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 Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045867
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsDefaults Upon Senior SecuritiesMine Safety DisclosuresOther InformationCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001641172-25-009451
Item 1A. Risk FactorsUnregistered Sales of Equity Securities and Use of ProceedsOther InformationThe 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 38 previous paragraphs and 33 current paragraphs.
15 unchanged; 10 reworded; 8 added; 12 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 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 (8)
Current report
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the trading price of our Class A common stock.
Current report
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. In connection with the audit of our consolidated financial statements for the year ended December 31, 2024, we identified certain material weaknesses in our internal control over financial reporting that continue to exist as of the date of this Quarterly Report on Form 10-Q. The material weaknesses identified relate to (i) our failure to design and maintain effective monitoring procedures and controls to evaluate the effectiveness of our individual control activities; (ii) a lack of sufficient number of personnel with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely; and (iii) documentation of certain complex accounting analyses and significant accounting positions that were not contemporaneously reviewed independently of the preparer.
Current report
If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and applicable listing requirements, investors may lose confidence in our financial reporting, and the share price of our Class A common stock may decline as a result. In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources. See Part II, Item 9A – “Controls and Procedures – Management’s Annual Report on Internal Control over Financial Reporting” of our Annual Report on Form 10-K for the year ended December 31, 2024 and Item 4 of this Quarterly Report on Form 10-Q for further information on material weaknesses and our remediation plans.
Current report
Limits on our ability to sell securities under the April Purchase Agreements may affect our ability to finance our operations.
Current report
The April Purchase Agreements prohibits us 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 April 11, 2025, 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 Agreements. The April Purchase Agreements further provides that, until the first anniversary of the closing date, 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”). To the extent we required additional funding, we will therefore be limited in the types of fundraising transactions that we are able to pursue in compliance with the April Purchase Agreements. If funding is not available or not available at terms acceptable to us, we may be compelled to further reduce overhead costs and our cash obligations in the short term. In addition, we may look to divest or bring in equity partners for our various divisions and bring in near term capital.
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
Purchases of Equity Securities
Current report
Not applicable.
Removed paragraphs (12)
Previous report
During the three months ended September 30, 2024, three customers accounted for 22.9%, 17.7% and 43.2% of our revenue and during the nine months ended September 30, 2024, the same three customers accounted for 25.1%, 28.7% and 19.8% of our revenue. In addition, the same customers represented 30.7%, 22.4% and 27.9% of our accounts receivable at September 30, 2024.
Previous report
To regain compliance with the Stockholders’ Equity Requirement, we entered into the INDYCAR Agreement. Pursuant to the INDYCAR Agreement, our liability to INDYCAR, LLC in the amount of approximately $2.9 million was settled for $400,000, which resulted in a gain of approximately $2.5 million, which resulted in a $2.5 million increase to our stockholders’ equity. On June 3, 2024, the Nasdaq Stock Market LLC notified us that based on our disclosure of the INDYCAR Agreement in our Current Report on Form 8-K filed by us on May 23, 2024, Nasdaq’s staff has determined that we comply with the Stockholders’ Equity Requirement. In our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, we reported stockholders’ equity of approximately $3.0 million; however, because we report stockholders’ equity of less than $2.2 million in this Report, which is below the Stockholders’ Equity Requirement, we expect to receive adeficiency letter from the NASDAQ Staff notifying us that we are not in compliance with the Stockholders’ Equity Requirement. If we fail to timely submit a plan to the NASDAQ Staff to regain compliance with the Stockholders’ Equity Requirement, and to thereafter regain compliance with such requirement, we may be subject to delisting. At that time, Nasdaq will provide written notification to us, which we may then appeal Nasdaq’s determination to a Nasdaq Hearings Panel.
Previous report
Driven Lifestyle controls a significant amount of our Class A common stock and all our Class B common stock and therefore it has the ability to exert significant control over the direction of our business, which could prevent other stockholders from influencing significant decisions regarding our business plans and other matters.
