UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
(Amendment
No. )
| Filed
by the Registrant ☒ |
|
| Filed
by a Party other than the Registrant ☐ |
|
Check
the appropriate box:
| ☐ |
Preliminary
Proxy Statement |
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| ☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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| ☒ |
Definitive
Proxy Statement |
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| ☐ |
Definitive
Additional Materials |
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| ☐ |
Soliciting
Material Pursuant to Section 240.14a-12 |
NETCAPITAL
INC.
(Name
of Registrant As Specified In Its Charter)
Payment
of Filing Fee (Check all boxes that apply):
| ☒ |
No
fee required. |
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|
| ☐ |
Fee
paid previously with preliminary materials. |
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| ☐ |
Fee
computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange
Act Rules 14c-5(g) and 0-11. |
NETCAPITAL
INC.
1
Lincoln Street,
Boston,
MA 02111
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
TO
BE HELD JULY 24, 2024
TO
OUR SHAREHOLDERS:
You
are cordially invited to attend the Special Meeting of Shareholders (the “Special Meeting”) of Netcapital Inc., a Utah corporation
(together with its subsidiaries, the “Company,” “Netcapital,” “we,” “us” or “our”),
which will be held on July 24, 2024, at 10:30 am ET. The Special Meeting will be a virtual meeting to be held as a listen-only conference
call by calling 877-407-3088 (Toll Free). There will not be a physical meeting location. If you encounter any technical difficulties
with the virtual meeting platform on the meeting day, please call 877-804-2062 (toll free) or email, proxy@equitystock.com. The meeting
will be held for the following purposes:
| 1. |
To
approve a proposal to give our board of directors the authority, at its discretion, to file articles of amendment to our articles
of incorporation to effect a reverse split of our issued common stock at a ratio that is not less than 1-for-2 and not greater than
1-for-100, without reducing the authorized number of shares of our common stock, with the exact ratio to be selected by our board
of directors in its discretion and to be effected, if at all, in the sole discretion of our board of directors at any time following
stockholder approval of the amendment to our articles of incorporation and before July 24, 2025 without further approval or authorization
of our stockholders (the “Reverse Stock Split Proposal”); |
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|
| 2. |
To
authorize the adjournment of the Special Meeting if necessary or appropriate, including to
solicit additional proxies in the event that there are not sufficient votes at the time of
the Special Meeting or adjournment or postponement thereof to approve any of the foregoing
proposals (the “Adjournment Proposal”) and
|
| 3. |
Other
Proposals – to consider and transact such other business as may properly come before the Special Meeting or any adjournment
or postponement thereof. |
A
copy of the Annual Report of the Company’s operations during the fiscal year ended April 30, 2023 is available on request or at
www.sec.gov.
OUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE REVERSE STOCK SPLIT PROPOSAL, AND THE ADJOURNMENT
PROPOSAL.
The
Company’s board of directors has fixed the close of business on June 4, 2024 as the record date for the determination of
shareholders entitled to receive notice of and to vote at the Special Meeting of Shareholders and any adjournment or postponement thereof.
Strategic
Shareholder Advisor and Proxy Solicitation Agent
200
Broadacres Drive
Bloomfield,
NJ 07003
North
American Toll Free Phone:
1-833-795-8488
Email:
NCPL@allianceadvisors.com
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By Order of the Board of Directors |
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|
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/s/
Martin Kay |
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Name: |
Martin
Kay |
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Title: |
Chief
Executive Officer |
| June
7, 2024 |
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| Boston,
Massachusetts |
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YOUR
VOTE IS IMPORTANT
WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, TO ASSURE THAT YOUR SHARES WILL BE REPRESENTED, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY.
PROXY
STATEMENT
SPECIAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON JULY 24, 2024
GENERAL
INFORMATION ABOUT THE PROXY STATEMENT AND SPECIAL MEETING
General
Netcapital
Inc. (the “Company,” “Netcapital,” “we,” “us,” or “our”), a Utah corporation
is providing this proxy statement in connection with the solicitation by the Company’s board of directors (the “Board”)
of proxies to be voted at the special meeting (“Special Meeting”) of shareholders to be held virtually at 10:30 am ET on
July 24, 2024 as a listen-only conference call by calling 877-407-3088 (Toll Free). There will not be a physical meeting location. If
you encounter any technical difficulties with the virtual meeting platform on the meeting day, please call 877-804-2062 (toll free) or
email, proxy@equitystock.com.
On
or about June 7, 2024, we will begin mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to
our shareholders of record on June 4, 2024 (the “Record Date”) (other than those who previously requested electronic
or paper delivery of proxy materials), directing shareholders to a website where they can access our proxy materials, including this
proxy statement and the 2023 Annual Report, and view instructions on how to vote. If you would prefer to receive a paper copy of our
proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials
electronically, you will continue to receive access to those materials via e-mail unless you elect otherwise.
The
Special Meeting will be held for the purpose of considering and voting upon the following proposals:
| 1. | a
proposal to give our board of directors the authority, at its discretion, to file articles
of amendment to our articles of incorporation to effect a reverse split of our issued common
stock at a ratio that is not less than 1-for-2 and not greater than 1-for-100, without reducing
the authorized number of shares of our common stock, with the exact ratio to be selected
by our board of directors in its discretion and to be effected, if at all, in the sole discretion
of our board of directors at any time following stockholder approval of the amendment to
our articles of incorporation and before July 24, 2025 without further approval or authorization
of our stockholders (the “Reverse Stock Split Proposal”); |
| | | |
| 2. | a
proposal to authorize the adjournment of the Special Meeting if necessary or appropriate,
including to solicit additional proxies in the event that there are not sufficient votes
at the time of the Special Meeting or adjournment or postponement thereof to approve any
of the foregoing proposals (the “Adjournment Proposal”); and |
| | | |
| 3. | such
other business as may properly come before the Special Meeting or any adjournment or postponement
thereof. |
These
proposals are more fully described in the accompanying proxy statement, which you should read carefully.
If
you are a shareholder of record, you may attend the Special Meeting in the following ways:
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● |
Access
an audio-only conference call by calling 877-407-3088 (Toll Free) or +1 877-407-3088 (International); |
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● |
Instructions
on how to attend and participate in the virtual Special Meeting, including how to demonstrate proof of stock ownership, are also
available as follows: |
Shareholders
of Record
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● |
Shareholders
of record as of the Record Date can attend the special meeting by accessing the live audio conference call at +1-877-407-3088 and
presenting the unique 12-digit control number on the proxy card. |
Beneficial
Owners
| |
● |
If
you were a beneficial owner of record as of the Record Date (i.e., you held your shares in an account at a brokerage firm, bank or
other similar agent), you will need to obtain a legal proxy from your broker, bank or other agent. Once you have received a legal
proxy from your broker, bank or other agent, it should be emailed to our transfer agent, Equity Stock Transfer, at proxy@equitystock.com
and should be labeled “Legal Proxy” in the subject line. Please include proof from your broker, bank or other agent of
your legal proxy (e.g., a forwarded email from your broker, bank or other agent with your legal proxy attached, or an image of your
valid proxy attached to your email). Requests for registration must be received by Equity Stock Transfer no later than 5:00 p.m.
