Core Viewpoint - Motorsport Games Inc. reported significant growth in its second quarter of 2025, with record player activity and increased revenues driven by the success of the Le Mans Ultimate game and its marketing efforts [2][3]. Financial Highlights - Consolidated revenue for Q2 2025 was approximately $2.6 million, a 37.7% increase from approximately $1.9 million in Q2 2024 [3]. - Gross profit rose to $2.1 million, up from $1.1 million year-over-year, with a gross profit margin increase to 82.4% from 59.0% [3]. - Net income for Q2 2025 was $4.2 million, an improvement of 103.0% compared to $2.1 million in Q2 2024, with net income per share for Class A common stock at $0.82, up from $0.77 [4][10]. - Adjusted EBITDA for Q2 2025 was $3.7 million, a significant improvement from an Adjusted EBITDA loss of $0.5 million in the same period last year [5]. Operational Developments - The company released Le Mans Ultimate Version 1.0 on July 22, 2025, featuring new cars and advanced game mechanics [10]. - The expansion downloadable content for Le Mans Ultimate, including the European Le Mans Series, is expected to be delivered by the end of Q3 2025 [2]. Cash Flow and Liquidity - As of June 30, 2025, the company had cash and cash equivalents of approximately $2.4 million, which increased to $2.8 million by July 31, 2025 [11]. - The company generated an average positive cash flow from operations of approximately $46,000 per month during the first half of 2025, primarily due to settlements with Wesco Insurance Company and HC2 Holdings [11]. Future Outlook - The company is focused on further growing the Le Mans franchise and exploring new titles to diversify its income streams [2]. - Future liquidity and capital requirements will support ongoing operations, product development, and capital expenditures [12].

Part I. Financial Information This section presents Motorsport Games Inc.'s unaudited financial statements and management's discussion [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Unaudited consolidated financial statements and notes for Motorsport Games Inc. for periods ending June 30, 2025 and December 31, 2024 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024%20%28Unaudited%29) Balance sheets show increased cash, total assets, and stockholders' equity, with decreased current liabilities, leading to positive working capital | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $2,365,410 | $859,271 | | Total Current Assets | $4,756,491 | $2,796,482 | | Total Assets | $8,154,140 | $6,268,221 | | Total Current Liabilities | $2,572,456 | $5,021,782 | | Total Liabilities | $2,583,900 | $5,042,219 | | Total Stockholders' Equity | $5,570,240 | $1,226,002 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) Statements of operations show significant net income increase for Q2 and H1 2025, driven by higher revenues, reduced expenses, and settlement gains | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $2,591,840 | $1,881,653 | $4,350,293 | $4,910,689 | | Gross profit | $2,136,953 | $1,110,006 | $3,430,020 | $3,472,415 | | Total operating expenses | $1,273,387 | $2,549,258 | $3,159,649 | $6,126,991 | | Net income | $4,238,172 | $2,087,483 | $5,260,785 | $404,085 | | Net income attributable to Motorsport Games Inc. | $4,258,400 | $2,105,928 | $5,299,458 | $440,972 | | Basic and diluted EPS | $0.82 | $0.77 | $1.26 | $0.16 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) Comprehensive income was reported, but foreign currency translation adjustments led to significant other comprehensive losses for Q2 and H1 2025 | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $4,238,172 | $2,087,483 | $5,260,785 | $404,085 | | Foreign currency translation adjustments | $(2,338,360) | $(60,886) | $(3,170,090) | $456,442 | | Comprehensive income | $1,899,812 | $2,026,597 | $2,090,695 | $860,527 | | Comprehensive income attributable to Motorsport Games Inc. | $1,916,796 | $2,025,623 | $2,068,974 | $940,900 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) Stockholders' equity significantly increased from December 2024 to June 2025, driven by net income and equity issuance, despite foreign currency losses | Metric | January 1, 2025 (USD) | June 30, 2025 (USD) | | :-------------------------------- | :-------------- | :------------ | | Class A Common Stock Shares | 3,183,558 | 5,456,286 | | Class A Common Stock Amount | $315 | $504 | | Additional Paid-In Capital | $92,960,275 | $95,213,629 | | Accumulated Deficit | $(91,789,968) | $(86,490,510) | | Accumulated Other Comprehensive Gain (Loss) | $(674,434) | $(3,904,918) | | Total Stockholders' Equity Attributable to Motorsport Games Inc. | $496,258 | $4,818,775 | | Total Stockholders' Equity | $1,226,002 | $5,570,240 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) Positive operating cash flow for H1 2025, a significant improvement from prior year, driven by net income and equity issuance, despite investing activities | Metric | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $274,747 | $(1,069,590) | | Net cash used in investing activities | $(370,000) | $(25,145) | | Net cash provided by (used in) financing activities | $1,653,543 | $(50,000) | | Net increase (decrease) in cash and cash equivalents | $1,506,139 | $(1,145,772) | | Total cash and cash equivalents at end of period | $2,365,410 | $529,438 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain Motorsport Games Inc.'s business, accounting policies, assets, liabilities, equity, and segment reporting, highlighting key changes [NOTE 1 - Business Organization, Nature of Operations, and Risks and Uncertainties](index=12&type=section&id=NOTE%201%20-%20BUSINESS%20ORGANIZATION%2C%20NATURE%20OF%20OPERATIONS%2C%20AND%20RISKS%20AND%20UNCERTAINTIES) Motorsport Games Inc. faces substantial doubt about its going concern ability due to an **$86.5 million** accumulated deficit and insufficient cash, prompting funding and cost reduction efforts - The Company had net income of **$5.3 million** and generated cash flows from operations of **$0.3 million** for the six months ended June 30, 2025[32](index=32&type=chunk) - As of June 30, 2025, the Company had an accumulated deficit of **$86.5 million**, working capital of **$2.2 million**, and cash and cash equivalents of **$2.4 million**[32](index=32&type=chunk) - Management concludes there is substantial doubt about the Company's ability to continue as a going concern for a period of at least 12 months[47](index=47&type=chunk) - The Company is exploring additional funding (equity/debt), strategic alternatives (asset sales/licensing), and cost reduction/restructuring initiatives to address liquidity[35](index=35&type=chunk)[41](index=41&type=chunk)[211](index=211&type=chunk) - Workforce reduction in October 2024 impacted approximately **38%** of worldwide employees, resulting in a **$0.2 million** restructuring charge[36](index=36&type=chunk)[212](index=212&type=chunk) - The Company completed a private placement in April 2025, raising approximately **$2.35 million** net proceeds for working capital and general corporate expenses[39](index=39&type=chunk) [NOTE 2 – Basis of Presentation and Summary of Significant Accounting Policies](index=14&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Unaudited financial statements adhere to U.S. GAAP; ASU No. 2023-07 had no material impact. Key policies include ratable subscription revenue and capitalized software development costs - The Company adopted ASU No. 2023-07, Segment Reporting, on January 1, 2024, which requires enhanced disclosures about significant segment expenses and interim disclosures, but had no material impact on financial position, results of operations, or cash flows[58](index=58&type=chunk) - Revenue from subscription-based matchmaking and online racing system (RaceControl) is recognized ratably over the subscription term[60](index=60&type=chunk) - Software