MIAMI - Motorsport Games Inc. (NASDAQ: MSGM), a developer and publisher of racing games, announced today that it has initiated definitive agreements for a registered direct offering and a concurrent private placement.
The company is set to sell 460,830 shares of its Class A common stock, or pre-funded warrants as an alternative, at a price of $2.17 each. The expected gross proceeds from the offering are approximately $1 million.
The offering, which is priced at-the-market under Nasdaq rules, also includes Series A and Series B warrants in a concurrent private placement. These warrants will be exercisable at the same price of $2.17 per share, contingent upon stockholder approval.
Series A warrants have a five and a half year lifespan post-approval, while Series B warrants will expire 18 months following approval. The closing of the offering is anticipated on or around July 29, 2024, subject to customary closing conditions.
H.C. Wainwright & Co. has been appointed as the exclusive placement agent for the transaction. Motorsport Games intends to allocate the net proceeds from this offering towards working capital and general corporate activities.
The offering utilizes a shelf registration statement filed with the Securities and Exchange Commission (SEC) on February 1, 2022, which became effective on February 10, 2022. The prospectus supplement and accompanying prospectus related to the offering will be available on the SEC's website or through H.C. Wainwright & Co.
The unregistered common warrants and the shares of common stock underlying them, described in the private placement, have not been registered under the Securities Act of 1933, as amended. Consequently, they may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Motorsport Games is known for developing and publishing games for iconic racing series such as the 24 Hours of Le Mans and the FIA World Endurance Championship. The company also operates esports competitions and owns simulation platforms rFactor 2 and KartKraft.
This financial move comes as part of Motorsport Games' strategy to bolster its working capital and enhance its corporate endeavors. The information provided in this article is based on a press release statement from Motorsport Games Inc.
In other recent news, Motorsport Games has reported a surge in revenues for Q1 2024, up 75.2% year-over-year, reaching $3 million. The net loss for the company decreased to $1.7 million, largely due to the success of their "Le Mans Ultimate" game, which exceeded sales expectations.
The company also elected John Delta as an independent Class II director for a two-year term, and shareholders ratified the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2024.
In addition to these developments, Motorsport Games regained compliance with NASDAQ's continued listing requirements, reflecting their commitment to strong corporate governance and financial integrity. This achievement was partly due to the implementation of a 2022 Restructuring Plan, which saved $6.7 million in annual costs.
Motorsport Games is planning a subscription service and content updates to further engage its user base. However, the company is also exploring various financial strategies to secure additional funding necessary for ongoing operations. These advancements are part of the company's broader strategy to create shareholder value and drive growth in the gaming and entertainment industry.
InvestingPro Insights
As Motorsport Games Inc. (NASDAQ: MSGM) forges ahead with its new capital-raising initiative, insights from InvestingPro shed light on the company's financial health and market performance. The developer and publisher of racing games holds a market capitalization of $5.91 million, reflecting its position in the industry. Despite the challenging market environment, the company has managed to maintain a gross profit margin of 62.99% over the last twelve months as of Q1 2024, which suggests a strong ability to generate revenue from its core operations.
InvestingPro Tips highlight that Motorsport Games is trading at a low revenue valuation multiple, which could signify a potential opportunity for investors seeking entry points into the gaming sector. Moreover, the company's balance sheet shows more cash than debt, providing a cushion that could be beneficial as it navigates through its cash-burning phase. These factors are essential for investors to consider in light of the company's recent financial moves.
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