V. and Technology In Business B.V. (collectively, “Luminis”). The purchase price originally consisted of a cash payment at closing and payments due at a later date. To date, we have not paid all of the payments due subsequent to the closing. Pursuant to the terms of agreements that we entered into, we are required to pay interest on the amounts owed but unpaid. The remaining balance owed as of December 31, 2024, was $0.6 million with unpaid accrued interest of $0.3 million. As security for payment of the amounts owed, we pledged 20% of the share capital of Studio397 (the “Pledged Shares”) to Luminis. The terms of the sale provide that, in the event we fail to make any payment due subsequent to the closing, Luminis would become entitled to exercise the voting rights and receive any dividends or distributions associated with the Pledged Shares.

Current wording

On April 20, 2021 we acquired 100% of the share capital of Studio397 from Luminis International B.V. and Technology In Business B.V. (collectively, “Luminis”). The purchase price originally consisted of a cash payment at closing and payments due at a later date. Pursuant to the terms of agreements that we entered into, we are required to pay interest on the amounts owed but unpaid. The remaining balance owed as of December 31, 2024, was $0.6 million with unpaid accrued interest of $0.3 million. As security for payment of the amounts owed, we pledged 20% of the share capital of Studio397 (the “Pledged Shares”) to Luminis. The terms of the sale provide that, in the event we fail to make any payment due subsequent to the closing, Luminis would become entitled to exercise the voting rights and receive any dividends or distributions associated with the Pledged Shares.

Previous wording

On February 20, 2025, we entered into a Settlement Agreement with Luminis, pursuant to which and subject to the satisfaction of certain payment conditions, we will pay Luminis in full satisfaction of all amounts due, the sum of $750,000 payable in five (5) equal installment payments of $150,000, commencing on March 5, 2025 and thereafter continuing on April 2, 2025, May 5, 2025, June 4, 2025 and July 3, 2025. We made installment payments of $150,000 each by March 5, 2025 and May 5, 2025. If we default on any payment, Luminis could exercise their rights with respect to the Pledged Shares, including the right to claim a share of Studio397’s profits, which represented approximately 11% of our revenue for the year ended December 31, 2024. As shareholders of Studio397, Luminis would have the right to compel us to call a meeting of the shareholders of Studio397 for the purpose of discussing a proposal to effect the public sale of all assets owned by Studio397, including software. In addition to such rights, Luminis would further be entitled to retain any payments that we make pursuant to the Settlement Agreement.

Current wording

On February 20, 2025, we entered into a Settlement Agreement with Luminis, pursuant to which and subject to the satisfaction of certain payment conditions, we will pay Luminis in full satisfaction of all amounts due, the sum of $750,000 payable in five (5) equal installment payments of $150,000, commencing on March 5, 2025 and thereafter continuing on April 2, 2025, May 5, 2025, June 4, 2025 and July 3, 2025. On July 2, 2025, we made the final $150,000 payment to Luminis, which has resulted in full settlement of all amounts due to Luminis under the Settlement Agreement.

Previous wording

On April 11, 2025, we entered into securities purchase agreements (the “April Purchase Agreements”) with several institutional and accredited investors for the issuance and sale in a private placement (the “April Private Placement”) of the following securities for gross proceeds of approximately $2.5 million: (i) 1,894,892 shares (the “April Shares”) of our Class A common stock, par value $0.0001 (the “Class A common stock”) and (ii) a pre-funded warrant (the “April Pre-Funded Warrant”) to purchase up to 377,836 shares of Class A common stock (the “April Pre-Funded Warrant Shares”)at an exercise price of $0.0001 per share. The purchase price for one share of Class A common stock was $1.10 and the purchase price for one pre-funded warrant was $1.0999 per share, representing a premium of approximately 33% to the closing price of our Class A common stock as of April 10, 2025. In April 2025, we received net proceeds of approximately $2.35 million from the Private Placement, after deducting estimated offering expenses payable by us.

