# Motorsport Games Inc.: Form 10-Q for the period ended Jun 30, 2026

- Company: [Motorsport Games Inc.](/companies/msgm.md) (CIK 1821175)
- Form: 10-Q
- Filed: 2026-08-14
- Accepted by EDGAR: Aug 14, 2026, 16:11 ET
- Period: 2026-06-30
- Accession: 0001493152-26-038360
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1821175/000149315226038360/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1821175/000149315226038360/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2026-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2026-04-01 to 2026-06-30 | $3.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2026-01-01 to 2026-06-30 | $7.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2026-04-01 to 2026-06-30 | $644.4k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2026-01-01 to 2026-06-30 | $1.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2026-04-01 to 2026-06-30 | $2.9m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2026-01-01 to 2026-06-30 | $6.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2026-04-01 to 2026-06-30 | $737.2k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2026-01-01 to 2026-06-30 | $1.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2026-04-01 to 2026-06-30 | $638.3k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2026-01-01 to 2026-06-30 | $1.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2026-04-01 to 2026-06-30 | $15.9k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2026-01-01 to 2026-06-30 | $19.1k | us-gaap:InterestExpense |
| Net income | 3 months, 2026-04-01 to 2026-06-30 | $401.5k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2026-01-01 to 2026-06-30 | $717.3k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2026-04-01 to 2026-06-30 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2026-01-01 to 2026-06-30 | $0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2026-04-01 to 2026-06-30 | $0.08 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2026-01-01 to 2026-06-30 | $0.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2026-04-01 to 2026-06-30 | 5,255,013 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2026-01-01 to 2026-06-30 | 5,570,953 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2026-01-01 to 2026-06-30 | $2.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2026-01-01 to 2026-06-30 | $29.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2026-01-01 to 2026-06-30 | $3.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2026-06-30 | $3.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2026-06-30 | $6.4m | us-gaap:AssetsCurrent |
| Total assets | at 2026-06-30 | $11.3m | us-gaap:Assets |
| Current liabilities | at 2026-06-30 | $3.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2026-06-30 | $6.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2026-06-30 | $3.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 56,822 characters.

*The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2026 and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Report. Unless the context requires otherwise, references to the “Company,” “Motorsport Games,” “we,” “us” and “our” refer to Motorsport Games Inc., a Delaware corporation.*

### About Motorsport Games

Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series, including the iconic 24 Hours of Le Mans endurance race (“Le Mans”) and the associated FIA World Endurance Championship (the “WEC”). Our portfolio also includes the KartKraft karting simulation game, as well as Studio 397 B.V. (“Studio397”) and their rFactor 2 realistic racing simulator technology and platform. rFactor 2 also powers F1® Arcade through a partnership with Kindred Concepts. Our purpose is to make the thrill of motorsports accessible to everyone by creating the highest quality, most sophisticated and innovative experiences for racers, gamers and fans of all ages. Our products and services target a large global motorsport audience.

We develop and publish racing video games including for personal computers (PCs) through various digital channels, including full-game and downloadable content (“DLC”). We have obtained the official licenses to develop multi-platform games for the 24 Hours of Le Mans race and the WEC. We are also striving to become a leader in organizing and facilitating esports tournaments, competitions, and events for our licensed racing games.

On February 20, 2024, we released *Le Mans Ultimate* on PC in early access. *Le Mans Ultimate* is the official game of the WEC and 24 Hours of Le Mans, and is the first officially licensed and dedicated 24 Hours of Le Mans video game release in over twenty years. On July 22, 2025, we released *Le Mans Ultimate* Version 1.0. This milestone marked the completion of the title’s Early Access phase and ushered in a new era of continued development and expansion for the official game of the FIA World Endurance Championship and the 24 Hours of Le Mans. We have sold more than half a million units of our Le Mans Ultimate base game alongside more than 1.2 million individual pieces of DLC. Additionally, we achieved an all-time peak of more than 8,800 concurrent players in March 2026 following the release of Le Mans Ultimate Version 1.3 and recorded our highest-ever month for average daily active users in April 2026.

### Recent Events

### Share Repurchase

On April 22, 2026, we entered into a Share Repurchase Agreement (the “Repurchase Agreement”) with Driven Lifestyle Group LLC, a Florida limited liability company (“Driven Lifestyle”), pursuant to which we repurchased 904,395 shares of our Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), held by Driven Lifestyle. The Repurchase Agreement provided for such shares to be purchased at a price of $4.11, which was equal to the average closing price of the Class A Common Stock as reported by the Nasdaq Capital Market for the five trading days immediately preceding the signing of the Repurchase Agreement. Pursuant to Section 1 of Article V of our Certificate of Incorporation, as amended (the “Certificate of Incorporation”), upon the repurchase of such shares of Class A Common Stock from Driven Lifestyle, all shares of our Class B common stock held by Driven Lifestyle were cancelled.

Pursuant to the Repurchase Agreement Driven Lifestyle executed an irrevocable written consent (the “Stockholder Consent”) in its capacity as the holder of at least two-thirds of the voting power of our Class A common stock and Class B common stock, voting together as a single class, approving a Certificate of Amendment (the “Charter Amendment”) to the Certificate of Incorporation and Amendment No. 2 (the “Bylaws Amendment”) to our Bylaws, as amended (the “Bylaws”). We subsequently filed with the Securities and Exchange Commission a Definitive Information Statement on Schedule 14C relating to the approval of the Charter Amendment and the Bylaws Amendment. On May 22, 2026, we filed the Charter Amendment, effective as of May 24, 2026, with the Delaware Secretary of State, and on May 24, 2026, the Bylaws Amendment was deemed effective. The Charter Amendment provided as follows:

- Section A of Article IX of the Certificate of Incorporation was amended to provide that we reserve the right to amend, alter, change or repeal any provision contained in the Certificate of Incorporation in the manner then or thereafter prescribed in the Certificate of Incorporation, and by the laws of the State of Delaware, and all rights conferred upon stockholders in the Certificate of Incorporation, as so amended, are granted subject to this reservation;
- Section B of Article IX of the Certificate of Incorporation was amended to provide that the Bylaws may be altered, amended or repealed, or new bylaws adopted, by the Board of Directors or a simple majority of all of the then outstanding shares of our capital stock entitled to vote generally in the election of directors; and
- Section C of Article VII of the Certificate of Incorporation was amended to provide that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of our stockholders and may not be effected by any consent in writing by such stockholders.

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The Bylaws Amendment provided as follows:

- Section 6.07 of the Bylaws was amended to provide that the Bylaws may be altered, amended or repealed, or new bylaws adopted, by the Board of Directors or a simple majority of all of the then outstanding shares of our capital stock entitled to vote generally in the election of directors; and
- Section 2.07 of the Bylaws was amended to provide that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of our stockholders and may not be effected by any consent in writing by such stockholders.