Eastern Time, on July 22, 2024. You will then receive a confirmation of your registration, with a control number, by email from Equity
Stock Transfer. At the time of the meeting, access the live audio conference call at +1-877-407-3088 and present your unique 12-digit
control number. |
| |
● |
Shareholders
may submit live questions on the conference line while attending the virtual Special Meeting. |
If
you are a shareholder of record, you may vote your shares in the following ways:
Whether
you plan to attend the Special Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive
through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed
via Internet. You may specify whether your shares should be voted for or “withheld” for each nominee for director, and whether
your shares should be voted for, against or abstain with respect to each of the other proposals. Except as set forth below, if you properly
submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board’s recommendations
as noted below. The Board has appointed Martin Kay, to serve as the proxy for the Special Meeting. Voting by proxy will not affect your
right to attend the Special Meeting. If your shares are registered directly in your name through our stock transfer agent, Equity Stock
Transfer, or you have stock certificates, you may vote:
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1. |
By
Internet. The website address for Internet voting is www.netcapital.vote. Please click “Vote Your Proxy” and enter your
control number. |
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|
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2. |
By
Email. Mark, date, sign and email the Proxy Card to proxy@equitystock.com, ATTN: Shareholder Services. |
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|
|
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3. |
By
mail. Mark, date, sign and mail promptly the Proxy Card, to Equity Stock Transfer at 237 W 37th St. Suite 602 New York,
NY 10018, ATTN: Shareholder Services. |
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|
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4. |
By
Fax. Mark, date, sign and fax the Proxy Card to 646-201-9006, ATTN: Shareholder Services. |
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|
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5. |
At
the Special Meeting. If you are a shareholder of record, you can participate and vote your shares in the Special Meeting by visiting
www.netcapital.vote and then clicking “Vote Your Proxy”. You may then enter the control number included on your Proxy
Card and view the proposals and cast your vote. |
If
you hold your shares in “street name,” your bank, broker or other nominee should provide to you a request for voting instructions
along with the Company’s proxy solicitation materials. By completing the voting instruction card, you may direct your nominee how
to vote your shares. Alternatively, if you want to vote your shares during the Special Meeting, you must contact your nominee directly
in order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that identifies you as a shareholder is not
the same as a nominee-issued proxy. If you fail to present a nominee-issued proxy to proxy@equitystock.com by 5:00 p.m. Eastern Time
on July 22, 2024, you will not be able to vote your nominee held shares during the Special Meeting.
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
These
Questions and Answers are only summaries of the matters they discuss. They do not contain all of the information that may be important
to you. You should read carefully the entire document, including any annexes to this proxy statement.
| Q: |
Why
are we holding a special meeting?
|
| A: |
The
primary goal of the reverse stock split, if implemented, is to increase the price per share
of our common stock to regain compliance with The Nasdaq Capital Market’s continued
listing requirements relating to maintaining a minimum bid price of $1.00 per share.
On
September 1, 2023, the Company received a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company
that it was not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing
on The Nasdaq Capital Market. Specifically, Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price
of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists
if the deficiency continues for a period of 30 consecutive business days. The Company initially had 180 calendar days, or until by
February 28, 2024, to regain compliance with the minimum bid price requirement. The Company was unable to regain compliance with
the minimum bid price requirement by February 28, 2024.
On
February 29, 2024, the Company received a letter (the “Extension Notice”) from Nasdaq notifying the Company that its
request for an extension to regain compliance with the minimum bid price requirement has been granted, and the Company has an additional
180 calendar days, or until August 26, 2024, to regain compliance with the minimum bid price requirement. Nasdaq’s determination
was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable
requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and the Company’s
written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if
necessary.
The
Board believes it is in the best interest of the Company and our stockholders to maintain the listing of our common stock on The
Nasdaq Capital Market. For more information on the reasons for the Reverse Stock Split Proposal and its general effect, if implemented,
please refer to the section of this proxy statement entitled “PROPOSAL NO. 1- THE REVERSE STOCK SPLIT PROPOSAL.” |
| Q: |
Why
did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? |
| |
|
| A: |
In
accordance with the rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we may furnish proxy materials,
including this proxy statement and our 2023 Annual Report, to our shareholders by providing access to such documents on the Internet
instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them.
Instead, the Notice, which we will begin mailing to our shareholders on or about June 4, 2024, will instruct you as to how
you may access and review all of the proxy materials over the Internet. The Notice also instructs you as to how you may submit your
proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions
for requesting such materials in the Notice. |
| Q: |
Who
is entitled to vote? |
| |
|
| A: |
Only
shareholders of record as of the close of business on the Record Date will be entitled to notice of, and to vote at, the Special
Meeting. A list of shareholders eligible to vote at the Special Meeting is available for inspection at any time up to the Special
Meeting. If you would like to inspect the list, please call our Corporate Secretary at (781) 925-1700 to arrange a visit to our offices. |
| Q: |
How
many shares of common stock can vote? |
| |
|
| A: |
There
were 34,904,680 shares of common stock issued and outstanding as of the close of business on the Record Date. Each shareholder
entitled to vote at the Special Meeting may cast one vote for each share of common stock owned by him, her or it which has voting
power upon each matter considered at the Special Meeting. |
| Q: |
What
may I vote on? |
| |
|
| A: |
You
may vote on the following matters: |
| |
1. |
To
approve the Reverse Stock Split Proposal; |
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|
|
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2. |
To
approve the Adjournment Proposal; and
|
| |
3. |
any
other business that may properly come before the Special Meeting and any adjournment or postponement thereof. |
| Q: |
Will
any other business be presented for action by shareholders at the Special Meeting? |
| |
|
| A: |
The
Board knows of no other matters that will be presented for consideration at the Special Meeting. If any other matters are properly
brought before the Special Meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in
accordance with their best judgment. |
| Q: |
How
does the Board recommend that I vote on each of the proposals? |
| |
|
| A: |
Our
Board recommends a vote “FOR” the Reverse Stock Split Proposal (Proposal No. 1) and “FOR” the
Adjournment Proposal (Proposal No. 2). |
| Q: |
How
do I vote my shares? |
| |
|
| A: |
Whether
you plan to attend the Special Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive
through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed
via Internet. You may specify whether your shares should be voted “FOR”, “AGAINST” or “ABSTAIN”
for the (i) Reverse Stock Split Proposal (Proposal No. 1) and (ii) Adjournment Proposal (Proposal No. 2). Except as set forth below,
if you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board’s
recommendations as noted below. The Board has appointed Martin Kay, to serve as the proxy for the Special Meeting. Voting by proxy
will not affect your right to attend the Special Meeting. If your shares are registered directly in your name through our stock transfer
agent, Equity Stock Transfer, or you have stock certificates, you may vote: |
| |
1. |
By
Internet. The website address for Internet voting is www.netcapital.vote. Please click “Vote Your Proxy” and enter your
control number. |
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|
|
| |
2. |
By
Email. Mark, date, sign and email the Proxy Card to proxy@equitystock.com, ATTN: Shareholder Services. |
| |
|
|
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3. |
By
mail. Mark, date, sign and mail promptly the Proxy Card, to Equity Stock Transfer at 237 W 37th St. Suite 602 New York, NY 10018
ATTN: Shareholder Services. |
| |
|
|
| |
4. |
By
Fax. Mark, date, sign and fax the Proxy Card to 646-201-9006, ATTN: Shareholder Services. |
| |
5. |
At
the Special Meeting. If you are a shareholder of record, you can participate and vote your shares in the Special Meeting by visiting
www.netcapital.vote and then clicking “Vote Your Proxy”. You may then enter the control number included on your Proxy
Card and view the proposals and cast your vote. |
If
you hold your shares in “street name,” your bank, broker or other nominee should provide to you a request for voting instructions
along with the Company’s proxy solicitation materials. By completing the voting instruction card, you may direct your nominee how
to vote your shares. Alternatively, if you want to vote your shares during the Special Meeting, you must contact your nominee directly
in order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that identifies you as a shareholder is not
the same as a nominee-issued proxy. If you fail to present a nominee-issued proxy to proxy@equitystock.com by 5:00 p.m. Eastern Time
on July 22, 2024, you will not be able to vote your nominee held shares during the Special Meeting.
| Q: |
What
is a proxy? |
| |
|
| A: |
A
proxy is a person you appoint to vote on your behalf. By using any of the methods discussed above, you will be appointing as your
proxy Martin Kay, our Chief Executive Officer. He may act on your behalf, and will have the authority to appoint a substitute to
act as proxy. Whether or not you expect to virtually attend the Special Meeting, we request that you please use the means available
to you to vote by proxy so as to ensure that your shares of common stock may be voted. |
| Q: |
How
Will my Shares be Voted if I Give No Specific Instruction? |
| |
|
| A: |
We
must vote your shares as you have instructed. If there is a matter on which a shareholder
of record has given no specific instruction but has authorized us generally to vote the shares,
they will be voted “FOR” the Reverse Stock Split Proposal (Proposal No.