Current wording

On April 11, 2025, we entered into securities purchase agreements (the “April Purchase Agreements”) with several institutional and accredited investors for the issuance and sale in a private placement (the “April Private Placement”) of the following securities for gross proceeds of approximately $2.5 million: (i) 1,894,892 shares (the “April Shares”) of our Class A common stock, par value $0.0001 (the “Class A common stock”) and (ii) a pre-funded warrant (the “April Pre-Funded Warrant”) to purchase up to 377,836 shares of Class A common stock (the “April Pre-Funded Warrant Shares”) at an exercise price of $0.0001 per share. The purchase price for one share of Class A common stock was $1.10 and the purchase price for one pre-funded warrant was $1.0999 per share. In April 2025, we received net proceeds of approximately $2.35 million from the Private Placement, after deducting offering expenses paid by us.

Previous wording

The April Pre-Funded Warrant is exercisable twenty-one days after we mail a Definitive Information Statement on Schedule 14C with respect to stockholder approval of such exercise and will not expire until exercised in full. The exercise price and number of April Pre-Funded Warrant Shares issuable upon exercise of the April Pre-Funded Warrant are subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our Class A common stock and the exercise price. The April Pre-Funded Warrant may be exercised, in whole or in part, at any time by means of a “cashless exercise.”

Current wording

The April Pre-Funded Warrant became exercisable commencing on May 29, 2025, which was twenty-one days after we mailed a Definitive Information Statement on Schedule 14C with respect to stockholder approval of such exercise, and will not expire until exercised in full. The exercise price and number of April Pre-Funded Warrant Shares issuable upon exercise of the April Pre-Funded Warrant are subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our Class A common stock and the exercise price. The April Pre-Funded Warrant may be exercised, in whole or in part, at any time by means of a “cashless exercise.”

Previous wording

Pursuant to the April Purchase Agreements, we agreed to prepare and file a registration statement with the SEC registering the resale of the April Shares and the April Pre-Funded Warrant Shares no later than 45 days after the date of the April Purchase Agreements, to use commercially reasonable efforts to have the registration statement declared effective as promptly as practicable thereafter, and to keep such registration statement effective at all times for a five-year period after the closing date.

Current wording

Pursuant to the April Purchase Agreements, we agreed to prepare and file a registration statement with the SEC registering the resale of the April Shares and the April Pre-Funded Warrant Shares no later than 45 days after the date of the April Purchase Agreements, to use commercially reasonable efforts to have the registration statement declared effective as promptly as practicable thereafter, and to keep such registration statement effective at all times for a five-year period after the closing date. Such registration statement on Form S-3 was filed on May 30, 2025, and became effective on June 10, 2025.

Previous wording

Pursuant to the terms of the April Purchase Agreement, we are prohibited from issuing, entering into any agreement to issue or announcing the issuance or proposed issuance of any shares of Class A common stock or securities convertible or exercisable into Class A common stock for a period commencing on the date of the April Purchase Agreement, and expiring four and one-half (4½) months thereafter in connection with a financing transaction without the prior written consent of purchasers that purchased at least 50.1% in interest of the April Shares and the April Pre-Funded Warrants based on the initial subscription amounts under the April Purchase Agreement. The April Purchase Agreements further provides that the purchasers have the right to participate in certain subsequent financings in an amount equal to 100% of the amount of the subsequent financing (or 80% in the case of a public offering or an offering of securities registered under a shelf registration statement on Form S-3) on the same terms, conditions and price provided for in the subsequent financing (the “Right of First Refusal”). We agreed to seek, and obtained, stockholder approval for the granting of the Right of First Refusal, which stockholder approval was obtained prior to the closing date. The Right of First Refusal shall be effective from the date of that is twenty-one days after we mail a Definitive Information Statement on Schedule 14C with respect to such stockholder approval until the first anniversary of the closing date.

