Motorsport Games Inc.
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
MSGM$4.25-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045867
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001641172-25-009451
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 127 current paragraphs.
70 unchanged; 36 reworded; 21 added; 44 removed; 7 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
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.
Current report
Recent Events
Current report
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 report
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 report
Private Placement Offering
Current report
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 report
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 report
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 report
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 report
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 report
Nasdaq Compliance
Current report
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 report
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. On March 3, 2025, Nasdaq notified us that, based on Nasdaq’s review of our submission, Nasdaq’s staff has determined to grant us an extension to regain compliance with the Stockholders’ Equity Requirement until April 14, 2025, subject to our regaining and evidencing compliance with the Stockholders’ Equity Requirement by such date.
Current report
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 report
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 report
Other operating income of $0.5 million in 2025 represents the amount to be reimbursed to us for legal fees pursuant to the Innovate Settlement Agreement entered on March 27, 2025.
Current report
Other Comprehensive (Loss) Gain
Current report
Net Loss Attributable to Non-Controlling Interest
Current report
Net cash used in financing activities for the three months ended March 31, 2025 and 2024 was $150,000 and $50,000, respectively, both of which were related to the repayment of purchase commitment liabilities.
Current report
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. We intend to use the net proceeds from this offering for working capital and general corporate purposes. 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 report
Critical Accounting Policies and Estimates
Removed paragraphs (44)
Previous report
Consolidated revenues, entirely comprised of the Gaming segment, were $1.8 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $0.1 million, or 6.4%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to higher digital game sales from the sale of Le Mans Ultimate released on PC in February 2024.
Previous report
General and administrative (“G&A”) expenses were $1.9 million and $1.5 million for 2024 and 2023, respectively, an increase of $0.4 million, or 27.5%, when compared to the prior period. The increase in G&A expenses was primarily driven by a $0.4 million increase in legal & professional fees, compared to the prior period.
Previous report
Other income (expense), net was $1.4 million for 2024, compared to ($0.6) million in 2023, an increase of $2.0 million compared to the prior period. Other income, net of $1.4 million for 2024 was primarily comprised of foreign currency gains incurred remeasuring transactions denominated in a currency other than U.S. dollars.
Previous report
Other Comprehensive Income (Loss)
Previous report
Net (Loss) Income Attributable to Non-Controlling Interest
Previous report
Nine Months Ended September 30, 2024 compared to Nine Months Ended September 30, 2023
Previous report
Revenue
Previous report
Consolidated revenues were $6.7 million and $5.2 million for 2024 and 2023, respectively, an increase of $1.6 million, or 30.0%, when compared to the prior period.
Previous report
Gaming segment revenues represented 100.0% and 94.4% of total 2024 and 2023 revenues, respectively, increasing by $1.8 million, or 37.8%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to $2.3 million in higher digital game sales due to sales of Le Mans Ultimate released on PC in February 2024, offset by $0.3 million and $0.2 million in lower revenues for NASCAR and rFactor2 titles, respectively.
Previous report
Esports segment revenues represented 0.0% and 5.6% of our total 2024 and 2023 revenues, respectively, decreasing by $0.3 million, or 100.0%, when compared to the prior period. The decrease in Esports segment revenue was due to us not organizing a LMVS event in 2024, resulting in no earned sponsorship or events revenue in 2024.
Previous report
Cost of Revenues
Previous report
Consolidated cost of revenues were $2.2 million and $2.9 million for 2024 and 2023, respectively, a decrease of $0.8 million, or 26.9%, when compared to the prior period.
Previous report
Gaming segment cost of revenues represented 100.0% and 87.3% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 16.2%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.7 million reduction in royalty & license payments, which was partially offset by a $0.3 million increase in amortization costs.
Previous report
Esports segment cost of revenues represented 0.0% and 12.7% of our total 2024 and 2023 cost of revenues, respectively, decreasing by $0.4 million, or 100.0%, when compared to the prior period. As explained above, we did not organize an LMVS event in 2024.
Previous report
Gross Profit
Previous report
Consolidated gross profit was $4.6 million and $2.2 million for 2024 and 2023, respectively, an increase of $2.3 million, or 105.7%, when compared to the prior period. Gross profit margin was 67.9% in 2024, compared to 42.9% in 2023.