development costs are expensed until technological feasibility is reached, then capitalized and amortized to cost of revenue over the estimated lives of the products[61](index=61&type=chunk) [NOTE 3 – Intangible Assets](index=16&type=section&id=NOTE%203%20%E2%80%93%20INTANGIBLE%20ASSETS) Intangible assets decreased slightly by June 30, 2025, due to amortization and foreign currency adjustments, following the **$6.0 million** NASCAR License sale in October 2023 - The Company secured exclusive video game developer and publisher rights for the 24 Hours of Le Mans race and FIA World Endurance Championship (WEC) for a ten-year period through a joint venture with ACO[63](index=63&type=chunk) - In October 2023, the Company sold its NASCAR License to iRacing.com Motorsport Simulations, LLC for **$6.0 million**, fully paid by December 31, 2024[65](index=65&type=chunk) Intangible Assets Summary | Intangible Asset Category | Balance as of January 1, 2025 (USD) | Additions (USD) | Amortization Expense (USD) | Foreign Currency Translation Adjustments (USD) | Balance as of June 30, 2025 (USD) | | :------------------------ | :---------------------------- | :-------- | :------------------- | :--------------------------------------- | :---------------------------- | | Licensing Agreements (Finite) | $2,381,743 | - | - | $19,939 | $2,401,682 | | Software (Finite) | $7,976,068 | $370,000 | - | $139,868 | $8,485,936 | | Distribution Contracts (Finite) | $560,000 | - | - | - | $560,000 | | Trade Names (Indefinite) | $201,969 | - | - | $21,225 | $223,194 | | Non Compete Agreements (Finite) | $170,222 | - | - | $10,044 | $180,266 | | Accumulated Amortization | $(7,924,704) | - | $(476,169) | $(119,207) | $(8,520,080) | | **Total** | **$3,365,298** | **$370,000** | **$(476,169)** | **$71,869** | **$3,330,998** | - Amortization expense for intangible assets was approximately **$0.5 million** for the six months ended June 30, 2025, down from **$1.1 million** in the prior year[68](index=68&type=chunk) [NOTE 4 – Accrued Expenses and Other Current Liabilities](index=18&type=section&id=NOTE%204%20%E2%80%93%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) Accrued expenses and other current liabilities increased from **$1.07 million** to **$1.35 million** by June 30, 2025, driven by royalties, professional fees, and deferred revenue Accrued Expenses and Other Current Liabilities Summary | Category | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------------- | :------------ | :------------------ | | Accrued royalties | $252,647 | $148,006 | | Accrued professional and consulting fees | $97,191 | $68,517 | | Accrued development costs | $59,436 | $26,925 | | Accrued taxes | $216,008 | $55,131 | | Accrued payroll | $125,895 | $191,736 | | Deferred revenue | $507,137 | $390,463 | | Loss contingency reserves | - | $41,764 | | Accrued other | $89,387 | $147,521 | | **Total** | **$1,347,701** | **$1,070,063** | - Revenue recognized from contract liability at the beginning of the period was approximately **$0.4 million** for the six months ended June 30, 2025, up from **$0.3 million** in the prior year[72](index=72&type=chunk) [NOTE 5 – Related Party Loans](index=18&type=section&id=NOTE%205%20%E2%80%93%20RELATED%20PARTY%20LOANS) The company has a **$12 million** line of credit with Driven Lifestyle at **10%** interest, not a viable future liquidity source, with no balance due as of June 30, 2025 - The Company has a **$12 million** line of credit with Driven Lifestyle, bearing **10%** annual interest, but does not view it as a viable source for future liquidity due to uncertainty of future borrowing requests[73](index=73&type=chunk)[74](index=74&type=chunk)[227](index=227&type=chunk) - As of June 30, 2025, there was no balance due to Driven Lifestyle under the **$12 million** Line of Credit[75](index=75&type=chunk)[226](index=226&type=chunk) [NOTE 6 – Related Party Transactions](index=18&type=section&id=NOTE%206%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) Ongoing related party transactions include payables and a sponsorship agreement; Backoffice Services Agreement fees with Driven Lifestyle were significantly reduced - The Company owed approximately **$12,000** to related parties as of June 30, 2025, down from **$26,000** at December 31, 2024[76](index=76&type=chunk) - In June 2025, the Company entered a sponsorship agreement with a significant shareholder, generating approximately **$25,000** in revenue[78](index=78&type=chunk) - The Backoffice Services Agreement with Driven Lifestyle was revised, reducing the monthly fee from **$17,500** (effective Jan 2023) to **$12,500** (effective July 2024), and further to **$5,000** (July-Aug 2025) then **$500** (starting Sep 2025) for U.S. payroll services only[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Fees incurred for Backoffice Services Agreement were **$75,000** for the six months ended June 30, 2025, a decrease from **$105,000** in the prior year[83](index=83&type=chunk) [NOTE 7 – Stockholders' Equity](index=19&type=section&id=NOTE%207%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) As of June 30, 2025, the company had **5,078,450** Class A and **700,000** Class B common shares outstanding, following recent offerings that raised **$1.0 million** and **$2.5 million** gross proceeds - As of June 30, 2025, the Company had **5,078,450** shares of Class A common stock and **700,000** shares of Class B common stock outstanding[84](index=84&type=chunk) - In July 2024, the Company completed offerings that raised approximately **$1.0 million** in gross proceeds, involving shares, pre-funded warrants, and purchase warrants[89](index=89&type=chunk)[228](index=228&type=chunk) - In April 2025, the Company completed a private placement, issuing **1,894,892** shares of Class A common stock and a pre-funded warrant for **377,836** shares, raising approximately **$2.5 million** in gross proceeds (**$2.35 million** net)[39](index=39&type=chunk)[96](index=96&type=chunk)[149](index=149&type=chunk)[229](index=229&type=chunk) - The April 2025 private placement included a Right of First Refusal for purchasers in certain subsequent financings and the appointment of a Class II director to the board[151](index=151&type=chunk)[152](index=152&type=chunk)[229](index=229&type=chunk) [NOTE 8 – Share-Based Compensation](index=21&type=section&id=NOTE%208%20%E2%80%93%20SHARE-BASED%20COMPENSATION) The MSGM 2021 Stock Plan had **96,828** options outstanding at **$61.76** weighted average exercise price, with no stock-based compensation expense recognized for Q2 and H1 2025 - As of June 30, 2025, **3,172** shares of Class A common stock were available for issuance under the MSGM 2021 Stock Plan[97](index=97&type=chunk) - There were **96,828** options outstanding under the MSGM 2021 Stock Plan as of June 30, 2025, with a weighted average exercise price of **$61.76**[98](index=98&type=chunk)[101](index=101&type=chunk) Stock-based Compensation Expense | Expense Category | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and Administrative | $- | $9,643 | $- | $79,374 | | Sales and Marketing | $- | $125 | $- | $1,472 | | Development | $- | $890 | $- | $(1,997) | | **Total Stock-based compensation expense** | **$-** | **$10,658** | **$-** | **$78,849** | [NOTE 9 – Commitments and Contingencies](index=22&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in legal proceedings and has significant commitments; recent settlements include gains of **$0.5 million**, **$0.8 million**, and **$0.175 million** - The Company settled claims with Innovate 2 Corp. (formerly HC2 Holdings 2 Inc.) for **$500,000**, with **$300,000** paid by March 31, 2025, and the remaining **$200,000** due by October 31, 2025[110](index=110&type=chunk)[202](index=202&type=chunk) - A settlement with Wesco Insurance Company in June 2025 resulted in an **$800,000** payment to Driven