NASDAQ: MSGM

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 any esport events during 2025 and 2024, we intend to leverage esports competitions to bring
wider awareness and engagement to our gaming products, while creating inspiring event spectacles for our viewers.

Company
Background

Motorsport
Games was formed in 2018 by Driven Lifestyle as a wholly-owned subsidiary in connection with the acquisition by Motorsport Games of a
controlling interest in 704Games Company, which previously held the exclusive license to be the official video game developer and publisher
for the NASCAR video game racing franchise, subject to certain limited exceptions. On October 3, 2023, we sold our NASCAR licensed rights
under that certain Second Amended and Restated Distribution and License Agreement with NASCAR Team Properties (“NTP”) (the
“NASCAR License”) to iRacing.com Motorsport Simulations, LLC (“iRacing”). Prior to the sale of our NASCAR License,
we had been the official video game developer and publisher for the NASCAR video game racing franchise and had the exclusive right to
create and organize esports leagues and events for NASCAR using our NASCAR racing video games, in each case, subject to certain limited
exceptions. Concurrently with the sale of our NASCAR License, we entered into an agreement with NTP pursuant to which we had a limited
non-exclusive right and license to, among other things, sell our NASCAR games and DLCs that were in our product portfolio through December
31, 2024 (the “NASCAR New Limited License”). We no longer sell NASCAR games and did not sell any NASCAR games during the year ended December 31, 2025.

We
entered into an agreement to facilitate the Le Mans Esports Series as part of a joint venture with Automobile Club de l’Ouest (“ACO”),
the organizer of the 24 Hours of Le Mans endurance race in 2019. Through our ownership interest in this joint venture, which was increased
to 51% from 45% in January 2021, we secured the rights to be the exclusive video game developer and publisher for the 24 Hours of Le
Mans race and the WEC, which the 24 Hours of Le Mans race is a part of, for a ten-year period. In addition, through this joint venture
with ACO, we have the right to create and organize esports leagues and events for the Le Mans Esports Series.

10

In
January 2021, we completed our initial public offering (“IPO”). Prior to our IPO, Motorsport Games was a wholly-owned subsidiary
of Driven Lifestyle and, following the completion of our IPO, Driven Lifestyle continues to be our controlling stockholder.

In
March 2021, we acquired all assets comprising the KartKraft computer video game from Black Delta Holdings PTY, Black Delta Trading Pty
Ltd and Black Delta IP Pty Ltd.

In
April 2021, we acquired the remaining equity interests in 704Games Company whereby 704Games Company merged with 704Games LLC, a newly
formed Delaware limited liability company and our wholly-owned subsidiary, with 704Games LLC being the surviving entity in such merger
(collectively referred to as “704Games” herein).

In
April 2021, we also acquired Studio397, the company behind the industry leading rFactor 2 racing simulation platform, from Luminis International
BV. Following this acquisition, Studio397 continues its work on the rFactor 2 platform while also developing the physics and handling
models for our other official games. We continue to utilize our resources and expertise to enhance the rFactor 2 platform, especially
in areas highlighted by the racing community.

Our
Products

Game
Products Portfolio

We
develop and publish racing video games for PCs through various digital channels, including full-game and DLCs.

Our
current video game catalog includes the following titles:

Game

Image

Overview

Platforms

Release
Date

rFactor
2

rFactor
2 is a realistic racing simulation game. It features mixed class road racing with realistic dynamics, an immersive sound environment,
and stunning graphics, that are perfect for top-level esports and a rich single-player experience. Content updates were released
in 2022 and 2023, as well as the rFactor 2: RaceControl multiplayer update in October 2023.

Microsoft
Windows via Steam

March
28, 2013

KartKraft

KartKraft
is a kart racing simulator, which was released in January 2022.

Microsoft
Windows via Steam

January
26, 2022

(full
release)

Le
Mans Ultimate

Le
Mans Ultimate is the official game of the FIA World Endurance Championship and 24 Hours of Le Mans. DLC updates were released in
July 2024, September 2024, December 2024, February 2025, June 2025, September 2025 and December 2025.

Microsoft
Windows via Steam

February
20, 2024

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.

11

Esports
Partnerships and Franchises

We
recognize the growing importance and business viability of esports, especially within the racing and motorsport genres. In recognition
of this importance, we manage and operate the esports platforms for numerous racing series and organizations. We also continue to leverage
esports competitions to bring wider awareness and engagement to our gaming products, while creating inspiring event spectacles for our
viewers. 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 the recurring
portion of our esports segment outside of Le Mans.

