Business Context and Reporting Period
Motorsport Games Inc. (MSGM), an emerging growth company incorporated in Delaware, filed this Form 8-K on February 20, 2026. The report details the entry into a material definitive agreement to secure financing for business operations.
Key Financial Metrics and Debt
- Debt Facility: Entered into a revolving line of credit with Citibank, N.A. for up to $3.0 million.
- Interest Rate: Adjusted Term SOFR plus 2.250%, with a floor of 0.75% on the SOFR component.
- Maturity Date: February 20, 2027.
- Collateral: The Company granted Citibank a lien on substantially all of its assets.
- Financial Covenants:
- Fixed Charge Coverage Ratio must exceed 1.200 to 1.000.
- Cash Flow Leverage Ratio must not exceed 2.500 to 1.000.
The filing does not provide specific values for revenue, profit, cash flow, or existing liquidity positions as of the reporting date.
Material Changes
The primary material change is the establishment of a new $3.0 million debt obligation and the associated security interest granted to the lender. This represents a new direct financial obligation not present in prior periods.
Outlook, Risks, and Contingencies
- Events of Default: Include failure to make payments, covenant breaches, defaults on other loans, or a change in ownership of 25% or more of common stock.
- Default Consequences: An event of default may trigger an immediate increase in the interest rate by 3.00% and accelerate the maturity of all outstanding amounts, making them immediately due and payable.
- Negative Covenants: Prohibit the creation of additional liens or security interests on the Company's assets.
Investor Verification Checklist
- Verify the current utilization amount of the $3.0 million revolving line of credit.
- Confirm the Company's current Fixed Charge Coverage Ratio and Cash Flow Leverage Ratio to ensure compliance with covenants.
- Review the full text of the Business Loan Agreement (Exhibit 10.1) and Promissory Note (Exhibit 10.2) for specific definitions of financial metrics.
- Assess the impact of the lien on substantially all assets on future financing capabilities.