Previous report
Driven Lifestyle currently owns all of the shares of our Class B common stock and 1,480,385 shares of our Class A common stock, which together represents a significant combined voting power of both classes of our common stock as of November 14, 2024. Our Class B common stock has ten times the voting power of our Class A common stock. As long as Driven Lifestyle continues to control a majority of the voting power of our outstanding common stock, it will generally be able to determine the outcome of all corporate actions requiring stockholder approval, including the election and removal of directors. Even if Driven Lifestyle were to control less than a majority of the voting power of our outstanding common stock, it may be able to influence the outcome of such corporate actions so long as it owns a significant portion of our common stock. In the event Driven Lifestyle or its affiliates relinquish beneficial ownership of any of the Driven Lifestyle Initial Class A Shares at any time, one share of Class B common stock held by Driven Lifestyle will be cancelled for each such Driven Lifestyle Initial Class A Share no longer beneficially owned by Driven Lifestyle or its affiliates. If, however, Driven Lifestyle does not dispose of its Driven Lifestyle Initial Class A Shares, it could remain our controlling stockholder for an extended period of time or indefinitely.
Previous report
Driven Lifestyle’s interests may not be the same as, or may conflict with, the interests of our other stockholders. Moreover, Mike Zoi, who is the manager of Driven Lifestyle and has sole voting and dispositive power with respect to the shares of our common stock held by Driven Lifestyle, may also have interests that are not the same as, or may conflict with, the interests of our other stockholders. Holders of our Class A common stock will not be able to affect the outcome of any stockholder vote while Driven Lifestyle controls the majority of the voting power of our outstanding common stock. As a result, Driven Lifestyle will be able to control, directly or indirectly and subject to applicable law, all matters affecting us, including:
Previous report
● any determinations with respect to mergers, business combinations or the disposition of assets;
Previous report
Because Driven Lifestyle’s interests may differ from ours or from those of our other stockholders, actions that Driven Lifestyle take with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our Class A common stock.
Previous report
We could be subject to unanticipated adverse effects arising from our inability to fully repay Luminis International B.V. and Technology In Business B.V., the sellers of Studio 397 B.V. (“Studio397”), relating to our acquisition of 100% of the share capital of Studio397 in April 2021.
Previous report
On April 20, 2021 we acquired 100% of the share capital of Studio 397 B.V. (“Studio397”) from Luminis International B.V. and Technology In Business B.V. (collectively, the “Sellers”). 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 September 30, 2024, was $0.6 million with unpaid accrued interest of $0.3 million. As security for payment of the amounts owed, we pledged stock of Studio397, the voting rights of which the seller could request to be transferred to it thirty days after such nonpayment.
Previous report
Use of Proceeds
Previous report
Issuer Purchases of Equity Securities
Reworded paragraphs (10)
Previous wording
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in “Risk Factors” in Part I, Item 1A of the 2023 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in the 2023 Form 10-K are not the only risks facing the Company. There have been no material changes from these risk factors as of the date of filing of this Report.
Current wording
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in “Risk Factors” in Part I, Item 1A of the 2024 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in the 2024 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.
Previous wording
We had negative cash flows from operations of $0.7 million for the nine months ended September 30, 2024. As of September 30, 2024, we had an accumulated deficit of $86.3 million and cash and cash equivalents of $0.8 million. We incurred a net loss of $14.3 million and had negative cash flows from operations of $12.9 million for the year ended December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $87.4 million and cash and cash equivalents of $1.7 million. For the year ended December 31, 2023, we experienced an average net cash burn from operations of approximately $1.1 million per month. 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.
Current wording
We generated positive cash flows from operations of $0.3 million for the three months ended March 31, 2025. 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. We incurred a net loss of $3.0 million and negative cash flows from operations of $2.8 million for the year ended December 31, 2024. As of December 31, 2024, we had an accumulated deficit of $91.8 million and cash and cash equivalents of $0.9 million. For the year ended December 31, 2024, we experienced an average net cash burn from operations of approximately $0.2 million per month. 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.