Revenues

We
currently generate revenue primarily by selling our racing video game products for PCs through various digital channels, including full-game
and downloadable content, as well as our RaceControl subscription service. In addition, we began providing product development services to third parties for the first time in 2022 that
included the ongoing support and maintenance of developed software.

During
the years ended December 31, 2025 and 2024, we did not generate any revenue from our esports business. Prior to 2024, our esports
business generated revenues from sponsorships, advertising and media rights for events and competitions. If audience patterns
continue to grow, we believe the esports business has the potential to generate incremental revenues through the further sale of
media rights to our esports events and competitions, as well as, among other things, merchandising.

Marketing,
Sales, and Distribution

Many
of our products contain software that enables us to connect with our gamers directly, including through customized advertising and in-game
messaging based on customer preferences and trends. This provides a significant marketing tool that allows us to communicate and market
directly to our customers.

Other
direct marketing efforts include activities on Facebook, X (formerly Twitter), Twitch, YouTube and other online social networks, online
advertising, public relations activity, broadcast advertising, participation in cooperative advertising programs, and product sampling
through demonstration software distributed through the Internet or the digital online services provided by our partners.

We
also are able to sell directly to consumers through various digital platforms. Our products and content are available for consumers to
purchase and download at their convenience directly to their PC through our platform partners, including Steam and Genba.

Customer
Concentration

For the year ended December 31, 2025, sales through one of our main distribution channels accounted for approximately 64% of our consolidated
revenues and approximately 47% of our accounts receivable as of December 31, 2025. For the year ended December 31, 2024, sales through
three of our main distribution channels accounted for approximately 86% of our consolidated revenues and approximately 77% of our accounts
receivable as of December 31, 2024. A reduction in sales from or loss of these distribution channels would have a material adverse effect on the Company’s results of
operations and financial condition.

12

Strategic
Licenses and Partnerships

24
Hours of Le Mans

On
March 15, 2019, we formed Le Mans Esports Series Limited as a joint venture between Motorsport Games and ACO with the primary purpose
of carrying on the promotion of and running of an esports event business replicating races of the WEC and the 24 Hours of Le Mans race
on an electronic gaming platform. Through our ownership interest in this joint venture, which was increased to 51% from 45% in January
2021, we secured the rights to be the exclusive video game developer and publisher for the 24 Hours of Le Mans race and the WEC through
a separate license agreement. This license expires 10 years beginning from the date of our first release of a WEC or Le Mans race video
gaming product with the term automatically renewing for an additional ten-year term unless ACO provides written notice of its intent
not to renew. In exchange for such license, we agreed to fund up to €8,000,000 (approximately $9,391,000 as of December 31, 2025)
as needed for development of the video game products, to be contributed on an as-needed basis during the term of the license. As of December
31, 2025, we have funded approximately $8.8 million for such development. Additionally, we are obligated to pay ACO an annual payment
beginning from the time of the launch of the first video game product and continuing on each anniversary thereof for the term of the
license. In addition, through this joint venture, we have the right to create and organize esports leagues and events for the 24 Hours
of Le Mans race, the WEC and the 24 Hours of Le Mans Virtual event through certain additional license agreements. These additional license
agreements, which were granted on a royalty-free basis, each expire January 25, 2031 with the term automatically renewing for an additional
ten-year term unless ACO provides written notice of its intent not to renew. This joint venture shall continue until the earlier of the
date on which the parties cease to be beneficially entitled in the aggregate to 25% or more of the equity share capital of the joint
venture, the parties otherwise cease to control the affairs of the joint venture or the date of the commencement of the winding-up of
the joint venture. If certain events of defaults occur, the non-defaulting party has a call option pursuant to which it can force the
defaulting party to sell all (but not part) of its ownership in the joint venture in accordance with the joint venture agreement.

Epic
Games

On
August 11, 2020, through our wholly owned subsidiary, MS Gaming Development LLC, we entered into a licensing agreement with Epic Games
International (“Epic”) for worldwide licensing rights to Epic’s proprietary computer program known as the Unreal Engine
4. This Agreement was assigned from MS Gaming Development LLC to Motorsport Games Inc. on September 3, 2021.

