Motorsport Games Announces Transformative 2022

2022 Restructuring Program designed to enhance Profitability and Cash Flow – Expected to generate roughly $4 million in Annualized Cost Reductions by the top of 2023

Financing Commitment will Improve Capital Structure and Deliver New Funding for the Business  

Planned Reverse Stock Split Expected to Allow Motorsport Games to Re-gain Compliance with NASDAQ’s Continued Listing Standards

MIAMI, Sept. 08, 2022 (GLOBE NEWSWIRE) — Motorsport Games Inc. (NASDAQ:MSGM) (“Motorsport Games” or the “Company”) right now introduced a number of vital steps ahead in strengthening the Company’s business, capital construction and basis for reaching future development.

First, the Company executed a Support Agreement with its majority stockholder, Motorsport Network, LLC (“Motorsport Network”), pursuant to which Motorsport Network not too long ago paid a $3 million money advance to Motorsport Games underneath the phrases of the events’ pre-existing line of credit score. 

Second, the Company introduced a brand new organizational restructuring program (the “2022 Restructuring Program”) that’s anticipated to generate materials annualized price reductions of roughly $4 million by the top of 2023. The aim of the 2022 Restructuring Program is to construct a stronger international business operation, improve the Company’s price effectivity and enhance the Company’s working margins. 

In an effort to re-gain compliance with NASDAQ’s continued itemizing requirements, the Company additionally introduced its plans to impact a 1-for-10 reverse inventory cut up through the fourth quarter of 2022, following stockholder approval. Motorsport Network agreed to train its mixed 94% voting energy to assist the reverse inventory cut up at a particular assembly anticipated to be held shortly.

Dmitry Kozko, the Company’s CEO, said, “Today’s announcement represents an important, necessary, and logical next step forward for Motorsport Games. The financing commitment and the launch of the new restructuring program represent our plans to optimize our business for the future and create a more optimal business structure that is designed to achieve success in terms of long-term profitability. The 2022 Restructuring Program, which we are implementing immediately, is expected to create a stronger global business operating model, enhance cost efficiency and improve profit margins to drive growth in operating income and Adjusted EBITDA. With the increased liquidity, and a more efficient and streamlined business, we are taking steps to becoming a stronger, more financially sound organization, while being in a better position to take on opportunities within the gaming industry and continuing to deliver for our key stakeholders and, most importantly, our deeply dedicated racing fans. That said, we recognize that we have additional work to do in terms of reinforcing our liquidity for the long-term and managing our business in these volatile markets.” 

Oliver Ciesla, CEO of Motorsport Network, mentioned, “At Motorsport Network, we are proud of the recent progress the Motorsport Games team has been making, especially on the game development side, thus, we decided to provide additional working capital to Motorsport Games. In addition, Motorsport Games has an exclusive promotion agreement with Motorsport Network under which Motorsport Games can exclusively advertise its products on our Motorsport Network channels in front of up to 62 million monthly unique users. To all motorsport series that are partners of Motorsport Games, this offers a unique marketing advantage. Also, our recent Global fan surveys with Formula 1, INDYCAR and MotoGP show the significant crossover of young gamers with motorsport fans, who desire interactive entertainment such as Motorsport Games strives to provide. With this, Motorsport Network is a strong believer in Motorsport Games’ future to successfully produce and market great interactive entertainment for the global motorsport fans and beyond.”

2022 Restructuring Program and Cost Reductions

The 2022 Restructuring Program is designed to scale back the Company’s advertising, normal and administrative bills, enhance the Company’s revenue and Adjusted EBITDA and maximize effectivity, money stream and liquidity.

Through the 2022 Restructuring Program, the Company expects to get rid of roughly 20% of its overhead prices worldwide, together with budgeted open positions, and ship roughly $4 million of complete annualized price reductions by the top of 2023. The fast headcount price reductions are anticipated to ship annualized price reductions of roughly $2.5 million by the top of 2022, with further actions to be taken throughout 2022 anticipated to generate a further $1.5 million of annualized price reductions by the top of 2023. 

The 2022 Restructuring Program contains right-sizing the group and working with extra environment friendly workflows and processes. The main elements of the organizational restructuring contain consolidating sure features; decreasing layers of administration, the place acceptable, to extend accountability and effectiveness; and streamlining assist features to replicate the brand new organizational construction. The leaner organizational construction can be anticipated to enhance communication stream and cross-functional collaboration, leveraging the extra environment friendly business processes. In addition, given the continuing unsure financial surroundings and the potential impact that it may have on web gross sales, this motion may also present the Company with further flexibility.