### 2026 Annual Meeting

At our 2026 Annual Meeting of Stockholders (the “Annual Meeting “), held on April 23, 2026, our stockholders approved an Amendment (the “Plan Amendment”) to our Amended and Restated 2021 Equity Incentive Plan (the “Plan”) to increase the number of shares of Class A common stock that we will have authority to grant under the Plan from 100,000 to 600,000. A description of the Plan is set forth in our definitive proxy statement for the 2026 Annual Meeting, as filed with the SEC on March 16, 2026 (the “Proxy Statement”), in the section entitled “Proposal No. 2—The Incentive Plan Increase Proposal,” which is incorporated herein by reference. The description is qualified in its entirety by reference to the full text of the Plan Amendment, a copy of which is included as an exhibit to this Report.

Also at the Annual Meeting our stockholders approved the exercise of the Series A Warrants, the Series B Warrants, and the Placement Agent Warrants issued on July 29, 2024 to purchase up to an aggregate of 949,310 shares of Class A common stock. As a result of such approval, the Series A Warrants will expire on October 23, 2031, the Series B Warrants will expire on October 25, 2027 and the Placement Agent Warrants will expire on July 26, 2029. In addition, the holders of the Series A Warrants and the Series B Warrants agreed that the repurchase of shares from Driven Lifestyle pursuant to the Repurchase Agreement would not constitute a “Fundamental Transaction” under the Warrants.

Rights Agreement

On July 22, 2026, our Board of Directors approved and adopted a preferred stock rights agreement and authorized and declared a dividend distribution of one right (each, a “Right”) for each outstanding share of the Class A Common Stock to stockholders of record as of the close of business on August 3, 2026 (the “Record Date”). The complete terms of the Rights are set forth in a Preferred Stock Rights Agreement (the “Rights Agreement”), dated as of July 22, 2026, with ClearTrust, LLC, a Florida limited liability company, as rights agent. In general terms, subject to certain exceptions, the Rights Agreement imposes significant dilution upon any person or group (other than us and certain other Exempt Persons (as defined in the Rights Agreement)), that becomes the beneficial owner of twelve and a half percent (12.5%) or more of the Class A Common Stock following our first public announcement of the adoption of the Rights Agreement. The term “beneficial ownership” is defined in the Rights Agreement and includes, among other things, certain derivative arrangements.

In connection with the adoption of the Rights Agreement, on July 22, 2026, our Board of Directors adopted a Certificate of Designations of Series A Participating Preferred Stock (the “Certificate of Designations”) setting forth the rights, powers, and preferences of the Series A Preferred Stock. The Certificate of Designations was filed with the Secretary of State of the State of Delaware on July 23, 2026. A copy of the Certificate of Designations is attached as an exhibit to this Report and is incorporated herein by reference.

Amended and Restated Bylaws

On July 22, 2026, our Board of Directors determined to amend our Bylaws by adopting certain Amended and Restated Bylaws (the “Amended and Restated Bylaws”), effective as of such date. The Amended and Restated Bylaws modified provisions of the Bylaws including, but not limited to:

- Conduct of Meetings: The Amended and Restated Bylaws provide that our Board of Directors or the presiding officer of any stockholders meeting has broad authority, to the maximum extent permitted by applicable law, to establish the rules, regulations, and procedures necessary or desirable for the proper conduct of a stockholders’ meetings.
- Adjournment, Postponements and Cancellations of Stockholders’ Meetings: The Amended and Restated Bylaws provide that if a quorum is not present or represented at any stockholders’ meeting, a majority of the voting power of our stockholders present in person or represented by proxy at the meeting or the individual acting as chairman of the meeting may adjourn the meeting, without notice other than announcement at the meeting, until a quorum shall be present or represented. The Amended and Restated Bylaws also provide that the individual acting as chairman of the meeting may also, from time to time, for any or no reason, adjourn, recess, postpone, or cancel any meeting of stockholders.
- Business Conducted or Considered at Meetings of Stockholders: The Amended and Restated Bylaws provide that, for nominations and proposals of other business to have been properly brought before an annual meeting such nominations and proposals of other business must be: (i) specified in a notice of meeting given by or at the direction of our Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of our Board of Directors, or (iii) otherwise properly requested by an eligible stockholder who complies with the advance notice and procedural requirements set forth in the Amended and Restated Bylaws. To be properly brought before a special meeting, proposals of business must be specified in the notice of meeting given by or at the direction of our Board of Directors or brought before the meeting at the direction of our Board of Directors.
- Advance Notice Requirements: The Amended and Restated Bylaws enhance the procedural mechanics and disclosure requirements in connection with stockholder nominations of directors and submissions of stockholder proposals (other than proposals to be included in our proxy statement pursuant to Rule 14a-8 under the Exchange Act at stockholders’ meetings).
- Special Meetings of Stockholders: The Amended and Restated Bylaws provide that, to the extent that our Board of Directors calls a special meeting of stockholders for the purpose of electing directors, the advance notice disclosure and other requirements contained in the Amended and Restated Bylaws applicable to proposing nominees for election to our Board of Directors at annual meetings of stockholders shall also apply to stockholders seeking to propose director nominations at such a special meeting.
- Special Meetings of Directors: The Amended and Restated Bylaws provide that notice of any special meeting of our Board of Directors shall be sent to each director either (a) by reputable overnight delivery service to his or her residence or usual place of business in circumstances to which such service guarantees next day delivery, not later than on the day that is the second business day immediately preceding the day of such meeting, or (b) by electronic mail or other electronic means, not later than twenty-four (24) hours before the time of such meeting, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.
- Miscellaneous: The Amended and Restated Bylaws also incorporate various other “clean-up” changes, including, but not limited to, grammatical and other typographical corrections, formatting changes, revisions to headings, titles, and captions, and providing capitalized definitions for certain terms.

The foregoing summary is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is filed as an exhibit to this Report and is incorporated herein by reference.

### Trends and Factors Affecting Our Business

### Product Release Schedule

Our financial results are impacted by the timing of our product releases and the commercial success of those titles. Our recent product releases include:

|  |  |
| --- | --- |
| 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 |
| Le Mans Ultimate – ELMS Pack 1 and Version 1.1 Release | September 23, 2025, available on PC |
| Le Mans Ultimate – ELMS Pack 2 and Version 1.2 Release | December 9, 2025, available on PC |
| Le Mans Ultimate – ELMS Pack 3 and Version 1.3 Release | March 31, 2026, available on PC |
| Le Mans Ultimate – American Pack 1 and Version 1.4 | July 28, 2026, available on PC |

We continually evaluate our planned product release schedule and modify the timing of upcoming products based on developments in our business, or if we believe it will result in a better consumer experience.

### Concentration of Sales

Revenues associated with our Le Mans Ultimate franchise accounted for approximately 75% and 76% of our total revenue for the three months ended June 30, 2026 and 2025, respectively, and for approximately 76% and 78% of our total revenue for the six months ended June 30, 2026 and 2025, respectively. We aim to explore ways to capitalize on new trends and diversify our product mix.

### Digital Business

Players increasingly purchase our games as digital downloads, as opposed to purchasing physical discs. All of our titles that are available through retailers as packaged goods products are also available through direct digital download. For the three and six months ended June 30, 2026 and 2025, substantially all of our revenue from sales of video games for PCs was through digital channels, respectively. We believe this trend of increasing direct digital downloads is primarily due to benefits relating to convenience and accessibility that digital downloads provide. In addition, as part of our digital business strategy, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases and extra content.