1) and “FOR” the Adjournment Proposal (Proposal No. 2).
This
authorization would exist, for example, if a shareholder of record merely signs, dates and returns the proxy card but does not indicate
how its shares are to be voted on one or more proposals. If other matters properly come before the Special Meeting and you do not
provide specific voting instructions, your shares will be voted at the discretion of the proxies. |
| Q: |
Will
my shares be voted if I do not return my proxy?
|
| A: |
If
your shares are registered directly in your name, your shares may not be voted if you do
not vote by returning your proxy by mail, over the phone or over the Internet before the
Annual Meeting or in person at the Annual Meeting.
If
your shares are held in “street name,” your brokerage firm, bank or other nominee may, under certain circumstances, vote
your shares if you do not timely return your voting instructions. Brokers, banks or other nominees can vote their customers’
unvoted shares on discretionary matters but cannot vote such shares on non-discretionary matters. If you do not timely return voting
instructions to your brokerage firm, bank or other nominee to vote your shares, your brokerage firm, bank or other nominee may, on
discretionary matters, either vote your shares or leave your shares unvoted.
Proposal
No. 1, regarding the Reverse Stock Split Proposal, is a discretionary matter and a broker will be permitted to exercise its
discretion to vote uninstructed shares on the proposal; however, we encourage you to timely provide voting instructions to your
brokerage firm, bank or other nominee. This ensures that your shares will be voted at the Special Meeting according to your instructions.
You should receive directions from your brokerage firm, bank or other nominee about how to submit your voting instructions to them.
Proposal
No. 2, regarding the Adjournment Proposal, is a discretionary matter and a broker will be permitted to exercise its discretion
to vote uninstructed shares on the proposal; however, we encourage you to timely provide voting instructions to your brokerage firm,
bank or other nominee. This ensures that your shares will be voted at the Special Meeting according to your instructions. You should
receive directions from your brokerage firm, bank or other nominee about how to submit your voting instructions to them.
|
| Q: |
What
if I want to change my vote or revoke my proxy? |
| |
|
| A: |
If
your shares are registered directly in your name, you may revoke your proxy and change your vote at any time before the Special Meeting.
To do so, you must do one of the following: |
| |
1. |
Vote
over the Internet as instructed above. Only your latest Internet vote is counted. You may not revoke or change your vote over the
Internet after 7:00 p.m. Eastern Time on July 22, 2024. |
| |
|
|
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2. |
Sign
a new proxy and submit it by mail to Equity Stock Transfer at 237 W 37th St. Suite 602 New York, NY 10018 ATTN: Shareholder Services,
who must receive the proxy card no later than July 22, 2024. Only your latest dated proxy will be counted. |
| |
|
|
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3. |
Virtually
attend the Special Meeting and vote electronically at the meeting. Virtually attending the Special Meeting alone will not revoke
your Internet vote or proxy submitted by mail, as the case may be. |
| |
|
|
| |
4. |
Give
our Corporate Secretary written notice before or at the Special Meeting that you want to revoke your proxy. |
If
your shares are held in “street name,” you may submit new voting instructions with a later date by contacting your bank,
brokerage firm, or other nominee. You may also vote electronically at the Special Meeting, which will have the effect of revoking any
previously submitted voting instructions, if you obtain a broker’s legal proxy as described in the answer to the question “How
do I vote my shares?” above.
| Q: |
What
is a quorum? |
| |
|
| A: |
The
holders of more than 50% of the 34,904,680 shares of common stock outstanding as of the Record Date, either present or represented
by proxy, constitute a quorum. A quorum is necessary in order to conduct the Special Meeting. If you choose to have your shares represented
by proxy at the Special Meeting, you will be considered part of the quorum. Broker non-votes and abstentions will be counted as present
for the purpose of establishing a quorum. If a quorum is not present by attendance at the Special Meeting or represented by proxy,
the shareholders present by attendance at the meeting or by proxy may adjourn the Special Meeting until a quorum is present. |
| Q: |
What
is a Broker Non-Vote? |
| |
|
| A: |
A
“broker non-vote” occurs when shares held by a broker in “street name”
for a beneficial owner are not voted with respect to a proposal because (1) the broker has
not received voting instructions from the shareholder who beneficially owns the shares and
(2) the broker lacks the authority to vote the shares at their discretion. Broker non-votes
will not be included in the tabulation of the voting results of any of the “non-discretionary”
proposals and, therefore, will have no effect on such proposals.
Our
common stock is listed on the Nasdaq Capital Market. However, under current New York Stock Exchange (“NYSE”) rules and
interpretations that govern broker non-votes:
(i)
Proposal No. 1 for the Reverse Stock Split Proposal is considered a discretionary matter and a broker will be permitted to exercise
its discretion to vote uninstructed shares of the proposal;
(ii)
Proposal No. 2 for the Adjournment Proposal is considered a discretionary matter, and a broker will be permitted to exercise its
discretion to vote uninstructed shares of the proposal; |
| Q: |
What
vote is required to approve each matter and how are votes counted?
|
| |
|
| A: |
The
table below summarizes the proposal that will be voted on, the vote required to approve the proposal and how votes are counted: |
| Proposal | |
Votes
Required | |
Voting Options | |
Impact of
“Abstain” Votes | |
Broker
Discretionary Voting Allowed |
Proposal No. 1:
Reverse Stock
Split Proposal | |
The affirmative vote of the
holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Special Meeting
by the holders entitled to vote thereon. | |
“FOR”
“AGAINST”
“ABSTAIN” | |
(1) | |
Yes(2) |
| | |
| |
| |
| |
|
Proposal No. 2:
Adjournment Proposal | |
The affirmative vote of the holders of a
majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the Special Meeting by the holders
entitled to vote thereon. | |
“FOR”
“AGAINST”
“ABSTAIN” | |
(1) | |
Yes(2) |
| (1) |
A
vote marked as an “Abstention” is not considered a vote cast and will, therefore, not affect the outcome of this proposal. |
| (2) |
As
this proposal is considered a discretionary matter, brokers are permitted to exercise their discretion to vote uninstructed shares
on this proposal. |
| Q: |
Do
the directors and officers of the Company have an interest in the outcome of the matters to be voted on? |
| |
|
| A: |
Directors
and executive officers, who, as of the Record Date, had beneficial ownership (or had the right to acquire beneficial ownership within
sixty days following the Record Date) of approximately 7.81% of our outstanding common stock and are expected to vote in
favor of Reverse Stock Split Proposal and the Abstention Proposal. |
| Q: |
Who
will count the votes? |
| |
|
| A: |
A
representative of Equity Stock Transfer, will serve as our inspector of elections and will count the votes cast by proxy and the
votes cast in person at the Special Meeting. |
| Q: |
How
do I attend the Special Meeting? |
| |
|
| A: |
Shareholders
of Record: Shareholders of record as of the Record Date can attend the special meeting
by accessing the live audio conference call at +1-877-407-3088 and presenting the unique
12-digit control number on the proxy card.
Beneficial
Owners: If you were a beneficial owner of record as of the Record Date (i.e., you held your shares in an account at a brokerage
firm, bank or other similar agent), you will need to obtain a legal proxy from your broker, bank or other agent. Once you have received
a legal proxy from your broker, bank or other agent, it should be emailed to our transfer agent, Equity Stock Transfer, at proxy@equitystock.com
and should be labeled “Legal Proxy” in the subject line. Please include proof from your broker, bank or other agent of
your legal proxy (e.g., a forwarded email from your broker, bank or other agent with your legal proxy attached, or an image of your
valid proxy attached to your email). Requests for registration must be received by Equity Stock Transfer no later than 5:00 p.m.