In reference to implementing the 2022 Restructuring Program, the Company expects to acknowledge throughout 2022 roughly $0.1 million to $0.3 million of complete pre-tax restructuring and associated costs, consisting primarily of employee-related prices, similar to severance, retention and different contractual termination advantages. The Company expects that considerably all of those restructuring costs will likely be paid in money throughout 2022, with the steadiness, if any, anticipated to be paid in 2023. The quantities and timing of all estimates are topic to vary till finalized and should differ materially based mostly on varied elements. See “Forward-Looking Statements” under.

Financing Commitment

The settlement reached with Motorsport Network will present the Company with $3 million in money which the Company plans to make use of for normal company functions and dealing capital. As a results of such money funding, the Company has available roughly $4.5 million of money. The Company continues to work with its monetary advisors on longer-term options to its liquidity wants. 

Reverse Stock Split

The Company additionally introduced right now that its Board of Directors accredited a reverse cut up of its Class A and Class B widespread inventory at a 1-for-10 cut up ratio. Pursuant to the Support Agreement, Motorsport Network agreed to vote all of its shares of Class A and Class B widespread inventory, representing roughly 94% of the mixed voting energy of the Company’s Class A and Class B widespread inventory, in favor of the reverse inventory cut up and in favor of any required actions associated to such reverse inventory cut up. With Motorsport Network’s settlement to supply its approval, the Company could have ample shareholder assist to approve the cut up on the particular assembly of stockholders.

The reverse inventory cut up could be meant to extend the per share buying and selling worth of the Company’s Class A typical inventory, which the Company believes could make it extra enticing to a broader vary of institutional and different buyers. The reverse inventory cut up would additionally scale back sure of the Company’s compliance prices, similar to NASDAQ’s itemizing charges, and could be meant to fulfill the Company’s compliance with the NASDAQ’s minimal closing bid worth requirement for continued itemizing. The identical reverse cut up ratio will likely be used to impact the reverse inventory cut up of each the Company’s Class A and Class B widespread inventory; accordingly all stockholders will likely be affected proportionately.

No fractional shares will likely be issued in reference to the reverse inventory cut up. Shares that will in any other case have resulted in fractional shares from the reverse inventory cut up will likely be collected and pooled by the Company’s switch agent and bought within the open market. The proceeds will likely be allotted to the stockholders’ respective accounts who’re entitled to obtain money in lieu of fractional shares. The variety of widespread shares topic to the Company’s excellent worker and director inventory choices and restricted inventory, in addition to the related train worth per share, will likely be proportionately adjusted to replicate the reverse inventory cut up. The variety of shares licensed for issuance underneath the Company’s inventory plan may also be decreased by the identical reverse inventory cut up ratio.

The Company plans to file shortly with the SEC a proxy assertion which is able to embrace further details about the reverse inventory cut up and requesting stockholders to vote for the reverse inventory cut up at an upcoming particular assembly, which proxy assertion will likely be accessible on the SEC’s web site at www.sec.gov. The Company expects the reverse inventory cut up to be consummated through the fourth quarter of 2022.

FORWARD-LOOKING STATEMENTS

Certain statements on this press launch which aren’t historic details are forward-looking statements inside the that means 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 supplied pursuant to the protected harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements on this press launch that aren’t statements of historic reality could also be deemed forward-looking statements. Words similar to “continue,” “will,” “may,” “could,” “should,” “expect,” “expected,” “plans,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” and comparable expressions are meant to determine such forward-looking statements.

These forward-looking statements embrace, however usually are not restricted to, statements regarding:

(i) the Company’s plans to safe the $3 million money advance as contemplated by the Support Agreement, to make use of the proceeds thereof for normal company functions and dealing capital and to bolster its liquidity for the long-term and managing its business in these risky markets;

(ii) the Company’s plans to implement the 2022 Restructuring Program and the anticipated advantages therefrom;

(iii) the Company’s expectation that it’s going to considerably full the employee-related actions by the top of September 2022;

(iv) the Company’s expectations concerning the quantity and timing of the fees and funds associated to the 2022 Restructuring Program;

(v) the Company’s expectations that because of the 2022 Restructuring Program, the Company will ship roughly $4 million of complete annualized price reductions by the top of 2023, with the fast headcount reductions anticipated to ship annualized price reductions of roughly $2.5 million by the top of 2022 and extra actions to be taken throughout 2022 anticipated to generate a further $1.5 million of annualized price reductions by the top of 2023; and

(vi) the Company’s plans to consummate the reverse inventory cut up, its anticipated phrases, circumstances and timing, in addition to the meant advantages of the reverse inventory cut up.