### Esports

We generate esports revenues from organizing and facilitating esports tournaments, competitions, and events for our licensed racing games as well as on behalf of third-party racing game developers and publishers. In 2023, we organized the grand finale of the Le Mans Virtual Series 2022/23, the 24 Hours of Le Mans Virtual event, which had a cumulative total of approximately 8.8 million video views with approximately 27 million minutes watched. The 24 Hours of Le Mans Virtual event had a global audience of 5 million across television (TV)/over-the-top (OTT) channels. Although we did not organize the Le Mans Virtual Series for the 2023/24, 2024/25 or 2025/26 seasons, we currently plan on organizing the 2026/27 Le Mans Virtual Series to commence this year. We also intend to continue exploring opportunities to expand our esports segment outside of Le Mans. During the three months ended June 30, 2026, we generated esports revenues from facilitating esports events on behalf of others.

### Recurring Revenue Sources

Our business model includes revenue that we deem recurring in nature, which consists primarily of revenue from our annualized video game racing franchise for PC, as well as our RaceControl subscription service. We historically have been able to forecast the revenue from this area of our business with greater relative confidence than for new games, services, and business models. As we continue to incorporate new business models and modalities of play into our games, our goal is to continue to look for opportunities to expand the recurring portion of our business, including through subscriptions. We plan to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through in-game purchases, RaceControl subscription offerings and extra content. As of June 30, 2026, we had more than 40,500 paid RaceControl subscribers. RaceControl revenues were approximately $1.4 million and $0.3 million for the six months ended June 30, 2026 and 2025, respectively.

### Reportable Segments

We use the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by our chief operating decision maker for making operating decisions and assessing performance as the source for determining our reportable segments. Our chief operating decision maker is our Chief Executive Officer (“CEO”), who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. We classified our reportable operating segments into (i) the development and publishing of interactive racing video games, entertainment content and services (the “Gaming segment”) and (ii) the organization and facilitation of esports tournaments, competitions, and events for our licensed racing games as well as on behalf of third-party video game racing series and other video game publishers (the “esports segment”).

### Components of Our Results of Operations

### Revenues

We derive substantially all our revenue from sales of our games and related extra content that can be played by customers on a PC platform. We also generate sponsorship revenues from our production of live and virtual esports events. We also offer software development services for racing simulators and offer a subscription service via RaceControl, our matchmaking and online racing platform.

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

- the initial game delivered digitally at the time of sale, which also typically provides access to offline core game content;
- updates to previously released games on a when-and-if-available basis, such as software patches or updates, and/or additional content to be delivered in the future, both paid and free; and
- outsourced code and content development services.

Our product and service offerings included within the esports segment relate primarily to curating esports events.

### Cost of Revenues

Cost of revenues for our Gaming segment is primarily comprised of royalty expenses, license fees, web hosting costs and amortization of certain acquired license agreements and other intangible assets acquired through our various acquisitions and internally-developed software. Furthermore, cost of revenues for our Gaming segment includes costs associated with our outsourced code and content development services. Cost of revenues for our esports segment consists primarily of the cost of event staffing and event production.

### Sales and Marketing

Sales and marketing expenses are primarily composed of salaries, benefits and related taxes of our in-house marketing teams, advertising, marketing, and promotional expenses, including fees paid to social media platforms and other websites where we market our products.

### Development

Development expenses consist of the cost to develop the games we produce, which includes salaries, benefits, and operating expenses of our in-house development teams, as well as consulting expenses for any contracted external development. Development expenses also include expenses relating to our software licenses, maintenance, and studio operating expenses. Costs incurred internally in developing a software product to be marketed or sold to external users are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, software costs are capitalized until the product is available for general release to customers. Technological feasibility for our software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to production. The amortization of these costs is included in cost of revenue over the estimated life of the products.

### General and Administrative

General and administrative expenses consist primarily of salaries, benefits and other costs associated with our operations including finance, human resources, information technology, public relations, legal audit and compliance fees, facilities, and other external general and administrative services.

### Depreciation and Amortization

Depreciation and amortization expenses include depreciation on fixed assets (primarily computers and office equipment), as well as amortization of certain definite lived intangible assets acquired through our various acquisitions.

### Results of Operations

### Three Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025

In this section, references to 2026 refer to the three months ended June 30, 2026 and references to 2025 refer to the three months ended June 30, 2025.

#### Revenues

| Revenues: | For the Three Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $3,503,685 | $2,591,840 | $911,845 | 35.2% |
| Esports | 36,277 | - | 36,277 | -% |
| Total Revenues | $3,539,962 | $2,591,840 | $948,122 | 36.6% |

21

Consolidated revenues were $3.5 million and $2.6 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $0.9 million, or 36.6%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to a $0.6 million increase in sales of Le Mans Ultimate, as well as a $0.4 million increase in RaceControl subscriptions, offset by a $0.1 million decrease in sales of our rFactor 2 title compared to 2025.

Esports revenues during the three months ended June 30, 2026 were approximately $36,000 and are the result of facilitating Esports events for partners using our Le Mans Ultimate title.

#### Cost of Revenues

| Cost of revenues: | For the Three Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $602,289 | $454,887 | $147,402 | 32.4% |
| Esports | 42,139 | - | 42,139 | -% |
| Total Cost of Revenues | $644,428 | $454,887 | $189,541 | 41.7% |

Consolidated cost of revenues was $0.6 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $0.1 million, or 41.7%, when compared to the same period in the prior year.

The increase in Gaming segment cost of revenues was mainly driven by increases in web hosting costs of approximately $0.1 million, when compared to the same period in the prior year.

Cost of revenues for the Esports segment during the three months ended June 30, 2026 of approximately $42,000 was related to expenses incurred facilitating Esports events for partners using our Le Mans Ultimate title.

#### Gross Profit

| Gross Profit (Loss): | For the Three Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $2,901,396 | $2,136,953 | $764,443 | 35.8% |
| Esports | (5,862) | - | (5,862) | -% |
| Total Gross Profit | $2,895,534 | $2,136,953 | $758,581 | 35.5% |

22

|  | For the Three Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: |
| Gaming - Gross Profit Margin | 82.8% | 82.4% |
| Esports - Gross Profit Margin | (16.2)% | NM |
| Total Gross Profit Margin | 81.8% | 82.4% |

NM = not meaningful

Consolidated gross profit was $2.9 million and $2.1 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $0.8 million, or 35.5%, when compared to the prior period. Gross profit margin was 81.8% in 2026, compared to 82.4% in 2025. The increase in our Gaming segment gross profit of $0.8 million, and increase in gross profit margin, was primarily due to higher revenues, offset by increases in web hosting, development and license fees, compared to the same period in the prior year.

Gross loss for the Esports segment during the three months ended June 30, 2026 of approximately $6,000 was related to revenues earned facilitating Esports events for partners using our Le Mans Ultimate title, and we will continue to pursue Esports partnerships in the second half of 2026.

