8-K: CXApp Inc. Secures $20 Million Financing Agreement with Avondale Capital

CXApp Inc. has entered into a Securities Purchase Agreement with Avondale Capital, LLC for a potential $20 million financing through pre-paid purchase agreements.

Summary

• CXApp Inc. has entered into a Securities Purchase Agreement with Avondale Capital, LLC, potentially providing up to $20 million in financing.
• The agreement involves the issuance and sale of pre-paid purchase agreements for shares of CXApp's common stock.
• The initial pre-paid purchase is for $4.2 million, with a net amount funded to CXApp of $4 million after discounts and expenses.
• CXApp also issued 80,000 commitment shares to Avondale at closing.
• Future pre-paid purchases are subject to certain conditions, including minimum trading volume thresholds and shareholder approval.
• The company intends to use the net proceeds for working capital and general corporate purposes.
• Issuances of common stock under the pre-paid purchases may result in dilution to existing shareholders.
• CXApp will seek shareholder approval to exceed Nasdaq limitations on share issuance, and if not obtained, any remaining balance above the limit must be satisfied in cash.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The agreement provides access to capital, but also carries risks of dilution and requires shareholder approval. The terms are fairly standard for this type of financing.

Positives

• CXApp gains access to a potential $20 million in financing.
• The initial pre-paid purchase provides an immediate $4 million infusion.
• The company retains discretion to draw or forego additional pre-paid purchases beyond the initial closing.
• The agreement includes standard beneficial ownership limitations preventing Avondale from exceeding 9.99% beneficial ownership of the Company's outstanding Common Stock.

Negatives

• Issuance of common stock under the pre-paid purchases may result in substantial dilution to existing shareholders.
• The company must seek shareholder approval to exceed Nasdaq limitations on share issuance.
• If shareholder approval is not obtained, any remaining outstanding balance above the Exchange Cap under any Pre-Paid Purchase must be satisfied in cash.
• The initial pre-paid purchase includes an original issue discount of $200,000 and a transaction expense amount of $10,000.

Risks

• Dilution of existing shareholders due to potential issuances of common stock.
• Failure to obtain shareholder approval for exceeding Nasdaq share issuance limits.
• Dependence on market conditions and other factors for the success of future pre-paid purchases.
• The company's reliance on using the proceeds effectively for working capital and general corporate purposes.

Future Outlook

The company intends to use the net proceeds from any pre-paid purchases primarily for working capital and general corporate purposes, as detailed in the applicable registration statement and in accordance with the terms of the Purchase Agreement. The company is not obligated to request any pre-paid purchase beyond the initial one.

Industry Context

This type of financing agreement is common for companies seeking capital, especially smaller companies. The structure allows for flexibility in drawing down funds as needed, but also carries the risk of dilution for existing shareholders. The inclusion of Nasdaq listing rule compliance and shareholder approval requirements is standard practice.

Comparison to Industry Standards

• The original issue discount of 5% for subsequent pre-paid purchases is within the typical range for this type of financing, but the initial discount of $200,000 on $4.2 million is relatively high.
• The floor price equal to 20% of the applicable Minimum Price is a fairly standard protection for the investor.
• The agreement's terms regarding registration rights and indemnification are typical for securities purchase agreements.
• Similar agreements often include covenants related to maintaining listing status and restrictions on certain types of issuances.

Stakeholder Impact

• Shareholders may experience dilution if common stock is issued under the pre-paid purchase agreements.
• The company's employees and operations will benefit from the increased working capital.
• The company's customers and suppliers may benefit from the company's improved financial stability.

Next Steps

• CXApp will file a registration statement covering the resale of at least 18,500,000 shares within 30 days following the initial closing.
• The company will seek shareholder approval to exceed Nasdaq limitations on share issuance, no later than May 31, 2025.
• CXApp may request one or more additional pre-paid purchases, subject to certain conditions.

Key Dates

Keywords

securities purchase agreement, pre-paid purchase, financing, common stock, Avondale Capital, dilution, shareholder approval, working capital, CXApp