Netcapital Inc. 8-K

What Happened

• Netcapital Inc. filed an 8-K (May 1, 2026) reporting that on April 26, 2026 it entered into two Securities Purchase Agreements with Vanquish Funding Group Inc. and issued two convertible promissory notes (aggregate principal $144,550) for aggregate proceeds of $125,000. On April 30, 2026 the company also issued an unsecured, non‑convertible promissory note with $300,000 principal for gross proceeds of $150,000 to a related party, Netcapital Systems LLC. The company said proceeds will be used for general working capital.

Key Details

• Two convertible notes to Vanquish Funding Group: aggregate principal $144,550, purchase price $125,000, aggregate original issue discount (OID) $19,550.
  • Bridge Note: $92,800 principal issued for $80,000 (OID $12,800); includes a one‑time 14% interest charge ($12,992); payable in five installments beginning Oct 30, 2026; matures Feb 28, 2027; total scheduled payments $105,792.
  • Promissory Note (convertible): $51,750 principal issued for $45,000 (OID $6,750); includes a one‑time 12% interest charge ($6,210); payable in ten monthly installments of $5,796 beginning May 30, 2026; matures Feb 28, 2027; total scheduled payments $57,960.
• Related‑party non‑convertible note: $300,000 principal issued for $150,000 (50% OID), 8% annual interest, matures Sept 30, 2026, prepayable without penalty; default interest 20% per annum.
• Default and other terms: convertible notes subject to 22% default interest on unpaid amounts; customary events of default (payment defaults, covenant breaches, bankruptcy/insolvency, delisting, failure to comply with reporting, certain restatements, transfer agent issues, and cross‑defaults). Notes are prepayable in full without penalty. The convertible notes were sold to an accredited investor in private placements relying on Section 4(a)(2) and Rule 506 (no general solicitation).

Why It Matters

• Netcapital has taken on short‑term debt and created new financial obligations that affect liquidity and cash flow through scheduled repayments and interest charges. Investors should note the high effective borrowing costs (original issue discounts plus one‑time interest charges) and the relatively near maturities (most due by Feb–Sept 2027).
• The related‑party sale and private placement terms are material to governance and related‑party scrutiny; the company used the proceeds for working capital rather than equity financing. These financings could affect future capital needs, potential dilution (for the convertible notes), and the company’s near‑term cash requirements.