#### Operating Expenses

| Operating Expenses: | For the Three Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $191,350 | $126,307 | $65,043 | 51.5% |
| Development | 737,228 | 270,343 | 466,885 | 172.7% |
| General and administrative | 1,321,381 | 865,040 | 456,341 | 52.8% |
| Depreciation and amortization | 7,311 | 11,697 | (4,386) | (37.5)% |
| Total Operating Expenses | $2,257,270 | $1,273,387 | $983,883 | 77.3% |

Changes in operating expenses are explained in more detail below:

#### Sales and Marketing

Sales and marketing expenses were $0.2 million and $0.1 million for the three months ended June 30, 2026 and 2025, respectively, representing a $0.1 million, or 51.5%, increase when compared to the prior period. The increase in sales and marketing expenses was primarily driven by a $0.1 million increase in payroll and employee-related expenses when compared to the prior period.

#### Development

Development expenses were $0.7 million and $0.3 million for the three months ended June 30, 2026 and 2025, respectively, representing a $0.4 million, or 172.7%, increase when compared to the prior period. The increase in development expenses was primarily driven by a $0.3 million increase in payroll and employee-related expenses and $0.1 million increase in web hosting costs, when compared to the prior period.

#### General and Administrative

General and administrative (“G&A”) expenses were $1.3 million and $0.9 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $0.4 million, or 52.8%, when compared to the prior period. The increase in G&A expenses was primarily driven by a $0.3 million increase in payroll and employee-related expenses and $0.1 million increase in legal and professional fees, compared to the prior period.

#### Depreciation and Amortization

Depreciation and amortization expenses for the three months ended June 30, 2026 and 2025 reflect no significant changes to the depreciation of capital assets.

#### Other Operating Income

Other operating income of $1.1 million for the three months ended June 30, 2025, primarily includes $0.8 million from the Wesco Insurance Company settlement and $0.3 million related to discounts negotiated on a few outstanding vendor invoices.

#### Interest Expense

Interest expense was approximately $16,000 and $5,000 for the three months ended June 30, 2026 and 2025, respectively. Interest expense in 2026 primarily relates to charges incurred as part of the business loan agreement with Citibank, N.A.

#### Other (Expense) Income, net

Other expense, net was $0.4 million for the three months ended June 30, 2026, compared to other income, net of $2.3 million for the three months ended June 30, 2025, a decrease of $2.7 million compared to the prior period. Other (expense) income, net of $(0.4) million and $2.3 million for 2026 and 2025, respectively, were primarily comprised of foreign currency (losses) gains arising from remeasuring transactions denominated in a currency other than U.S. Dollars.

#### Other Comprehensive Income (Loss)

Other comprehensive income was $0.2 million for the three months ended June 30, 2026, compared to other comprehensive loss of $2.3 million for the three months ended June 30, 2025. The $2.5 million increase in other comprehensive income was primarily due to activity in our U.K. and Netherlands subsidiaries and represents foreign currency translation adjustments.

#### Net Loss Attributable to Non-Controlling Interest

Net loss attributable to non-controlling interest was approximately $0.2 million and $20,000 for the three months ended June 30, 2026 and 2025, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture. Under the terms of this joint venture, we agreed to fund up to €8,000,000 (approximately $9,120,000 as of June 30, 2026) as needed for development of video game products, which was fully funded as of June 30, 2026.

### Six Months Ended June 30, 2026 compared to Six Months Ended June 30, 2025

In this section, references to 2026 refer to the six months ended June 30, 2026 and references to 2025 refer to the six months ended June 30, 2025.

#### Revenues

| Revenues: | For the Six Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $7,534,974 | $4,350,293 | $3,184,681 | 73.2% |
| Esports | 36,277 | - | 36,277 | -% |
| Total Revenues | $7,571,251 | $4,350,293 | $3,220,958 | 74.0% |

Consolidated revenues were $7.6 million and $4.4 million for the six months ended June 30, 2026 and 2025, respectively, an increase of $3.2 million, or 74.0%, when compared to the prior period. The increase in Gaming segment revenues was primarily due to a $2.2 million increase in sales of Le Mans Ultimate, particularly from downloadable content revenues which increased by the same amount, as well as a $1.1 million increase in RaceControl subscriptions, offset by a $0.1 million decrease in sales of our rFactor 2 game title, compared to 2025.

Esports revenues during the six months ended June 30, 2026 were approximately $36,000 and are the result of facilitating Esports events for partners using our Le Mans Ultimate title.

#### Cost of Revenues

| Cost of revenues: | For the Six Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $1,096,414 | $920,273 | $176,141 | 19.1% |
| Esports | 65,151 | - | 65,151 | -% |
| Total Cost of Revenues | $1,161,565 | $920,273 | $241,292 | 26.2% |

24

Consolidated cost of revenues was $1.2 million and $0.9 million for the six months ended June 30, 2026 and 2025, respectively, an increase of $0.3 million, or 26.2%, when compared to the same period in the prior year.

The increase in Gaming segment cost of revenues was mainly driven by a $0.1 million increase in direct development costs, web hosting costs and license fees, respectively, offset by a $0.1 million decrease in amortization, when compared to the same period in the prior year.

Esports cost of revenues during the six months ended June 30, 2026 of $0.1 million was related to expenses incurred facilitating Esports events for partners using our Le Mans Ultimate title.

#### Gross Profit

| Gross Profit (Loss): | For the Six Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Gaming | $6,438,560 | $3,430,020 | $3,008,540 | 87.7% |
| Esports | (28,874) | - | (28,874) | -% |
| Total Gross Profit | $6,409,686 | $3,430,020 | $2,979,666 | 86.9% |

|  | For the Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: |
| Gaming - Gross Profit Margin | 85.4% | 78.8% |
| Esports - Gross Profit Margin | (79.6)% | NM |
| Total Gross Profit Margin | 84.7% | 78.8% |

NM = not meaningful

Consolidated gross profit was $6.4 million and $3.4 million for the six months ended June 30, 2026 and 2025, respectively, an increase of $3.0 million, or 86.9%, when compared to the prior period. Gross profit margin was 84.7% in 2026, compared to 78.8% in 2025. The increase in our Gaming segment gross profit of $3.0 million, and increase in gross profit margin, was primarily due to higher revenues and decreases in amortization, offset by increases in web hosting, development and license fees, compared to the prior period.

Gross loss for the Esports segment during the six months ended June 30, 2026 of approximately $29,000 was related to revenues earned facilitating Esports events for partners using our Le Mans Ultimate title.

#### Operating Expenses

| Operating Expenses: | For the Six Months Ended June 30, 2026 | 2025 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $401,669 | $224,008 | $177,661 | 79.3% |
| Development | 1,251,565 | 872,296 | 379,269 | 43.5% |
| General and administrative | 3,020,012 | 2,033,522 | 986,490 | 48.5% |
| Impairment of intangible assets | 27,928 | - | 27,928 | -% |
| Depreciation and amortization | 13,827 | 29,823 | (15,996) | (53.6)% |
| Total Operating Expenses | $4,715,001 | $3,159,649 | $1,555,352 | 49.3% |

25

Changes in operating expenses are explained in more detail below:

#### Sales and Marketing

Sales and marketing expenses were $0.4 million and $0.2 million for the six months ended June 30, 2026 and 2025, respectively, representing a $0.2 million, or 79.3%, increase when compared to the prior period. The increase in sales and marketing expenses was primarily driven by a $0.2 million increase in payroll and employee-related expenses when compared to the prior period.

