DEF 14C: Motorsport Games Inc. Announces Approval of Pre-Funded Warrant Exercise and Right of First Refusal

Motorsport Games Inc. informs stockholders of the approval by the majority stockholder and the Board of Directors for the exercise of a pre-funded warrant and the granting of a right of first refusal to certain investors.

Summary

• Motorsport Games Inc. has filed an information statement regarding corporate actions approved by its Board of Directors and the majority stockholder.
• These actions include the authorization of the exercise of a pre-funded warrant issued on April 11, 2025, and the approval of granting a right of first refusal to investors who purchased securities under a Securities Purchase Agreement.
• The majority stockholder, holding 83.28% of the voting power, approved these actions via written consent, negating the need for a stockholder meeting.
• The pre-funded warrant allows the purchase of up to 377,836 shares of Class A Common Stock at an exercise price of $0.0001 per share.
• The right of first refusal grants investors the opportunity to participate in future equity financings, up to 100% of the offering amount, subject to certain conditions and Nasdaq regulations.
• The company expects the corporate actions to be effective on May 29, 2025.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company had to take action to regain Nasdaq compliance, it successfully raised capital and is moving forward with its plans. The document is primarily informational.

Positives

• The exercise of the pre-funded warrant and the private placement provided Motorsport Games with approximately $2.35 million in net proceeds.
• The capital injection helped the company regain compliance with Nasdaq's minimum stockholders equity requirement.
• The company has secured additional funding for general corporate purposes.

Negatives

• The company was previously notified by Nasdaq that it was not in compliance with the Stockholders Equity Requirement.
• The company's stockholders equity as of December 31, 2024, was $1,226,002, which is below the Nasdaq minimum of $2,500,000.
• The granting of a right of first refusal to investors could limit the company's flexibility in future financings.

Risks

• Nasdaq will continue to monitor the company's ongoing compliance with continued listing requirements, and failure to maintain compliance could result in delisting.
• The company's reliance on private placements for funding may indicate underlying financial instability.
• The right of first refusal granted to investors could potentially hinder the company's ability to secure the best possible terms in future financings.

Future Outlook

The company anticipates that the Corporate Actions will be effective on May 29, 2025, and Nasdaq will continue to monitor the company's ongoing compliance with the continued listing requirements.

Management Comments

• The Board determined that it was necessary to raise additional funds for general corporate purposes and to increase stockholders equity.
• The Board considered numerous other alternatives to the transaction, none of which proved to be feasible or, in the opinion of the Board, would have resulted in aggregate terms equivalent to, or more favorable than, the terms obtained in the Private Placement.

Industry Context

Many small-cap companies in the gaming and esports industry face challenges in maintaining Nasdaq listing compliance, often requiring them to raise capital through private placements or other means.

Comparison to Industry Standards

• The use of pre-funded warrants and rights of first refusal is a relatively common practice for small-cap companies seeking to raise capital.
• Comparable companies that have utilized similar financing structures include those in the software and technology sectors facing liquidity constraints.
• The specific terms of the warrant and right of first refusal, such as the exercise price and percentage of future financings covered, are generally negotiated on a case-by-case basis.

Stakeholder Impact

• Shareholders are being informed of corporate actions that will affect the company's capital structure.
• The company's ability to maintain its Nasdaq listing is crucial for shareholder value.
• Employees and other stakeholders benefit from the company's improved financial stability.

Next Steps

• The company will provide the Information Statement to stockholders of record as of April 10, 2025.
• The company anticipates the Corporate Actions will be effective on May 29, 2025.
• Nasdaq will continue to monitor the company's ongoing compliance with the continued listing requirements.

Key Dates

Keywords

Motorsport Games, Pre-Funded Warrant, Right of First Refusal, Stockholders Equity, Nasdaq, Private Placement, Corporate Actions, Financing