Current wording

Pursuant to the terms of the April Purchase Agreement, we are prohibited from issuing, entering into any agreement to issue or announcing the issuance or proposed issuance of any shares of Class A common stock or securities convertible or exercisable into Class A common stock for a period commencing on the date of the April Purchase Agreement, and expiring four and one-half (4½) months thereafter in connection with a financing transaction without the prior written consent of purchasers that purchased at least 50.1% in interest of the April Shares and the April Pre-Funded Warrant based on the initial subscription amounts under the April Purchase Agreement. The April Purchase Agreements further provides that the purchasers have the right to participate in certain subsequent financings in an amount equal to 100% of the amount of the subsequent financing (or 80% in the case of a public offering or an offering of securities registered under a shelf registration statement on Form S-3) on the same terms, conditions and price provided for in the subsequent financing (the “Right of First Refusal”). We agreed to seek, and obtained, stockholder approval for the granting of the Right of First Refusal, which stockholder approval was obtained prior to the closing date. The Right of First Refusal is effective commencing on May 29, 2025, which was twenty-one days after we mailed a Definitive Information Statement on Schedule 14C with respect to such stockholder approval, until the first anniversary of the closing date.

Previous wording

The April Purchase Agreements provided that our board of directors (the “Board”) will appoint an individual designated by the purchasers that purchased at least 50.1% in interest of the April Shares and the April Pre-Funded Warrants based on the initial subscription amounts under the April Purchase Agreement to serve as a Class II director on the board for a term expiring at our 2026 annual meeting of stockholders. In accordance with the foregoing, Mr. Guoquan (Paul) Huang was appointed to the Board effective as of April 16, 2025. The April Purchase Agreement further provides that the purchasers holding a 50.1% interest in the securities issued upon closing of the April Private Placement shall have the right to appoint an individual to our management team, subject to Board approval.

Current wording

The April Purchase Agreements provided that our board of directors (the “Board”) will appoint an individual designated by the purchasers that purchased at least 50.1% in interest of the April Shares and the April Pre-Funded Warrant based on the initial subscription amounts under the April Purchase Agreement to serve as a Class II director on the board for a term expiring at our 2026 annual meeting of stockholders. In accordance with the foregoing, Mr. Guoquan (Paul) Huang was appointed to the Board effective as of April 16, 2025. The April Purchase Agreement further provides that the purchasers holding a 50.1% interest in the securities issued upon closing of the April Private Placement shall have the right to appoint an individual to our management team, subject to Board approval.

Previous wording

We are required to continually meet Nasdaq’s listing requirements, including, among other things, a minimum stockholders’ equity requirement of at least $2,500,000 for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”). As described in a Current Report on Form 8-K filed with the SEC on November 22, 2024, we received a deficiency letter from Nasdaq’s Listing Qualifications Department (the “Nasdaq Staff”) on November 20, 2024 notifying us that we were not in compliance with the Stockholders’ Equity Requirement. In our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, we reported stockholders’ equity of $2,170,911, which was below the Stockholders’ Equity Requirement. Additionally, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, which include (i) a market value of listed securities of at least $35 million or (ii) net income of $500,000 from continuing operations in the most recently completed fiscal year or in two of the three most recently completed fiscal years. As of March 31, 2025, our stockholders’ equity was $1,416,885.

Current wording

We are required to continually meet Nasdaq’s listing requirements, including, among other things, a minimum stockholders’ equity requirement of at least $2,500,000 for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Requirement”). As described in a Current Report on Form 8-K filed with the SEC on November 22, 2024, we received a deficiency letter from Nasdaq’s Listing Qualifications Department (the “Nasdaq Staff”) on November 20, 2024 notifying us that we were not in compliance with the Stockholders’ Equity Requirement. In our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, we reported stockholders’ equity of $2,170,911, which was below the Stockholders’ Equity Requirement. Additionally, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules, which include (i) a market value of listed securities of at least $35 million or (ii) net income of $500,000 from continuing operations in the most recently completed fiscal year or in two of the three most recently completed fiscal years.

Previous wording

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. Nasdaq will continue to monitor our ongoing compliance with the continued listing requirements for The Nasdaq Capital Market and, if at the time of our next periodic report we do not evidence compliance we may be subject to delisting.

Current wording

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. Nasdaq will continue to monitor our ongoing compliance with the continued listing requirements for The Nasdaq Capital Market and, if at the time of our next periodic report we do not evidence compliance we may be subject to delisting. As of June 30, 2025, our stockholders’ equity was $5,570,240.

Previous wording

Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs. All of our titles that are available through retailers as packaged goods products are also available through direct digital download. For the three months ended March 31, 2025 and 2024, approximately 89% and 92% of our revenue from sales of video games for game consoles and PCs was through digital channels, respectively. We believe this trend of increasing direct digital downloads is primarily due to benefits relating to convenience and accessibility that digital downloads provide. 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.

