Memphasys Limited has announced a pro-rata entitlement offer to raise approximately $1.12 million, issuing new shares at $0.003 each with free attaching options, aiming to fund the commercialisation of its Felix™ system and strengthen working capital.
- Pro-rata non-renounceable entitlement offer to raise up to $1.12 million
- Free attaching options issued on a 1 for 4 basis with new shares
- Placement of additional shares and options subject to shareholder approval
- Funds primarily allocated to Felix™ system commercialisation and debt settlement
- Convertible notes maturing December 2025 may cause significant dilution
Capital Raise Details
Memphasys Limited (ASX – MEM), a medical device company focused on the development and commercialisation of its Felix™ system, has launched a pro-rata non-renounceable entitlement offer to raise up to approximately $1.12 million. Eligible shareholders can subscribe for 1 new share for every 6 shares held at an issue price of $0.003 per share. Additionally, for every 4 shares subscribed, investors will receive 1 free attaching option exercisable at $0.011 before 5 November 2026.
The offer also includes secondary options offers to placement participants and Lynx Advisors Pty Ltd, the company’s lead manager and broker, subject to shareholder approval at the upcoming Annual General Meeting. These options are intended to remove trading restrictions on shares issued upon exercise.
Use of Funds and Strategic Focus
The proceeds from the entitlement offer and a recent placement of approximately $842,000 will be primarily directed towards accelerating the commercialisation of the Felix™ system. This includes progressing regulatory approvals for European markets, manufacturing scale-up, and marketing efforts. A portion of the funds will also be used to settle existing debts and provide working capital to support ongoing operations through to mid-2026, assuming full subscription.
Memphasys has strategically prioritized the Felix™ system as its core product, temporarily pausing other projects to focus resources on bringing Felix™ to market. While this concentrated approach aims to expedite commercial success, it also heightens the company’s exposure to risks associated with a single product’s regulatory and market acceptance challenges.
Capital Structure and Dilution Risks
Upon completion of the offer, the number of shares on issue is expected to increase from approximately 2.24 billion to 2.65 billion, with options rising from nearly 795 million to over 962 million. Shareholders who do not participate in the entitlement offer may face dilution of around 14.29% of their holdings.
Compounding dilution concerns, Memphasys currently has $3 million in convertible notes held by Peters Investments Pty Ltd, maturing in December 2025. These notes carry a conversion price that could drop to $0.0024 if the capital raising exceeds $1 million, potentially resulting in the issuance of nearly 1.8 billion new shares upon conversion. This could significantly concentrate ownership and impact shareholder voting power.
Risks and Outlook
The company’s financial reports highlight a material uncertainty regarding its ability to continue as a going concern without successful completion of the capital raising. Additional funding beyond this offer is likely necessary to sustain medium- to long-term operations until profitability is achieved.
Other risks include reliance on regulatory approvals, market acceptance of the Felix™ system, competition, and the ability to retain key personnel. The company also faces uncertainties related to research and development tax rebates and potential repayment liabilities.
Memphasys’ offer is not underwritten, and the success of the placement and shortfall offers will be critical in determining the company’s funding runway and operational plans. Shareholder approval for certain option issuances remains pending, adding another layer of uncertainty.
Bottom Line?
Memphasys’ latest capital raise is a pivotal step in funding Felix™ commercialisation, but investors should watch closely for shareholder approvals and the impact of convertible note conversions on dilution and control.
Questions in the middle?
- Will shareholder approval be secured for the issuance of placement and Lynx options at the AGM?
- How will the potential conversion of $3 million in convertible notes affect shareholder dilution and control?
- What is the likelihood of full subscription for the entitlement offer given it is not underwritten?