Lifestyle for the Company's benefit, recorded as other operating income[112](index=112&type=chunk)[202](index=202&type=chunk) - The Company secured exclusive video game developer and publisher rights for the 24 Hours of Le Mans race and WEC, committing to fund up to **€8 million** for development and an annual royalty of **€250,000**[115](index=115&type=chunk) - The Prior BTCC License Agreement was terminated in November 2023, and a settlement in April 2024 resulted in a **$0.6 million** gain and a new non-exclusive license for BTCC downloadable content for rFactor 2[118](index=118&type=chunk)[119](index=119&type=chunk)[201](index=201&type=chunk) - INDYCAR Licenses were terminated in November 2023, leading to a settlement in May 2024 where the Company paid **$400,000** and recognized a **$2.5 million** gain, granting INDYCAR a royalty-free, perpetual license to use the licensed IP[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[201](index=201&type=chunk) - The deferred payment for the Studio397 acquisition was settled for **$750,000**, payable in five installments, resulting in a gain of approximately **$175,000**. The final payment was made on July 2, 2025[126](index=126&type=chunk)[148](index=148&type=chunk)[204](index=204&type=chunk) [NOTE 10 – Concentrations](index=26&type=section&id=NOTE%2010%20%E2%80%93%20CONCENTRATIONS) Revenue and accounts receivable are highly concentrated, with Customer D and Customer H accounting for **65.5%** and **18.1%** of H1 2025 revenues Revenue Concentration by Customer | Customer | Three Months Ended June 30, 2025 (Revenue %) | Three Months Ended June 30, 2024 (Revenue %) | Six Months Ended June 30, 2025 (Revenue %) | Six Months Ended June 30, 2024 (Revenue %) | | :--------- | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Customer B | *% | 23.6% | *% | 21.2% | | Customer C | *% | 20.5% | *% | 20.6% | | Customer D | 58.2% | 41.2% | 65.5% | 47.3% | | Customer H | 23.2% | *% | 18.1% | *% | | **Total** | **81.4%** | **85.3%** | **83.6%** | **89.1%** | Accounts Receivable Concentration by Customer | Customer | June 30, 2025 (Accounts Receivable %) | December 31, 2024 (Accounts Receivable %) | | :--------- | :------------------------------------ | :---------------------------------------- | | Customer B | *% | 16.8% | | Customer C | *% | 15.1% | | Customer D | 52.0% | 45.2% | | Customer H | 30.3% | *% | | **Total** | **82.3%** | **77.1%** | - A reduction in sales from or loss of these concentrated customers could have a material adverse effect on the Company's results of operations and financial condition[129](index=129&type=chunk) [NOTE 11 – Segment Reporting](index=27&type=section&id=NOTE%2011%20%E2%80%93%20SEGMENT%20REPORTING) The company operates in Gaming and Esports segments; Gaming generated all revenues and gross profit, while Esports reported operating losses - The Company's two reportable segments are Gaming (interactive racing video games) and Esports (esports tournaments and events)[131](index=131&type=chunk) - All reported revenues for the three and six months ended June 30, 2025 and 2024, were generated by the Gaming segment[135](index=135&type=chunk) Segment Financial Performance | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenues:** | | | | | | Gaming | $2,591,840 | $1,881,653 | $4,350,293 | $4,910,689 | | Esports | - | - | - | - | | **Total Revenues** | **$2,591,840** | **$1,881,653** | **$4,350,293** | **$4,910,689** | | **Gross Profit:** | | | | | | Gaming | $2,136,953 | $1,110,006 | $3,430,020 | $3,472,415 | | Esports | - | - | - | - | | **Total Gross Profit** | **$2,136,953** | **$1,110,006** | **$3,430,020** | **$3,472,415** | | **Income (Loss) From Operations:** | | | | | | Gaming | $1,989,365 | $2,091,424 | $1,917,646 | $967,877 | | Esports | $(21,302) | $(32,676) | $(42,778) | $(124,453) | | **Total Income From Operations** | **$1,968,063** | **$2,058,748** | **$1,874,868** | **$843,424** | | **Total Assets:** | | | | | | Gaming | $6,674,308 | $5,065,073 | $6,674,308 | $5,065,073 | | Esports | $1,479,832 | $1,203,148 | $1,479,832 | $1,203,148 | | **Total Assets** | **$8,154,140** | **$6,268,221** | **$8,154,140** | **$6,268,221** | [NOTE 12 - Subsequent Events](index=29&type=section&id=NOTE%2012%20-%20SUBSEQUENT%20EVENTS) Subsequent to June 30, 2025, Motorsport Games released Le Mans Ultimate Version 1.0 and revised its Backoffice Services Agreement, reducing monthly fees to **$500** - On July 22, 2025, the Company released Le Mans Ultimate Version 1.0, completing its Early Access phase[138](index=138&type=chunk) - Effective July 1, 2025, the Revised Backoffice Services Agreement with Driven Lifestyle reduced the monthly fee to **$5,000** for July and August 2025, and then to **$500** for U.S. payroll services only starting September 1, 2025[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Motorsport Games' financial condition and operational results for Q2 and H1 2025, detailing revenue drivers, expense changes, liquidity, and strategic initiatives [About Motorsport Games](index=30&type=section&id=About%20Motorsport%20Games) Motorsport Games is a racing game developer, publisher, and esports provider with Le Mans and WEC licenses, developing new titles after selling NASCAR and terminating other licenses - Motorsport Games is a racing game developer, publisher, and esports ecosystem provider for official motorsport racing series, including the 24 Hours of Le Mans and FIA World Endurance Championship[141](index=141&type=chunk) - The company sold its NASCAR licensed rights in October 2023 and had a limited non-exclusive right to sell NASCAR games and DLCs through December 31, 2024[143](index=143&type=chunk) - Le Mans Ultimate, the official game of WEC and 24 Hours of Le Mans, was released on PC in early access on February 20, 2024[144](index=144&type=chunk) [Recent Events](index=31&type=section&id=Recent%20Events) The company explores strategic alternatives like asset sales to improve working capital and reduce cash burn, and settled the Studio397 acquisition deferred payment for **$750,000** - The Company continues to explore strategic alternatives, including asset sales or licensing, to improve working capital and reduce cash burn, in addition to past sales of its NASCAR License and Traxion[146](index=146&type=chunk) - The deferred payment for the Studio397 acquisition was settled for **$750,000**, payable in five equal installments, with the final payment made on July 2, 2025[148](index=148&type=chunk) [Private Placement Offering](index=31&type=section&id=Private%20Placement%20Offering) An April 2025 private placement raised **$2.35 million** net proceeds through Class A common stock and pre-funded warrant issuance, including a Right of First Refusal and a new director appointment - In April 2025, the Company completed a private placement, raising approximately **$2.35 million** net proceeds from the issuance of **1,894,892** shares of Class A common stock and a pre-funded warrant for **377,836** shares[149](index=149&type=chunk) - The private placement included a Right of First Refusal for purchasers to participate in certain subsequent financings and the appointment of Mr. Guoquan (Paul) Huang as a Class II director[151](index=151&type=chunk)[152](index=152&type=chunk) [Nasdaq Compliance](index=32&type=section&id=Nasdaq%20Compliance) Motorsport Games regained Nasdaq Stockholders' Equity Requirement compliance by April 15, 2025, reporting **$5,570,240** in equity as of June 30, 2025 - The Company received a deficiency letter from Nasdaq on November 20, 2024, for non-compliance with the Stockholders' Equity Requirement (**$2.5 million** minimum)[153](index=153&type=chunk) - Nasdaq granted an extension until April 14, 2025, to regain compliance[154](index=154&type=chunk) - As of June 30, 2025, the Company's stockholders' equity was **$5,570,240**, indicating compliance with the Nasdaq