Eastern Time, on July 22, 2024. You will then receive a confirmation of your registration, with a control number, by email from Equity
Stock Transfer. At the time of the meeting, access the live audio conference call at +1-877-407-3088 and present your unique 12-digit
control number. |
| Q: |
Why
a virtual meeting? |
| |
|
| A: |
We
are pleased to offer our shareholders a completely virtual Special Meeting, which provides
worldwide access, improved communication and cost savings for our shareholders and the Company.
|
| Q: |
What
if during the check-in time or during the meeting I have technical difficulties or trouble accessing the virtual audio conference
line? |
| |
|
| A: |
We
will have technicians ready to assist you with any technical difficulties you may have in accessing the virtual Special Meeting.
If you encounter any difficulties, please call: 877-804-2062 (Toll Free) or email proxy@equitystock.com. |
| Q: |
Are
there any expenses associated with collecting the shareholder votes? |
| |
|
| A: |
All
of the expenses involved in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be paid
by us. In addition to the solicitation by mail, proxies may be solicited by our officers and other employees by telephone or in person.
Such persons will receive no compensation for their services other than their regular salaries. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of the
shares held of record by such persons, and we may reimburse such persons for reasonable out of pocket expenses incurred by them in
forwarding solicitation materials. If you have any questions or require any assistance with completing your proxy, please contact
Equity Stock Transfer by telephone at 877-804-2062 (Toll Free) or email proxy@equitystock.com. In addition, we have retained Alliance
Advisors as our strategic shareholder advisor and proxy solicitation agent in connection with the solicitation of proxies for the
Special Meeting at an approximate cost of $15,000, plus reimbursement of expenses. If you have any questions or require any assistance
with completing your proxy, please contact Alliance Advisors by telephone (toll-free within North America) at 1-833-795-8488 or by
email at NCPL@allianceadvisors.com. |
| Q: |
Do
I have Dissenters’ Rights of Appraisal? |
| |
|
| A: |
Our
shareholders do not have appraisal rights under Utah law or under our governing documents with respect to the matters to be voted
upon at the Special Meeting. |
| Q: |
Where
can I find the voting results? |
| |
|
| A: |
Voting
results will be reported in a Current Report on Form 8-K, which we will file with the SEC within four business days following the
Special Meeting. |
| Q: |
How
do I obtain an Annual Report on Form 10-K |
| |
|
| A: |
If
you would like a copy of our Annual Report on Form 10-K for the fiscal year ended April 30,
2023 that we filed with the SEC, we will send you one without charge. Please write to:
NETCAPITAL
INC.
1
Lincoln Street,
Boston,
MA 02111
Attn:
Corporate Secretary
All
of our SEC filings are also available free of charge under the heading “SEC Filings” in the “Investors” section
of our website at www.netcapitalinc.com. |
PROPOSAL
NO. 1
THE
REVERSE STOCK SPLIT PROPOSAL
General
Our
Board is recommending that our stockholders approve an amendment to our articles of incorporation, as amended, to effect a reverse split
of the issued shares of our common stock at a ratio that is not less than 1-for-2 and not greater than 1-for-100, without reducing
the authorized number of shares of our common stock, with the exact ratio to be selected by the Board in its discretion, and to be effected,
if at all, in the sole discretion of the Board at any time after stockholder approval of the amendment and before July 24, 2025 without
further approval or authorization of our stockholders. If our stockholders approve this proposal, the Board will have authority to give
effect to the reverse stock split. However, notwithstanding stockholder approval of this proposal, the Board may elect not to proceed
with the reverse stock split if, at any time the Board, in its sole discretion, determines that it is no longer in our best interest
and the best interests of our stockholders to proceed with the reverse stock split. By voting in favor of this proposal, you are expressly
also authorizing the Board to determine not to proceed with the reverse stock split in its sole discretion.
If
the reverse stock split is implemented, at the effective time of the reverse split, the issued shares of our common stock immediately
prior to the effective time will be combined and reclassified into a smaller number of shares such that, except for adjustments that
may result from the treatment of fractional shares as described below, each of our stockholders will own one new share of our common
stock for every 2 to 100 shares of common stock owned by such stockholder immediately prior to the effective time of the reverse split,
depending on the exact ratio approved by the Board.
A
copy of the proposed form of articles of amendment to our articles of incorporation to effect the reverse stock split is attached as
Appendix A to this proxy statement. Any amendment to our articles of incorporation to effect the reverse stock split will include
the reverse stock split ratio fixed by the board of directors, within the range approved by our stockholders.
Reasons
for the Reverse Stock Split; Potential Consequences of the Reverse Stock Split
Our
primary reason for recommending the reverse stock split is based on our belief that the reverse stock split will be necessary to increase
the bid price of our common stock to avoid being delisted from The Nasdaq Capital Market. Our common stock is publicly traded and listed
on The Nasdaq Capital Market under the trading symbol “NCPL.” To maintain our listing, we must comply with the continued
listing requirements of The Nasdaq Capital Market, which include a minimum bid price requirement of $1.00 per share.
On
September 1, 2023, the Company received a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company
that it was not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing
on The Nasdaq Capital Market. Specifically, Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price
of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if
the deficiency continues for a period of 30 consecutive business days. The Company initially had 180 calendar days, or until by February
28, 2024, to regain compliance with the minimum bid price requirement. The Company was unable to regain compliance with the minimum bid
price requirement by February 28, 2024.
On
February 29, 2024, the Company received a letter (the “Extension Notice”) from Nasdaq notifying the Company that its request
for an extension to regain compliance with the minimum bid price requirement has been granted, and the Company has an additional 180
calendar days, or until August 26, 2024, to regain compliance with the minimum bid price requirement. Nasdaq’s determination was
based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements
for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and the Company’s written notice
of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
The
Board believes it is in the best interest of the Company and our stockholders to maintain the listing of our common stock on The Nasdaq
Capital Market.
In
evaluating whether to seek stockholder approval for the Reverse Stock Split, our Board took into consideration negative factors associated
with reverse stock splits. These factors include: the negative perception of reverse stock splits that investors, analysts and other
stock market participants may hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently
declined, sometimes significantly, following their reverse stock splits; the possible adverse effect on liquidity that a reduced number
of outstanding shares could cause; and the costs associated with implementing a reverse stock split. Even if our stockholders approve
the Reverse Stock Split, our Board reserves the right not to effect the Reverse Stock Split if in our Board’s opinion it would
not be in the best interests of the Company or our stockholders to effect such Reverse Stock Split.
The
Board has considered the potential harm to the Company and our stockholders should Nasdaq delist our common stock from The Nasdaq Capital
Market. Delisting our common stock could adversely affect the liquidity and market price of our common stock because alternatives, such
as the OTCQB and the Pink markets operated by the OTC Markets Group Inc., are generally considered to be less efficient markets. An investor
likely would find it less convenient to sell, or to obtain accurate quotations in seeking to buy our common stock on such markets. Many
investors likely would not buy or sell our common stock due to difficulty in accessing the OTCQB or Pink markets, policies preventing
them from trading in securities not listed on a national securities exchange, or other reasons. Delisting of our common stock from The
Nasdaq Capital Market could also cause a loss of confidence of existing or potential industry partners, clients, lenders, and employees,
which could further harm our business and our future prospects. The Board believes that the reverse stock split is a potentially effective
means for us to regain compliance with the Minimum Bid Price Requirement by producing the immediate effect of increasing the per share
bid price of our common stock to avoid, or at least mitigate, the likely adverse consequences of our common stock being delisted from
The Nasdaq Capital Market.
