Motorsport Games Inc.

Previous wording

On February 20, 2024, we releasedLe Mans Ultimate on PC in early access.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 releasedLe Mans UltimateVersion 1.0. 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.

Current wording

On February 20, 2024, we releasedLe Mans Ultimate on PC in early access.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 releasedLe Mans UltimateVersion 1.0. This milestone marked the completion of the title’s Early Access phase and ushered 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.

Previous wording

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. The sale of our NASCAR License and the termination of our BTCC License and INDYCAR License, as disclosed elsewhere in this Report, has impacted our long-term product release schedule as we will no longer be producing NASCAR, BTCC and INDYCAR titles moving forward.

Current wording

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.

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 nine-month periods ended September 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.

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 three months ended March 31, 2026 and 2025, substantially all of our revenue from sales of video games for 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.

Previous wording

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 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. 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.

Current wording

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. 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. 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.

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, as well as our RaceControl subscription service. 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.

Current wording

Our business model includes revenue that we deem recurring in nature, which consists primarily of revenue from our annualized video game racing franchise for PC, as well as our RaceControl subscription service. 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. 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. 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.

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 and in December 2024, we started offering a subscription service via RaceControl, our matchmaking and online racing platform.

Current wording

We derive substantially all of our revenue from sales of our games and related extra content that can be played by customers on a PC platform. 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. 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

Our product and service offerings included within the Gaming segment primarily include, but are not limited to, full PC, console, and mobile games with both online and offline functionality, which generally include:

Current wording

Our product and service offerings included within the Gaming segment primarily include PCs with both online and offline functionality, which generally include:

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 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.

Current wording

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. 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 and other websites where we market our products.

Current wording

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.

Previous wording

Consolidated gross profit was $5.9 million and $4.6 million for 2025 and 2024, respectively, an increase of $1.4 million, or 30.1%, when compared to the prior period. Gross profit margin was 79.6% in 2025, compared to 67.9% in 2024. The increase in our Gaming segment gross profit of $1.4 million, and an increase in gross profit margin, was primarily due to higher revenues 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.

Current wording

Consolidated gross profit was $3.5 million and $1.3 million for 2026 and 2025, respectively, an increase of $2.2 million, or 171.8%, when compared to the prior period. Gross profit margin was 87.2% in 2026, compared to 73.5% in 2025. The increase in our Gaming segment gross profit of $2.2 million, and an increase in gross profit margin, was primarily due to higher revenues and a reduction in amortization, compared to the prior period.

Previous wording

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

Current wording

As explained above, we did not organize a LMVS event in 2026 or 2025.

Previous wording

Sales and marketing expenses were $0.1 million and $0.2 million for 2025 and 2024, respectively, representing a $0.1 million, or 22.5%, decrease when compared to the prior period. 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 period.

Current wording

Sales and marketing expenses were $0.2 million and $0.1 million for 2026 and 2025, respectively, representing a $0.1 million, or 115.3%, increase when compared to the prior period. The increase in sales and marketing expenses was primarily driven by a $0.1 million increase in payroll and employee-related expenses when compared to the prior period.

Previous wording

Development expenses were $0.4 million and $0.8 million for 2025 and 2024, respectively, representing a $0.4 million, or 50.6%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.3 million decrease in payroll as a result of lower headcount and the capitalization of internally-development software costs, and a $0.1 million decrease in external development services, when compared to the prior period.

Current wording

Development expenses were $0.5 million and $0.6 million for 2026 and 2025, respectively, representing a $0.1 million, or 14.6%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.1 million decrease in external development costs when compared to the prior period.

Previous wording

General and administrative (“G&A”) expenses were $1.1 million and $1.9 million for 2025 and 2024, respectively, a decrease of $0.8 million, or 41.3%, when compared to the prior period. The reduction in G&A expenses was primarily driven by a $0.8 million decrease in legal and professional fees, a decrease of $0.2 million in severance expenses and $0.1 million reduction in insurance costs, offset by a $0.3 million increase in payroll expenses, when compared to the prior period.

Current wording

General and administrative (“G&A”) expenses were $1.7 million and $1.2 million for 2026 and 2025, respectively, an increase of $0.5 million, or 45.4%, when compared to the prior period. The increase in G&A expenses was primarily driven by a $0.4 million increase in stock-based compensation and a $0.1 million increase in payroll, compared to the prior period.