#### Development

Development expenses were $1.3 million and $0.9 million for the six months ended June 30, 2026 and 2025, respectively, representing a $0.4 million, or 43.5% increase when compared to the prior period. The increase in development expenses was primarily driven by a $0.2 million increase in payroll and employee-related expenses and web hosting costs, when compared to the prior period.

#### General and Administrative

General and administrative (“G&A”) expenses were $3.0 million and $2.0 million for the six months ended June 30, 2026 and 2025, respectively, an increase of $1.0 million, or 48.5%, when compared to the prior period. The increase in G&A expenses was primarily driven by a $0.4 million increase in stock-based compensation and payroll expenses, respectively, and a $0.2 million increase in legal and professional fees, compared to the prior period.

#### Impairment of Intangible Assets

Impairment of intangible assets of $28,000 during the six months ended June 30, 2026 relates to the impairment of a domain name no longer used.

#### Depreciation and Amortization

Depreciation and amortization expenses for the six months ended June 30, 2026 and 2025 reflect no significant changes to the depreciation of capital assets.

#### Other Operating Income

Other operating income of $1.6 million for the six months ended June 30, 2025 primarily includes $0.8 million from the Wesco Insurance Company settlement, $0.5 million from a settlement agreement with HC2 Holdings 2 Inc. (now known as Innovate 2) and $0.3 million related to discounts negotiated on a few outstanding vendor invoices.

#### Interest Expense

Interest expense was approximately $19,000 and $18,000 for the six months ended June 30, 2026 and 2025, respectively. Interest expense during the six months ended June 30, 2026 primarily relates to charges incurred as part of the business loan agreement with Citibank, N.A. Interest expense in 2025 is mainly from non-cash interest accretion of purchase commitment liabilities relating to the acquisition of Studio397 in April 2021.

#### Other (Expense) Income, net

Other expense, net was $0.5 million for the six months ended June 30, 2026, compared to other income, net of $3.4 million for 2025, a decrease of $3.9 million compared to the prior period. Other expense, net of $0.5 million in 2026 is primarily comprised of foreign currency losses arising from remeasuring transactions denominated in a currency other than U.S. Dollars. Other income, net of $3.4 million for the six months ended June 30, 2025 was primarily comprised of $3.2 million in foreign currency gains arising from remeasuring transactions denominated in a currency other than U.S. Dollars and a $0.2 million gain from the Settlement Agreement entered into with Luminis on February 20, 2025.

#### Other Comprehensive Income (Loss)

Other comprehensive income was $0.2 million for the six months ended June 30, 2026, compared to other comprehensive loss of $3.2 million for 2025. The $3.4 million increase in other comprehensive income was primarily due to activity in our U.K. and Netherlands subsidiaries, and represents foreign currency translation adjustments.

#### Net Income (Loss) Attributable to Non-Controlling Interest

Net income (loss) attributable to non-controlling interest was approximately $0.5 million and ($39,000) for the six months ended June 30, 2026 and 2025, respectively, and is attributed to the Le Mans Esports Series Ltd joint venture. Under the terms of this joint venture, we agreed to fund up to €8,000,000 (approximately $9,120,000 as of June 30, 2026) as needed for development of video game products, which was fully funded as of June 30, 2026. We have recouped our investment and are now allocating the distribution of profits and losses to the joint venture licensor, pursuant to the terms of the Le Mans Esports Series Ltd joint venture agreement.

### Liquidity and Capital Resources

### Liquidity

Since our IPO in 2021, we have financed our operations primarily through cash generated from operations, advances from lines of credit, and sales of our equity securities. We have entered into a line of credit with Citibank N.A. that will provide us with up to $3 million provided we meet the requirements for use of the line of credit. As of June 30, 2026, we had $1.8 million available under the line of credit with Citibank N.A.

We measure our liquidity in a number of ways, including the following:

|  | June 30, 2026 | December 31, 2025 |
| --- | ---: | ---: |
| Cash and cash equivalents | $3,946,341 | $4,993,390 |
| Working capital | $2,938,641 | $4,221,682 |

For the six months ended June 30, 2026, we generated net income of $1.2 million and positive cash flows from operations of approximately $2.8 million. As of June 30, 2026, we had an accumulated deficit of $84.6 million and cash and cash equivalents of $3.9 million. We expect that our cash on hand, cash to be generated from operations and availability on our line of credit will fund our operations for at least one year from the date the consolidated financial statements are issued. Our future liquidity and capital requirements include funds to support the planned costs to operate our business, including amounts required to fund working capital, support the development and introduction of new products and maintain existing titles, and certain capital expenditures.

Historically, we have financed our operations primarily through revenue generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. There can be no assurance that we will be able to raise funds by selling additional securities, which sales, if successful, could dilute the ownership interest of our existing shareholders. The issuance of debt, such as our line of credit with Citibank, N.A. can result in restrictive covenants that limit operations. If funding is not available or not available at terms acceptable to us, we will seek to further reduce overhead costs and our cash obligations in the short term, as needed. In addition, we may look to divest or bring in equity partners for our various divisions and bring in near term capital.

### Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2026 and 2025 was $2.8 million and $0.6 million, respectively. Net cash provided by operating activities for the six months ended June 30, 2026 was primarily a result of cash from net income of $1.2 million, adjusted for net non-cash adjustments of $1.0 million and $0.6 million of cash from changes in the levels of operating assets and liabilities. Net cash provided by operating activities for the six months ended June 30, 2025 was primarily a result of cash used to generate net income of $5.3 million, adjusted for net non-cash adjustments of $2.9 million and $1.7 million of cash used by changes in the levels of operating assets and liabilities.

### Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2026 and 2025 was approximately $1.0 million and $0.4 million, respectively, primarily related to capitalization of internally-developed software.

### Cash Flows from Financing Activities

Net cash used in financing activities for the six months ended June 30, 2026 was $2.7 million, resulting from $3.7 million of cash used for the repurchase of stock, and $0.2 million of payments on notes payable, partially offset by $1.2 million in proceeds from a Citibank Line of Credit drawdown. Net cash flows provided by financing activities during the six months ended June 30, 2025 of $1.3 million were primarily attributable to $2.3 million raised in connection with shares sold in a private placement offering in April 2025, partially offset by a $0.6 million payment for purchase commitments, $0.1 million of equity issuance costs, and $0.3 million in payments on notes payable.

