Item
1.01. | Entry
into a Material Definitive Agreement. |
Registered
Direct Offering
On
February 1, 2023, Motorsport Games Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase
Agreement”) with the purchaser listed on the signature page thereto (the “Purchaser”), pursuant
to which the Company agreed to issue and sell to the Purchaser 183,020 shares (the “Registered Shares”) of the Company’s
Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), in a registered direct offering priced at-the-market
under Nasdaq rules (the “Offering”) for a purchase price of $21.40 per Registered Share.
The
Company expects to receive aggregate gross proceeds from the Offering of approximately $3.9 million, before deducting placement agent
fees and other offering expenses. The Offering is expected to close on or about February 2, 2023, subject to the satisfaction
of customary closing conditions. The Company intends to use the net proceeds from the Offering for development of multiple games, working
capital and general corporate purposes.
H.C.
Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement agent for the Offering, pursuant to the engagement
letter with the Company, dated as of January 9, 2023. Upon closing of the Offering, the Company will pay Wainwright a cash transaction
fee equal to 7.0% of the aggregate gross proceeds to the Company from the Offering, non-accountable expenses of $50,000 and
closing fees of $15,950. The Company also will issue to Wainwright (or its designees) warrants to purchase up to 10,981
shares of Class A Common Stock (the “Wainwright Warrants”), which is equal to 6.0% of the aggregate number of shares of Class
A Common Stock placed in the Offering, at an exercise price of $26.75 per share (which represents 125% of the purchase price
per Registered Share) and will expire five years after the commencement of sales under the Offering.
The
Registered Shares are being issued pursuant to an effective registration statement on Form S-3 that the Company filed with the Securities
and Exchange Commission (“SEC”) on February 1, 2022 (File No. 333-262462) and became effective on February 10, 2022, and
a base prospectus and prospectus supplement thereunder.
The
representations, warranties and covenants contained in the Purchase Agreement and the Wainwright Warrants were made solely for the benefit
of the parties thereto and may be subject to limitations agreed upon by the contracting parties. The foregoing descriptions of the Purchase
Agreement and the Wainwright Warrants do not purport to be complete and are qualified in their entirety by reference to the full text
of the Purchase Agreement and the Wainwright Warrants, copies of which are filed as Exhibits 4.1 and 10.1 hereto, respectively, and incorporated
by reference herein.
A
copy of the legal opinion of Snell & Wilmer L.L.P. relating to the Registered Shares is attached as Exhibit 5.1 hereto.
Debt-for-Equity
Exchange Agreement
On
February 1, 2023, the Company entered into a debt-for-equity exchange agreement (the “Exchange Agreement”) with Motorsport
Network, LLC (“Motorsport Network”) whereby the Company issued to Motorsport Network 441,402 shares of Class A Common Stock
(the “Acquired Shares”), which amount represents the aggregate number of shares of Class A Common Stock equal to $2,948,565.99
(the “Discharged Debt”), representing the Company’s remaining debt outstanding (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 $6.68, which is 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 1,038,983 shares
of Class A Common Stock, representing approximately 61.19% of the issued and outstanding shares of Class A Common Stock as of January
31, 2023. After the closing of the transactions contemplated under the Exchange Agreement and the Offering described above, Motorsport
Network will hold approximately 63.74% 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 description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Exchange Agreement, which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.