Pursuant
to the agreement, we were granted a nonexclusive, non-transferable and terminable license to develop, market and sublicense (under
limited circumstances and subject to conditions of the agreement) certain products using the Unreal Engine 4 for our next generation
of games. In exchange for the license, the agreement required us to pay Epic an initial license fee, royalties, support fees and
supplemental license fees for additional platforms. During a two-year support period, Epic was required to use commercially
reasonable efforts to provide us with updates to the Unreal Engine 4 and technical support via a licensee forum. After the
expiration of the support period, Epic has no further obligation to provide or to offer to provide any support services. The
agreement was effective until terminated under the provisions of the agreement; however, pursuant to the terms of the agreement, we
could only actively develop new or existing authorized products during a five-year active development period, which ended on August
11, 2025.

13

Product
Development and Support

We
develop and produce our titles using a model in which a group of creative, technical, and production professionals, including among others,
designers, producers, programmers, artists, and sound engineers, in coordination with our marketing, finance, analytics, sales, and other
professionals, has responsibility for the entire development and production process, including the supervision and coordination of, where
appropriate, external resources. We believe this model allows us to deploy the best resources for a given task, by supplementing our
internal expertise with top-quality external resources on an as-needed basis.

In
addition to our experienced development team, we also rely, in part, on third-party software developers for the partial development of
our titles. From time to time, we also acquire the license rights to publish and/or distribute software products.

We
also provide various forms of product support. Central technology and development teams review, assess, and provide support to products
throughout the development process. Quality assurance personnel are also involved throughout the development and production of published
content. We subject all such content to extensive testing before public release to ensure compatibility with appropriate hardware systems
and configurations and to minimize the number of bugs and other defects found in the products. To support our content, we generally provide
rapid game support to players through various means, primarily online through our social media channels.

Competition

The
interactive entertainment industry is intensely competitive and new interactive entertainment software products and platforms are regularly
introduced. We believe that the main competitive factors in the interactive entertainment industry include: product features, game quality,
and playability; brand name recognition; compatibility of products with popular platforms; access to distribution channels; online capability
and functionality; ease of use; price; marketing support; and quality of customer service.

We
compete with other publishers of virtual racing video games for console, PC, and mobile entertainment, including Codemasters, iRacing
and other major video game publishers and esports companies, such as Electronic Arts. In addition to third-party software competitors,
integrated video game console hardware and software companies, such as Microsoft, Sony, and Nintendo, compete directly with us in the
development of game titles for their respective platforms, including titles in the motorsport racing genre, even though they generally
cannot create branded Le Mans games for which we hold an exclusive license. A number of software publishers have developed and commercialized,
or are currently developing, online games for use by consumers, and we must compete with them for our audience base.

Furthermore,
as there are relatively low barriers to entry to developing mobile or online free-to-play or other casual games, we expect new competitors
to enter the market and existing competitors to allocate more resources to developing and marketing competing games and applications.
We compete, or may compete, with a vast number of small companies and individuals who are able to create and launch casual games and
other content using relatively limited resources and with relatively limited start-up time or expertise. Competition for the attention
of consumers on mobile devices is intense, as the number of applications on mobile devices has been increasing dramatically, which, in
turn, has required increased marketing to garner consumer awareness and attention. This increased competition could negatively impact
our business. In addition, a continuing industry shift to free-to-play games could result in a reprioritization of our other products
by traditional retailers and distributors.

14

In
a broad sense, we compete for the leisure time and discretionary spending of consumers with other interactive entertainment companies,
as well as with providers of different forms of entertainment, such as film, television, social networking, music and other consumer
products.

Seasonality
in Our Business

Historically,
we have seen a high degree of seasonality in our business and financial results due to the introduction of seasonal video game updates.
We generally aim to synchronize these yearly video game updates with the start of the new racing season and race calendars. Overall,
our sales volumes are strongest around the time we launch our new products. We expect similar patterns for new racing series we are or
may be in the process of developing and publishing in the future. We have also historically experienced a higher demand for our games
during our fourth calendar quarter due to seasonal holiday demand.

Human
Capital

Our
business relies on our ability to attract and retain the right team to enable us to be a game developer, publisher and esports ecosystem
provider of official motorsport racing series. Our headcount as of December 31, 2025 was 44, made up of 26 full-time employees and 18
contractors, with 32 people in total dedicated to game development, located primarily in the United States of America and Europe. None
of our employees were covered by collective bargaining agreements, and we believe that relations with our employees are generally good.