### Citibank Line of Credit

On February 20, 2026, we entered into a business loan agreement (the “Original Credit Agreement”) with Citibank, N.A. (“Citibank”), and on June 15, 2026 we entered into an Amendment to the Business Loan Agreement (as amended the “Credit Agreement”). Pursuant to the Credit Agreement, Citibank provided us with a revolving line of credit of up to $3.0 million at an interest rate equal to the Adjusted Term SOFR (as defined in the Credit Agreement) plus 2.250%, subject to increase upon an event of default. The Adjusted Term SOFR has a floor of 0.75%. The revolving line of credit is evidenced by a Promissory Note that we issued to Citibank on February 20, 2026, which we amended on June 15, 2026 (as amended, the “Citibank Promissory Note”), in the principal amount of up to $3.0 million. The Citibank Promissory Note has a stated maturity date of February 20, 2028. We also entered into a commercial security agreement pursuant to which we granted Citibank a lien on substantially all of our assets. The Credit Agreement includes certain affirmative covenants related to conducting our business and maintaining certain levels of cash flow and fixed charges, including a requirement to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) in excess of 1.200 to 1.000 and a Cash Flow Leverage Ratio (as such term is defined in the Credit Agreement) not in excess of 2.500 to 1.000. The Credit Agreement also contains negative covenants including prohibitions on the creation or existence of any liens or security interests on our assets. The Credit Agreement also contains events of default, including failure to make payments under the Note or any related documents, failure to comply with covenants, obligations or conditions contained in the Note or any related document, defaults under other loans, extension of credit or security agreement and any change in our ownership of twenty five percent (25%) or more of our common stock. The occurrence of an event of default can result in the exercise of remedies including an increase in the applicable rate of interest by 3.00% and declaration that all outstanding amounts owed under the Citibank Promissory Note immediately become due and payable. As of June 30, 2026, the balance due to Citibank under the Credit Agreement was $1.2 million and there was $1.8 million of available capacity. As of June 30, 2026, we were in compliance with all covenants related to the Credit Agreement.

### Other Financing Activity

On July 29, 2024, we completed a registered direct offering and a concurrent private placement (the “July 2024 Offerings”) with certain investors, which raised approximately $1.0 million in gross proceeds (the “$1.0 million RDO”) before deducting $0.1 million in placement agent’s fees and other offering expenses. In connection with the $1.0 million RDO, we issued Series A warrants (the “Series A Warrants”) to purchase up to 460,830 shares of Class A common stock and Series B warrants (the “Series B Warrants,” and collectively with the Series A Warrants, the “Purchase Warrants”) to purchase up to 460,830 shares of Class A common stock. The Series A Warrants and the Series B Warrants both have an exercise price of $2.17 per share. The shares of Class A common stock issuable upon the exercise of the Purchase Warrants are collectively referred to as the “Warrant Shares.” The Purchase Warrants became exercisable on the effective date of the stockholder approval for the issuance of the shares of Class A common stock issuable upon exercise of the Purchase Warrants (the “Stockholder Approval Date”), which approval was obtained on April 23, 2026. The Series A Warrants will expire on October 23, 2031 and the Series B Warrants will expire on October 25, 2027.

H.C. Wainwright & Co., LLC (“HCW”) acted as the exclusive placement agent for the July 2024 Offerings, and we issued to its designees warrants to purchase up to 27,650 shares of Class A common stock (the “Placement Agent Warrants”) as compensation. The Placement Agent Warrants will expire on July 26, 2029.

On April 11, 2025, we entered into securities purchase agreements (the “April Purchase Agreements”) with several institutional and accredited investors for the issuance and sale in a private placement (the “April Private Placement”) of the following securities for gross proceeds of approximately $2.5 million: (i) 1,894,892 shares of our Class A common stock and (ii) a pre-funded warrant (the “April Pre-Funded Warrant”) to purchase up to 377,836 shares of our Class A common stock at an exercise price of $0.0001 per share. The purchase price for one share of Class A common stock was $1.10 and the purchase price for one pre-funded warrant was $1.0999 per share. We received net proceeds of approximately $2.35 million from the April Private Placement, after deducting offering expenses paid by us. The April Pre-Funded Warrant became exercisable commencing on May 29, 2025, and will not expire until exercised in full.

The April Purchase Agreements provided that our board of directors (the “Board”) would appoint an individual designated by the purchasers that purchased at least 50.1% in interest of the shares of Class A common stock and pre-funded warrants issued in the April Private Placement based on the initial subscription amounts under the April Purchase Agreement to serve as a Class II director on the Board for a term expiring at our 2026 annual meeting of stockholders. In accordance with the foregoing, Mr. Guoquan (Paul) Huang was appointed to the Board effective as of April 16, 2025. The April Purchase Agreement further provides that the purchasers holding a 50.1% interest in the securities issued upon closing of the April Private Placement shall have the right to appoint an individual to our management team, subject to Board approval.

### Capital Expenditures

The nature of our operations does not require significant expenditures on capital assets, nor do we typically enter into significant commitments to acquire capital assets. We do not have material commitments to acquire capital assets as of June 30, 2026.

### Material Cash Requirements

Except as described below, there have been no material changes in our reported material cash requirements as described under “Liquidity and Capital Resources – Material Cash Requirements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2025 Form 10-K.

### Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any relationships with any organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

### Critical Accounting Policies and Estimates

There have been no material changes to the items disclosed as critical accounting policies and estimates under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2025 Form 10-K.

### Recently Issued Accounting Standards

As an “emerging growth company”, the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act until such time as we are no longer considered to be an emerging growth company.

Our analysis of recently issued accounting standards is more fully described in our condensed consolidated financial statements included elsewhere in this Report.

### Non-GAAP Financial Measures

#### Adjusted EBITDA and Non-GAAP Adjusted Diluted Net Income Per Share

Adjusted EBITDA, a measure used by management to assess the Company’s operating performance, is defined as EBITDA, which is net income plus interest expense, depreciation and amortization, less income tax benefit (if any), adjusted to exclude: (i) gain from settlement of license liabilities and other agreements; (ii) gain from sale of gaming licenses; (iii) impairment of intangible assets; (iv) loss contingency expenses; (v) loss (gain) on foreign exchange rates; and (vi) stock-based compensation expenses.

Non-GAAP Adjusted diluted net income per share, another measure used by management to assess the Company’s operating performance, is defined as diluted net income per share plus depreciation and amortization, adjusted to exclude: (i) gain from settlement of license liabilities and other agreements; (ii) gain from sale of gaming licenses; (iii) impairment of intangible assets; (iv) loss contingency expenses; (v) loss (gain) on foreign exchange rates; and (vi) stock-based compensation expenses.

Adjusted EBITDA and Non-GAAP Adjusted diluted net income per share (the “Non-GAAP Measures”) are not financial measures defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Reconciliations of these Non-GAAP Measures to net income and diluted net income per share, their most directly comparable financial measures, calculated and presented in accordance with U.S. GAAP, are presented in the tables below. We use the Non-GAAP Measures to manage our business and evaluate our financial performance, as Adjusted EBITDA and Non-GAAP Adjusted diluted net income per share eliminate items that affect comparability between periods that we believe are not representative of our core ongoing operating business. Additionally, we believe that using the Non-GAAP Measures is useful to our investors because it enhances investors’ understanding and assessment of our normalized operating performance and facilitates comparisons to prior periods and our competitors’ results (who may define Adjusted EBITDA and Non-GAAP Adjusted diluted net income per share differently).