Current wording

Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs. All of our titles that are available through retailers as packaged goods products are also available through direct digital download. For the six-month periods ended June 30, 2025 and 2024, substantially all of our revenue from sales of video games for game consoles and PCs was through digital channels. We believe this trend of increasing direct digital downloads is primarily due to benefits relating to convenience and accessibility that digital downloads provide. 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.

Previous wording

In the past we derived most of our revenue from the sale of products made for 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 0% and 44% of our total revenue for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, the sale of products for Microsoft Windows via Steam comprised approximately 90% and 50% of our total revenue, respectively, and revenue from licensing and development agreements comprised approximately 10% and 6% of our total revenue for the three months ended March 31, 2025 and 2024, respectively. 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.

Current wording

In the past we derived most of our revenue from the sale of products made for 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 50% of our total revenue for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June, 2025 and 2024, the sale of products for Microsoft Windows via Steam comprised approximately 68% and 38% of our total revenue, respectively, and the sale of products via Genba comprised approximately 15% and 1% of our total revenue, respectively. For the six months ended June, 2025 and 2024, licensing and development agreements comprised approximately 6% and 5% of our total revenue, respectively. 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.

Previous wording

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. We historically have been able to forecast the revenue from this area of our business with greater relative confidence than for new games, services, and business models. 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.

Current wording

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. We historically have been able to forecast the revenue from this area of our business with greater relative confidence than for new games, services, and business models. 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 and the planned introduction of new annualized sports franchise games, such as with Le Mans.

Previous wording

We have historically derived substantially all of our revenue from sales of our games and related extra content that can be played by customers on a variety of platforms, including game consoles, mobile phones, PCs and tablets. 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.

Current wording

We have historically derived substantially all of our revenue from sales of our games and related extra content that can be played by customers on a variety of platforms, including game consoles, mobile phones, PCs and tablets. 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 and in December 2024, we started offering a subscription service via RaceControl, our matchmaking and online racing platform.

Previous wording

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. 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. Furthermore, cost of revenues for our Gaming segment includes costs associated with our outsourced code and content development services. Cost of revenues for our esports segment consists primarily of the cost of event staffing and event production.

Current wording

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. 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 and internally-developed software. Furthermore, cost of revenues for our Gaming segment includes costs associated with our outsourced code and content development services. Cost of revenues for our esports segment consists primarily of the cost of event staffing and event production.

Previous wording

Sales and marketing expenses are primarily comprised 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.

Current wording

Sales and marketing expenses are primarily comprised 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.

Previous wording

Consolidated revenues were $1.8 million and $3.0 million for 2025 and 2024, respectively, a decrease of $1.3 million, or 41.9%, when compared to the prior period. The decrease in Gaming segment revenues was primarily due to a $1.5 million decrease in NASCAR-related revenues in 2025, a gaming title we are no longer authorized to sell starting in 2025, a $0.2 million decrease in our rFactor 2 title, offset by a $0.4 million increase in 2025 from sales of Le Mans Ultimate compared to 2024.

Current wording

Consolidated revenues were $2.6 million and $1.9 million for 2025 and 2024, respectively, an increase of $0.7 million, or 37.7%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to a $1.3 million increase in 2025 from sales of our Le Mans Ultimate racing title, particularly DLC sales, a $0.2 million increase from RaceControl, and a $0.1 million increase in our rFactor 2 title, compared to 2024, offset by a $0.9 million decrease in NASCAR-related revenues in 2025, a gaming title we are no longer authorized to sell starting in 2025.

Previous wording

Consolidated cost of revenues was $0.5 million and $0.7 million for 2025 and 2024, respectively, a decrease of $0.2 million, or 30.2%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a reduction in royalty payments, mainly related to our NASCAR titles as a direct result of no game sales for the franchise in 2025 compared to the prior period.

Current wording

Consolidated cost of revenues were $0.5 million and $0.8 million for 2025 and 2024, respectively, a decrease of $0.3 million, or 41.0%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by 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.

Previous wording

As explained above, we did not organize a LMVS event in 2025 or 2024.