Government
Regulation

We
are subject to various federal, state and international laws and regulations that affect companies conducting business on the
Internet and mobile platforms, including those relating to privacy, use and protection of player and employee personal information
and data (including the collection of data from minors), the Internet, behavioral tracking, mobile applications, content,
advertising and marketing activities (including sweepstakes, contests and giveaways), and anti-corruption. In addition, laws and
regulations relating to user privacy, including children’s data privacy, electronic contracts and communications, mobile
communications, data collection, retention, consumer protection, and publishing activities, including production and delivery of
content, advertising, localization, and information security have been adopted or are being considered for adoption by many
jurisdictions and countries throughout the world. These laws, including the General Data Protection Regulation and the California
Consumer Privacy Act, which may restrict our ability to gather and use data about our users, or could harm our business by limiting
the products and services we can offer consumers or the manner in which we advertise or offer them. Data privacy, data protection,
localization, security and consumer-protection laws are evolving, and the interpretation and application of these laws in the United
States (including compliance with the California Consumer Privacy Act), Europe (including compliance with the General Data
Protection Regulation), and elsewhere often are uncertain, contradictory and changing. It is possible that these laws may be
interpreted or applied in a manner that is adverse to us or otherwise inconsistent with our practices, which could result in
litigation, regulatory investigations and potential legal liability or require us to change our practices in a manner adverse to our
business. As a result, our reputation and brand may be harmed, we could incur substantial costs, and we could lose both gamers and
revenue. Furthermore, the costs of compliance with these laws may increase in the future as a result of the adoption of new laws,
amendments, and changes in interpretation. Any failure on our part to comply with these laws or the application of these laws in an
unanticipated manner may harm our business and result in penalties or significant legal liability.

Many
of these laws and regulations are continuously evolving and developing, and the application to, and ultimate impact on, us is uncertain.
Additional laws in all of these areas are likely to be passed
in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit
the personal information and data of our customers or employees, communicate with our players, and deliver products and services, and
may significantly increase our compliance costs. As our business expands to include new uses or collection of data that are subject to
privacy or security regulations, our compliance requirements and costs will increase, and we may be subject to increased regulatory scrutiny.
See Part I, Item 1A, “Risk Factors—Risks Related to Our Business and Industry—Government
regulations applicable to us may negatively impact our business” of this Report for additional information.

Intellectual
Property

Our
business is based on the creation, acquisition, use and protection of intellectual property. Some of this intellectual property is in
the form of software code, trademarks and copyrights, and trade secrets that we use to develop our games and to enable them to run properly
on multiple platforms. Other intellectual property we integrate includes audio-visual elements, including graphics, music and interface
design.

While
most of the intellectual property we use has been created or acquired by us, we have licensed rights to certain significant proprietary
intellectual property. We have also licensed rights from third parties to use certain significant marquee racing brands and related intellectual
property (See, “Strategic Licenses and Partnerships”). These agreements typically limit our use of the third party’s
respective intellectual property to specific uses and for specific time periods, in consideration for up-front and recurring royalty
payments that are typically based upon our sales of the respective products.

15

We
protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We
control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees
and contractors, and nondisclosure agreements with third parties. We also engage in monitoring and enforcement activities with respect
to infringing uses of our intellectual property by third parties.

In
addition to these contractual arrangements, we also rely on a combination of trade secret, copyright, trademark, trade dress and domain
names to protect our games and other intellectual property. We typically own the copyright to the software code to our content, as well
as the brand or title name trademark under which our games are marketed. We pursue the registration of our domain names, trademarks,
and service marks in the United States and in certain locations outside the United States.

Corporate
History and Available Information

Motorsport
Gaming US LLC was organized as a limited liability company on August 2, 2018 under the laws of the State of Florida. On January 8, 2021,
Motorsport Gaming US LLC converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Motorsport
Games Inc. in connection with our IPO. Effective as of January 8, 2021, 100% of the membership interests held by the sole member of Motorsport
Gaming US LLC, Driven Lifestyle, converted into an aggregate of (i) 700,000 shares of Class A common stock of Motorsport Games Inc.,
which have 1 vote per share (the “DL Initial Class A Shares”) and (ii) 700,000 shares of Class B common stock, which have
10 votes per share, of Motorsport Games Inc., which represented all of the outstanding shares of Class A and Class B common stock immediately
following the corporate conversion. Driven Lifestyle is the only holder of shares of the Company’s Class B common stock and does
not have any transfer, conversion, registration, or economic rights with respect to such shares of Class B common stock.

Our
Internet address is motorsportgames.com. We regularly file reports with the SEC, including our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We make available
free of charge through our website copies of these reports as soon as reasonably practicable after such documents are electronically
filed with, or furnished to, the SEC. The SEC also maintains a website, sec.gov that contains the reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC. The information contained on our website is
not included as a part of, or incorporated by reference into, this Report.