Item 1.01. Entry into a Material Definitive Agreement.
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.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 above regarding the issuance by the
Company of the Acquired Shares to Motorsport Network as contemplated by the
Exchange Agreement is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On January 30, 2023, the Company issued a press release relating to the
transactions described in this Current Report on Form 8-K, which is attached
hereto as Exhibit 99.1.
The information in this Item 7.01, including Exhibit 99.1, is furnished and
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to
liabilities under that section, and shall not be deemed to be incorporated by
reference into any filing or other document under the Securities Act or the
Exchange Act, regardless of any general incorporation language in such filings
except as shall be expressly set forth by specific reference in such a filing or
document. This report will not be deemed an admission as to the materiality of
any information of the information contained in this Item 7.01, including
Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
4.1 Debt-For-Equity Exchange Agreement, dated as of January 30, 2023,
between Motorsport Games Inc. and Motorsport Network, LLC (included
in Exhibit 10.1)
10.1 Debt-For-Equity Exchange Agreement, dated as of January 30, 2023,
between Motorsport Games Inc. and Motorsport Network, LLC
99.1 Press Release dated January 30, 2023
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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