Previous report
Gaming segment gross profit was $4.6 million for 2024, compared to $2.3 million for 2023, representing a gross profit margin of 67.9% for 2024 and 47.2% for 2023. The increase in our Gaming segment gross profit of $2.3 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 gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period.
Previous report
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.
Previous report
Operating Expenses
Previous report
Sales and Marketing
Previous report
Sales and marketing expenses were $0.6 million and $1.4 million for 2024 and 2023, respectively, representing a $0.8 million, or 55.3% decrease when compared to the prior period. The reduction in sales and marketing expense was primarily driven by a $0.7 million reduction in payroll and employee-related expenses as a result of lower headcount, and a $0.1 million decrease in software and travel expenses, when compared to the prior period.
Previous report
Development
Previous report
Development expenses were $2.8 million and $5.8 million for 2024 and 2023, respectively, representing a $3.0 million, or 51.7%, decrease when compared to the prior period. The reduction in development expense was primarily driven by a $2.0 million reduction in payroll and employee-related expenses expense as a result of lower headcount, as well as a decrease in $1.0 million in external development, when compared to the prior period.
Previous report
General and Administrative
Previous report
Impairment of Intangible Assets
Previous report
Impairment of finite-lived intangible assets was $0 million and $4.0 million in 2024 and 2023, respectively. The trigger for the impairment in 2023 was our decision to explore strategic alternatives and potential options for our business, resulting in a probable likelihood of the sale of certain licensing rights that would result in our inability to comply with the terms of a licensing agreement by the end of the year and the resulting reduction in expected future revenues.
Previous report
Depreciation and Amortization
Previous report
Gain from settlement of license liabilities of $3.2 million for 2024 is primarily comprised of a $2.5 million gain stemming from a Settlement and License Agreement with INDYCAR LLC executed on May 17, 2024 and a gain of $0.6 million related to the Settlement Agreement with BARC (TOCA) LIMITED, the exclusive promoter of the British Touring Car Championship on April 12, 2024.
Previous report
Other operating income was $0.3 million for 2024, compared to $0 million for 2023, an increase of $0.3 million compared to the prior period. Other operating income of $0.3 million for 2024 relates to the gain from the sale of Traxion, which was our motorsport and racing games community content platform, in April 2024.
Previous report
Interest Expense
Previous report
Interest expense was $0.1 million and $0.7 millionfor 2024 and 2023 primarily from non-cash interest accretion of our INDYCAR and BTCC license liabilities, which were both fully settled in Q2 2024.
Previous report
Other Income, net
Previous report
Other Comprehensive Income (Loss)
Previous report
Net (Loss) Income Attributable to Non-Controlling Interest
Previous report
Net (loss) income attributable to non-controlling interest was $(1.3) million for 2024 compared to $0.1 million in 2023. The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Previous report
Cash Flows from Investing Activities
Previous report
Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 was approximately $0.03 million, which was attributable to the purchases of property and equipment.
Previous report
Net cash provided by financing activities during the nine months ended September 30, 2024 and 2023 was $0.8 million and $10.1 million, respectively. Cash flows provided by financing activities for the nine months ended September 30, 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. Cash flows provided by financing activities for the nine months ended September 30, 2023 were primarily attributable to $0.6 million raised in connection with shares sold under a stock purchase commitment agreement that we entered into on December 9, 2022 with Alumni Capital LP and $10.4 million raised in connection with shares sold in our registered direct offerings, partially offset by $0.7 million of payments for purchase commitments and $0.3 million for payments relating to license liabilities.
Previous report
On February 1, 2023, we issued 183,020 shares of our Class A common stock in a registered direct offering priced at-the-market under NASDAQ rules, with a fair market value of approximately $3.9 million (the “$3.9 million RDO”), before deducting placement agent fees and other offering expenses payable by us. H.C. Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement agent for the $3.9 million RDO, pursuant to the engagement letter with us, dated as of January 9, 2023. In connection with the $3.9 million RDO, we paid Wainwright a cash transaction fee equal to 7.0% of the aggregate gross proceeds from the registered direct offering, non-accountable expenses of $50,000 and closing fees of $15,950. We has also issued to Wainwright warrants to purchase up to 10,981 shares of Class A common stock, which is equal to 6.0% of the aggregate number of shares of Class A common stock placed in the $3.9 million RDO, at an exercise price of $26.75 per share and will expire five years from the closing of the $3.9 million RDO.