Current wording

As explained above, we did not organize an LMVS event in 2025 or 2024.

Previous wording

Development expenses were $0.6 million and $1.1 million for 2025 and 2024, respectively, representing a $0.5 million, or 43.5%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.4 million decrease in payroll as a result of lower headcount, as well as a $0.1 million decrease in external development services, when compared to the prior period.

Current wording

Development expenses were $0.3 million and $0.9 million for 2025 and 2024, respectively, representing a $0.6 million, or 68.9%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.5 million decrease in payroll as a result of lower headcount and the capitalization of internally-developed software costs, a decrease of $0.2 million in software expenses, offset by a $0.1 million increase in external development services, when compared to the prior period.

Previous wording

Interest expense was approximately $13,000 and $31,000 for 2025 and 2024, respectively, primarily from non-cash interest accretion of purchase commitment liabilities relating to the acquisition of Studio397 in April 2021.

Current wording

Interest expense was approximately $5,000 and $30,000 for 2025 and 2024, respectively, primarily from non-cash interest accretion of purchase commitment liabilities relating to the acquisition of Studio397 in April 2021.

Previous wording

Other income, net was $1.1 million for 2025, compared to other expense, net of $0.4 million for 2024, an increase of $1.6 million compared to the prior period. Other income, net of $1.1 million for 2025 was primarily comprised of $0.9 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.

Current wording

Other income, net was $2.3 million for 2025, compared to other income, net of $0.1 million for 2024, an increase of $2.2 million compared to the prior period. Other income, net of $2.3 million and $0.1 million for 2025 and 2024, respectively, was primarily comprised of foreign currency gains arising from remeasuring transactions denominated in a currency other than U.S. Dollars.

Previous wording

Net loss attributable to non-controlling interest was approximately $18,000 for 2025 and 2024, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture.

Current wording

Net loss attributable to non-controlling interest was approximately $20,000 and $18,000 for 2025 and 2024, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture.

Previous wording

Consolidated gross profit was $1.3 million and $2.4 million for 2025 and 2024, respectively, a decrease of $1.1 million, or 45.3%, when compared to the prior period. Gross profit margin was 73.5% in 2025, compared to 78.0% in 2024. The decrease in our Gaming segment gross profit of $1.1 million, and corresponding decrease in gross profit margin, was primarily due to lower gaming revenues in 2025, particularly related to NASCAR-related revenues, a gaming title we are no longer authorized to sell starting in 2025.

Current wording

Consolidated gross profit was $3.4 million and $3.5 million for 2025 and 2024, respectively, a decrease of $0.1 million, or 1.2%, when compared to the prior period. Gross profit margin was 78.8% in 2025, compared to 70.7% in 2024. The decrease in our Gaming segment gross profit of $0.05 million, and an increase in gross profit margin, was primarily due to 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.

Previous wording

Sales and marketing expenses were $0.1 million and $0.3 million for 2025 and 2024, respectively, representing a $0.2 million, or 61.0%, decrease when compared to the prior period. The reduction in sales and marketing expenses was primarily driven by a $0.2 million reduction in payroll and employee-related expense as a result of lower headcount when compared to the prior period.

Current wording

Sales and marketing expenses were $0.2 million and $0.5 million for 2025 and 2024, respectively, representing a $0.2 million, or 50.9% decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $0.3 million reduction in payroll and employee-related expenses as a result of lower headcount, when compared to the prior period.

Previous wording

General and administrative (“G&A”) expenses were $1.2 million and $2.2 million for 2025 and 2024, respectively, a decrease of $1.0 million, or 46.7%, when compared to the prior period. The reduction in G&A expenses was primarily driven by a $0.7 million decrease in legal and professional fees, as well as a decrease of $0.1 million in each of payroll, insurance and office rent, respectively.

Current wording

G&A expenses were $2.0 million and $3.6 millionfor 2025 and 2024, respectively, a decrease of $1.6 million, or 43.5%, when compared to the prior period. The reduction in G&A expenses was primarily driven by a $1.1 million decrease in legal and professional fees, a $0.2 million decrease in insurance expense, as well as a decrease of $0.1 million in each of office rent, payroll costs and stock compensation expense, respectively.

