Northann Corp (NYSE American:NCL), a Nevada-incorporated company specializing in plastics products currently trading at $0.28 per share with a market cap of $9.42 million, disclosed today that it has entered into agreements for two separate private placement transactions.
According to InvestingPro data, the company faces significant financial challenges with a weak overall health score of 1.28 out of 5. The announcement, based on a Securities and Exchange Commission (SEC) filing, reveals the company's plans to issue a combined total of 120 million shares of common stock to a group of investors.
On Friday, Northann Corp signed a securities purchase agreement with Oneflow LLC and other passive investors, agreeing to sell 40 million shares of common stock. Following this transaction, the company will have 86,464,400 shares outstanding, assuming no other shares are issued after today.
The closing of this deal, known as the Oneflow Private Placement, is contingent on the approval of Northann's stockholders and clearance from the NYSE American exchange 60 days after such approval. The proceeds from the Oneflow Private Placement are earmarked for working capital.
In conjunction with the Oneflow SPA, Northann Corp also entered into a registration rights agreement, obligating the company to file a registration statement with the SEC within 60 days following the close of the transaction, to enable the resale of the Oneflow Shares by the investors.
Similarly, the company also executed a securities purchase agreement with X29 LLC and four additional passive investors for the sale of 80 million shares. This transaction, referred to as the X29 Private Placement, will result in a total of 166,464,400 shares of common stock outstanding, again assuming no other shares are issued post-December 6, 2024, other than the Oneflow Shares.
The X29 Private Placement is subject to stockholder approval and a 120-day period following NYSE American's approval. Like the Oneflow agreement, the X29 deal includes a registration rights agreement requiring Northann Corp to file a registration statement with the SEC for the resale of the X29 Shares.
Both investor groups understand that the shares acquired have not been registered under the Securities Act of 1933 and cannot be sold without either registration or an exemption.
This strategic move by Northann Corp aims to bolster its working capital through these equity sales, signaling potential growth and expansion efforts. The timing is crucial, as InvestingPro analysis shows the company's current ratio at 0.53, indicating potential liquidity challenges, with short-term obligations exceeding liquid assets. The company's stockholders and market regulators will play a crucial role in finalizing these transactions. While the stock has shown strong returns in the past month, InvestingPro analysis suggests the company currently trades above its Fair Value.
Investors seeking deeper insights into company valuations can access 15 additional ProTips and comprehensive financial metrics through InvestingPro's advanced analytics platform.
In other recent news, Northann Corp, a Nevada-based plastics products manufacturer, has been active in strategic expansions and amendments.
The company has amended a lease agreement with SKY SC LLC, shifting the commencement date from August to November 2024. This amendment is in addition to Northann Corp's recent acquisitions of Raleigh Industries Limited and Cedar Modern Limited, both Hong Kong-based companies.
In each acquisition, Northann Corp issued millions of shares of its common stock to the respective sellers, leading to an increase in its total outstanding common stock. The acquisition of Cedar Modern came with a stipulation that Northann Corp will file a registration statement with the SEC if Cedar Modern generates revenue of at least $20 million in the first three months post-acquisition.
These strategic moves are expected to enhance Northann Corp's market reach and contribute to its revenue stream, contingent upon Cedar Modern achieving the specified revenue target.
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