Previous report
On February 2, 2023, we issued 144,366 shares of our Class A common stock in a registered direct offering priced at-the-market under NASDAQ rules, with a fair market value of approximately $3.4 million (the “$3.4 million RDO”), before deducting placement agent fees and other offering expenses payable by us. Wainwright acted as the exclusive placement agent for the $3.4 million RDO. In connection with the $3.4 million RDO, we paid Wainwright a cash transaction fee equal to 7.0% of the aggregate gross proceeds from the registered direct offering, non-accountable expenses of $25,000 and closing fees of $15,950. We has also issued to Wainwright warrants to purchase up to 8,662 shares of Class A common stock, which is equal to 6.0% of the aggregate number of shares of Class A common stock placed in the $3.4 million RDO, at an exercise price of $29.375 per share and will expire five years from the closing of the $3.4 million RDO.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Reworded paragraphs (36)
Previous wording
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 are also striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games.
Current wording
We develop and publish racing video games including 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. We are also striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games.
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 have a limited non-exclusive right and license to, among other things, sell our NASCAR games and DLCs that are currently in our product portfolio through December 31, 2024 (the “NASCAR New Limited License”). For the three months ended September 30, 2024 and 2023, 55.6% and 77.9% 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”). 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.
Previous wording
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 in addition to the recent sales of our NASCAR License and Traxion, which was our motorsport and racing games community content platform. 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. 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. 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.
Current wording
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 in addition to the sales of our NASCAR License and Traxion, which was our motorsport and racing games community content platform. 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. 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. 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.
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 each of the nine months ended September 30, 2024, and 2023, approximately 86.8% and 86.9% 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, 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.
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 organizedthe 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 season, we currently plan on organizing the 2024/25 Le Mans Virtual Series to commence later 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 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.
Previous wording
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 50.6% and 66.1% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the sale of products for Microsoft Windows via Steam comprised approximately 47.1% and 22.4% of our total revenue, respectively, and the sale of products for mobile platforms comprised approximately 2.0% and 4.9% 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. When new hardware platforms are introduced, such as those released by Sony and Microsoft in November 2020, demand for interactive entertainment used on older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest generation of Sony and Microsoft consoles provide “backwards compatibility” (i.e., the ability to play games for the previous generation of consoles), which could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products.
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 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.
Previous wording
We use “the management approach” in determining reportable operating segments. 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, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. We classified our reportable operating segments into (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”); and (ii) the organization and facilitation of esports tournaments, competitions and events for our licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”).
Current wording
We use the “management approach” in determining reportable operating segments. 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. We classified our reportable operating segments into (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”) and (ii) the organization and facilitation of esports tournaments, competitions, and events for our licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”).
Previous wording
Cost of revenues for our Gaming segment is primarily comprised of royalty expenses, which historically has been primarily attributable to our NASCAR License prior to its sale and certain other third parties relating to our NASCAR and Le Mans Ultimate racing series games. Cost of revenues for 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, 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. 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 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.
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, Driven Lifestyle and other websites where we market our products.
Previous wording
Consolidated cost of revenues, entirely comprised of the Gaming segment, was $0.7 million and $0.8 million for 2024 and 2023, respectively, a decrease of $0.1 million, or 13.8%, when compared to the prior period. The decrease in Gaming segment cost of revenues was primarily driven by a $0.1 million reduction in royalty payments, mainly related to our NASCAR titles as a direct result of lower game sales for the franchise compared to the prior period.
Current 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.
Previous wording
Consolidated gross profit, entirely comprised of the Gaming segment, was $1.1 million and $0.9 million for 2024 and 2023, respectively, an increase of $0.2 million, or 26.0%, when compared to the prior period. Gross profit margin was 60.2% in 2024, compared to 50.9% in 2023. The increase in our Gaming segment gross profit of $0.2 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 sales of Le Mans Ultimate released on PC in February 2024. The increase in gross profit for the Gaming segment was also attributable to lower cost of revenues due to decreased royalty payments resulting from the decrease in NASCAR game sales compared to the prior period.
Current 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.
Previous wording
Sales and marketing expenses were $0.2 million and $0.4 million for 2024 and 2023, respectively, representing a $0.2 million, or 51.0%, 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 $0.1 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.