Previous wording

Other income, net was $3.4 million for 2025, compared to $1.0 million for 2024, an increase of $2.4 million compared to the prior period. 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. Other income, net of $1.0 million for 2024 was primarily comprised of $0.9 million in foreign currency gains arising from remeasuring transactions denominated in a currency other than U.S. dollars and $0.1 million in rental income.

Current wording

Other expense, net was $0.1 million for 2026, compared to other income, net of $1.1 million for 2025, a decrease of $1.2 million compared to the prior period. Other expense, net of $0.1 million for 2026 was primarily comprised of foreign currency losses arising from remeasuring transactions denominated in a currency other than U.S. Dollars. 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 other than U.S. Dollars and a $0.2 million gain from the Settlement Agreement entered into with Luminis on February 20, 2025.

Previous wording

Other comprehensive income was $0.5 million for 2025, compared to other comprehensive loss of $1.2 million for 2024. The $1.7 million increase in other comprehensive income was primarily due to operational transactions in our U.K. and Netherlands subsidiaries, and represents unrealized foreign currency translation adjustments.

Current wording

Other comprehensive gain was less than $0.1 million for 2026, compared to other comprehensive loss of $0.8 million for 2025. The $0.9 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.

Previous wording

Net loss attributable to non-controlling interest was approximately $21,000 and $18,000 for 2025 and 2024, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture.

Current wording

Net income (loss) attributable to non-controlling interest was approximately $0.6 million and ($18,000) for 2026 and 2025, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture. Under the terms of this joint venture, we agreed to fund up to €8,000,000 (approximately $9,175,000 as of March 31, 2026) as needed for development of video game products, which was fully funded as of March 31, 2026. We have recouped our investment and are now allocating the distribution of profits to the joint venture licensor, pursuant to the terms of the Le Mans Esports Series Ltd joint venture agreement.

Previous wording

We have historically financed our operations primarily through cash generated from operations, advances from Driven Lifestyle pursuant to the $12 million Line of Credit (as defined below) and through sales of our equity securities.

Current wording

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. We have entered into a line of credit with Citibank N.A. that will provide us with up to an additional $3 million provided we meet the requirements for use of the line of credit.

Previous wording

For the nine months ended September 30, 2025, we generated net income of $6.0 million and generated cash flows from operations of approximately $2.3 million that was primarily due to increased profitability, $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 September 30, 2025, we had an accumulated deficit of $85.7 million, working capital of $3.0 million, and cash and cash equivalents of $4.1 million, which increased to $4.5 million as of October 31, 2025. We expect that our cash on hand will fund our operations for at least one year from the date the condensed consolidated financial statements are issued. Our future liquidity and capital requirements include funds to support the planned costs to operate our business, including amounts required to fund working capital, support the development and introduction of new products and maintain existing titles, and certain capital expenditures.

Current wording

For the three months ended March 31, 2026, we generated net income of $1.0 million and positive cash flows from operations of approximately $1.6 million. As of March 31, 2026, we had an accumulated deficit of $84.5 million and cash and cash equivalents of $5.9 million, which decreased to $3.8 million as of April 2026, due to the Company’s repurchase of its shares from Driven Lifestyle Group LLC on April 22, 2026, partially offset by a $1.2 million drawdown from the Credit Agreement (as defined below) with Citibank (as defined below) and cash inflows from operations. In May 2026, Citibank extended the maturity date of the Citibank Promissory Note (as defined below) to February 20, 2028. We expect that our cash on hand and cash to be generated from operations will fund our operations for at least one year from the date the consolidated financial statements are issued. Our future liquidity and capital requirements include funds to support the planned costs to operate our business, including amounts required to fund working capital, support the development and introduction of new products and maintain existing titles, and certain capital expenditures.

Previous wording

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 private placement offering that closed on April 11, 2025 (the “April 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

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. 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. 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

Net cash provided by (used in) operating activities for the nine months ended September 30, 2025 and 2024 was $2.3 million and ($1.7) million, respectively. The net cash provided by operating activities for the nine months ended September 30, 2025 was primarily a result of our net income of $6.0 million, adjusted for net non-cash adjustments of $2.7 million and $1.0 million of cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the nine months ended September 30, 2024 was primarily a result of our net loss of $0.2 million, adjusted for net non-cash adjustments of $2.1 million and $0.5 million of cash provided by changes in the levels of operating assets and liabilities.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2026 and 2025 was $1.6 million and $0.4 million, respectively. Net cash provided by operating activities for the three months ended March 31, 2026 was primarily a result of cash from net income of $1.0 million, adjusted for net non-cash adjustments of $0.6 million and $0.1 million of cash from changes in the levels of operating assets and liabilities. 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, reduced by net non-cash adjustments of $0.9 million and supplemented by $0.3 million of cash from changes in the levels of operating assets and liabilities.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2025 and 2024 was approximately $0.7 million and $0.03 million, respectively. The net cash used in investing activities during the nine months ended September 30, 2025 relates to capitalization of internally-developed software. The net cash used in investing activities during the nine months ended September 30, 2024 was attributable to the purchases of property and equipment.

