{"url_path":"/sec/msgm/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1821175/0001493152-26-022725-index.html","accession_number":"0001493152-26-022725","cik":"0001821175","ticker":"MSGM","issuer_name":"Motorsport Games Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1821175/0001493152-26-022725-index.html","primary_entity_key":"0001821175","primary_entity_name":"Motorsport Games Inc."},"word_count":1056,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors**\n\n \n\nIn\naddition to the other information set forth in this Report, you should carefully consider the factors discussed in “Risk Factors”\nin Part I, Item 1A of the 2025 Form 10-K, which could materially affect our business, financial condition or future results. The risks\ndescribed in the 2025 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that\nwe currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.\n\n \n\n**We\nhave identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses,\nor if we identify additional material weaknesses in the future, we may not be able to accurately or timely report our financial condition\nor results of operations, which may adversely affect our business and the trading price of our Class A common stock.**\n\n \n\nA\nmaterial weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is\na reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected\nand corrected on a timely basis. In connection with the audit of our consolidated financial statements for the years ended December 31,\n2025 and 2024, we identified certain material weaknesses in our internal control over financial reporting that continue to exist. The\nmaterial weaknesses identified relate to (i) our failure to design and maintain effective monitoring procedures and controls to evaluate\nthe effectiveness of our individual control activities; (ii) a lack of sufficient number of personnel with an appropriate level of accounting\nknowledge, training and experience to appropriately analyze, record and disclose accounting matters timely; and (iii) documentation of\ncertain complex accounting analyses and significant accounting positions that were not contemporaneously reviewed independently of the\npreparer. Our Chief Executive Officer and Chief Financial Officer have concluded\nthat our disclosure controls and procedures were not effective as of March 31, 2026 because of the material weaknesses in our internal\ncontrol over financial) as discussed in Part II, Item 9A, “Controls and Procedures” of the 2025 Form 10-K, and that continued\nto exist as of March 31, 2026\n\n \n\nIf\nwe are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting,\nor identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may\nbe unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and applicable listing\nrequirements, investors may lose confidence in our financial reporting, and the share price of our Class A common stock may decline as\na result. In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require\nadditional financial and management resources. See Part II, Item 9A – “Controls and\nProcedures – Management’s Annual Report on Internal Control over Financial Reporting” of our Annual Report on Form\n10-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\nand our remediation plans.\n\n \n\n30\n\n \n\n \n\n**We\ndepend on a relatively small number of franchises for a significant portion of our revenues and profits.**\n\n \n\nWe\nfollow a franchise model and a significant portion of our revenues has historically been derived from products based on a relatively\nsmall number of popular franchises, including our *Le Mans Ultimate* franchise, which now accounts for the majority of our revenue.\nFor the three months ended March 31, 2026 and 2025, revenues associated with our *Le Mans Ultimate*franchise accounted for approximately\n76% and 82% of our total revenue, respectively. For the three months ended March 31, 2026 and 2025, our top three customers accounted\nfor 84% and 86% of our revenues, respectively. No other distribution channel accounted for 10% or more of our revenues in those periods.\nOur top four customers accounted for approximately 99% and 98% of our accounts receivable as of March 31, 2026 and December 31, 2025,\nrespectively. No other distribution channel accounted for 10% or more of our accounts receivable in those periods. A reduction in sales\nfrom or loss of these distribution channels would have a material adverse effect on our results of operations and financial condition.\n\n \n\nDue\nto this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these\nfranchises, or the loss of any franchise, especially our two main distributors, could negatively impact our business. Additionally, if\nthe popularity of a franchise declines, we may have to write off the unrecovered portion of the underlying intellectual property assets,\nwhich could negatively impact our business. In the future, we expect this trend to continue with a relatively limited number of franchises\nproducing a disproportionately high percentage of our revenues and profits.\n\n \n\n**Certain\nprovisions in our charter documents and Delaware law could limit attempts by our stockholders to replace or remove our board of directors\nor current management and limit the market price of our Class A common stock.**\n\n \n\nProvisions\nin our certificate of incorporation and bylaws may have the effect of delaying or preventing changes in our board of directors or management\nincluding, but not limited to:\n\n \n\n \n●\nestablishing\nan advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons\nfor election to our board of directors;\n\n \n \n \n\n \n●\ncreating\na classified board of directors;\n\n \n \n \n\n \n●\nprohibiting\ncumulative voting in the election of directors;\n\n \n \n \n\n \n●\npermitting\nour board of directors to issue preferred stock without stockholder approval; and\n\n \n \n \n\n \n●\nprohibiting\nour stockholders from acting by written consent.\n\n \n\nThese\nprovisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult\nfor stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In\naddition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation\nLaw, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested”\nstockholder for a period of three years following the date on which the stockholder became an “interested” stockholder."}