Previous wording
Development expenses were $0.9 million and $1.6 million for 2024 and 2023, respectively, representing a $0.7 million, or 45.8%, decrease when compared to the prior period. The reduction in development expenses was primarily driven by a $0.6 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 $0.6 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.
Previous wording
G&A expenses were $5.5 million and $7.5 millionfor 2024 and 2023, respectively, a decrease of $1.9 million, or 25.6%, when compared to the prior period. The reduction in G&A expense was primarily driven by a $1.3 million reduction in payroll and employee-related expenses due to lower headcount period over period, a $0.5 million reduction in severance and insurance costs, respectively, as well as a $0.2 million reduction in rent and office expense. This was partially offset by a $0.6 million increase in legal and professional fees.
Current 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.
Previous wording
Interest expense was approximately $0.03 million for 2024 compared to $0.2 million in 2023, 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 $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.
Previous wording
Other income, net was $1.0 million for 2024, compared to $0.4 million for 2023, an increase of $0.6 million compared to the prior period. 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 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.
Previous wording
Other comprehensive loss was $0.6 million for 2024, compared to other comprehensive income of $0.2 million in 2023. The $0.8 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.
Current 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.
Previous wording
Net (loss) income attributable to non-controlling interest was ($0.6) million in 2024 compared to $0.03 million for 2023. The variance was attributed to an increase in net losses in the Le Mans Esports Series Ltd joint venture.
Current 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.
Previous wording
We have historically financed our operations primarily through cash generated from operations and through sales of our equity securities.
Current 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.
Previous wording
For the nine months ended September 30, 2024, we incurred a net loss of $0.2 million and negative cash flows from operations of $0.7 million. As of September 30, 2024, we had an accumulated deficit of $86.3 million and cash and cash equivalents of $0.8 million, which decreased to $0.5 million as of October 31, 2024. 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, 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 accompanying unaudited 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. 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 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.
Previous wording
For the nine months ended September 30, 2024, we experienced an average net cash burn from operations of approximately $0.1 million per month, and while we have taken measures to reduce our costs, 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. Based on our cash and cash equivalents position and our average cash burn, we do not believe we 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 $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.
Previous wording
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, maintain existing titles, and certain capital expenditures.
Current wording
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
In order to address our liquidity shortfall, we continue to explore several options, including, but not limited to: i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”); ii) other strategic alternatives for our business, including, but not limited to, the sale or licensing of our assets in addition to the recent sales of our NASCAR License and Traxion; and iii) cost reduction and restructuring initiatives, each of which is described more fully below.
Current wording
In order to address our liquidity shortfall, we continue to explore several options, including, but not limited to: (i) additional funding in the form of potential equity and/or debt financing arrangements or similar transactions (collectively, “Capital Financing”); (ii) other strategic alternatives for our business, including, but not limited to, the sale or licensing of our assets in addition to the past sales of our NASCAR License and Traxion; and (iii) cost reduction and restructuring initiatives, each of which is described more fully below.
Previous wording
On October 3, 2024, we implemented additional measures to continue to bring down our year-over-year operating expense through a reduction of our workforce primarily in the United States and the United Kingdom by approximately 23 employees and contractors. The workforce reduction is expected to impact approximately 38% of total employees worldwide. We recorded a restructuring charge related to the workforce reduction, primarily consisting of severance and redundancy costs of approximately $0.2 million. We expect to recognize and pay out the majority of the restructuring charge in the fourth quarter of fiscal year 2024.
Current wording
On October 3, 2024, we implemented additional measures intended to continue to bring down our year-over-year operating expense through a reduction of our workforce primarily in the United States and the United Kingdom by approximately 23 employees and contractors. The workforce reduction impacted approximately 38% of total employees worldwide. We recorded a restructuring charge related to the workforce reduction, primarily consisting of severance and redundancy costs of approximately $0.2 million. We recognized and paid out the majority of the restructuring charge in the fourth quarter of fiscal year 2024.
Previous wording
On July 29, 2024, we closed on a registered direct offering transaction with H.C. Wainwright & Co., LLC acting as the exclusive placement agent, which raised $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses. We intend to use the net proceeds from this offering for working capital and general corporate purposes.
Current wording
On July 29, 2024, we completed the July 2024 Offerings, which raised approximately $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses. We intend to use the net proceeds from this offering for working capital and general corporate purposes.
