Motorsport Games Inc. has been notified by The Nasdaq Stock Market LLC that it is currently not in compliance with the minimum stockholders' equity requirement for continued listing on The Nasdaq Capital Market. The video game company, which specializes in racing games, reported stockholders' equity of $2,170,911 in its most recent quarterly filing, falling short of the required $2,500,000.
The deficiency letter, received by the company on November 20, 2024, also indicated that Motorsport Games does not meet alternative listing standards, such as having a market value of listed securities of at least $35 million or net income from continuing operations of $500,000 in the most recent fiscal year or in two of the last three fiscal years.
Motorsport Games, listed under the ticker NASDAQ:MSGM, has been given 45 days, until January 6, 2025, to submit a plan to regain compliance. If Nasdaq accepts this plan, the company could be granted an extension of up to 180 days from the notification date to meet the stockholders' equity requirement.
Despite the notice, trading of the company’s Class A common stock remains unaffected and continues on The Nasdaq Capital Market, contingent on meeting other listing requirements.
The company has stated its intention to submit a compliance plan by the specified deadline and is exploring various options to address the shortfall, including potential equity or debt financing. However, there is no certainty that the compliance plan will be accepted by Nasdaq or that the company will be able to regain compliance within the potential extension period.
This news is based on a recent 8-K filing by Motorsport Games with the Securities and Exchange Commission. The company's forward-looking statements, which include plans to submit a compliance plan and consider options to regain compliance, are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
In other recent news, Motorsport Games Inc. has reported noteworthy developments in its third-quarter 2024 financial results. The company has seen an increase in revenues to $1.8 million, marking a 6.4% year-over-year growth. In addition, the net loss was significantly reduced to $0.6 million from $3.5 million in the same quarter of the previous year.
The company also announced the successful update of its Le Mans Ultimate game and the introduction of innovative gaming features. However, Motorsport Games has acknowledged a need for additional funding to maintain operations over the next year.
In terms of future developments, the company intends to introduce real-time driver swaps in Q1 2025 and is planning to launch an optional subscription service. Despite the positive financial results and plans for the future, Motorsport Games has recognized a shortfall in liquidity, and is actively exploring funding options.
InvestingPro Insights
Recent InvestingPro data provides additional context to Motorsport Games Inc.'s (NASDAQ:MSGM) current financial situation. The company's market capitalization stands at a modest $3.6 million, reflecting its struggles in the stock market. This is further evidenced by the stock's poor performance, with a 52-week high price percentage of just 26.68% and a significant year-to-date price total return of -63.43%.
InvestingPro Tips highlight that MSGM is "quickly burning through cash" and that "short term obligations exceed liquid assets," which aligns with the company's struggle to meet Nasdaq's minimum stockholders' equity requirement. These factors contribute to the company's precarious financial position and the need for a robust compliance plan.
On a positive note, an InvestingPro Tip indicates that MSGM "holds more cash than debt on its balance sheet," which could potentially provide some flexibility as the company explores options to address its equity shortfall. Additionally, analysts anticipate sales growth in the current year, which might offer a glimmer of hope for the company's future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide valuable insights into MSGM's financial health and market position.
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