Previous wording
As a result of our financial condition, management has concluded that there is substantial doubt in our ability to continue as a going concern. Our unaudited financial statement for the quarter ended September 30, 2024 were prepared under the assumption that we will continue as a going concern; however, we have incurred losses from operations to date, and due to the lack of available cash on hand to fund our operations over the next year and the continuing uncertainty surrounding our ability to raise funding in the form of potential capital financing, there is substantial doubt about our ability to continue as a going concern for one year after the financial statements are issued. Our unaudited financial statements for the quarter ended September 30, 2024 contain an explanatory paragraph with respect to this uncertainty. The report of our independent registered public accountant on our financial statements as of and for the years ended December 31, 2023 and 2022 also includes explanatory language describing the existence of substantial doubt about our ability to continue as a going concern. There have been no adjustments to the accompanying financial statements to reflect this uncertainty. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Going Concern” of his Report, Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Going Concern” of our 2023 Form 10-K and Note 1 –Business Organization, Nature of Operations and Risks and Uncertainties in our consolidated financial statements for additional information.
Current wording
As a result of our financial condition, management has concluded that there is substantial doubt in our ability to continue as a going concern. Our unaudited financial statement for the quarter ended March 31, 2025 were prepared under the assumption that we will continue as a going concern; however, we have incurred losses from operations to date, and due to the lack of available cash on hand to fund our operations over the next year and the continuing uncertainty surrounding our ability to raise funding in the form of potential capital financing, there is substantial doubt about our ability to continue as a going concern for one year after the financial statements are issued. The reports of our independent registered public accountants on our financial statements as of and for the years ended December 31, 2024 and 2023 also include explanatory language describing the existence of substantial doubt about our ability to continue as a going concern. There have been no adjustments to the accompanying financial statements to reflect this uncertainty. See Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Going Concern” of this Report, Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” of our 2024 Form 10-K and Note 1 –Business Organization, Nature of Operations and Risks and Uncertainties in the accompanying condensed consolidated financial statements for additional information.
Previous wording
Our Class A common stock may be delisted from NASDAQ, which could affect the market price and liquidity of our Class A common stock.
Current wording
If we fail to maintain compliance with the listing requirements of The Nasdaq Capital Market our Class A common stock could be delisted, which could affect the market price and liquidity of our Class A common stock.
Previous wording
We are required to continually meet NASDAQ’s listing requirements, including, among other things, aminimum 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, 2023, we received a deficiency letter from NASDAQ’s Listing Qualifications Department (the “NASDAQ Staff”) on November 17, 2023 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, 2023, we reported stockholders’ equity of $498,897, 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 December 31, 2023, our stockholders’ equity was $2,089,704.
Current wording
We are required to continually meet Nasdaq’s listing requirements, including, among other things, the Stockholders’ Equity Requirement, which requires 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). As described in a Current Report on Form 8-K filed with the SEC on November 22, 2024, we received a deficiency letter from 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 December 31, 2024, our stockholders’ equity was $1,226,002.
Previous wording
In accordance with NASDAQ rules, we had until January 2, 2024 to submit a plan to the NASDAQ Staff to regain compliance with the Stockholders’ Equity Requirement, which we submitted by such date. On February 5, 2024, Nasdaq notified us that, based on its review of the Company and the materials submitted by us to NASDAQ, NASDAQ Staff determined to grant us an extension to regain compliance with the Stockholders’ Equity Requirement until May 15, 2024, subject to the Company regaining and evidencing compliance with the Stockholders’ Equity Requirement by such date.
Current wording
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.
Previous wording
Any delisting of our Class A common stock from NASDAQ, including as a result of our inability to regain compliance with the Stockholders’ Equity Requirement, could adversely affect our ability to attract new investors, reduce the liquidity of our outstanding shares of Class A common stock, reduce our ability to raise additional capital, reduce the price at which our Class A common stock trades, result in negative publicity and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders. We cannot assure you that our Class A common stock, if delisted from NASDAQ, will be listed on another national securities exchange or quoted on an over-the-counter quotation system. In addition, delisting of our Class A common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our Class A common stock and might deter certain institutions and persons from investing in our securities at all. For these reasons and others, delisting could adversely affect our business, financial condition and liquidity.
Current wording
Any delisting of our Class A common stock from Nasdaq, including as a result of our inability to maintain compliance with the Stockholders’ Equity Requirement, could adversely affect our ability to attract new investors, reduce the liquidity of our outstanding shares of Class A common stock, reduce our ability to raise additional capital, reduce the price at which our Class A common stock trades, result in negative publicity and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders. We cannot assure you that our Class A common stock, if delisted from Nasdaq, would be listed on another national securities exchange or quoted on an over-the-counter quotation system. In addition, delisting of our Class A common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our Class A common stock and might deter certain institutions and persons from investing in our securities at all. For these reasons and others, delisting could adversely affect our business, financial condition and liquidity.