In
addition, the reverse stock split may make our common stock a more attractive and cost-effective investment to a broader range of investors,
which in turn could improve the marketability and liquidity of our common stock. For example, the current market price of our common
stock may prevent certain institutional investors, professional investors and other members of the investing public from purchasing our
common stock. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing
in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Furthermore, some
of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers.
Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions
on higher-priced stocks, the current average price per share of our common stock can result in investors paying transaction costs representing
a higher percentage of their total share value than would be the case if the share price were higher.
Reducing
the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the
per share bid price of our common stock. However, other factors, such as our financial results, market conditions and the market perception
of our business may adversely affect the bid price of our common stock. As a result, there can be no assurance that the reverse stock
split, if completed, will result in the intended or expected benefits described above, that the bid price of our common stock will increase
following the reverse stock split, that as a result of the reverse stock split we will be able to satisfy the Minimum Bid Price Requirement,
or that the bid price of our common stock will not decrease in the future. Additionally, we cannot assure you that the bid price per
share of our common stock after the reverse stock split will increase in proportion to the reduction in the number of shares of our common
stock outstanding before the reverse stock split. Accordingly, the total market capitalization of our common stock after the reverse
stock split may be lower than the total market capitalization before the reverse stock split, and a reduction in number of shares outstanding
may impair the liquidity for our common stock, which may reduce the value of our common stock.
Effects
of the Reverse Stock Split
Generally
Based
on 34,904,680 shares of our common stock issued as of the Record Date for the Meeting, immediately following the reverse stock
split, if implemented (without giving effect to rounding for fractional shares):
| |
● |
assuming
a 1-for-2 reverse split ratio, we would have approximately 17,452,340 shares of common stock issued; |
| |
● |
assuming
a 1-for-20 reverse split ratio, we would have approximately 1,745,234 shares of common stock issued, which; |
| |
|
|
| |
● |
assuming
a 1-for-50 reverse split ratio, we would have approximately 698,094 shares of common stock issued; and |
| |
|
|
| |
● |
assuming
a 1-for-100 reverse split ratio, we would have approximately 349,047 shares of common stock issued. |
The
reverse stock split will affect all holders of our common stock uniformly and will not affect any stockholder’s percentage ownership
interest or any stockholder’s proportionate voting power, except that, as described below under “Fractional Shares,”
record holders of common stock otherwise entitled to a fractional share as a result of the reverse stock split because they hold a number
of shares not evenly divisible by the reverse stock split ratio will automatically be entitled to receive an additional fraction of a
share of common stock to round up to the next whole share.
The
reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares
may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than
the costs of transactions in “round lots” of even multiples of 100 shares.
If
the reverse stock split is effected, our common stock will have a new Committee on Uniform Securities Identification Procedures (“CUSIP”)
number, which is a number used to identify our common stock, and stock certificates with the older CUSIP numbers will need to be exchanged
for stock certificates with the new CUSIP number by following the procedures described below under “Procedure for Implementing
the Reverse Stock Split — Holders of Certificated Shares of Common Stock.”
Our
common stock is currently registered under the Securities Exchange Act of 1934 (the “Exchange Act”), and we are subject to
the current and periodic reporting and other requirements of the Exchange Act. The reverse stock split will not affect the registration
of our common stock under the Exchange Act. In addition, notwithstanding the decrease in the number of outstanding shares that will result
if the reverse stock split is effected, the Board does not intend for this transaction to be the first step in a “going private
transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Our
common stock would continue to be listed on The Nasdaq Capital Market under the symbol “NCPL” immediately following the reverse
stock split, although it is likely that Nasdaq would temporarily add the letter “D” to the end of the trading symbol to indicate
that the reverse stock split occurred.
Effect
on Authorized Shares of Common Stock
The
reverse stock split will not change the number of authorized shares of our common stock. Because the number of issued shares of our common
stock will decrease if the reverse stock split is effected, the number of shares of our common stock remaining available for issuance
will increase. Currently, the number of authorized shares of our common stock is 900,000,000. Subject to limitations imposed by Nasdaq,
the additional shares available for issuance may be issued without stockholder approval at any time, in the sole discretion of the Board.
The authorized and unissued shares may be issued for cash, for acquisitions or for any other purpose that the Board determines to be
in our best interests.
By
increasing the number of authorized but unissued shares of our common stock, the reverse stock split could, under certain circumstances,
have an anti-takeover effect, although this is not the intent of the Board. For example, it may be possible for the Board to delay or
impede a takeover or transfer of control of the Company by causing such additional authorized but unissued shares to be issued to holders
who might side with the Board in opposing a takeover bid that the Board determines is not in the best interests of the Company or our
stockholders. The reverse stock split therefore may have the effect of discouraging unsolicited takeover attempts. By potentially discouraging
initiation of any such unsolicited takeover attempts, the reverse stock split may limit the opportunity for our stockholders to dispose
of their shares at the higher price generally available in takeover attempts or that may be available under a merger proposal. The reverse
stock split may have the effect of permitting our current management, including our current directors, to retain their position, and
place it in a better position to resist changes that stockholders may wish to make if they are dissatisfied with our operations. However,
the Board is not aware of any attempt to take control of the Company and the Board has not approved the reverse stock split with the
intent that it be utilized as a type of anti-takeover device.
Effect
on Par Value of our Common Stock
The
reverse stock split will not affect the per share par value of our common stock, which will remain at $0.001.
Effect
on Warrants, and Convertible or Exchangeable Securities
If
the reverse stock split is effected, proportionate adjustments are generally required to be made to the per share exercise price and
the number of shares issuable upon the exercise or conversion of outstanding warrants, and convertible or exchangeable securities entitling
the holders to purchase, exchange for, or convert into, shares of our common stock, if any. This will result in approximately the same
aggregate price being required to be paid under such securities upon exercise, exchange or conversion, and approximately the same value
of shares of common stock being delivered upon such exercise, exchange or conversion, immediately following the reverse stock split as
was the case immediately preceding the reverse stock split. The number of shares reserved for issuance pursuant to these securities,
if any, will be proportionately adjusted based on the reverse stock split ratio approved by the Board, subject to our treatment of fractional
shares.
Effect
on our Equity Incentive Plans and Outstanding Awards
Pursuant
to the terms of our 2023 Omnibus Equity Incentive Plan (the “2023 Plan”) the number of shares of common stock issuable upon
exercise or vesting of all then outstanding stock options, restricted stock units (“RSUs”), and other equity awards will
be proportionately adjusted using the reverse stock split ratio approved by the Board for the reverse stock split, and rounded down to
the nearest whole share. The number of shares then reserved for issuance under the Plans will also be reduced proportionately based upon
the reverse stock split ratio approved by the Board. In addition, the exercise price for each outstanding stock option will be increased
in inverse proportion to the reverse stock split ratio approved by the Board such that upon an exercise, the aggregate exercise price
payable by the option holder to the Company for the shares subject to the option will remain approximately the same as the aggregate
exercise price prior to the reverse stock split, subject to the terms of such securities.
Effect
on our Outstanding Warrants
As
of the Record Date, we have 20,562,932 shares of common stock issuable upon the exercise of stock warrants outstanding at a weighted
average exercise price of $0.61 per share. The number of shares of common stock issuable upon exercise of all then outstanding
stock warrants will be proportionately adjusted using the reverse stock split ratio approved by the Board for the reverse stock split,
and rounded down to the nearest whole share.
Fractional
Shares
We
will not issue fractional shares in connection with the reverse stock split. Instead, record holders of our common stock who otherwise
would be entitled to receive a fractional share because they hold a number of shares not evenly divisible by the reverse stock split
ratio approved by the Board will automatically be entitled to receive an additional fraction of a share of common stock to round up to
the next whole share. In any event, cash will not be paid for fractional shares.
