Netcapital Inc. 8-K

What Happened

• Netcapital Inc. filed a Form 8‑K (June 10, 2026) disclosing that it entered into a Securities Purchase Agreement (dated June 4, 2026) with Vanquish Funding Group Inc. The transaction closed and funded on June 5, 2026. The company issued a promissory note with a principal amount of $182,120 in exchange for a purchase price of $157,000 (an original issue discount of $25,120). After reimbursing $7,000 of the buyer’s legal and due‑diligence expenses, Netcapital received net proceeds of $150,000 to be used for general working capital.

Key Details

• Note principal: $182,120; purchase price: $157,000; net proceeds to company: $150,000.
• Issue date: June 4, 2026; maturity date: March 30, 2027 (short‑term debt).
• Interest & payments: one‑time interest charge of 13%; five payments totaling $205,795 (a $71,250 payment on Nov 30, 2026, and four payments of $33,636.25 on Dec 30, 2026; Jan 30, 2027; Feb 28, 2027; Mar 30, 2027). Five‑day grace periods apply.
• Defaults and penalties: unpaid amounts bear 22% default interest; upon default the amount due can accelerate to 150% of outstanding (200% in certain secondary default scenarios). Buyer may convert some or all of the obligation into common stock at a conversion price equal to 65% of the lowest trading price during the 20 trading days before conversion (but not below $1.00 per share during the first six months). A 4.99% beneficial ownership limitation applies to conversions.
• Other terms: limited asset‑sale restrictions while the note is outstanding and customary default events (payment, covenant breaches, insolvency, delisting, reporting failures, restatements, transfer‑agent issues, cross‑defaults).

Why It Matters

• This transaction adds short‑term debt and creates a new financial obligation for Netcapital with relatively high effective cost and strict default remedies. The note’s short maturity (March 2027) and accelerated/default penalties could pressure liquidity if the company cannot meet scheduled payments.
• The buyer’s conversion feature creates potential equity dilution tied to future market prices (conversion at a discount to market subject to a 4.99% cap and a $1.00 floor for six months). Investors should note both the increased leverage and the possibility of conversion‑related dilution if conversion occurs or defaults trigger conversion rights.