Motorsport Games (MSGM) risk factors, FY2025 10-K

Risks Related to Our Financial Condition and Liquidity

1. 01We may require additional capital to meet our financial obligations, and this capital might not be available on acceptable terms or at all27% rewritten
2. 02Restrictions under the Credit Agreement with Citibank may affect our ability to finance our operationsNew

Risks Related to Our Business and Industry

1. 03If we do not consistently deliver popular products or if consumers prefer competing products, our business may be negatively impacted
2. 04Our business and products are highly concentrated in the racing game genre, and our operating results may suffer if consumer preferences shift away from this genre
3. 05If we do not provide high-quality products in a timely manner, our business operations, financial performance, financial condition, liquidity, cash flows and/or results of operations may be negatively impacted
4. 06Declines in consumer spending and other adverse changes in economic, market and geopolitical conditions could have a material adverse effect on our business, financial condition and operating results
5. 07We depend on a relatively small number of franchises for a significant portion of our revenues and profits73% rewritten
6. 08Our ability to acquire and maintain licenses to intellectual property, especially for racing series, affects our revenue and profitability. Competition for these licenses may make them more expensive and increase our costs27% rewritten
7. 09Our business is partly dependent on our ability to enter into successful software development arrangements with third parties
8. 10Our business depends in part on the success and availability of platforms and mass media channels developed by third parties and our ability to develop commercially successful content, products, and services for those platforms
9. 11Third-party platform providers may be able to influence our products and costs
10. 12The increasing importance of free-to-play games to our business exposes us to the risks of that business model, including the dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game
11. 13We are subject to risks associated with operating in a rapidly developing industry and a relatively new market36% rewritten
12. 14We plan to generate a portion of our revenues from advertising and sponsorship during our esports events. If we fail to attract advertisers and sponsors to our gaming platform, tournaments or competitions, our revenues may be adversely affected
13. 15We are reliant on the retention of certain key personnel and the hiring of strategically valuable personnel, and we may lose or be unable to hire one or more of such personnel
14. 16Competition in the interactive entertainment industry is intense, and our existing and potential users may be attracted to competing products or other forms of entertainment
15. 17Our revenue may be harmed by the proliferation of “cheating” programs and scam offers that seek to exploit our games and players, which may negatively affect players’ game-playing experiences and our ability to reliably validate our audience metric reporting and may lead players to stop playing our games
16. 18Some of our players may make sales or purchases of virtual items used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue
17. 19The success of our business relies on our marketing and branding efforts, and these efforts may not be accepted by consumers to the extent we planned
18. 20Our games are subject to scrutiny regarding the appropriateness of their content. If we fail to receive our target ratings for certain titles, or if our retailers refuse to sell such titles due to what they perceive to be objectionable content, it could have a negative impact on our business
19. 21Government regulations applicable to us may negatively impact our business
20. 22We are exposed to seasonality in the sale of our retail products
21. 23Our retail products, online gaming platform and games offered through our gaming platform may contain defects
22. 24We may be held liable for information or content displayed on, retrieved from or linked to our gaming platform, or distributed to our users
23. 25We may experience security breaches and cyber threats
24. 26Our business could be adversely affected if our data privacy and security practices are inadequate, or are perceived as being inadequate, to prevent data breaches, or under the applicable data privacy and security laws generally
25. 27We depend on servers and Internet bandwidth to operate our games and digital services with online features. If we were to lose server capacity or lack sufficient Internet bandwidth for any reason, our business could suffer
26. 28A significant disruption in service on our website or platforms could damage our reputation and result in a loss of traffic and visitors, which could harm our business, brand, operating results and financial condition
27. 29Our business partners may be unable to honor their obligations to us, or their actions may put us at risk
28. 30Our efforts to expand into new products and services may subject us to additional risks
29. 31Failure to adequately protect our intellectual property, technology and confidential information could harm our business and operating results
30. 32The costs involved in enforcement of our intellectual property rights could harm our business, financial condition and results of operations
31. 33We may be subject to claims of infringement of third-party intellectual property rights
32. 34Our technology, content, and brands are subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement
33. 35We use open source software in connection with certain of our games and services, which may pose particular risks to our proprietary software, products, and services in a manner that could have a negative impact on our business
34. 36We rely on third-party technology to complete critical business functions. If that technology becomes unavailable or fails to adequately serve our needs and we cannot find alternatives, it may negatively impact our operating results
35. 37Our international operations are subject to increased challenges and risks29% rewritten
36. 38Catastrophic events may disrupt our business

Risks Related to Our Relationship with Driven Lifestyle

1. 39Because Driven Lifestyle’s interests may differ from ours or from those of our other stockholders, actions that Driven Lifestyle takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our Class A common stock
2. 40We are a “controlled company” within the meaning of the NASDAQ rules and, as a result, qualify for and may rely on exemptions from certain corporate governance requirements of NASDAQ. Our stockholders will not have the same protections afforded to stockholders of other companies that are subject to such requirements
3. 41Driven Lifestyle’s competitive position in certain markets may constrain our ability to build and maintain certain partnerships or relationships in the motorsport industry
4. 42Our inability to resolve in a manner favorable to us any potential conflicts or disputes that arise between us and Driven Lifestyle or its subsidiaries with respect to our past and ongoing relationships may adversely affect our business and prospects

Risks Related to Our Company

1. 43Our limited operating history makes it difficult to evaluate our current business and future prospects, and we may not be able to effectively grow our business or implement our business strategies
2. 44Impairment of our intangible assets has had, and in the future could have, a material adverse impact on our results of operations
3. 45We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to us will make our Class A common stock less attractive to investors
4. 46We may acquire other companies, technologies, or assets, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results
5. 47We may be subject to various legal proceedings, claims, litigation, governmental investigations or inquiries and other disputes from time to time. If the outcomes of any of these actions are adverse to us, it could have a material adverse effect on our business, results of operations and financial condition
6. 48Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition

Risks Related to Ownership of Our Class A Common Stock

1. 49Our Class A common stock may be delisted from Nasdaq, which could affect the market price and liquidity of our Class A common stock51% rewritten
2. 50Substantial future sales of our Class A common stock, or the perception that such sales may occur, could depress the price of our Class A common stock25% rewritten
3. 51Our certificate of incorporation has limitations on the liability of our directors, and we may have to indemnify our officers and directors in certain instances
4. 52Certain provisions in our charter documents 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
5. 53We expect that the price of our Class A common stock will fluctuate substantially
6. 54We have only a minimal number of shares of Class A Common Stock available for equity award grants under the Motorsport Games Inc. 2021 Equity Incentive Plan (the “Plan”)New
7. 55If securities industry analysts cease to publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our Class A common stock could be negatively affected
8. 56The dual class structure of our common stock may adversely affect the trading market for our Class A common stock
9. 57We do not intend to pay dividends for the foreseeable future25% rewritten
10. 58Our results of operations and financial condition are subject to management’s accounting judgments and estimates, as well as changes in accounting policies
11. 59The requirements of being a public company may require significant resources and divert management’s attention
12. 60If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired
13. 61We are subject to risks related to corporate and social responsibility and reputation
14. 62The shutdown of the U.S. federal government may adversely affect our businessNew