Netcapital Announces Exercise of Warrants for $2.2 Million Gross Proceeds

Rhea-AI Summary

Netcapital has announced the immediate exercise of Series A-2 warrants, reducing their price from $0.25 to $0.155 per share. This decision will generate gross proceeds of approximately $2.2 million before fees and expenses. H.C. Wainwright & Co. acted as the exclusive placement agent. In return, Netcapital will issue new Series A-3 and Series A-4 warrants, each exercisable at $0.155 per share upon shareholder approval. Series A-3 warrants have a five-year expiration, while Series A-4 warrants expire in eighteen months. The funds will be used for general working capital. The offering is expected to close around May 29, 2024, subject to customary conditions.

Positive

• Immediate exercise of warrants will generate approximately $2.2 million in gross proceeds.
• Reduced exercise price may attract more investors to exercise their warrants.
• H.C. Wainwright & Co. acting as the exclusive placement agent adds credibility.
• Issuance of new Series A-3 and Series A-4 warrants at $0.155 per share provides potential future capital influx.
• Funds will be utilized for general working capital purposes, potentially strengthening the company's financial position.

Negative

• Reduction in exercise price from $0.25 to $0.155 per share indicates possible struggles in warrant conversion.
• Issuance of new warrants could lead to shareholder dilution.
• Gross proceeds of $2.2 million are subject to placement agent fees and estimated offering expenses, reducing net gain.
• New warrants are unregistered and cannot be sold in the U.S. without SEC registration or applicable exemption, potentially limiting liquidity.

Financial Analyst

The exercise of warrants leading to $2.2 million in gross proceeds is a significant event. This infusion of capital can aid Netcapital in meeting its working capital needs. However, it's essential to note the reduced exercise price from $0.25 to $0.155 per share, which might raise concerns among investors about the underlying reasons for such a reduction. Typically, companies lower warrant exercise prices to incentivize immediate conversion, suggesting a short-term need for liquidity.

Given that the new Series A-3 and A-4 warrants have a similar exercise price and are unregistered, there could be potential dilution issues for existing shareholders. Investors need to consider the long-term impact of this dilution, especially with the newly issued warrants being exercisable upon stockholder approval.

The role of H.C. Wainwright & Co. as the placement agent underlines the importance of the transaction, but investors should be mindful of the placement agent fees and offering expenses which will reduce net proceeds. Furthermore, the company's intent to use these funds for general working capital purposes does not provide specific insights into any strategic initiatives or projects that might drive future growth.

In summary, while the immediate capital raise is positive, the reduced exercise price and potential dilution introduce elements of risk that investors should monitor closely.

Market Research Analyst

For investors, understanding the broader market implications is crucial. Netcapital operates in the digital private capital markets ecosystem, a niche but growing sector. The additional funding might help the company to enhance its platform or expand its service offerings, making it more competitive in the market.

However, the reduced exercise price may signal weaker than expected financial health or a need to attract investors quickly. This could be viewed as a defensive move, potentially reflecting underlying operational challenges. The issuance of new Series A-3 and Series A-4 warrants, while providing future capital opportunities, also suggests the company is preparing for ongoing capital requirements, indicating that more funding rounds could follow.

From a competitive standpoint, securing $2.2 million in proceeds does provide short-term stability, but the broader market will be watching how these funds are deployed and whether they translate into tangible growth or improvements in Netcapital's market position. Investors should monitor subsequent quarterly reports for signs of effective capital deployment.

BOSTON--(BUSINESS WIRE)-- Netcapital Inc. (the “Company”) (NASDAQ: NCPL, NCPLW), a digital private capital markets ecosystem, today announced the entry into definitive agreements for the immediate exercise of certain outstanding Series A-2 warrants to purchase up to an aggregate of 14,320,000 shares of common stock of the Company originally issued in December 2023, having an exercise price of $0.25 per share, at a reduced exercise price of $0.155 per share. The shares of common stock issuable upon exercise of the warrants are registered pursuant to an effective registration statement on Form S-1 (No. 333-275210). The gross proceeds to the Company from the exercise of the warrants are expected to be approximately $2.2 million, prior to deducting placement agent fees and estimated offering expenses.

H.C. Wainwright & Co. is acting as the exclusive placement agent for the offering.

In consideration for the immediate exercise of the warrants for cash, the Company will issue new unregistered Series A-3 warrants to purchase up to 14,320,000 shares of common stock and new unregistered Series A-4 warrants to purchase up to 14,320,000 shares of common stock. The Series A-3 new warrants will have an exercise price of $0.155 per share, will be exercisable beginning on the effective date of stockholder approval of the issuance of the shares issuable upon exercise of the new warrants and will expire five years thereafter. The Series A-4 new warrants will have an exercise price of $0.155 per share, will be exercisable beginning on the effective date of stockholder approval of the issuance of the shares issuable upon exercise of the new warrants and will expire eighteen months thereafter.

The offering is expected to close on or about May 29, 2024, subject to satisfaction of customary closing conditions. The Company intends to use the net proceeds from the offering for general working capital purposes.

The new warrants described above were offered in a private placement pursuant to an applicable exemption from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”) and, along with the shares of common stock issuable upon their exercise, have not been registered under the 1933 Act, and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission (“SEC”) or an applicable exemption from such registration requirements. The Company has agreed to file a registration statement with the SEC covering the resale of the shares of common stock issuable upon exercise of the new warrants.

The Company is voluntarily reducing the exercise price for all outstanding Series A-2 Warrants to purchase 16,000,000 shares of common stock, including the Series A-2 Warrants to purchase up to 14,320,000 shares of common stock referred to above, that were previously issued in December 2023 and have an exercise price of $0.25 per share, such that all outstanding Series A-2 Warrants have a reduced exercise price of $0.155 per share.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

About Netcapital Inc.

Netcapital Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online and provides private equity investment opportunities to investors. The Company's consulting group, Netcapital Advisors, provides marketing and strategic advice and takes equity positions in select companies. The Company’s funding portal, Netcapital Funding Portal Inc. is registered with the U.S. Securities & Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA), a registered national securities association.

Forward Looking Statements

The information contained herein includes forward-looking statements. These statements relate to future events, including, but not limited to, statements relating to closing of the offering and satisfaction of closing conditions of the offering, the expected gross proceeds from the offering and statements regarding the anticipated use of proceeds from the offering, or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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Investor Contact

800-460-0815

ir@netcapital.com

Source: Netcapital Inc.

FAQ

What is the gross proceeds amount from Netcapital's warrant exercise?

The gross proceeds from the exercise of the warrants are expected to be approximately $2.2 million.

What is the new exercise price for Netcapital's Series A-2 warrants?

The new exercise price for the Series A-2 warrants is $0.155 per share.

When is the expected closing date for Netcapital's warrant offering?

The offering is expected to close on or about May 29, 2024, subject to customary closing conditions.

What will the funds from Netcapital's warrant exercise be used for?

The funds will be used for general working capital purposes.

Who is the exclusive placement agent for Netcapital's warrant offering?

H.C. Wainwright & Co. is acting as the exclusive placement agent for the offering.