Previous wording
We follow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises, including our NASCAR products, which have historically accounted for the majority of our revenue. For the years ended December 31, 2023 and 2022, revenues associated with our NASCAR franchise accounted for approximately 71.6% and 62.9% of our total revenue, respectively. Revenues associated with our NASCAR franchise accounted for approximately 52.6% and 70.9% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively. Following the sale of our NASCAR License and the execution of the NASCAR New Limited License, which allows us to sell our NASCAR games and DLCs that are currently in our product portfolio through December 31, 2024, we anticipate the amount of revenue to be generated by our existing NASCAR products to decline over time and to cease after December 31, 2024.
Current wording
We follow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises, including our NASCAR products, which have historically accounted for the majority of our revenue. For the three months ended March 31, 2025, two customers accounted for 74.9% and 10.6% of our revenue and the same distributors accounted for approximately 65.5% and 21.6% of our accounts receivable. For the years ended December 31, 2024 and 2023, revenues associated with our NASCAR franchise accounted for approximately 52% and 72% of our total revenue, respectively. For the years ended December 31, 2024 and 2023, sales through our three main distribution channels accounted for approximately 86% and 83% of our consolidated revenues, respectively. No other distribution channel accounted for 10% or more of our revenues in those periods. For the years ended December 31, 2024 and 2023, sales through our three main distribution channels accounted for approximately 77% and 89% of our accounts receivable, respectively. No other distribution channel accounted for 10% or more of our accounts receivable in those periods. A reduction in sales from or loss of these distribution channels would have a material adverse effect on the Company’s results of operations and financial condition.
Previous wording
Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises, or the loss of any franchise, could negatively impact our business. For example, with the consummation of the sale of our NASCAR License to iRacing on October 3, 2023, we are no longer the official video game developer and publisher for the NASCAR video game racing franchise and no longer have the exclusive right to create and organize esports leagues and events for NASCAR using our NASCAR racing video games. Accordingly, we no longer have the right to use the NASCAR brand for our products other than 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. Similarly, our BTCC license agreement and INDYCAR license agreements were terminated by the respective licensors, effective November 2023. We believe this will require us to modify our existing business model and significantly alter the risk profile relating to our operations. As a result, we may encounter difficulties or challenges in continuing operations due to the sale of our NASCAR License and the termination of our BTCC license agreement and INDYCAR license agreements, and our cash flows and results of operations will likely be materially adversely impacted as we anticipate the amount of revenue to be generated by our existing NASCAR products to decline over time.
Current wording
Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises, or the loss of any franchise, could negatively impact our business. For example, with the consummation of the sale of our NASCAR License to iRacing on October 3, 2023, we are no longer the official video game developer and publisher for the NASCAR video game racing franchise and no longer have the exclusive right to create and organize esports leagues and events for NASCAR using our NASCAR racing video games. Accordingly, during the year ended December 31, 2024 we no longer had the right to use the NASCAR brand for our products other than a limited non-exclusive right and license to, among other things, sell NASCAR games and DLCs that were in our product portfolio through December 31, 2024, and since that date we have no further right to use the NASCAR brand for our products. Similarly, our BTCC license agreement and INDYCAR license agreements were terminated by the respective licensors, effective November 2023. We believe this will require us to modify our existing business model and significantly alter the risk profile relating to our operations. As a result, we may encounter difficulties or challenges in continuing operations due to the sale of our NASCAR License and the termination of our BTCC license agreement and INDYCAR license agreements, and our cash flows and results of operations will likely be materially adversely impacted as we anticipate no more revenues to be generated from our NASCAR products.
Previous wording
There were no unregistered sales of equity securities during the quarter ended September 30, 2024, other than as reported in our filings with the SEC.
Current wording
There were no unregistered sales of equity securities during the quarter ended March 31, 2025, other than as reported in our Current Reports on Form 8-K filed with the SEC.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
A reduction in sales from or loss of these customers, in a significant amount, will have a material adverse effect on the Company’s results of operations and financial condition.