MSGM Motorsport Games Inc

On January 30, 2023, Motorsport Games Inc. (the “Company”) entered into a debt-for-equity exchange agreement (the “Exchange Agreement”) with Motorsport Network, LLC (“Motorsport Network”) whereby the Company issued 338,983 shares (the “Acquired Shares”) of its Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), to Motorsport Network, which amount represents the aggregate number of shares of Class A Common Stock equal to $1,000,000 (the “Discharged Debt”), representing a portion of the Company’s outstanding debt (including the principal and not yet paid interest thereon) under that certain promissory note dated April 1, 2020, as amended on November 23, 2020 (as amended, the “Line of Credit”), held by Motorsport Network, divided by the lower of: (i) the Nasdaq Official Closing Price of the Class A Common Stock immediately preceding the signing of the Exchange Agreement, or (ii) the average Nasdaq Official Closing Price of the Class A Common Stock for the five trading days immediately preceding the signing of the Exchange Agreement. The Acquired Shares were issued in consideration for the cancellation of the Discharged Debt under the Line of Credit.

Under the Exchange Agreement, subject to conditions set forth therein, the Company agreed to file a registration statement with the Securities and Exchange Commission upon demand from Motorsport Network at any time within 60 days after date on which the transactions contemplated under the Exchange Agreement have been completed in order to register the resale of the Acquired Shares. The Exchange Agreement also granted certain piggyback registration rights to Motorsport Network.

Prior to the closing of the transactions contemplated under the Exchange Agreement, Motorsport Network beneficially owned 700,000 shares of Class A Common Stock, representing approximately 51.51% of the issued and outstanding shares of Class A Common Stock as of January 24, 2023. After the closing of the transactions contemplated under the Exchange Agreement, Motorsport Network will hold approximately 61.19% of the issued and outstanding shares of Class A Common Stock. Motorsport Network also beneficially owns 700,000 shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”) of the Company, representing all of the issued and outstanding shares of Class B Common Stock. Based upon the related party nature of the Exchange Agreement with Motorsport Network, a special committee of Company’s Board of Directors (the “Board”) comprised of independent and disinterested directors unanimously approved the terms of the Exchange Agreement and the transactions contemplated by the Exchange Agreement and, based on the recommendation of the special committee, the Board unanimously approved the terms of the Exchange Agreement and the transactions contemplated by the Exchange Agreement.

The Acquired Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and cannot be offered or sold in the United States absent effective registration or an applicable exemption from registration requirements. The Company is relying on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and/or by Rule 506 of Regulation D promulgated thereunder and on similar exemptions under applicable state laws.

The foregoing summary is incomplete and qualified in its entirety by reference to the Exchange Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.