Stockholders' Equity Requirement[155](index=155&type=chunk) [Trends and Factors Affecting Our Business](index=32&type=section&id=Trends%20and%20Factors%20Affecting%20Our%20Business) Financial results are driven by product releases like Le Mans Ultimate; the company focuses on digital downloads, expanding recurring revenue via subscriptions and new annualized sports games Le Mans Ultimate Release Schedule | Title | Release Date and Platform | | :-------------------------- | :------------------------ | | Le Mans Ultimate | February 20, 2024, available on PC | | Le Mans Ultimate – 2024 DLC Pack 1 | July 23, 2024, available on PC | | Le Mans Ultimate – 2024 DLC Pack 2 | September 24, 2024, available on PC | | Le Mans Ultimate – 2024 DLC Pack 3 | December 10, 2024, available on PC | | Le Mans Ultimate – 2024 DLC Pack 4 | February 25, 2025, available on PC | | Le Mans Ultimate – 2024 DLC Pack 5 | June 10, 2025, available on PC | | Le Mans Ultimate – Version 1.0 Release | July 22, 2025, available on PC | - Substantially all revenue from video games for game consoles and PCs for the six months ended June 30, 2025 and 2024, was through digital channels[158](index=158&type=chunk) - The company plans to organize the 2025/26 Le Mans Virtual Series and expand its esports segment beyond Le Mans[159](index=159&type=chunk) - For the six months ended June 30, 2025, sales for Microsoft Windows via Steam comprised approximately **68%** of total revenue, and sales via Genba comprised approximately **15%**[160](index=160&type=chunk) - The company aims to expand recurring revenue through subscriptions (e.g., RaceControl) and new annualized sports franchise games, such as with Le Mans[161](index=161&type=chunk) [Components of Our Results of Operations](index=33&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section outlines key financial components: Revenues, Cost of Revenues, Sales and Marketing, Development, General and Administrative, and Depreciation and Amortization - Revenues are primarily derived from sales of games and related content, with new sources including sponsorship from esports events, software development services, and subscription services (RaceControl launched December 2024)[163](index=163&type=chunk) - Cost of revenues for the Gaming segment includes royalty expenses (historically NASCAR), merchant fees, manufacturing/packaging/hosting/shipping costs, distribution fees, mobile platform fees, and amortization of acquired licenses and internally-developed software[167](index=167&type=chunk) - Development expenses include in-house team salaries, operating expenses, consulting for external development, and software licenses/maintenance[169](index=169&type=chunk) - General and administrative expenses cover salaries, benefits, and other costs for finance, HR, IT, legal, facilities, and external services[170](index=170&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Results of operations show significant improvements in net income and gross profit margins for Q2 and H1 2025, driven by Le Mans Ultimate sales, reduced expenses, and substantial settlement gains [Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024](index=34&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) For Q2 2025, consolidated revenues increased by **37.7%** to **$2.6 million**, gross profit surged by **92.5%** to **$2.1 million**, and net income reached **$4.2 million** Three Months Ended June 30, 2025 vs 2024 Financial Summary | Metric | June 30, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenues | $2,591,840 | $1,881,653 | $710,187 | 37.7% | | Cost of Revenues | $454,887 | $771,647 | $(316,760) | (41.0)% | | Gross Profit | $2,136,953 | $1,110,006 | $1,026,947 | 92.5% | | Sales and marketing | $126,307 | $205,549 | $(79,242) | (38.6)% | | Development | $270,343 | $868,745 | $(598,402) | (68.9)% | | General and administrative | $865,040 | $1,411,826 | $(546,786) | (38.7)% | | Total Operating Expenses | $1,273,387 | $2,549,258 | $(1,275,871) | (50.0)% | | Net income | $4,238,172 | $2,087,483 | $2,150,689 | 103.0% | - Increase in Gaming segment revenues was primarily due to a **$1.3 million** increase from Le Mans Ultimate sales (especially DLCs) and **$0.2 million** from RaceControl, offset by a **$0.9 million** decrease in NASCAR-related revenues[174](index=174&type=chunk) - Gross profit margin increased to **82.4%** in 2025 from **59.0%** in 2024, driven by reduced royalty payments related to NASCAR titles[178](index=178&type=chunk) - Development expenses decreased by **$0.6 million** (**68.9%**) due to lower payroll from reduced headcount and capitalization of internally-developed software costs[182](index=182&type=chunk) - General and administrative expenses decreased by **$0.5 million** (**38.7%**) primarily due to a reduction in legal and professional fees[183](index=183&type=chunk) - Other operating income increased by **$0.9 million** to **$1.1 million**, including **$0.8 million** from the Wesco Insurance Company settlement[186](index=186&type=chunk) - Other income, net increased by **$2.2 million** to **$2.3 million**, primarily from foreign currency gains[188](index=188&type=chunk) [Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024](index=37&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) For H1 2025, consolidated revenues decreased by **11.4%** to **$4.4 million**, gross profit remained stable at **$3.4 million**, and net income significantly increased to **$5.3 million** Six Months Ended June 30, 2025 vs 2024 Financial Summary | Metric | June 30, 2025 (USD) | June 30, 2024 (USD) | Change (USD) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenues | $4,350,293 | $4,910,689 | $(560,396) | (11.4)% | | Cost of Revenues | $920,273 | $1,438,274 | $(518,001) | (36.0)% | | Gross Profit | $3,430,020 | $3,472,415 | $(42,395) | (1.2)% | | Sales and marketing | $224,008 | $455,935 | $(231,927) | (50.9)% | | Development | $872,296 | $1,932,102 | $(1,059,806) | (54.9)% | | General and administrative | $2,033,522 | $3,602,092 | $(1,568,570) | (43.5)% | | Total Operating Expenses | $3,159,649 | $6,126,991 | $(2,967,342) | (48.4)% | | Net income | $5,260,785 | $404,085 | $4,856,700 | 1201.9% | - Decrease in Gaming segment revenues was primarily due to a **$2.4 million** decrease in NASCAR-related revenues, offset by a **$1.6 million** increase from Le Mans Ultimate sales and **$0.3 million** from RaceControl[192](index=192&type=chunk) - Gross profit margin increased to **78.8%** in 2025 from **70.7%** in 2024, mainly due to reduced royalty payments for NASCAR titles[195](index=195&type=chunk) - Development expenses decreased by **$1.0 million** (**54.9%**) due to lower payroll from reduced headcount and capitalization of internally-developed software costs[198](index=198&type=chunk) - General and administrative expenses decreased by **$1.6 million** (**43.5%**) primarily due to a **$1.1 million** decrease in legal and professional fees[199](index=199&type=chunk) - Other operating income increased by **$1.3 million** to **$1.6 million**, including **$0.8 million** from Wesco settlement and **$0.5 million** from HC2 Holdings 2 Inc. settlement[202](index=202&type=chunk) - Other income, net increased by **$3.8 million** to **$3.4 million**, primarily from foreign currency gains and a **$0.2 million** gain from the Luminis settlement[204](index=204&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Motorsport Games faces substantial doubt about its going concern ability due to an **$86.5 million** accumulated deficit and insufficient cash, prompting funding, asset sales, and cost reduction efforts Liquidity Summary | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------------- | :------------ | :------------------ | | Cash and cash equivalents | $2,365,410 | $859,271 | | Working capital (deficiency) | $2,184,035 | $(2,225,300) | - The Company had net income of **$5.3 