DEF: Motorsport Games Seeks Key Approvals for Funding, Equity

Motorsport Games Inc. calls for stockholder vote on critical equity plan expansion and warrant exercise to secure future funding and talent retention.

Summary

• Stockholders are asked to elect two Class II directors, John Delta and Guoquan (Paul) Huang, for two-year terms expiring at the 2028 Annual Meeting.
• Approval is sought to amend the 2021 Equity Incentive Plan to increase available Class A common stock for awards by 500,000 shares, bringing the total to 600,000 shares.
• Ratification of Grassi & Co., CPAs, P.C. as the independent registered public accounting firm for the year ending December 31, 2026, is on the agenda.
• A crucial proposal seeks approval for the exercise of warrants issued on July 29, 2024, to purchase up to 949,310 shares of Class A Common Stock, which could yield up to $2.1 million in gross proceeds.
• Stockholders will also vote on a proposal to adjourn the Annual Meeting if necessary to solicit further proxies for the warrant exercise approval.
• The Board of Directors unanimously recommends voting FOR all proposals.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing with significant caution. While management is actively addressing compensation and seeking critical approvals, the repeated failure to secure warrant exercise approval and the prior 'going concern' warning indicate substantial underlying financial and operational challenges that require immediate resolution.

Positives

• The $12 million Line of Credit with majority stockholder Driven Lifestyle was terminated on November 5, 2025, relieving the Company of a significant related-party debt.
• Executive base salaries were increased effective September 1, 2025, with Stephen Hood's salary rising to $485,000 and Stanley Beckley's to $300,000, following a market-based analysis.
• Catch-up bonuses for 2024 were approved for the CEO ($50,000) and CFO ($30,000), payable in September 2025.
• A new non-employee director compensation policy became effective September 1, 2025, providing competitive cash retainers and annual stock option awards.
• The company successfully raised approximately $0.9 million in net proceeds from a July 2024 offering.

Negatives

• The Company was unable to grant equity awards to executive officers in 2025 and directors in 2024 and 2025 due to insufficient shares available under the 2021 Equity Incentive Plan, impacting talent retention.
• Stockholder approval for the exercise of warrants issued on July 29, 2024, has been sought and not obtained at three previous meetings (October 25, 2024, April 25, 2025, and October 24, 2025).
• Grant Thornton LLP's audit report for the year ended December 31, 2023, included an explanatory paragraph describing conditions that raised substantial doubt about the Company's ability to continue as a going concern.
• The termination of the $12 million Line of Credit was partly due to the Company's belief that Driven Lifestyle would not fulfill future borrowing requests, indicating potential liquidity challenges.
• Two Section 16(a) reports were filed late: Guoquan (Paul) Huang's Form 3 on April 29, 2025, and Mike Zoi's Form 4 on February 25, 2026.

Risks

• Failure to approve Proposal No. 2 (Incentive Plan Increase) would prevent the Company from granting equity awards, potentially hindering its ability to attract, motivate, and retain key employees, officers, non-employee directors, and consultants.
• Failure to approve Proposal No. 4 (Warrant Exercise) means the Company cannot permit the exercise of the Warrants, foregoing up to approximately $2.1 million in potential gross proceeds, which could adversely impact its ability to fund operations.
• The Company may incur substantial additional costs and expenses by needing to hold further meetings to seek approval for the Warrant Exercise Proposal every six months until approved or warrants are no longer outstanding.
• Approval of Proposal No. 4 will result in dilution for existing stockholders, as an aggregate of 949,310 additional shares of Class A Common Stock would be outstanding upon full exercise of the Warrants.
• The sale of shares underlying the Warrants into the public market could materially and adversely affect the market price of the Class A Common Stock.
• The Company's previous auditor, Grant Thornton LLP, noted substantial doubt about the Company's ability to continue as a going concern as of December 31, 2023.

Future Outlook

The Company's future outlook is heavily dependent on securing stockholder approval for the proposed increase in its equity incentive plan and the exercise of warrants. These approvals are deemed critical for attracting and retaining talent, as well as for providing necessary funding to support ongoing operations. Management aims to address past liquidity concerns and enhance long-term stockholder value through these strategic initiatives.

Management Comments

• Our Board recommends that you vote FOR each of the nominees and FOR Proposal Nos. 2-5.
• Our Board is deeply committed to the Company, its stockholders and enhancing stockholder value and we thank you for your ongoing support and continued interest in Motorsport Games.
• The Board believes that it should be free to decide from time to time in any manner that is in the best interests of the Company and its stockholders whether or not the roles of Chairman of the Board and Chief Executive Officer should be separate.
• The Board believes that the 500,000 shares requested represents a reasonable amount of potential equity dilution, which will allow us to continue awarding equity awards, an important component of our compensation program.
• We believe that the Offering [July 2024], which yielded gross proceeds of approximately $1.0 million, was necessary in light of the Company's cash and funding requirements at the time.
• The Board believes that if the number of shares of the Company's common stock voted in favor of and entitled to vote at the Annual Meeting is insufficient to approve Proposal No. 4 (the Warrant Exercise Proposal) it is in the best interests of the stockholders to enable the Board to continue to seek to obtain a sufficient number of additional votes to approve any of the Warrant Exercise Proposal.