Procedure
for Implementing the Reverse Stock Split
If
our stockholders approve this proposal, and if the Board determines that it is in our best interest and the best interests of our stockholders
to implement the reverse stock split, we will file the articles of amendment to our articles of incorporation with the Secretary of State
of the State of Utah to effect the reverse stock split with the reverse stock split ratio approved by the Board. As of the effective
time of the reverse stock split, each stock certificate representing pre-split shares will be deemed for all corporate purposes to evidence
ownership of post-split shares.
Holders
of Certificated Shares of Common Stock
If
the reverse stock split is effected, stockholders holding shares of our common stock in certificated form will be sent a transmittal
letter by our transfer agent after the effective time of the reverse stock split. The letter of transmittal will contain instructions
on how a stockholder should surrender their certificate(s) representing pre-split shares of our common stock to our transfer agent in
exchange for certificates representing the appropriate number of shares of post-reverse stock split common stock. No certificates representing
post-split shares of our common stock will be issued to a stockholder until such stockholder has surrendered to our transfer agent all
their certificates representing their pre-split shares, together with a properly completed and executed letter of transmittal. No stockholder
will be required to pay a transfer or other fee to exchange their certificates representing pre-split shares of our common stock. Until
surrendered, we will deem certificates representing pre-split shares of our common stock to be cancelled and only to represent the number
of whole shares of post-split shares of our common stock to which these stockholders are entitled, subject to the treatment of fractional
shares. If a certificate representing pre-split shares of our common stock bears a restrictive legend, the certificate issued in exchange
therefor will bear the same restrictive legend. Any pre-split shares submitted for transfer, whether pursuant to a sale or other disposition,
or otherwise, will automatically be exchanged for post-split shares. Stockholders should not destroy any stock certificate(s) and
should not submit any certificate(s) unless and until requested to do so.
Registered
“Book-Entry” Holders of Common Stock
If
the reverse stock split is effected, stockholders who hold their shares of our common stock electronically in book-entry form with our
transfer agent will not need to any take action to receive their shares of post-reverse stock split common stock (i.e., the exchange
will be automatic).
Beneficial
Owners
If
the reverse stock split is effected, we intend to treat shares held by stockholders through a broker, bank, or other nominee in the same
manner as shares held by stockholders of record. Brokers, banks, and other nominees will be instructed to effect the reverse stock split
for beneficial owners holding our common stock in street name. However, these brokers, banks, and other nominees may have different procedures
for processing the reverse stock split than for stockholders of record. Stockholders who hold shares of our common stock in street name
and who have questions in this regard are encouraged to contact the brokers, banks, or other nominees holding their shares.
Accounting
Matters
The
reverse stock split will not affect the per share par value of our common stock. As a result, as of the effective time of the reverse
stock split, the stated capital attributable to common stock and the additional paid-in capital account on our balance sheet, in the
aggregate, will not change due to the reverse stock split. Reported per share net income or loss will be higher because there will be
fewer shares of common stock outstanding.
Certain
U.S. Federal Income Tax Consequences of the Reverse Stock Split
The
following summary describes, as of the date of this proxy statement, certain U.S. federal income tax consequences of the reverse stock
split to holders of our common stock. This summary addresses the tax consequences only to a U.S. holder of our common stock, which is
a beneficial owner of our common stock that is either:
| |
● |
an
individual citizen or resident of the United States; |
| |
|
|
| |
● |
a
corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the
laws of the United States or any state thereof or the District of Columbia; |
| |
|
|
| |
● |
an
estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| |
|
|
| |
● |
a
trust, if: (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more
U.S. persons has the authority to control all of its substantial decisions or (ii) it has a valid election in effect to be treated
as a U.S. person for U.S. federal income tax purposes. |
This
summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations,
administrative rulings and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S.
federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material
effect on the U.S. federal income tax consequences of the reverse stock split.
This
summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that
arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known
by investors. For example, this summary does not address the tax consequences to (i) persons that may be subject to special treatment
under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate
investment trusts, tax-exempt organizations, U.S. expatriates or former citizens or residents, persons subject to the alternative or
corporate minimum tax, persons whose functional currency is not the U.S. dollar, partnerships or other pass-through entities, traders
in securities that elect to mark to market and dealers in securities or currencies, (ii) persons who acquired their shares or equity
awards in connection with employment or other performance of services, (iii) persons who hold our common stock as part of a position
in a “straddle” or as part of a “hedging transaction,” “conversion transaction” or other integrated
investment transaction for federal income tax purposes, or (iv) persons who do not hold our common stock as “capital assets”
(generally, property held for investment). This summary does not address backup withholding and information reporting. This summary does
not address U.S. holders who beneficially own common stock through a “foreign financial institution” (as defined in Code
Section 1471(d)(4)) or certain other non-U.S. entities specified in Code Section 1472. This summary does not address the Medicare tax
on net investment income, tax considerations in respect of our preferred stock, or tax considerations arising under any state, local
or foreign laws, or under federal estate or gift tax laws.
If
a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common
stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the
activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax
advisors regarding the U.S. federal income tax consequences of the reverse stock split.
We
have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service regarding the U.S. federal income
tax consequences of the reverse stock split, and there can be no assurance that the Internal Revenue Service will not challenge the statements
and conclusions set forth below or that a court would not sustain any such challenge.
Stockholders
should consult their own tax advisors concerning the particular U.S. federal tax consequences of the reverse stock split to them, as
well as the consequences to them arising under the laws of any other taxing jurisdiction, including any foreign, state, or local income
tax consequences.
General
Tax Treatment of the Reverse Stock Split
The
reverse stock split is intended to qualify as a “reorganization” under Section 368 of the Code that should constitute a “recapitalization”
for U.S. federal income tax purposes. Certain filings with the Internal Revenue Service must be made by us and certain ‘significant
holders” of our common shares in order for the reverse stock split to qualify as a reorganization. Assuming the reverse stock split
qualifies as a reorganization, other than with respect to any U.S. holder that receives a full share in lieu of a fractional share, a
U.S. holder generally will not recognize gain or loss upon the exchange of shares of our common stock for a lesser number of shares of
our common stock, based upon the reverse stock split ratio.
A
U.S. holder’s aggregate tax basis in the lesser number of shares of our common stock received in the reverse stock split will be
the same such U.S. holder’s aggregate tax basis in the shares of our common stock that such U.S. holder owned immediately prior
to the reverse stock split. The holding period for the common stock received as a result of the period during which a U.S. holder held
the shares of our common stock that were surrendered in the reverse stock split. The United States Treasury regulations provide detailed
rules for allocating the tax basis and holding period of the shares of our common stock surrendered for the shares of our common stock
received pursuant to the reverse stock split. U.S. holders of shares of our common stock acquired on different dates and at different
prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
As
noted above, we will not issue fractional shares in connection with the reverse stock split. Instead, stockholders who would be entitled
to receive fractional shares because they hold a number of shares not evenly divisible by the reverse stock split ratio will automatically
be entitled to receive an additional fraction of a share of common stock to round up to the next whole share of common stock. The U.S.
federal income tax consequences of the receipt of such an additional fraction of a share are not clear. A U.S. holder that receives a
full share in lieu of a fractional share may be treated as though it received a distribution from us to the extent that the value of
the full share exceeds the value of the fractional share the holder otherwise would have received. Such distribution would generally
be a dividend to the extent of our current or accumulated earnings and profits. Any amount in excess of earnings and profits would generally
reduce the holder’s basis their shares by the amount of such excess. The portion of the full share in excess of the fractional
share would generally have a tax basis equal to the amount recognized as a dividend and the holding period for such share would begin
on the date of the deemed distribution. Holders are urged to consult their own tax advisors as to the possible tax consequences of receiving
an additional fraction of a share in the reverse stock split.
THE
FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT AND DOES NOT CONSTITUTE
A TAX OPINION. EACH STOCKHOLDER SHOULD CONSULT THEIR OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO THEM
AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
Interests
of Directors and Executive Officers
None
of the Company’s directors or executive officers have any substantial interest, directly or indirectly, in this proposal except
to the extent of their ownership of shares of the Company’s common stock.