million** and generated cash flows from operations of **$0.3 million** for the six months ended June 30, 2025, primarily due to **$0.8 million** from Wesco settlement and **$0.5 million** from HC2 Holdings 2 Inc. settlement[208](index=208&type=chunk) - As of June 30, 2025, the Company had an accumulated deficit of **$86.5 million** and does not believe current capital resources are sufficient to fund operations over the next year[208](index=208&type=chunk) - Management concludes there is substantial doubt about the Company's ability to continue as a going concern[208](index=208&type=chunk)[219](index=219&type=chunk) - The Company is exploring additional funding (equity/debt), strategic alternatives (asset sales/licensing), and cost reduction/restructuring initiatives[211](index=211&type=chunk) - The April Purchase Agreements include a prohibition on issuing certain securities for **4.5 months** and a Right of First Refusal for purchasers in subsequent financings, limiting future fundraising flexibility[214](index=214&type=chunk)[229](index=229&type=chunk) - Net cash provided by operating activities for the six months ended June 30, 2025, was **$0.3 million**, a significant improvement from **$1.1 million** used in the prior year[222](index=222&type=chunk) - Net cash provided by financing activities for the six months ended June 30, 2025, was **$1.7 million**, primarily from **$2.3 million** raised in a private placement offering[224](index=224&type=chunk) [Off-Balance Sheet Arrangements](index=44&type=section&id=Off-Balance%20Sheet%20Arrangements) Motorsport Games Inc. did not have any off-balance sheet arrangements during the periods presented or currently - The Company did not have any off-balance sheet arrangements during the periods presented or currently[232](index=232&type=chunk) [Critical Accounting Policies and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The primary critical accounting policy is Development Costs, capitalized post-technological feasibility; no other material changes were reported - Costs incurred internally for software product development are expensed until technological feasibility is established, then capitalized and amortized over the estimated life of the products[233](index=233&type=chunk) - Technological feasibility is generally reached shortly before products are released to production[233](index=233&type=chunk) - Sales returns and price protection reserves are no longer relevant critical accounting estimates starting in 2025[234](index=234&type=chunk) [Recently Issued Accounting Standards](index=44&type=section&id=Recently%20Issued%20Accounting%20Standards) As an emerging growth company, Motorsport Games elected to delay new accounting pronouncement adoption until applicable to private companies - As an emerging growth company, Motorsport Games has elected to use the extended transition period under the JOBS Act for complying with new or revised financial accounting standards[235](index=235&type=chunk) [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA as a non-GAAP financial measure to assess operating performance, excluding specific items to enhance understanding of normalized operating performance - Adjusted EBITDA is defined as EBITDA adjusted to exclude gain from settlement of license liabilities and other agreements, impairment of intangible assets, loss contingency expense, and stock-based compensation expenses[237](index=237&type=chunk) - Management uses Adjusted EBITDA to assess operating performance, as it eliminates items affecting comparability between periods and is believed to be representative of core ongoing operating business[238](index=238&type=chunk) Adjusted EBITDA (Three Months) | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net income | $4,238,172 | $2,087,483 | | Interest expense, net | $4,740 | $29,746 | | Depreciation and amortization | $253,935 | $587,160 | | **EBITDA** | **$4,496,847** | **$2,704,389** | | Gain from settlement of license liabilities | - | $(3,248,000) | | Gain from Wesco Settlement Agreement | $(800,000) | - | | Stock-based compensation | - | $10,658 | | **Adjusted EBITDA** | **$3,696,847** | **$(532,953)** | Adjusted EBITDA (Six Months) | Metric | Six Months Ended June 30, 2025 (USD) | Six Months Ended June 30, 2024 (USD) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income | $5,260,785 | $404,085 | | Interest expense, net | $17,750 | $60,628 | | Depreciation and amortization | $505,992 | $1,189,106 | | **EBITDA** | **$5,784,527** | **$1,653,819** | | Gain from settlement of license liabilities | - | $(3,248,000) | | Gain from settlement of purchase commitment liabilities | $(175,460) | - | | Gain from Settlement Agreement | $(500,000) | - | | Gain from Wesco Settlement Agreement | $(800,000) | - | | Stock-based compensation | - | $78,849 | | **Adjusted EBITDA** | **$4,309,067** | **$(1,515,332)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - The company states that quantitative and qualitative disclosures about market risk are not applicable[243](index=243&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to un-remediated material weaknesses in internal control - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[245](index=245&type=chunk) - Material weaknesses include failure to design and maintain effective monitoring procedures, lack of sufficient accounting personnel, and inadequate independent review of complex accounting analyses[246](index=246&type=chunk)[257](index=257&type=chunk) - The company plans to make progress on remediation plans described in its 2024 Form 10-K[247](index=247&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control during the quarter ended June 30, 2025[249](index=249&type=chunk) Part II. Other Information This section provides other information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, but believes the aggregate outcome is not reasonably likely to have a material adverse effect on its business - The Company believes the outcome of all pending legal proceedings in aggregate is not reasonably likely to have a material adverse effect on its business, prospects, results of operations, financial condition, and/or cash flows, except as otherwise disclosed[251](index=251&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) The company highlights significant risks, including substantial doubt about its going concern ability, un-remediated material weaknesses, limitations on future equity sales, potential Nasdaq delisting, and high revenue concentration - The Company has incurred significant losses since inception and expects to continue incurring losses, raising substantial doubt about its ability to continue as a going concern[253](index=253&type=chunk)[254](index=254&type=chunk) - Un-remediated material weaknesses in internal control over financial reporting could adversely affect financial reporting accuracy and timeliness, potentially impacting business and stock price[257](index=257&type=chunk)[258](index=258&type=chunk) - Limitations on the ability to sell securities under the April Purchase Agreements (e.g., **4.5-month** prohibition on new issuances and Right of First Refusal) may affect the company's ability to finance operations[259](index=259&type=chunk) - Failure to maintain compliance with Nasdaq's listing requirements, specifically the Stockholders' Equity Requirement, could lead to delisting, adversely affecting market price and liquidity of Class A common stock[261](index=261&type=chunk)[264](index=264&type=chunk) - The company depends on a relatively small number of franchises and customers for a significant portion of its revenues and profits, with top two customers accounting for **84%** of revenue for the six months ended June 30, 2025[265](index=265&type=chunk) - The sale of the NASCAR License and termination of BTCC and INDYCAR licenses will materially adversely impact cash flows and