Industry Context

StockSavvy.ai notes that the gaming and technology sectors, where Motorsport Games operates, are highly competitive for talent. The emphasis on expanding the equity incentive plan and adjusting executive compensation reflects the industry's reliance on attracting and retaining skilled professionals through competitive remuneration packages, including equity. The Company's engagement with entities like Pimax Innovation Co. Limited, involved in extended reality (XR), aligns with broader industry trends towards immersive digital experiences and autonomous technologies, as evidenced by director Guoquan (Paul) Huang's expertise.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• No material legal proceedings to which any director or executive officer of the Company, or any associate of any director or executive officer of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
• At present, there is no pending litigation or proceeding involving any of its directors or executive officers regarding which indemnification is sought.

Related Party Transactions

• Driven Lifestyle Group LLC (majority stockholder): The $12 million Line of Credit, which previously provided liquidity, was terminated on November 5, 2025. Prior to termination, the Company believed Driven Lifestyle would not fulfill future borrowing requests.
• Driven Lifestyle Group LLC (majority stockholder): The Backoffice Services Agreement was revised on August 8, 2025 (effective July 1, 2025), reducing monthly fees from $12,500 to $5,000 (for July-August 2025) and then to $500 (from September 1, 2025) for U.S. payroll services only. Fees incurred were $87,000 in 2025 and $226,272 in 2024.
• Sharp Arrow Global Tech Ventures L.P. (significant shareholder): On April 11, 2025, the Company entered into a securities purchase agreement for a private placement, issuing 1,085,801 shares of Class A Common Stock and a pre-funded warrant for 377,836 shares, for gross proceeds of $1.61 million.
• Sharp Arrow Global Tech Ventures L.P.: Guoquan (Paul) Huang was appointed to the Board of Directors pursuant to the Purchase Agreement with this investor.
• Pimax Innovation Co. Limited (affiliate of Sharp Arrow Global Tech Ventures L.P.): A sponsorship arrangement in June 2025 generated approximately $25,000 in revenue.
• Pimax Innovation Co. Limited: Approximately $1,850 in gaming revenues recorded in December 2025.

Stakeholder Impact

• Shareholders: Potential dilution from the proposed increase in the equity incentive plan (500,000 shares) and the exercise of warrants (949,310 shares). Voting on critical proposals directly impacts future funding and corporate governance. The repeated failure to approve warrants could lead to further costs and liquidity issues.
• Employees/Management: The approval of the equity incentive plan increase is crucial for the Company's ability to attract, motivate, and retain key talent through equity awards, as no awards could be granted in 2025 due to insufficient shares. Executive compensation adjustments aim to align with market standards.
• Customers/Suppliers: The Company's ability to fund operations and retain talent could indirectly impact product development and service delivery.
• Creditors: The termination of the $12 million Line of Credit with Driven Lifestyle, while reducing related-party debt, also removes a potential source of liquidity, which could be a concern for other creditors.

Next Steps

• Stockholders to vote on five proposals at the Annual Meeting on April 17, 2026.
• If Proposal No. 4 (Warrant Exercise) does not receive sufficient votes, the Board may adjourn the Annual Meeting to solicit further proxies.
• The Company intends to announce voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K within four business days.
• The Compensation Committee will determine and disclose the amount of bonuses earned by executive officers for the year ended December 31, 2025, in a future Current Report on Form 8-K.
• The Company will continue to seek stockholder approval for the warrant exercise every six months if not approved at the upcoming meeting.
• Stockholder proposals for the 2027 Annual Meeting must be submitted by November 16, 2026, for inclusion in proxy materials, or between January 18, 2027, and February 17, 2027, for other proposals.
• Notice for universal proxy rules for the 2027 Annual Meeting is due by February 16, 2027.

Key Dates

Recommendation

A 'hold' recommendation is appropriate given the critical nature of the proposals and the Company's current financial situation. While the termination of the related-party line of credit and adjustments to executive compensation are positive steps, the repeated failure to secure stockholder approval for warrant exercises and the prior 'going concern' warning from auditors present significant risks. The approval of the equity incentive plan and warrant exercise is paramount for the Company's ability to fund operations and retain talent. Investors should closely monitor the outcome of these votes, as their success or failure will be a strong indicator of the Company's near-term viability and strategic execution. Until these fundamental issues are resolved, the stock remains highly speculative.

Keywords

Motorsport Games, SEC Filing, Proxy Statement, Annual Meeting, Director Election, Equity Incentive Plan, Stock Options, Warrants, Auditor Ratification, Corporate Governance, Dilution, Nasdaq, Financial Reporting, Gaming Industry, Executive Compensation