Current wording

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was approximately $0.7 million and $0, respectively. The net cash used in investing activities during the three months ended March 31, 2026 primarily relates to capitalization of internally-developed software. Development expenses in 2025 were charged to expense because technological feasibility was not reached. Once technological feasibility was reached, relevant development costs were capitalized and amortized to cost of revenue over the estimated lives of the products.

Previous wording

On July 29, 2024, we completed 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. In connection with the $1.0 million RDO, we issued Series A warrants (the “Series A Warrants”) to purchase up to 460,830 shares of Class A common stock and Series B warrants (the “Series B Warrants,” and collectively with the Series A Warrants, the “Purchase Warrants”) to purchase up to 460,830 shares of Class A common stock. The Series A Warrants and the Series B Warrants both have an exercise price of $2.17 per share. The shares of Class A common stock issuable upon the exercise of the Purchase Warrants are collectively referred to as the “Warrant Shares.” The Purchase Warrants will become exercisable on the effective date of the stockholder approval for the issuance of the shares of Class A common stock issuable upon exercise of the Purchase Warrants (the “Stockholder Approval Date”). 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. 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 the date of the filing of this Quarterly Report on Form 10-Q, the exercise of the Purchase Warrants and Placement Agent Warrants have not been approved by stockholders.

Current wording

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. In connection with the $1.0 million RDO, we issued Series A warrants (the “Series A Warrants”) to purchase up to 460,830 shares of Class A common stock and Series B warrants (the “Series B Warrants,” and collectively with the Series A Warrants, the “Purchase Warrants”) to purchase up to 460,830 shares of Class A common stock. The Series A Warrants and the Series B Warrants both have an exercise price of $2.17 per share. The shares of Class A common stock issuable upon the exercise of the Purchase Warrants are collectively referred to as the “Warrant Shares.” The Purchase Warrants will become exercisable on the effective date of the stockholder approval for the issuance of the shares of Class A common stock issuable upon exercise of the Purchase Warrants (the “Stockholder Approval Date”). 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. 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. As of the date of the filing of this Quarterly Report on Form 10-Q for March 31, 2026, the exercise of the Purchase Warrants and Placement Agent Warrants had not been approved by stockholders.

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 the April Private Placement of the following securities for gross proceeds of approximately $2.5 million: (i) 1,894,892 shares of our Class A common stock and (ii) a pre-funded warrant (the “April Pre-Funded Warrant”) to purchase up to 377,836 shares of our Class A common stock 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. We received net proceeds of approximately $2.35 million from the Private Placement, after deducting offering expenses paid by us. The April Pre-Funded Warrant became exercisable commencing on May 29, 2025, and will not expire until exercised in full. The April Purchase Agreements provide 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”). The Right of First Refusal is effective commencing on May 29, 2025, until the first anniversary of the closing date of the April Private Placement.

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 of our Class A common stock and (ii) a pre-funded warrant (the “April Pre-Funded Warrant”) to purchase up to 377,836 shares of our Class A common stock 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. We received net proceeds of approximately $2.35 million from the April Private Placement, after deducting offering expenses paid by us. The April Pre-Funded Warrant became exercisable commencing on May 29, 2025, and will not expire until exercised in full. The April Purchase Agreements provide that the purchasers had 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”). The Right of First Refusal was effective commencing on May 29, 2025, until the first anniversary of the closing date of the April Private Placement.

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 shares of Class A common stock and pre-funded warrants issued in the April Private Placement 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”) would appoint an individual designated by the purchasers that purchased at least 50.1% in interest of the shares of Class A common stock and pre-funded warrants issued in the April Private Placement 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

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.

Current wording

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 2025 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 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 the Company’s 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) gain from sale of gaming licenses; (iii) impairment of intangible assets; (iv) loss contingency expenses; and (v) stock-based compensation expenses.