results of operations as no more revenues are anticipated from these products[266](index=266&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during Q2 2025, other than previously reported, and no Class A common stock shares were purchased - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, other than those previously reported[268](index=268&type=chunk) - The Company did not purchase any shares of its Class A common stock during the quarter ended June 30, 2025[269](index=269&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) During Q2 2025, no directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - None of the company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[272](index=272&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, warrant agreements, securities purchase agreements, certifications, and XBRL - Exhibits include Certificate of Incorporation, Bylaws, Pre-Funded Warrant, Form of Securities Purchase Agreement, CEO and CFO Certifications, and Inline XBRL documents[273](index=273&type=chunk) Signatures The report is duly signed on behalf of Motorsport Games Inc. by its Chief Executive Officer and Chief Financial Officer as of August 13, 2025 [Signatures](index=52&type=section&id=Signatures) The report is duly signed by Stephen Hood, CEO, and Stanley Beckley, CFO, on behalf of Motorsport Games Inc. as of August 13, 2025 - The report was signed by Stephen Hood, Chief Executive Officer, and Stanley Beckley, Chief Financial Officer, on August 13, 2025[276](index=276&type=chunk)

[Executive Summary & Business Update](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Update) Motorsport Games achieved significant Q2 2025 growth, driven by "Le Mans Ultimate" performance and strategic initiatives, solidifying its financial position and expanding the Le Mans franchise [Q2 2025 Highlights & CEO Commentary](index=1&type=section&id=Q2%202025%20Highlights%20%26%20CEO%20Commentary) Motorsport Games reported significant growth in Q2 2025, driven by the strong performance of 'Le Mans Ultimate' and strategic marketing, now on a more solid financial footing - Q2 2025 was an incredible period of growth, with Le Mans Ultimate achieving **record player activity** and greatly increased revenues year-over-year due to key features and strong marketing[3](index=3&type=chunk) - The company plans to continue this trend with an expansion downloadable content (DLC) for Le Mans Ultimate, including the European Le Mans Series, expected to be delivered by the end of Q3 2025[3](index=3&type=chunk) - Motorsport Games is committed to growing the Le Mans franchise and developing new titles to bolster its portfolio and diversify income streams, now operating on a more solid financial footing[3](index=3&type=chunk) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) The company demonstrated robust Q2 2025 financial performance with substantial year-over-year increases across key metrics including revenue, gross profit, net income, and Adjusted EBITDA [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20and%20Subsequent%20Business%20Update) Motorsport Games reported a strong Q2 2025 with significant year-over-year increases in revenue, gross profit, net income, and Adjusted EBITDA, driven by product performance and strategic financial management [Revenue and Gross Profit](index=1&type=section&id=Select%20Financial%20Highlights%20-%20Revenue%20and%20Gross%20Profit) Q2 2025 saw a substantial year-over-year increase in revenue and gross profit, significantly improving the gross profit margin Revenue and Gross Profit (in millions USD) | Metric | Q2 2025 (approx.) | Q2 2024 (approx.) | Change ($) | Change (%) | | :----- | :---------------- | :---------------- | :--------- | :--------- | | Revenue | $2.6 million | $1.9 million | $0.7 million | 37.7% | | Gross Profit | $2.1 million | $1.1 million | $1.0 million | 90.9% | | Gross Profit Margin | 82.4% | 59.0% | 23.4 pp | | [Net Income and EPS](index=1&type=section&id=Select%20Financial%20Highlights%20-%20Net%20Income%20and%20EPS) Net income and EPS attributable to Class A common stock experienced significant year-over-year growth in Q2 2025, bolstered by revenue and other operating income Net Income and EPS (in millions USD, except per share) | Metric | Q2 2025 (approx.) | Q2 2024 (approx.) | Change ($) | Change (%) | | :----- | :---------------- | :---------------- | :--------- | :--------- | | Net Income | $4.2 million | $2.1 million | $2.1 million | 103.0% | | Net Income Attributable to Motorsport Games Inc. | $4.3 million | $2.1 million | $2.2 million | 102.2% | | Net Income Attributable to Class A Common Stock per Share | $0.82 | $0.77 | $0.05 | 6.5% | - The increase in net income was driven by a **$0.7 million increase in consolidated revenue** and **$1.1 million in other operating income**, which included $0.8 million from the Wesco Insurance Company settlement and $0.3 million from negotiated vendor invoice discounts[6](index=6&type=chunk) [Adjusted EBITDA](index=2&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA showed a significant positive turnaround in Q2 2025, primarily due to increased net income and reduced stock-based compensation Adjusted EBITDA (in USD) | Metric | Q2 2025 | Q2 2024 | Change ($) | | :----- | :------ | :------ | :--------- | | Adjusted EBITDA | $3,696,847 | $(532,953) | $4,229,800 | - The improvement in Adjusted EBITDA was primarily due to the same factors driving the change in net income, as well as a decrease in stock-based compensation compared to the prior year period[8](index=8&type=chunk) [Cash Flow, Liquidity, and Capital Management](index=2&type=section&id=Cash%20Flow%2C%20Liquidity%2C%20and%20Capital%20Management) The company maintained a stable cash position, generated positive operational cash flow in H1 2025, and secured additional funding for working capital and strategic investments [Cash Flow and Liquidity](index=2&type=section&id=Cash%20Flow%20and%20Liquidity) As of June 30, 2025, the Company had $2.4 million in cash, increasing to $2.8 million by July 31, 2025, and generated $0.3 million in cash from operations during the first six months of 2025 Cash and Cash Equivalents (in millions USD) | Metric | As of June 30, 2025 | As of July 31, 2025 | | :----- | :------------------ | :------------------ | | Cash and Cash Equivalents | ~$2.4 million | ~$2.8 million | - Generated cash from operations of **$0.3 million** during the six months ended June 30, 2025, primarily due to **$0.8 million from the Wesco Insurance Company settlement** and **$0.5 million from a settlement agreement with HC2 Holdings 2 Inc**[7](index=7&type=chunk)[10](index=10&type=chunk) - The Company expects a net cash outflow from operations for the foreseeable future as it continues to develop its product portfolio and invest in new video game titles[10](index=10&type=chunk) - Completed a registered direct offering on July 29, 2024, raising approximately **$1.0 million in gross proceeds** for working capital and general corporate purposes[12](index=12&type=chunk) - Entered into a private placement on April 11, 2025, for approximately **$2.5 million in gross proceeds** (net $2.35 million) from the issuance of Class A common stock and pre-funded warrants, intended for working capital, general corporate expenses, and strategic initiatives[13](index=13&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes Adjusted EBITDA as a non-GAAP measure to provide a clearer view of core operating performance by excluding non-recurring and non-cash items [Use of Non-GAAP Financial Measures](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA, a non-GAAP measure, to assess operating performance by excluding items not representative of its core business, such as interest, depreciation, amortization, and specific gains/losses from settlements and stock-based compensation - Adjusted EBITDA is defined as EBITDA (net income