The Non-GAAP Measures are not recognized terms under U.S. GAAP and do not purport to be an alternative to revenue, income/loss from operations, net income, or cash flows from operations or as a measure of liquidity or any other performance measure derived in accordance with U.S. GAAP. Additionally, the Non-GAAP Measures are not intended to be measures of free cash flows available for our discretionary use, as they do not consider certain cash requirements, such as interest payments, tax payments, working capital requirements and debt service requirements. The Non-GAAP Measure have limitations as an analytical tool, and investors should not consider them in isolation or as a substitute for our results as reported under U.S. GAAP. Management compensates for the limitations of using the Non-GAAP Measures by using them to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business than would be presented by using only measures in accordance with U.S. GAAP. Because not all companies use identical calculations, the Non-GAAP Measures may not be comparable to other similarly titled measures of other companies.

The tables below provide reconciliations between net income and adjusted EBITDA, and diluted net income per share and Non-GAAP Adjusted diluted net income per share:

|  | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 |
| --- | ---: | ---: |
| Net income | $243,199 | $4,238,172 |
| Interest expense, net | 15,891 | 4,740 |
| Depreciation and amortization (1) | 237,050 | 253,935 |
| EBITDA | 496,140 | 4,496,847 |
| Gain from Wesco Settlement Agreement | - | (800,000) |
| Loss (gain) on foreign exchange rates | 225,675 | (2,328,115) |
| Stock-based compensation | 37,644 | - |
| Adjusted EBITDA | $759,459 | $1,368,732 |

(1) Includes $229,739 and $242,238 of amortization expenses included in cost of revenues for the three months ended June 30, 2026 and 2025, respectively.

Reconciliation between GAAP and Non-GAAP Adjusted diluted net income per share:

|  | Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 |
| --- | ---: | ---: |
| Diluted net income per share | $0.08 | $0.82 |
| Depreciation and amortization | 0.05 | 0.05 |
| Gain from Wesco Settlement Agreement | - | (0.17) |
| Loss (gain) on foreign exchange rates | 0.05 | (0.45) |
| Stock-based compensation | 0.01 | - |
| Non-GAAP Adjusted diluted net income per share | $0.19 | $0.25 |

|  | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 |
| --- | ---: | ---: |
| Net income | $1,194,772 | $5,260,785 |
| Interest expense, net | 19,096 | 17,750 |
| Depreciation and amortization (1) | 413,099 | 505,992 |
| EBITDA | 1,626,967 | 5,784,527 |
| Gain from settlement of purchase commitment liabilities | - | (175,460) |
| Gain from HC2 Holdings 2 Inc. Settlement Agreement | - | (500,000) |
| Gain from Wesco Settlement Agreement | - | (800,000) |
| Impairment of intangible assets | 27,928 | - |
| Loss (gain) on foreign exchange rates | 173,666 | (3,302,878) |
| Stock-based compensation | 412,675 | - |
| Adjusted EBITDA | $2,241,236 | $1,006,189 |

(1) Includes $399,271 and $476,169 of amortization expenses included in cost of revenues for the six months ended June 30, 2026 and 2025, respectively.

Reconciliation between GAAP and Non-GAAP Adjusted diluted net income per share:

|  | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 |
| --- | ---: | ---: |
| Diluted net income per share | $0.13 | $1.26 |
| Depreciation and amortization | 0.08 | 0.12 |
| Gain from settlement of purchase commitment liabilities | - | (0.04) |
| Gain from HC2 Holdings 2 Inc. Settlement Agreement | - | (0.12) |
| Gain from Wesco Settlement Agreement | - | (0.19) |
| Impairment of intangible assets | 0.01 | - |
| Loss (gain) on foreign exchange rates | 0.03 | (0.79) |
| Stock-based compensation | 0.08 | - |
| Non-GAAP Adjusted diluted net income per share | $0.33 | $0.24 |

## Controls and procedures

As filed, 5,793 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer, Chief Financial Officer and Chief Accounting and Compliance Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026. Based on this evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting and Compliance Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2026 because of the material weaknesses in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as discussed in Part II, Item 9A, “*Controls and Procedures”* of the 2025 Form 10-K, and that continued to exist as of June 30, 2026.

### Remediation of Material Weaknesses

We have not yet remediated the material weaknesses relating 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. We are actively engaged in the design and implementation of remedial measures to address the material weaknesses in our internal control over financial reporting. We are committed to improving our internal control processes and resolving our control deficiencies, including the material weaknesses identified above.

To date, we have taken and will continue to take the actions described below to remediate the identified material weaknesses. As the remediation efforts are ongoing, we will continue to evaluate and work to improve our internal control over financial reporting and may implement additional measures, or modify the remedial actions described below, as considered appropriate, to remediate the identified material weaknesses.

Steps taken to remediate the remaining material weaknesses include actions related to designing and maintaining effective monitoring procedures and controls to evaluate and monitor the effectiveness of our individual control activities, and minimum documentation requirements for significant accounting positions and management estimates, including consideration of underlying assumptions and judgments, where applicable, that are used in the financial statement preparation and reporting process. In addition, we have engaged qualified risk advisory consultants and technical accounting personnel, with experience in evaluating internal controls over financial reporting, along with hiring additional accounting staff, to further assist with our remediation efforts by independently assessing our monitoring procedures and controls, verifying segregation of duties are appropriately considered, and through performing tests of internal controls, verifying reviews over certain complex accounting analyses and significant accounting positions are performed by an independent reviewer, with an appropriate level of accounting knowledge, training, and experience.

We continue to evaluate the design and operating effectiveness of internal controls across various business processes and accordingly, our management plans to continue its efforts to remediate the identified material weaknesses and remains committed to improving our internal control processes, activities and resolving identified deficiencies.

If not remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our consolidated financial statements and a failure to meet our reporting and financial obligations. We plan to make continued progress in the coming months on the remediation plans described in our 2025 Form 10-K, under Part II, Item 9A, “*Controls and Procedures.”*

### Limitations on the Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) under the Exchange Act during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 15,077 characters.

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 2025 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in the 2025 Form 10-K are not the only risks facing us. 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.

***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.***

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 years ended December 31, 2025 and 2024, we identified certain material weaknesses in our internal control over financial reporting that continue to exist. 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. Our Chief Executive Officer, Chief Financial Officer and Chief Accounting and Compliance Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2026 because of the material weaknesses in our internal control over financial reporting as discussed in Part II, Item 9A, “Controls and Procedures” of the 2025 Form 10-K, and that continue to exist as of June 30, 2026.

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, 2025 and Item 4 of this Quarterly Report on Form 10-Q for further information on material weaknesses and our remediation plans.