Previous wording

Other comprehensive loss was $0.8 million for 2025, compared to other comprehensive gain of $0.5 million for 2024. The $1.3 million decrease in other comprehensive loss was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.

Current wording

Other comprehensive loss was $3.2 million for 2025, compared to other comprehensive gain of $0.5 million for 2024. The $3.6 million decrease in other comprehensive loss was primarily due to operational transactions in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.

Previous wording

For the three months ended March 31, 2025, we generated net income of $1.0 million and positive cash flows from operations of approximately $0.3 million. As of March 31, 2025, we had an accumulated deficit of $90.7 million, working capital deficit of $1.9 million, and cash and cash equivalents of $1.1 million, which increased to $3.1 million at April 30, 2025 after taking into account the proceeds from the Private Placement. The increase in cash and cash equivalents was primarily due to $2.35 million in net proceeds from a private placement of our Class A common stock and issuance of a pre-funded warrant, which closed on April 11, 2025. We do not believe that our current capital resources will be sufficient to fund our operations over the next year. Based on our current expected level of operating expenditures and cash and cash equivalents on hand and anticipated revenue, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months subsequent to the issuance of the condensed consolidated financial statements. Historically, we have financed our operations primarily through revenue generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. Management is actively pursuing financing and other strategic plans, however, we do not have any committed sources of financing at this time, and it is uncertain whether any additional funding will be available when we need it on terms that will be acceptable to us, or at all. 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. In addition, our ability to sell additional securities may be limited by the terms of the Right of First Refusal granted to the purchasers in the April Private Placement and our agreement not to issue any shares of our Class A common stock or certain other securities for four and a half months form the closing date of the Private Placement. The issuance of debt can result in restrictive covenants that limit operations. 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.

Current wording

For the six months ended June 30, 2025, we had net income of $5.3 million and generated cash flows from operations of approximately $0.3 million that was primarily due to $0.8 million from the Wesco Insurance Company settlement in June 2025 and $0.5 million from a settlement agreement with HC2 Holdings 2 Inc. in March 2025. As of June 30, 2025, we had an accumulated deficit of $86.5 million, working capital of $2.2 million, and cash and cash equivalents of $2.4 million, which increased to $2.8 million as of July 31, 2025. We do not believe that our current capital resources will be sufficient to fund our operations over the next year. Based on our current expected level of operating expenditures and cash and cash equivalents on hand and anticipated revenue, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months subsequent to the issuance of the condensed consolidated financial statements. Historically, we have financed our operations primarily through revenue generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. Management is actively pursuing financing and other strategic plans, however, we do not have any committed sources of financing at this time, and it is uncertain whether any additional funding will be available when we need it on terms that will be acceptable to us, or at all. 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. In addition, our ability to sell additional securities may be limited by the terms of the Right of First Refusal granted to the purchasers in the April Private Placement and our agreement not to issue any shares of our Class A common stock or certain other securities for four and a half months form the closing date of the Private Placement. The issuance of debt can result in restrictive covenants that limit operations. 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.

Previous wording

We generated an average monthly cash flow from operations of approximately $0.1 million during the three months ended March 31, 2025, which was primarily due to a gain from the Innovate Settlement Agreement entered on March 27, 2025. While we have taken measures to reduce our costs, we expect 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. Based on our cash and cash equivalents position and our expected average future cash burn, we believe that we do not have sufficient cash on hand to fund our operations over the next year and that additional funding will be required in order to continue operations.

Current wording

We generated an average monthly cash flow from operations of approximately $46,000 during the six months ended June 30, 2025, which was primarily due to $0.8 million from the Wesco Insurance Company settlement in June 2025 and $0.5 million from a settlement agreement with HC2 Holdings 2 Inc. in March 2025. While we have taken measures to reduce our costs, we expect 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. Based on our cash and cash equivalents position and our expected average future cash burn, we believe that we do not have sufficient cash on hand to fund our operations over the next year and that additional funding will be required in order to continue operations.