plus interest expense, depreciation, and amortization, less income tax benefit) adjusted to exclude gain from settlement of license liabilities and other agreements, impairment of intangible assets, loss contingency expense, and stock-based compensation expenses[15](index=15&type=chunk) - Management uses Adjusted EBITDA to manage the business and evaluate financial performance, as it eliminates items affecting comparability between periods that are not considered representative of core ongoing operating business[16](index=16&type=chunk) - Adjusted EBITDA is not a recognized term under U.S. GAAP and should not be considered an alternative to GAAP measures like revenue, net income, or cash flows from operations, nor a measure of liquidity or free cash flows[17](index=17&type=chunk) [Company Information & Disclosures](index=3&type=section&id=Company%20Information%20%26%20Disclosures) This section provides an overview of Motorsport Games' business, outlines communication practices, details forward-looking statements, and lists contact information [About Motorsport Games](index=3&type=section&id=About%20Motorsport%20Games) Motorsport Games is a racing game developer, publisher, and esports ecosystem provider for official motorsport racing series, holding licenses for iconic events and owning simulation platforms - Motorsport Games is a racing game developer, publisher, and esports ecosystem provider for official motorsport racing series, aiming to create authentically realistic racing games[18](index=18&type=chunk) - The company is the officially licensed video game developer and publisher for iconic series including the 24 Hours of Le Mans and FIA World Endurance Championship, recently releasing Le Mans Ultimate Version 1.0[18](index=18&type=chunk) - Motorsport Games also owns the industry-leading rFactor 2 and KartKraft simulation platforms and is an award-winning esports partner for the 24 Hours of Le Mans, creating the renowned Le Mans Virtual Series[18](index=18&type=chunk) [Conference Call and Webcast Details](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Details) The company will host a conference call and webcast on August 13, 2025, at 5:00 p.m. ET to discuss its financial results, accessible via phone or the investor relations website - A conference call and webcast will be held on August 13, 2025, at 5:00 p.m. ET to discuss financial results, accessible by dialing 1-800-579-2543 or 1-785-424-1789 (Conference ID 'MOTOR') or via the Motorsport Games Investor Relations website[18](index=18&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding the company's future plans, including growth of the Le Mans franchise, new titles, and financial stability, which are subject to significant risks and uncertainties - Forward-looking statements include confidence in solid financial footing, efforts to grow the Le Mans franchise and new titles, planned updates for Le Mans Ultimate, and the need for additional funding to continue operations[20](index=20&type=chunk) - Significant risks and uncertainties include difficulties in achieving growth plans, delays in new game features or DLC, failure to improve long-term funding, decreased sales due to asset disposition, and inability to execute business strategies[21](index=21&type=chunk) - Other risks include unanticipated events impacting product timing, less than expected benefits from management strategies, negative operating cash flows, difficulties in resolving liquidity issues, and challenges in completing cost reduction initiatives[21](index=21&type=chunk) [Website and Social Media Disclosure](index=5&type=section&id=Website%20and%20Social%20Media%20Disclosure) Motorsport Games communicates material financial information to investors via its investor relations website, SEC filings, press releases, conference calls, webcasts, and social media - The company announces material financial information through its investor relations website (ir.motorsportgames.com), SEC filings, press releases, public conference calls, webcasts, social media, and blogs[24](index=24&type=chunk) Company Websites and Social Media Channels | Websites | Social Media | | :------------------ | :-------------------- | | motorsportgames.com | Twitter: @msportgames | | | Instagram: msportgames | | | Facebook: Motorsport Games | | | LinkedIn: Motorsport Games | [Contacts](index=5&type=section&id=Contacts) Contact information for investor relations and media inquiries is provided - Investors can contact Investors@motorsportgames.com[25](index=25&type=chunk) - Media can contact PR@motorsportgames.com[25](index=25&type=chunk) [Appendix: Financial Statements](index=6&type=section&id=Appendix%3A%20Financial%20Statements) The appendix presents the unaudited condensed consolidated statements of operations, detailing financial results for the three and six months ended June 30, 2025 and 2024 [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The unaudited condensed consolidated statements of operations provide a detailed breakdown of the company's financial performance for the three and six months ended June 30, 2025, and 2024, covering revenues, cost of revenues, operating expenses, and net income Condensed Consolidated Statements of Operations (in USD) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $2,591,840 | $1,881,653 | $4,350,293 | $4,910,689 | | Cost of revenues | $454,887 | $771,647 | $920,273 | $1,438,274 | | Gross profit | $2,136,953 | $1,110,006 | $3,430,020 | $3,472,415 | | Sales and marketing | $126,307 | $205,549 | $224,008 | $455,935 | | Development | $270,343 | $868,745 | $872,296 | $1,932,102 | | General and administrative | $865,040 | $1,411,826 | $2,033,522 | $3,602,092 | | Depreciation and amortization | $11,697 | $63,138 | $29,823 | $136,862 | | Total operating expenses | $1,273,387 | $2,549,258 | $3,159,649 | $6,126,991 | | Gain from settlement of license liabilities | $- | $3,248,000 | $- | $3,248,000 | | Other operating income | $1,104,497 | $250,000 | $1,604,497 | $250,000 | | Income from operations | $1,968,063 | $2,058,748 | $1,874,868 | $843,424 | | Interest expense | $(4,740) | $(29,746) | $(17,750) | $(60,628) |\ | Other income (loss), net | $2,274,849 | $58,481 | $3,403,667 | $(378,711) | | Net income | $4,238,172 | $2,087,483 | $5,260,785 | $404,085 | | Net income attributable to Motorsport Games Inc. | $4,258,400 | $2,105,928 | $5,299,458 | $440,972 | | Net income attributable to Class A common stock per share: Basic and diluted | $0.82 | $0.77 | $1.26 | $0.16 | | Weighted-average shares of Class A common stock outstanding: Basic and diluted | $5,206,536 | $2,722,728 | $4,195,047 | $2,722,728 |

Core Viewpoint - Motorsport Games Inc. will report its financial results for the second quarter of 2025 on August 13, 2025, after market close, followed by a conference call to discuss the results [1][6]. Company Overview - Motorsport Games is a racing game developer, publisher, and esports ecosystem provider, focusing on official motorsport racing series [3]. - The company is the officially licensed developer and publisher for notable racing series such as the 24 Hours of Le Mans and the FIA World Endurance Championship [3]. - Recently, Motorsport Games released Le Mans Ultimate Version 1.0, which includes new cars, updated 2025 content, and additional improvements [3]. - The company owns leading simulation platforms, rFactor 2 and KartKraft, and powers F1® Arcade through a partnership with Kindred Concepts [3]. - Motorsport Games is recognized as an award-winning esports partner for the 24 Hours of Le Mans, creating the Le Mans Virtual Series [3]. Financial Communication - Participants can access the financial results webcast on the company's investor relations website and it will remain available for 12 months [2]. - The conference call can be accessed live via phone with specific dial-in numbers and a Conference ID [2].