No
Appraisal Rights
Stockholders
are not entitled to rights of appraisal with respect to this proposal.
Required
Vote
The
affirmative vote of a majority of the votes cast at the Special Meeting is required to approve Proposal No. 1.
Recommendation
of the Board of Directors
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL NO. 1.
PROPOSAL
NO. 2
ADJOURNMENT
PROPOSAL
At
the Special Meeting, we may ask our shareholders to vote on a proposal to adjourn the Special Meeting if necessary or appropriate in
the sole discretion of our Board, including to solicit additional proxies in the event that there are not sufficient votes at the time
of the Special Meeting or any adjournment or postponement of the Special Meeting to approve any of the other proposals.
If
at the Special Meeting the number of shares authorized to vote present or represented by proxy and voting in favor of a proposal is insufficient
to approve such proposal, then our Board may hold a vote on each proposal that has garnered sufficient votes, if any, and then move to
adjourn the Special Meeting as to the remaining proposals in order to solicit additional proxies in favor of those remaining proposals.
Alternatively,
even if there are sufficient shares authorized to vote present or represented by proxy voting in favor of all of the proposals, our Board
may hold a vote on the adjournment proposal if, in its sole discretion, it determines that it is necessary or appropriate for any reason
to adjourn the Special Meeting to a later date and time. In that event, the Company will ask its shareholders to vote only upon the adjournment
proposal and not any other proposal.
Any
adjournment may be made without notice (if the adjournment is not for more than thirty days and a new record date is not fixed for the
adjourned meeting), other than by an announcement made at the Special Meeting of the time, date and place of the adjourned meeting.
Any
adjournment of the Special Meeting will allow our shareholders who have already sent in their proxies to revoke them at any time prior
to their use at the Special Meeting as adjourned.
If
we adjourn the Special Meeting to a later date, we will transact the same business and, unless we must fix a new record date, only the
shareholders who were eligible to vote at the original meeting will be permitted to vote at the adjourned meeting.
Required
Vote
The
affirmative vote of a majority of the votes cast at the Special Meeting is required to approve Proposal No. 2.
Recommendation
of the Board of Directors
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership of shares of our Common Stock as of the Record Date
by:
| ● |
each
person whom we know beneficially owns more than 5% of any class of equity security; |
| |
|
| ● |
each
of our directors individually; |
| |
|
| ● |
each
of our named executive officers individually; and |
| |
|
| ● |
all
of our current directors and executive officers as a group. |
We
have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of
securities to persons who possess sole or shared voting or investment power with respect to such securities. In addition, pursuant to
such rules, we deemed outstanding shares of common stock subject to options or warrants held by that person that are currently exercisable
or exercisable within 60 days of June 4, 2024. We did not deem such shares outstanding, however, for the purpose of computing
the percentage ownership of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished
to us, that the beneficial owners named in the table below have sole voting and investment power with respect to all shares of our common
stock that they beneficially own, subject to applicable community property laws. The inclusion in the table below of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership of those shares.
| Name and Address of Beneficial Owner(1) | |
Number of Shares | | |
Percent of
Common Stock* | |
| 5% or Greater Shareholders: | |
| | | |
| | |
| Netcapital DE LLC(2) | |
| 1,711,261 | | |
| 4.90 | % |
| Armistice Capital Master Fund Ltd.(3)(4) | |
| 3,455,563 | | |
| 9.99 | % |
| Lind Global Fund II LP(5) | |
| 3,455,563 | | |
| 9.99 | % |
| Officers and Directors: | |
| | | |
| | |
| Jason Frishman(6) | |
| 1,802,928 | | |
| 5.17 | % |
| Martin Kay(7) | |
| 395,833 | | |
| 1.13 | % |
| Steven Geary(8) | |
| 259,366 | | |
| * | |
| Arnold Scott(9) | |
| 92,807 | | |
| * | |
| Coreen Kraysler(10) | |
| 114,167 | | |
| * | |
| Cecilia Lenk(11) | |
| 38,568 | | |
| * | |
| Avi Liss(12) | |
| 20,792 | | |
| * | |
| All Named Executive Officers and Directors as a Group (7 persons) | |
| 2,724,460 | | |
| 7.81 | % |
*
Based on 34,904,680 shares outstanding as of the Record Date.
**
Less than 1%
| (1) |
Unless
otherwise noted, the business address of each member of our Board is c/o Netcapital Inc. 1 Lincoln Street, Boston Massachusetts 02111. |
| (2) |
The
natural person with investment control over the securities held by Netcapital DE LLC is Jason Frishman. Netcapital Systems LLC has
agreed to vote its shares of common stock to support the resolutions of the Board of Netcapital Inc. on any matters that are brought
to a shareholder vote. |
| (3) |
Consists
of (i) 3,455,563 shares of Common Stock (including 3,006,000 shares of Common Stock held in abeyance at our transfer agent which
may not be issued if such issuance would result in the Armistice Capital Master Fund owning a percentage of our outstanding common
stock exceeding 9.99% after giving effect to the issuance and
(ii) Series A-1 Warrants to purchase 8,000,000 shares of Common Stock with such Series A-1 Warrants being subject to beneficial
ownership limitations that prohibit the Master Fund from exercising any portion of such warrants if such exercise would result in
the Master Fund owning a percentage of our outstanding common stock exceeding 4.99% after giving effect to the issuance of Common
Stock in connection with the Master Fund’s exercise of any portion of such warrants. Excludes (i) Series A-3 Warrants to purchase
8,000,000 shares of Common Stock and (ii) Series A-4 Warrants to purchase 8,000,000 shares of Common Stock, as both the Series A-3
Warrants and Series A-4 Warrants (and the shares issuable thereunder) are subject to shareholder approval. Such Series A-3 Warrants
and Series A-4 Warrants contain beneficial ownership limitations that prohibit the Master Fund from exercising any portion of such
warrants if such exercise would result in the Master Fund owning a percentage of our outstanding common stock exceeding 4.99% after
giving effect to the issuance of Common Stock in connection with the Master Fund’s exercise of any portion of such warrants. |
| |
|
| (4) |
Armistice
Capital, LLC (“Armistice Capital”) is the investment manager of Armistice Capital Master Fund Ltd. (the “Master
Fund”), the direct holder of the Shares, and pursuant to an Investment Management Agreement, Armistice Capital exercises voting
and investment power over the securities of the Issuer held by the Master Fund and thus may be deemed to beneficially own the securities
of the Issuer held by the Master Fund. Mr. Boyd, as the managing member of Armistice Capital, may be deemed to beneficially own the
securities of the Issuer held by the Master Fund. The Master Fund specifically disclaims beneficial ownership of the securities of
the Issuer directly held by it by virtue of its inability to vote or dispose of such securities as a result of its Investment Management
Agreement with Armistice Capital. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue,
7th Floor, New York, NY 10022. |
| |
|
| (5) |
Consists
of (i) 3,455,563 shares of Common Stock (including 2,550,000 shares of Common Stock held in abeyance at our transfer agent which
may not be issued if such issuance would result in the Lind Global Fund II LP owning a percentage of our outstanding common stock
exceeding 9.99% after giving effect to the issuance and (ii) Series A-1 Warrants to purchase 6,000,000 shares of Common Stock with
such Series A-1 Warrants being subject to beneficial ownership limitations that prohibit Lind Global Fund II LP from exercising any
portion of such warrants if such exercise would result in the Lind Global Fund II LP owning a percentage of our outstanding common
stock exceeding 9.99% after giving effect to the issuance of Common Stock in connection with the Lind Global Fund II LP’s exercise
of any portion of such warrants. Excludes (i) Series A-3 Warrants to purchase 6,000,000 shares of Common Stock and (ii) Series A-4
Warrants to purchase 6000,000 shares of Common Stock, as both the Series A-3 Warrants and Series A-4 Warrants (and the shares issuable
thereunder) are subject to shareholder approval. Such Series A-3 Warrants and Series A-4 Warrants contain beneficial ownership limitations
that prohibit the Lind Global Fund II LP from exercising any portion of such warrants if such exercise would result in the Lind Global
Fund II LP owning a percentage of our outstanding common stock exceeding 9.99% after giving effect to the issuance of Common Stock
in connection with the Master Fund’s exercise of any portion of such warrants.
