Motorsport Games Announces $1 Million Registered Direct Offering Priced At-the-Market Under Nasdaq Rules

Rhea-AI Summary

Motorsport Games (NASDAQ: MSGM) has announced a $1 million registered direct offering priced at-the-market under Nasdaq rules. The company will sell and issue 460,830 shares of Class A common stock (or pre-funded warrants) at $2.17 per share. In a concurrent private placement, MSGM will issue unregistered Series A and B warrants to purchase up to 460,830 shares each. The offering is expected to close around July 29, 2024. H.C. Wainwright & Co. is the exclusive placement agent. Motorsport Games plans to use the net proceeds for working capital and general corporate purposes. The offering is made under a shelf registration statement filed with the SEC on February 1, 2022.

Positive

• Raised $1 million in capital through registered direct offering
• Offering priced at-the-market under Nasdaq rules, potentially indicating fair market value
• Additional capital to be used for working capital and general corporate purposes

Negative

• Potential dilution of existing shareholders due to issuance of new shares
• Issuance of unregistered warrants may lead to further dilution if exercised
• Small offering size of $1 million may indicate investor interest or financial constraints

Insights

Financial Analyst

Motorsport Games' $1 million registered direct offering is a strategic move to bolster its financial position, but it comes with significant implications for existing shareholders. The offering price of $2.17 per share, priced at-the-market, suggests the company is capitalizing on its current market valuation. However, this will result in immediate dilution for existing shareholders.

The inclusion of Series A and B warrants adds complexity to the deal. If exercised, these warrants could lead to further dilution, potentially doubling the number of new shares. The exercise price of $2.17 for both warrant series indicates the company's expectation of share price stability or growth in the near to medium term.

Notably, the offering's size relative to Motorsport Games' market cap is substantial, signaling potential cash flow concerns. The stated use of proceeds for working capital and general corporate purposes lacks specificity, which may raise questions about the company's immediate financial needs and strategic direction.

Investors should closely monitor the company's cash burn rate and upcoming financial reports to assess the impact of this capital injection on Motorsport Games' operational runway and growth prospects. The involvement of H.C. Wainwright & Co. as the exclusive placement agent lends some credibility to the offering, but doesn't negate the need for careful scrutiny of the company's financial health and future plans.

Legal Expert

The structure of Motorsport Games' offering presents several legal and regulatory considerations. The company is utilizing a shelf registration statement for the common stock (or pre-funded warrants), which streamlines the offering process. However, the concurrent private placement of unregistered warrants under Section 4(a)(2) of the Securities Act and/or Regulation D adds a layer of complexity.

Key legal points to note:

• The offering is contingent on stockholder approval for the issuance of shares upon exercise of the unregistered warrants. This requirement could potentially delay the full execution of the deal and introduces an element of uncertainty.
• The use of pre-funded warrants in lieu of common stock provides flexibility but may complicate the company's capital structure.
• The private placement of unregistered warrants restricts their transferability and requires careful compliance with exemption requirements.

Investors should be aware that the unregistered nature of the warrants limits their liquidity until a registration statement becomes effective. Additionally, the company's commitment to file a registration statement for the warrant shares suggests future regulatory filings and potential further dilution.

The explicit disclaimer regarding the offer and sale of securities underscores the importance of regulatory compliance in such transactions. Potential investors must rely on the official prospectus and SEC filings for complete and accurate information, rather than this press release alone.

MIAMI, July 26, 2024 (GLOBE NEWSWIRE) -- Motorsport Games Inc. (NASDAQ: MSGM) (“Motorsport Games” or the “Company”), today announced that it has entered into definitive agreements for the sale and issuance of 460,830 shares of Class A common stock (or pre-funded warrants in lieu thereof) of the Company at an offering price of $2.17 per share (or per pre-funded warrant in lieu thereof), in a registered direct offering priced at-the-market under the Nasdaq rules. In a concurrent private placement, Motorsport Games will issue unregistered Series A warrants to purchase up to 460,830 shares of Class A common stock and unregistered Series B warrants to purchase up to 460,830 shares of Class A common stock, each will be exercisable on the effective date of stockholder approval of the issuance of the shares upon exercise of the unregistered common warrants (the “Stockholder Approval”), at an exercise price of $2.17 per share. The Series A warrants will expire five and one-half years following the Stockholder Approval and the Series B will expire 18 months following the Stockholder Approval. The closing of the offering is expected to occur on or about July 29, 2024, subject to the satisfaction of customary closing conditions.

H.C. Wainwright & Co. is acting as the exclusive placement agent for the offering.

The gross proceeds to the Company from this offering are expected to be approximately $1 million, before deducting the placement agent’s fees and other offering expenses. Motorsport Games intends to use the net proceeds from this offering for working capital and general corporate purposes.