Core Viewpoint - Motorsport Games Inc. has officially released Le Mans Ultimate Version 1.0, marking the end of its Early Access phase and initiating a new phase of development and expansion for the game [1][6][10] New Features and Additions - The 1.0 release includes two new cars, the Aston Martin Valkyrie AMR LMH and the Mercedes AMG LMGT3, available at no extra cost, enhancing the gameplay experience with high-performance vehicles [2][10] - The update also features the BMW M4 Evo LMGT3, updated to 2025 specifications, available for free to previous owners of the M4 [2][10] Gameplay Enhancements - Version 1.0 introduces significant gameplay refinements, including a revised LMGT3 tyre model to improve grip loss and thermal operating windows, aiming for a smoother experience for players [3][10] - Usability improvements include a reworked car setup interface that consolidates critical elements into a single screen and an extended Race Weekend calendar for the full 2025 season [3][10] Purchasing Experience - The game's Steam store configuration has been updated, integrating previously free DLCs into the core game and introducing a new 2024 WEC Bundle for easier access to post-launch content [4][10] Future Development Plans - The company is actively developing the European Le Mans Series and plans to showcase a hands-on build during the Silverstone ELMS weekend in September [6][10] - A full-featured single-player career mode is in the works, with a planned release for early 2026 [6][10] Company Overview - Motorsport Games is a developer and publisher of racing games, focusing on creating authentic racing experiences and building a virtual racing ecosystem that includes esports competitions [7][10]

Core Insights - Motorsport Games Inc. has achieved significant operational milestones for its game Le Mans Ultimate and its online racing system RaceControl, enhancing user experience and engagement [1][4][5] Group 1: Game Development and Updates - In June 2025, Motorsport Games executed major updates for Le Mans Ultimate, including support for Teams and Driver Swaps, and Custom Liveries for RaceControl Pro subscribers [3] - The game transitioned to "version 1.0" on June 13, 2025, introducing two new cars for all players and confirming the addition of the European Le Mans Series as an expansion [3][4] - The company plans to release new content on July 22, 2025, including quality of life fixes and the highly anticipated Career Mode expected in early 2026 [6] Group 2: Performance Metrics - Le Mans Ultimate reached an all-time peak concurrent player count, surpassing initial launch levels from February 2024 and more than doubling the previous month's figures [4] - The game generated revenues approximately eleven times faster than the prior title, rFactor 2, over the past eighteen months [4] - Subscriptions to the RaceControl service grew by 148% in June 2025 compared to the previous month, setting new monthly revenue records since its launch in December 2024 [4] Group 3: Company Vision and Strategy - Motorsport Games aims to create racing games that are authentically close to reality while building a comprehensive virtual racing ecosystem [6] - The company is focused on enhancing its esports offerings, including the renowned Le Mans Virtual Series, to drive excitement and engagement among racing fans [6]

Core Viewpoint - Motorsport Games Inc. announced the official 1.0 release date for Le Mans Ultimate on July 22, 2025, marking the end of the Early Access period and the start of a new development phase driven by community feedback and technical advancements [1][12]. Game Updates - The version 1.0 release will include two major vehicle additions: the Mercedes AMG LMGT3 Evo and the Aston Martin Valkyrie AMR LMH, both available for free to all players as part of the base game [2][3]. - All official 2025 team liveries from the FIA WEC grid will also be added free of charge, enhancing player immersion in the current racing season [4]. Community Engagement and Features - Since its Early Access launch in February 2024, Le Mans Ultimate has evolved rapidly, introducing features such as RaceControl-powered online events, co-operative mode, and driver swaps, alongside improvements in product stability [5][6]. - The CEO of Motorsport Games emphasized that the 1.0 release is not the end of development but the beginning of a more ambitious project, with ongoing enhancements planned for features like Teams and Driver Swaps [6][16]. Future Developments - A new single-player "career mode" is in production, expected to launch in Q1 2026, allowing players to experience a driver’s career within a racing team [6][16]. - The company teased the addition of the European Le Mans Series (ELMS), which will feature three new circuits and the LMP3 category of race cars, with more details to be announced soon [7][15]. Company Overview - Motorsport Games is a developer and publisher of racing games, focusing on creating authentic racing experiences and engaging esports competitions, and is the official developer for the 24 Hours of Le Mans and the FIA World Endurance Championship [9].

Core Insights - Motorsport Games Inc. has released a significant update for "Le Mans Ultimate," introducing features such as online driver swaps, a community Team Management system, customized liveries, and the completion of the 2024 WEC season content [1][12][14] Feature Enhancements - The update includes the debut of driver swap functionality, allowing players to transfer control of the car to teammates during live online races, enhancing the endurance racing experience [2][7] - Players can now form persistent teams, assign roles, and manage line-ups using built-in team management tools, fostering a strategic gameplay environment [3][7] - A custom livery system has been introduced, enabling players to design and share car liveries for online multiplayer events, enhancing personalization and immersion [4][7] Content Additions - The update releases Pack 4 of the 2024 Season Pass, completing the 2024 FIA WEC season content, which includes the Lusail International Circuit and two new GT3 entries: Lamborghini Huracán LMGT3 Evo2 and Lexus RC F LMGT3 [5][6] - With this update, "Le Mans Ultimate" now features a total of 11 tracks with 21 layouts and 25 cars, including 11 Hypercars, 1 LMP2, 4 GTEs, and 9 LMGT3s [6] Future Developments - The CEO of Motorsport Games emphasized that this update marks a pivotal moment for the game and reflects the community's feedback, with more features and updates expected in the future [7][12] - A special update is scheduled for June 13, 2025, to provide insights into the future of the title and upcoming features [7][12]

Financial Performance - Q1 2025 revenues were $18 million[7] - Q1 2025 net income was $10 million[7] - Q1 2025 adjusted EBITDA was $06 million[7] - Q1 2025 EPS was $033 compared to an EPS loss of $061 for Q1 2024[7] - Net income attributable to Motorsport Games Inc was $104 million in Q1 2025 compared to a net loss of $166 million in Q1 2024 an improvement of $27 million[7,8] Liquidity and Funding - As of March 31 2025 the Company had cash and cash equivalents of approximately $11 million which increased to $31 million as of April 30 2025[10] - The increase in cash was primarily due to $235 million in net proceeds from a private placement of Class A common stock and a pre-funded warrant which closed on April 11 2025[10] - The Company discloses substantial doubt about its ability to continue as a going concern and believes it needs additional funding to continue operations[10] Operational Highlights - Released an update for Le Mans Ultimate in February 2025 including new LMGT3 category cars and quality of life improvements[7]

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $1,800,000, down by $1,300,000 or 41.9% compared to the same period in the prior year [13] - Net income for the quarter was $1,000,000, an improvement of $2,700,000 from a net loss of $1,700,000 in the prior year [14] - Adjusted EBITDA was $600,000 for Q1 2025, compared to an adjusted EBITDA loss of $1,000,000 in the same period last year, marking an improvement of $1,600,000 [15][16] - Cash and cash equivalents increased from $1,100,000 as of March 31, 2025, to $3,100,000 by April 30, 2025, primarily due to $2,350,000 in net proceeds from a private placement [16][17] Business Line Data and Key Metrics Changes - Net revenues from the Le Mans Ultimate racing title were $400,000 higher in Q1 2025 compared to the same prior year period, despite Q1 2024 being the release quarter for the game [6][14] - Total revenues decreased primarily due to a $1,500,000 decrease in NASCAR-related revenues, as the company is no longer authorized to sell this title starting in 2025 [13][14] Market Data and Key Metrics Changes - The company has seen an increase in confidence in the market, with shares trading more than 2.5 times higher than the period prior to the announcement of the $2,500,000 investment [5][6] Company Strategy and Development Direction - The company is focusing on building owned infrastructure around its gaming titles, particularly through the Race Control subscription platform [7][11] - Plans to move the Le Mans Ultimate game from early access to a full release version 1.0 are underway, which will unlock new sales and marketing tactics [9] - The company is exploring opportunities to bring Le Mans Ultimate to PlayStation and Xbox, with discussions ongoing with potential publishing collaborators [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's improved state and the potential for growth following the recent investment [5][19] - The company is assessing new ways to expand the audience for Le Mans Ultimate and believes the racing game market is underserved in terms of quality and choice [11] Other Important Information - The company is exploring additional funding options, including equity and debt financing, to address liquidity shortfalls while continuing to develop its product portfolio [17] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating that the call may have concluded without a formal Q&A session.