The address of Lind Global Fund II LP is 444 Madison Ave, Floor 41 New York, NY 10022 |
| |
|
| (6) |
Includes
(i) 91,667 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after
the Record Date, and (ii) 1,711,261 shares of common stock held by Netcapital Systems LLC, an entity that Jason Frishman is
the President of and in such capacity has the right to vote and dispose of the securities held by such entity. |
| |
|
| (7) |
Includes
(i) 395,833 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after
the Record Date. |
| |
|
| (8) |
Includes
(i) 249,274 shares of common stock and (ii) 9,792 shares of common stock subject to stock options that are presently
exercisable or exercisable within 60 days after the Record Date. |
| |
|
| (9) |
Includes
6,667 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days of the
Record Date. |
| |
|
| (10) |
Includes
91,667 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after
the Record Date. |
| |
|
| (11) |
Includes
12,917 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after
the Record Date. |
| |
|
| (12) |
Includes
9,792 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days of the
Record Date. |
SHAREHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS FOR 2024 ANNUAL MEETING OF
SHAREHOLDERS
Shareholders
who intend to have a proposal considered for inclusion in our proxy materials for presentation at our 2024 annual meeting of shareholders
(the “2024 Annual Meeting”) must submit the proposal to us at our corporate headquarters no later than June 7, 2024, which
proposal must be made in accordance with the provisions of Rule 14a-8 of the Exchange Act. In the event the date of the 2024 Annual Meeting
has been changed by more than 30 days from the date of the 2023 Annual Meeting, shareholders who intend to have a proposal considered
for inclusion in our proxy materials for presentation at our 2024 Annual Meeting must submit the proposal to us at our corporate headquarters
no later than a reasonable time before we begin to print and send our proxy materials for our 2024 Annual Meeting.
Shareholders
who intend to present a proposal at our 2024 Annual Meeting without inclusion of the proposal in our proxy materials are required to
provide notice of such proposal to our Corporate Secretary so that such notice is received by our Corporate Secretary at our principal
executive offices on or after January 5, 2024 but no later than February 6, 2024; provided, however, in the event that the 2024 Annual
Meeting occurs on a date that is not within 25 days before or after the anniversary date of the 2023 Annual Meeting, notice of such proposal
must be received by our Corporate Secretary no later than the close of business on the 10th day following the day on which
such notice of the date of the 2024 Annual Meeting is mailed or public disclosure of the date of the 2024 Annual Meeting is made, whichever
first occurs. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does
not comply with these and other applicable requirements.
OTHER
MATTERS
The
Board knows of no other business, which will be presented to the Special Meeting. If any other business is properly brought before the
Special Meeting, proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.
If
you do not plan to attend the Special Meeting, in order that your shares may be represented and in order to assure the required quorum,
please sign, date and return your proxy promptly. In the event you are able to attend the Special Meeting virtually, at your request,
we will cancel your previously submitted proxy.
ADDITIONAL
INFORMATION
HOUSEHOLDING
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements
and other Special Meeting materials with respect to two or more stockholders sharing the same address by delivering a proxy statement
or other Special Meeting materials addressed to those stockholders. This process, which is commonly referred to as householding, potentially
provides extra convenience for stockholders and cost savings for companies. Stockholders who participate in householding will continue
to be able to access and receive separate proxy cards.
If
you share an address with another stockholder and have received multiple copies of our proxy materials, you may write or call us at the
address or phone number below to request delivery of a single copy of the notice and, if applicable, other proxy materials in the future.
We undertake to deliver promptly upon written or oral request a separate copy of the proxy materials, as requested, to a stockholder
at a shared address to which a single copy of the proxy materials was delivered. If you hold stock as a record stockholder and prefer
to receive separate copies of our proxy materials either now or in the future, please contact us at 1 Lincoln Street, Boston, MA 02111,
Attn: Secretary, or by phone at (781) 925-1700. If your stock is held through a brokerage firm or bank and you prefer to receive separate
copies of our proxy materials either now or in the future, please contact your brokerage firm or bank.
ANNUAL
REPORT
Additional
copies of our Annual Report on Form 10-K for the fiscal year ended April 30, 2023 may be obtained without charge by writing to the Company
at 1 Lincoln Street, Boston, MA 02111, Attn: Secretary, or by phone at (781) 925-1700.
| |
By
Order of the Board of Directors |
| |
|
| |
By: |
/s/
Martin Kay |
| |
Name: |
Martin
Kay |
| |
Title: |
Chief
Executive Officer |
| |
Date: |
June
7, 2024
|
APPENDIX
A
 |
|
State
of Utah
DEPARTMENT
OF COMMERCE
Division
of Corporations & Commercial Code
Articles
of Amendment to Articles of Incorporation (Profit) |
Entity
Number: 866715-0142
Non-Refundable
Processing Fee: $37.00
Pursuant
to UCA § 16-10a part 10, the individual named below causes this Amendment to the Articles of Incorporation to be delivered to the
Utah Division of Corporations for filing, and states as follows:
1.
The name of the corporation is: Netcapital Inc.
2.
The date the following amendment(s) was adopted: _________________________
3.
If changing the corporation name, the new name of the corporation is:
4.
The text of each amendment adopted (include attachment if additional space needed): The Articles of Incorporation are hereby amended
by revising Article IV to include a new Section C as follows:
“(C)
Effective at 6:00 p.m. Eastern Time (the “Effective Time”) on the effective date of the articles of amendment
adding this Section C to Article FOURTH of the certificate of incorporation of the corporation (the “Effective Date”),
every [two to one hundred, depending on the exact ratio to be approved by the Board of Directors (2 to 100]) shares of Common
Stock issued and outstanding or held by the corporation in treasury stock, in each case immediately prior to the Effective Time, shall
automatically be combined and reclassified into one (1) validly issued, fully paid and non-assessable share of Common Stock without any
further action by the corporation or the holder thereof (the “Reverse Split”); provided, however, that if the
Reverse Split would result in the record account of any holder of Common Stock having a number of shares of Common Stock that is, in
the aggregate, less than one (1) share (a “Fractional Share”), such holder shall be entitled to receive a whole
share of Common Stock in lieu of a Fractional Share. The Reverse Split shall have no effect on the number of authorized shares of Common
Stock or the par value per share thereof.”
5.
If providing for an exchange, reclassification or cancellation of issued shares, provisions for implementing the amendment if not contained
in the amendment itself:
6.
Indicate the manner in which the amendment(s) was adopted (mark only one):
| |
|
Adopted
by Incorporators or Board of Directors - Shareholder action not required. |
| |
|
|
| X |
|
Adopted
by Shareholders - Number of votes cast for amendment was sufficient for approval. |
7.
Delayed effective date (if not to be effective upon filing) _______ (MM-DD-YYYY not to exceed 90 days)
Under
penalties of perjury, I declare that this Amendment of Articles of Incorporation has been examined by me and is, to the best of my knowledge
and belief, true, correct and complete.
| By: |
|
|
| |
|
|
| Title: |
Chief
Executive Officer |
|
Date:
_________, 2024
Under
GRAMA {63G-2-201}, all registration information maintained by the Division is classified as public record. For confidentiality purposes,
you may use the business entity physical address rather than the residential or private address of any individual affiliated with the
entity.
Mailing/Faxing
Information:www.corporations.utah.gov/contactus.html Division’s Website:www.corporations.utah.gov
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