Previous wording

In March 2023, we entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which we may issue and sell shares of our Class A common stock having an aggregate offering price of up to $10 million (subject to compliance with the limitations set forth in the SEC’s “baby shelf” rules). Subject to the terms and conditions of the ED Agreement, the Sales Agent may sell shares by any method deemed to be an “at-the-market” (“ATM”) offering as defined in Rule 415 under the Securities Act. During the three months ended March 31, 2025, we did not sell any shares of Class A common stock pursuant to the terms of the ED Agreement. On July 26, 2024, we filed a prospectus supplement terminating the continuous offering, although the ED Agreement remains in effect. However, due to our present liquidity position and expected future funding requirements, even if we filed another prospectus supplement to reinstate the continuous offering pursuant to the ED Agreement and raised the maximum amount available for future sales via our ATM program, such proceeds would not be sufficient to satisfy our ongoing liquidity requirements and further potential Capital Financing would be required, in conjunction to the other options we are exploring. Further, there can be no assurance we will be able to obtain funds via our ATM program, should we choose to sell shares under the ED Agreement, nor can there be any other assurance that we can secure additional funding in the form of equity and/or debt financing on commercially acceptable terms, if at all, to satisfy our future needed liquidity and capital resources.

Current wording

In March 2023, we entered into an Equity Distribution Agreement (the “ED Agreement”) with Canaccord Genuity LLC, as sales agent (the “Sales Agent”), pursuant to which we may issue and sell shares of our Class A common stock having an aggregate offering price of up to $10 million (subject to compliance with the limitations set forth in the SEC’s “baby shelf” rules). Subject to the terms and conditions of the ED Agreement, the Sales Agent may sell shares by any method deemed to be an “at-the-market” (“ATM”) offering as defined in Rule 415 under the Securities Act. During the six months ended June 30, 2025, we did not sell any shares of Class A common stock pursuant to the terms of the ED Agreement. On July 26, 2024, we filed a prospectus supplement terminating the continuous offering, although the ED Agreement remains in effect. However, due to our present liquidity position and expected future funding requirements, even if we filed another prospectus supplement to reinstate the continuous offering pursuant to the ED Agreement and raised the maximum amount available for future sales via our ATM program, such proceeds would not be sufficient to satisfy our ongoing liquidity requirements and further potential Capital Financing would be required, in conjunction to the other options we are exploring. Further, there can be no assurance we will be able to obtain funds via our ATM program, should we choose to sell shares under the ED Agreement, nor can there be any other assurance that we can secure additional funding in the form of equity and/or debt financing on commercially acceptable terms, if at all, to satisfy our future needed liquidity and capital resources.

Previous wording

Net cash provided by (used in) operating activities for the three months ended March 31, 2025 and 2024 was $0.3 million and ($0.4 million), respectively. Net cash provided by operating activities for the three months ended March 31, 2025 was primarily a result of cash from net income of $1.0 million, adjusted for net non-cash adjustments of $0.9 million and $0.2 million of cash from changes in the levels of operating assets and liabilities. Net cash used in operating activities for the three months ended March 31, 2024 was primarily a result of cash used to fund a net loss of $1.7 million, adjusted for net non-cash adjustments of $1.2 million and $0.1 million of cash used by changes in the levels of operating assets and liabilities.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 and 2024 was $0.3 million and $1.1 million, respectively. The net cash provided by operating activities for the six months ended June 30, 2025 was primarily a result of cash used to generate net income of $5.3 million, adjusted for net non-cash adjustments of $2.9 million and $2.0 million of cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the six months ended June 30, 2024 was primarily a result of cash used to generate net income of $0.4 million, adjusted for net non-cash adjustments of $1.3 million and $0.1 million of cash provided by changes in the levels of operating assets and liabilities.

Previous wording

On September 8, 2022, we entered into a support agreement with Driven Lifestyle (the “Support Agreement”) pursuant to which Driven Lifestyle issued approximately $3 million (the “September 2022 Cash Advance”) to us in accordance with the $12 million Line of Credit. Additionally, the Support Agreement modified the $12 million Line of Credit such that, among other things, until June 30, 2024, Driven Lifestyle would not demand repayment of the September 2022 Cash Advance or other advances under the $12 million Line of Credit, unless certain events occurred, as prescribed in the Support Agreement, such as the completion of a new financing arrangement or we generate positive cash flows from operations, among others. All principal and accrued interest owed on the $12 million Line of Credit were exchanged for equity following the completion of two debt-for-equity exchange agreements with Driven Lifestyle on January 30, 2023 and February 1, 2023, relieving us of approximately $3.9 million in owed principal and unpaid interest in exchange for an aggregate of 780,385 shares of our Class A common stock. See Note 5 –Related Party Loans in our condensed consolidated financial statements in this Report for further information. As of March 31, 2025, the balance due to Driven Lifestyle under the $12 million Line of Credit was $0.