All forward-looking statements contain important dangers and uncertainties that might trigger precise outcomes to vary materially from these expressed or implied within the forward-looking statements, a lot of that are typically exterior the management of Motorsport Games and are troublesome to foretell. Examples of such dangers and uncertainties embrace, however usually are not restricted to:

(i) difficulties, delays or the lack of the Company to make use of the proceeds thereof as meant and/or in reinforcing its liquidity for the long-term and managing its business in these risky markets, similar to attributable to tightening credit score and fairness markets, lower than anticipated client acceptance of the Company’s video games and occasions and/or recessionary elements within the broader economy that causes customers to change their buying habits in ways in which the Company didn’t predict;

(ii) difficulties, delays or the lack of the Company to efficiently full the 2022 Restructuring Program, in complete or partially, which may end in lower than anticipated working and monetary advantages from such actions;

(iii) delays in finishing the 2022 Restructuring Program, which may scale back the advantages realized from such actions;

(iv) greater than anticipated restructuring costs and/or funds and/or modifications within the anticipated timing of such costs and/or funds;

(v) lower than anticipated annualized price reductions from the 2022 Restructuring Program and/or modifications within the timing of realizing such price reductions, similar to attributable to lower than anticipated liquidity to fund such actions and/or greater than anticipated prices to attain the anticipated price reductions; and/or

(vi) difficulties, delays, unanticipated prices or the Company’s incapability to consummate the reverse inventory cut up on the anticipated phrases and circumstances or timeline, in addition to future decreases within the worth of the Company’s Class A typical inventory whether or not attributable to, amongst different issues, the announcement of the reverse inventory cut up, the Company’s incapability to make its Class A typical inventory extra enticing to a broader vary of institutional or different buyers or an incapability to extend the inventory worth in an quantity enough to fulfill compliance with the NASDAQ’s minimal closing bid worth requirement for continued itemizing.

Additional elements that might trigger precise outcomes to vary materially from these expressed or implied within the forward-looking statements will be present in Motorsport Games’ filings with the Securities and Exchange Commission (the “SEC”), together with its Annual Report on Form 10-Ok for the fiscal yr ended December 31, 2021, its Quarterly Reports on Form 10-Q filed with the SEC throughout 2022, in addition to in its subsequent filings with the SEC. Motorsport Games anticipates that subsequent occasions and developments could trigger its plans, intentions and expectations to vary. Motorsport Games assumes no obligation, and it particularly disclaims any intention or obligation, to replace any forward-looking statements, whether or not because of new data, future occasions or in any other case, besides as expressly required by regulation. Forward-looking statements communicate solely as of the date they’re made and shouldn’t be relied upon as representing Motorsport Games’ plans and expectations as of any subsequent date. Additionally, the business and monetary supplies and every other assertion or disclosure on, or made accessible by way of, Motorsport Games’ web site or different web sites referenced or linked to this press launch shall not be included by reference into this press launch.

About Motorsport Games:

Motorsport Games, a Motorsport Network firm, is a number one racing recreation developer, writer and esports ecosystem supplier of official motorsport racing collection all through the world. Combining progressive and interesting video video games with thrilling esports competitions and content material for racing followers and players, Motorsport Games strives to make the enjoyment of racing accessible to everybody. The Company is the formally licensed online game developer and writer for iconic motorsport racing collection throughout PC, PlayStation, Xbox, Nintendo Switch and cellular, together with NASCAR, INDYCAR, 24 Hours of Le Mans and the British Touring Car Championship (“BTCC”), in addition to the trade main rFactor 2 and KartKraft simulations. RFactor 2 additionally serves because the official sim racing platform of Formula E, whereas additionally powering Formula 1™ facilities by way of a partnership with Kindred Concepts. Motorsport Games is an award-winning esports associate of alternative for twenty-four Hours of Le Mans, Formula E, BTCC, the FIA World Rallycross Championship and the eNASCAR Heat Pro League, amongst others. Motorsport Games is constructing a digital racing ecosystem the place every product drives pleasure, each esports occasion is an journey and each story evokes.

Website and Social Media Disclosure:

Investors and others ought to word that we announce materials monetary data to our buyers utilizing our investor relations web site (ir.motorsportgames.com), SEC filings, press releases, public convention calls and webcasts. We use these channels, in addition to social media and blogs, to speak with our buyers and the general public about our firm and our merchandise. It is feasible that the data we submit on our web sites, social media and blogs might be deemed to be materials data. Therefore, we encourage buyers, the media and others excited about our firm to evaluate the data we submit on the web sites, social media channels and blogs, together with the next (which record we are going to replace infrequently on our investor relations web site):

The contents of those web sites and social media channels usually are not a part of, nor will they be included by reference into, this press launch.

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