***We depend on a relatively small number of franchises for a significant portion of our revenues and profits.***

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 *Le Mans Ultimate* franchise, which now accounts for the majority of our revenue. For the three months ended June 30, 2026 and 2025, revenues associated with our *Le Mans Ultimate* franchise accounted for approximately 75% and 76% of our total revenue, respectively. For the three months ended June 30, 2026, our top three customers accounted for 83% of our revenues. For the three months ended June 30, 2025, our top two customers accounted for 81% of our revenues. For the six months ended June 30, 2026 and 2025, revenues associated with our *Le Mans Ultimate* franchise accounted for approximately 76% and 78% of our total revenue, respectively. For the six months ended June 30, 2026 our top three customers accounted for 83% of our revenues, and for the six months ended June 30, 2025 our top two customers accounted for 84% of our revenues. No other customer accounted for 10% or more of our revenues in those periods. Our top three customers accounted for approximately 88% of our accounts receivable as of June 30, 2026 and our top four customers accounted for approximately 98% of our accounts receivable as of December 31, 2025. No other customer accounted for 10% or more of our accounts receivable in those periods. A reduction in sales from or loss of these customers would have a material adverse effect on our results of operations and financial condition.

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, especially our main customers, could negatively impact our business. Additionally, if the popularity of a franchise declines, we may have to write off the unrecovered portion of the underlying intellectual property assets, which could negatively impact our business. In the future, we expect this trend to continue with a relatively limited number of franchises producing a disproportionately high percentage of our revenues and profits.

***Certain provisions in our Certificate of Incorporation, our Amended and Restated Bylaws and Delaware law could limit attempts by our stockholders to replace or remove our board of directors or current management and limit the market price of our Class A common stock.***

Provisions in our Certificate of Incorporation and Amended and Restated Bylaws may have the effect of delaying or preventing changes in our board of directors or management including, but not limited to:

- establishing an advance notice procedure for stockholder proposals to be brought before an annual meeting (other than proposals to be included in our proxy statement pursuant to Rule 14a-8 under the Exchange Act at stockholders’ meetings), including proposed nominations of persons for election to our board of directors;
- requiring that stockholders who wish to bring stockholder proposals, including proposed nominations, before an annual meeting comply with the advance notice and procedural requirements set forth in the Amended and Restated Bylaws;
- authorizing an individual acting as chairman of a meeting of our stockholders to, for any or no reason, adjourn, recess, postpone, or cancel any such meeting;
- creating a classified board of directors of two staggered classes;
- prohibiting cumulative voting in the election of directors;
- providing our board of directors with the exclusive ability to fill director vacancies;
- prohibiting our stockholders from calling special meetings of stockholders; and
- prohibiting our stockholders from acting by written consent.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

***Our stockholder rights plan, along with certain provisions of our Certificate of Incorporation and Amended and Restated Bylaws and Delaware law could discourage, delay, or prevent a change in control that stockholders may consider favorable, which could adversely affect the trading price of our Class A Common Stock.***

On July 22, 2026, our Board of Directors approved and adopted the Rights Agreement and authorized and declared a dividend distribution of one Right for each outstanding share of the Class A Common Stock to stockholders of record as of the close of business on August 3, 2026. The complete terms of the Rights are set forth in the Rights Agreement, dated as of July 22, 2026, with ClearTrust, LLC, a Florida limited liability company, as rights agent. In general terms, subject to certain exceptions, the Rights Agreement imposes significant dilution upon any person or group (other than us and certain other Exempt Persons (as defined in the Rights Agreement)), that becomes the beneficial owner of twelve and a half percent (12.5%) or more of the Class A Common Stock following our first public announcement of the adoption of the Rights Agreement. The term “beneficial ownership” is defined in the Rights Agreement and includes, among other things, certain derivative arrangements. The significant dilution caused by the exercise of the rights makes an unsolicited acquisition of the company prohibitively expensive without approval from our Board of Directors. In connection with the Rights Agreement, on July 22, 2026 our Board also designated a new series of participating preferred stock. In addition, the Amended and Restated Bylaws adopted on July 22, 2026, among other things, enhance our advance notice procedures and disclosure requirements for stockholder nominations and proposals. We are also subject to provisions of Delaware law that may have anti-takeover effects.

These provisions, alone or in combination, could make it more difficult, or discourage, a merger, tender offer, or assumption of control by a substantial holder of our securities, or for our stockholders to change the composition of our Board, even in a transaction that some or all of our stockholders might consider to be in their best interests or in which our stockholders might receive a premium over the then-current market price of our Class A Common Stock. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our Class A Common Stock and could adversely affect the market price of our common stock and the ability of our stockholders to realize a premium for their shares.

As a result, third parties may be deterred from pursuing a merger, tender offer, or takeover attempt that stockholders might otherwise deem to be in their best financial interest.

***Our Board of Directors has the authority to issue “blank check” preferred stock, which could dilute the voting power and economic rights of holders of our Class A Common Stock and delay or prevent a change in control.***

Our Certificate of Incorporation authorizes our Board of Directors to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions thereof—including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, and sinking fund terms—without any further vote or action by the holders of our Class A Common Stock.

The issuance of shares of preferred stock could adversely affect the holders of our Class A Common Stock in several ways, including:

- *Dilution of Voting Power and Ownership*: If preferred shares are issued with super-voting rights or are convertible into a large block of Class A common stock, the voting power of existing holders of our Class A Common Stock will be diluted.
- *Economic Subordination*: Shares of preferred stock typically carry dividend preferences and liquidation preferences over common stock. In the event of a liquidation, dissolution, or winding up of the Company, preferred stockholders would be entitled to receive their contractual distributions before any distribution is made to holders of our Class A Common Stock.
- *Anti-Takeover Effect*: The authority to issue preferred stock without stockholder approval can be used as an anti-takeover defense (such as issuing a new series of preferred stock to a friendly investor or issuing preferred stock pursuant to the Rights Agreement). This could delay, deter, or prevent a merger, tender offer, or change in control that stockholders might otherwise consider to be in their best interests, including transactions that might offer a premium over the prevailing market price of our Class A Common Stock.

As of the date of this filing, our Board of Directors has no immediate plans or commitments to issue any shares of preferred stock other than pursuant to the Rights Agreement. However, we cannot assure you that our Board of Directors will not issue preferred stock in the future.

***Actions of activist stockholders could be disruptive and costly and could adversely affect our results of operations, financial condition, and/or share price***

While we strive to maintain constructive communications with our stockholders, we may, from time to time, be subject to demands from activist stockholders. Any activist campaign against the Company that contests, conflicts with, or seeks to change, our board composition, leadership, strategic direction, or business mix could have an adverse effect on us because: (i) responding to actions by activist stockholders could disrupt our operations, be costly or time-consuming, or divert the attention of our board of directors and senior management from their regular duties, including diverting their attention from the operation of our business and the execution of our strategic plans, which could adversely affect our results of operations or financial condition; (ii) perceived uncertainties as to our future direction, including as a result of possible changes to the composition of our board, may lead to the perception of a change in the direction of the business or lack of continuity, any of which may be exploited by our competitors, cause concern to our customers, employees, and/or business partners and result in the loss of potential business opportunities, or make it more difficult to attract and retain qualified personnel and business partners, and may adversely affect our relationships with vendors, customers, business partners, and other third parties; (iii) these types of actions could cause significant fluctuations in our share price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and (iv) if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders.

Filed Aug 14, 2026.
Source: SEC EDGAR, the filing index for accession 0001493152-26-038360. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.