Motorsport Games Inc. Secures \$3 Million Revolving Credit Facility with Citibank

Key Developments

• Motorsport Games Inc. (NASDAQ: MSGM) has entered into a new business loan agreement with Citibank, N.A.
• The agreement provides the company with a revolving line of credit of up to \$3 million.
• The facility carries an interest rate of Adjusted Term SOFR (with a floor of 0.75%) plus 2.25%, subject to a potential increase in the event of default.
• The loan is evidenced by a promissory note with a principal amount of up to \$3 million and a stated maturity date of February 20, 2027.
• As part of the arrangement, Motorsport Games has granted Citibank a lien on substantially all of the company’s assets as collateral.

Important Details for Shareholders

• Affirmative Covenants: The Credit Agreement contains various operational and financial covenants. These include requirements regarding the conduct of business, minimum cash flow levels, and fixed charge coverage.
• Specifically, the company must maintain a Fixed Charge Coverage Ratio in excess of 1.2:1 and a Cash Flow Leverage Ratio not exceeding 2.5:1.
• Negative Covenants: The agreement restricts the creation of additional liens or security interests on the company’s assets.
• Events of Default: Triggers for default include failure to make payments, breach of covenants, cross-defaults under other financing arrangements, and any change in ownership of 25% or more of Motorsport Games’ common stock.
• If an event of default occurs, Citibank may increase the interest rate by 3% and declare that all outstanding loan amounts are immediately due and payable.
• The representations, warranties, and covenants in the agreement are only for the benefit of the contracting parties and may be subject to limitations and specific dates.

Potential Share Price Impact

• This new credit facility is a significant development for Motorsport Games Inc., as it provides immediate liquidity and financial flexibility. For a company in the competitive and capital-intensive gaming sector, access to revolving credit can be critical for ongoing operations, development, and resilience during market fluctuations.
• The secured nature of the loan—using substantially all company assets as collateral—may signal that MSGM is seeking enhanced stability or preparing for upcoming investments or cash flow needs. Shareholders should note the implications of such a security interest, especially in the event of further financial stress or a default scenario.
• The inclusion of strict financial covenants and a change of control clause (triggered by a 25%+ ownership change) are noteworthy. Any breach could lead to accelerated repayment obligations and increased borrowing costs, both of which could materially impact the company’s financial health and share value.
• Investors should also consider the potential dilution or company control changes that could arise if the company seeks additional financing or if a significant ownership change were to occur.

Other Notable Information

• The agreement classifies Motorsport Games Inc. as an emerging growth company under SEC rules, which may impact certain reporting and compliance requirements.
• The relevant agreements (Business Loan Agreement and Promissory Note) are available as exhibits in the SEC filing for further review.
• Stephen Hood, Chief Executive Officer and President, authorized the filing and agreement on behalf of the company.

Conclusion

The entry into this \$3 million revolving credit facility marks an important financial event for Motorsport Games Inc. Shareholders should carefully monitor the company’s compliance with the covenants, its use of the new credit line, and any changes in ownership structure, as these could all have meaningful implications for the company’s future performance and share value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions related to Motorsport Games Inc. or its securities.

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