Current wording

See Note 5 –Related Party Loans in our condensed consolidated financial statements in this Report for further information. As of June 30, 2025, the balance due to Driven Lifestyle under the $12 million Line of Credit was $0.

Previous wording

Other than accounting estimates for sales returns and price protection reserves which are no longer relevant starting in 2025, there have been no material changes to the items disclosed as critical accounting policies and estimates under “Liquidity and Capital Resources—Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2024 Form 10-K.

Current wording

Other than development costs and accounting estimates for sales returns and price protection reserves which are no longer relevant starting in 2025, there have been no material changes to the items disclosed as critical accounting policies and estimates under “Liquidity and Capital Resources—Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2024 Form 10-K.

Previous wording

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) impairment of intangible assets; (iii) loss contingency expense; and (iv) stock-based compensation expenses.

Current wording

Adjusted EBITDA, a measure used by management to assess our operating performance, is defined as EBITDA, which is net income 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) impairment of intangible assets; (iii) loss contingency expense; and (iv) stock-based compensation expenses.

Previous wording

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 income (loss), its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below. We use the Non-GAAP Measure to manage our business and evaluate our financial performance, as Adjusted EBITDA eliminates items that affect comparability between periods that we believe are not representative of our core ongoing operating business. Additionally, we believe that using the Non-GAAP Measure is useful to our investors because it enhances investors’ understanding and assessment of our normalized operating performance and facilitates comparisons to prior periods and our competitors’ results (who may define Adjusted EBITDA differently).

Current wording

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 income, its most directly comparable financial measure, calculated and presented in accordance with U.S. GAAP, are presented in the tables below. We use the Non-GAAP Measure to manage our business and evaluate our financial performance, as Adjusted EBITDA eliminates items that affect comparability between periods that we believe are not representative of our core ongoing operating business. Additionally, we believe that using the Non-GAAP Measure is useful to our investors because it enhances investors’ understanding and assessment of our normalized operating performance and facilitates comparisons to prior periods and our competitors’ results (who may define Adjusted EBITDA differently).

Previous wording

The Non-GAAP Measure is not a recognized term under U.S. 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. Additionally, the Non-GAAP Measure is not intended to be a measure of free cash flows available for our discretionary use, as it does not consider certain cash requirements, such as interest payments, tax payments, working capital requirements and debt service requirements. The Non-GAAP Measure has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for our results as reported under U.S. GAAP. Management compensates for the limitations of using the Non-GAAP Measure by using it to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business than would be presented by using only measures in accordance with U.S. GAAP. Because not all companies use identical calculations, the Non-GAAP Measure may not be comparable to other similarly titled measures of other companies.

Current wording

The Non-GAAP Measure is not a recognized term under U.S. GAAP and does not purport to be an alternative to revenue, income/loss from operations, net income, or cash flows from operations or as a measure of liquidity or any other performance measure derived in accordance with U.S. GAAP. Additionally, the Non-GAAP Measure is not intended to be a measure of free cash flows available for our discretionary use, as it does not consider certain cash requirements, such as interest payments, tax payments, working capital requirements and debt service requirements. The Non-GAAP Measure has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for our results as reported under U.S. GAAP. Management compensates for the limitations of using the Non-GAAP Measure by using it to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business than would be presented by using only measures in accordance with U.S. GAAP. Because not all companies use identical calculations, the Non-GAAP Measure may not be comparable to other similarly titled measures of other companies.

Previous wording

The following table provides a reconciliation from net income (loss) to Adjusted EBITDA for the respective periods presented:

Current wording

The following table provides a reconciliation from net income to Adjusted EBITDA for the respective periods presented: