Following the release of the company’s third quarter 2022 financial results, Motorsport Games’ earnings call highlighted board member changes and continued cash burn challenges.
Another quarterly earnings call, another troubling moment for Motorsport Games. The Miami-based racing game developer and publisher today held its third quarter 2022 (18e November 2022).
“Based on cash and cash equivalents available as of October 31, 2022 and [Motorsport Games] average cash burn, we do not believe we have sufficient cash to fund our operations for the remainder of 2022 and that additional funding will be required to continue operations,” read the additional statement.
CEO Dmitry Kozko explained that several funding options are being considered.
“We continue to explore all available options,” Kozko said on the call.
“These options always include different types of debt financing, there are some options in the type of equity financing, there are major shareholder options with the existing line of credit – however, of course, we don’t know not whether or not there will be the ability to finance, it is something that belongs to them.
“All of these options are still on the table, they’re being explored…We need to come in and announce something fairly quickly here to continue to support the growth of this business.”
In SeptemberMotorsport Games received a $3 million cash advance from Motorsport Network – the parent company that owns seven million shares in the games offshoot.
This came from a “previously disclosed $12 million line of credit, the proceeds of which were [Motorsport Games] plans to use for general business purposes and working capital.
Over the three months, from July to September 2022 (ending on the 30e September), the company’s net loss was $8.5 million and its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) loss was $6.5 million.
“The company [Motorsport Games] has cash and cash equivalents of approximately $1.8 million,” the press release read.
During the year – in addition to the downloadable content of rFactor 2, the release of KartKraft in January and the running of the Le Mans Virtual Series – the decision to skip a year for the main NASCAR game and postpone his project BTCC game until 2024 meant potential revenue generators did not materialize
All the while, the company continues to invest in development. In fact, development spending was up $1.6 million year-to-date through Q3 compared to 2021.
“The company expects to continue to incur losses for the foreseeable future as it continues to expand its product portfolio and invest in the development of new video game titles,” the associated f reads.inancial statement.
The multi-licensed real-world publisher has come under intense scrutiny lately following a Form 8-K filed with the United States Securities and Exchange Commission.
He explains that Neil Anderson, Peter Moore and Francesco Piovanetti have resigned from its board of directors, after being asked to do so by majority shareholder and parent company Motorsport Network. This followed an as yet undisclosed disagreement over future investment proposals.
“The major shareholder has virtually asked the independent board members to resign, following a disagreement,” Kozko said on the third quarter 2022 earnings call.
“These members have accepted this and this is what you have seen in the recent news.
“According to the Nasdaq letter, [we have] 45 days to provide a plan to Nasdaq staff on how we would fill at least two more seats to be in compliance with our audit committee composition of three such members,”
“We are actively having conversations with these types of candidates.”
According to the filing, the company has until Dec. 29 to submit a new subsistence plan to comply with Nasdaq Capital Market listing requirements. If the plan is approved, an extension of up to 180 days could be granted to find independent directors.
On the other hand, failure to comply could see the company listed on other markets or seek an alternative structure.
“On my side of the office, the focus remains on resolving our liquidity and I am exploring all available options.”
Figures do not include recent releases
It should be noted that the figures for the third quarter of 2022 published today (18e November) exclude sales of Switch-exclusive NASCAR rivals launched on October 14, the release of a second season of paint schemes for NASCAR 21: Ignition which started on October 26 and Q4 content drop for rFactor 2 released 7e November.
The developer also plans to release a paid 2022 Cup Series DLC pack for NASCAR Heat 5, which was recently delayed. An official IndyCar game, the experience of the 24 Hours of Le Mans and a new NASCAR title are scheduled for launch in 2023.
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