A “shelf” registration statement (File Number 333-262462) relating to the offered shares of Class A common stock (or pre-funded warrants in lieu thereof) being offered in the registered direct offering (but excluding the unregistered common warrants and the shares of common stock underlying the unregistered common warrants issued in the concurrent private placement) was filed with the Securities and Exchange Commission (“SEC”) on February 1, 2022 and became effective on February 10, 2022. The offering of the shares of Class A common stock (or pre-funded warrants in lieu thereof) in the registered direct offering is being made only by means of a prospectus, including a prospectus supplement, forming a part of an effective registration statement. A prospectus supplement and accompanying prospectus relating to the registered direct offering will be filed with the SEC. Electronic copies of the prospectus supplement and accompanying prospectus may be obtained, when available, on the SEC’s website at www.sec.gov or by contacting H.C. Wainwright & Co., LLC at 430 Park Avenue, 3rd Floor, New York, NY 10022, by phone at (212) 856-5711 or e-mail at placements@hcwco.com.

The unregistered common warrants and the shares of common stock underlying the unregistered common warrants described above are being offered in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder have not been registered under the Securities Act, or applicable state securities laws. Accordingly, the unregistered common warrants and underlying shares of common stock may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Motorsport Games:

Motorsport Games is a racing game developer, publisher and esports ecosystem provider of official motorsport racing series. Combining innovative and engaging video games with exciting esports competitions and content for racing fans and gamers, Motorsport Games strives to make racing games that are authentically close to reality. The Company is the officially licensed video game developer and publisher for iconic motorsport racing series including the 24 Hours of Le Mans and the FIA World Endurance Championship, recently releasing Le Mans Ultimate in Early Access. Motorsport Games also owns the industry leading rFactor 2 and KartKraft simulation platforms. rFactor 2 also serves as the official sim racing platform of Formula E, while also powering F1 Arcade through a partnership with Kindred Concepts. Motorsport Games is also an award-winning esports partner of choice for the 24 Hours of Le Mans, creating the renowned Le Mans Virtual Series. Motorsport Games is building a virtual racing ecosystem where each product drives excitement, every esports event is an adventure, and every race inspires.

For more information about Motorsport Games visit: www.motorsportgames.com.

Forward Looking Statements

Certain statements in this press release which are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements in this press release that are not statements of historical fact may be deemed forward-looking statements. Words such as “continue,” “will,” “may,” “could,” “should,” “expect,” “expected,” “plans,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements include, but are not limited to, the statements concerning the completion of the offering, the satisfaction of customary closing conditions related to the offering, the anticipated use of proceeds therefrom and the receipt of stockholder approval.

All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of Motorsport Games and are difficult to predict. Examples of such risks and uncertainties include, without limitation, market and other conditions.

Additional factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements can be found in Motorsport Games’ filings with the Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as in its subsequent filings with the SEC. Motorsport Games anticipates that subsequent events and developments may cause its plans, intentions and expectations to change. Motorsport Games assumes no obligation, and it specifically disclaims any intention or obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law. Forward-looking statements speak only as of the date they are made and should not be relied upon as representing Motorsport Games’ plans and expectations as of any subsequent date. Additionally, the business and financial materials and any other statement or disclosure on, or made available through, Motorsport Games’ website or other websites referenced or linked to this press release shall not be incorporated by reference into this press release.

Website and Social Media Disclosure

Investors and others should note that we announce material financial information to our investors using our investor relations website (ir.motorsportgames.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media and blogs, to communicate with our investors and the public about our company and our products. It is possible that the information we post on our websites, social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on the websites, social media channels and blogs, including the following (which list we will update from time to time on our investor relations website):

Websites	Social Media
motorsportgames.com	Twitter: @msportgames Instagram: msportgames Facebook: Motorsport Games LinkedIn: Motorsport Games

The contents of these websites and social media channels are not part of, nor will they be incorporated by reference into, this press release.

Contacts:

Investors:
Investors@motorsportgames.com

Media:
PR@motorsportgames.com

FAQ

What is the size and price of Motorsport Games' (MSGM) recent offering?

Motorsport Games (MSGM) announced a $1 million registered direct offering, selling 460,830 shares of Class A common stock (or pre-funded warrants) at $2.17 per share.

When is the expected closing date for MSGM's recent offering?

The offering is expected to close on or about July 29, 2024, subject to customary closing conditions.

How does Motorsport Games (MSGM) plan to use the proceeds from the offering?

Motorsport Games intends to use the net proceeds from this offering for working capital and general corporate purposes.

What types of warrants are included in MSGM's private placement?

In the concurrent private placement, MSGM will issue unregistered Series A warrants (expiring in 5.5 years) and Series B warrants (expiring in 18 months), each to purchase up to 460,830 shares at $2.17 per share.