Motorsport Games Inc. – 2025 Annual Report: Key Highlights and Shareholder Insights

Overview

Motorsport Games Inc. (“Motorsport Games” or the “Company”) has released its Annual Report on Form 10-K for the fiscal year ended December 31, 2025. This detailed analysis highlights crucial developments, financial risks, ongoing business strategies, and other factors that may significantly affect shareholders and the Company’s share price.

Key Points and Developments

• Filing of Annual Report: Motorsport Games filed its 2025 Form 10-K as an annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The fiscal year ended December 31, 2025.
• Exchange and Trading Details:
  • Trading Symbol: MSGM
  • Exchange: Nasdaq Capital Market
  • Securities registered: Class A common stock, \$0.0001 par value per share
  • No securities registered under Section 12(g) of the Act.
• Issuer Status:
  • Motorsport Games is not a well-known seasoned issuer.
  • It is a non-accelerated filer, a smaller reporting company, and an emerging growth company.
  • The Company has not elected to use the extended transition period for complying with any new or revised financial accounting standards for emerging growth companies.
• Compliance and Reporting:
  • The Company has filed all required reports under the Exchange Act in the past 12 months and has submitted all required Interactive Data Files under Rule 405 of Regulation S-T.
  • No attestation of internal control effectiveness under Section 404(b) of the Sarbanes-Oxley Act, as expected for a non-accelerated filer.
  • No corrections or restatements for previously issued financial statements, and the Company is not a shell company.
• Capital Structure:
  • As of March 10, 2026, the Company had 700,000 shares of Class B common stock issued and outstanding.
  • Driven Lifestyle Group LLC (formerly Motorsport Network, LLC) controls more than a majority of the voting shares, making MSGM a “controlled company” under Nasdaq rules.
• Documents Incorporated by Reference:
  • Portions of the 2026 proxy statement are incorporated by reference into Part III of this Form 10-K.

Forward-Looking Statements and Strategic Initiatives

The Company’s report contains forward-looking statements covering a range of strategic areas and financial risks:

• Esports and New Revenue Streams:
  • Motorsport Games plans to expand the recurring portion of its Esports segment beyond Le Mans and believes the esports business may generate incremental revenues via media rights sales, merchandising, and other activities if the esports audience continues to grow.
• Customer Concentration:
  • The Company expects to continue deriving significant revenues from a very limited number of distribution partners.
• Franchise Development:
  • Intends to expand recurring revenues through the introduction of new annualized sports franchise games, including Le Mans.
• Funding and Use of Proceeds:
  • Plans to use proceeds from future equity sales for ongoing business operations and strategic initiatives.
• Remediation of Internal Controls:
  • The Company is executing plans to address material weaknesses in internal controls over financial reporting.
• Legal Proceedings:
  • The Company does not expect pending legal proceedings to have a material adverse effect on its business or financial condition, but acknowledges that litigation outcomes are uncertain and could be material for a specific period.
• Dividends and NOLs:
  • Has no plans to declare dividends in the foreseeable future.
  • Intends to utilize net operating loss carryforwards, where possible.
• Nasdaq Compliance:
  • Plans to maintain Nasdaq listing through equity financing transactions and may use “controlled company” exemptions in the future.
• Geopolitical Risk:
  • Does not expect its current development operations to have significant exposure to risks from the Ukraine-Russia and Middle East conflicts.

Risks and Uncertainties That May Impact Shareholders

The Company provides a comprehensive risk summary, highlighting several factors that may be price-sensitive and of particular concern to investors:

• Liquidity and Capital Needs:
  • There is an ongoing risk that Motorsport Games may require additional capital to meet its financial obligations. Such capital may not be available on acceptable terms or at all. This is a key risk that could impact the Company’s ability to continue as a going concern and may materially affect share value.
  • Restrictions under its Credit Agreement with Citibank may affect its ability to finance operations.
• Business Concentration and Market Trends:
  • The Company’s business is highly concentrated in the racing game genre. Shifts in consumer preference away from this genre could negatively impact results.
  • Dependence on a small number of franchises and distribution partners exposes the Company to greater volatility.
• Operational and Industry Risks:
  • Risks from delays in high-quality product delivery, declines in consumer spending, adverse economic conditions, and challenges in acquiring/maintaining intellectual property licenses.
  • Reliance on third-party platform providers and exposure to the risks of the free-to-play game model.
  • Fast-evolving market conditions and government regulations could hinder business growth or require costly compliance.
  • Seasonality in product sales and risks from product defects and partner non-performance.
• Legal and Structural Risks:
  • Driven Lifestyle Group LLC’s majority control means minority shareholders have limited influence over the Company’s decisions.
  • Exposure to risks from legal proceedings, which could become material depending on outcomes.
  • Risks associated with maintaining compliance with Nasdaq requirements—failure to do so could result in delisting, directly impacting share liquidity and value.
• Internal Controls:
  • Material weaknesses in internal controls remain an ongoing concern, though management is actively working on remediation.

Potential Share Price Movers

• The Company’s going concern and liquidity risks are significant. If it cannot secure additional capital, it may not be able to meet its obligations—this is likely to be highly price-sensitive.
• Any developments regarding Nasdaq listing compliance (positive or negative), major customer changes, or new franchise launches could meaningfully impact the stock.
• Legal proceedings, while not expected to be material currently, could affect the Company’s financial position and valuation if outcomes change.
• Ongoing weaknesses in internal controls and any difficulties in remediation are red flags for investors and may weigh on market sentiment.

Conclusion

Motorsport Games Inc. faces a critical period in its development. The Company is pursuing new recurring revenue streams in esports and franchise games but is simultaneously exposed to significant risks related to liquidity, customer concentration, and execution. Shareholders should pay close attention to developments regarding the Company’s capital raising efforts, Nasdaq compliance, and execution of strategic plans, as these are likely to drive future share price action. The Company’s status as a “controlled company” also means that minority shareholders have limited influence over strategic direction.

Disclaimer: This summary is for informational purposes only and does not constitute investment advice. Investors should review the full Annual Report and consult with their financial advisors before making investment decisions. Forward-looking statements are inherently uncertain, and actual results may differ materially from those expressed or implied herein.

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