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 its 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 of 1933, as amended. During the three and nine months ended September 30, 2024, we did not sell any shares of Class A common stock pursuant to the terms of the ED Agreement. At the time we filed an initial prospectus supplement in connection with the offering of our shares of Class A common stock pursuant to the ED Agreement, the aggregate market value of the shares of Class A common stock eligible for sale under the initial prospectus supplement was approximately $2.9 million, which was based on the limitations of such offerings under SEC Regulations. 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 required 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 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.
Previous wording
Due to the continuing uncertainty surrounding our ability to raise funding in the form of potential Capital Financing, 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 in addition to the recent sales of our NASCAR License and Traxion. 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. 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. 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.
Current wording
Due to the continuing uncertainty surrounding our ability to raise funding in the form of potential Capital Financing, 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 in addition to the past sales of our NASCAR License and Traxion. 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. 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 may include further restructuring of our business and operations. 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.
Previous wording
Even if we do secure additional Capital Financing, if the anticipated level of revenues are 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 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 our 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, our liquidity position may continue to be insufficient to satisfy our future capital requirements. If we are ultimately unable to satisfy our capital requirements, we would likely need to dissolve and liquidate our assets under the bankruptcy laws or otherwise.
Current wording
Even if we do secure additional Capital Financing, if the anticipated level of revenues are 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 and Traxion, further changes to 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 our 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, our liquidity position may continue to be insufficient to satisfy our future capital requirements. If we are ultimately unable to satisfy our capital requirements, we would likely need to dissolve and liquidate our assets under the bankruptcy laws or otherwise.
Previous wording
In accordance with Accounting Standards Codification (“ASC”) 205-40,Going Concern, we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying consolidated financial statements to this Report are issued. The factors described above, in particular the lack of available cash on hand to fund operations over the next year, have raised substantial doubt about our ability to continue as a going concern.
Current wording
In accordance with Accounting Standards Codification (“ASC”) 205-40,Going Concern, we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying condensed consolidated financial statements to this Report are issued. The factors described above, in particular the lack of available cash on hand to fund operations over the next year, have raised substantial doubt about our ability to continue as a going concern.
Previous wording
Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $0.7 million and $10.1 million, respectively. The net cash used in operating activities for the nine months ended September 30, 2024 was primarily a result of cash used to fund a net loss of $0.2 million, adjusted for net non-cash adjustments of $1.3 million and $0.8 million of cash provided by changes in the levels of operating assets and liabilities. Net cash used in operating activities for the nine months ended September 30, 2023 was primarily a result of cash used to fund a net loss of $17.0 million, adjusted for net non-cash adjustments of $6.9 million.
Current 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.
Previous wording
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 September 30, 2024.
Current wording
The nature of our operations does 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 March 31, 2025.
Previous 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 2023 Form 10-K.
Current 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.
Previous wording
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) 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 (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.
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 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 (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).
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 loss 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.
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 (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.
Previous wording
The following table provides a reconciliation from net loss to Adjusted EBITDA for the respective periods presented:
Current wording
The following table provides a reconciliation from net income (loss) to Adjusted EBITDA for the respective periods presented:
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Other comprehensive loss was $1.1 million for 2024 compared to other comprehensive income of $0.5 million in 2023. The variance was primarily due to activity in our U.K. and Netherlands subsidiaries and represents unrealized foreign currency translation adjustments.
Previous report — wording carried elsewhere
In this section, references to 2024 refer to the nine months ended September 30, 2024 and references to 2023 refer to the nine months ended September 30, 2023.
Previous report — wording carried elsewhere
Changes in operating expenses are explained in more detail below:
Previous report — wording carried elsewhere
Depreciation and amortization expenses for 2024 and 2023 presented no significant changes to the depreciation of capital assets.
Previous report — wording carried elsewhere
Gain from Settlement of License Liabilities
Previous report — wording carried elsewhere
The following table provides a reconciliation from net loss to Adjusted EBITDA for the respective periods presented:
Previous report — wording carried elsewhere
On July 29, 2024, we closed on a registered direct offering transaction with H.C. Wainwright & Co., LLC acting as the exclusive placement agent, which raised $1.0 million in gross proceeds before deducting the placement agent’s fees and other offering expenses. We intend to use the net proceeds from this offering for working capital and general corporate purposes.