NCPLW Netcapital Inc.

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Executive Summary

Netcapital Inc. entered into a securities purchase agreement with Labrys Fund II, L.P., issuing a $290,000 convertible promissory note (purchased for $250,000, reflecting a $40,000 OID) and a warrant to purchase 250,000 shares at $0.50/share. The note carries 12% interest, requires amortization payments starting November 2026, and is convertible into common stock at a 25% discount to the lowest VWAP over the prior 10 days (floor $0.10). The warrant is exercisable from November 2026 to May 2029. Proceeds are for working capital. This is a dilutive, high-cost financing for a micro-cap company, creating significant future dilution and debt service obligations.

Key Financial Metrics

Actionable Insight

Key Facts

• Issued $290,000 principal convertible note to Labrys Fund II for net proceeds of $250,000 (effective OID of $40,000 plus $25,500 in fees withheld).
• Note carries 12% interest ($34,800) earned upfront, with default interest at 22%.
• Conversion price is 75% of the lowest closing bid price over the prior 10 trading days, subject to a $0.10 floor (floor waived on default).
• Warrant to purchase 250,000 shares at $0.50/share, exercisable from Nov 12, 2026 to May 12, 2029.
• Amortization payments begin Nov 12, 2026: $162,400 initial, then $27,066.66 monthly through April 2027, with balance due May 12, 2027.
• Company must seek shareholder approval for issuance above 1,569,579 shares (Exchange Cap) within 180 days.
• Registration statement for resale of conversion and warrant shares required within 60 days, effective within 120 days.
• Proceeds used for business development and working capital.
• Outstanding shares: 7,847,899 as of May 12, 2026.
• Warrant shares represent ~3.2% dilution at issuance; potential conversion shares could be substantially higher depending on stock price.

Financial Impact

Net proceeds of $250,000 against $290,000 principal plus $34,800 interest; potential dilution from conversion at a 25% discount to market, with no cap on share issuance beyond the Exchange Cap (subject to shareholder approval).

Risk Factors

• Massive dilution from conversion at a 25% discount to market price, with no floor on default.
• High effective interest cost (~28%+ including OID and fees) strains cash flow.
• Amortization payments ($162,400 initial) may pressure liquidity given micro-cap status.
• Risk of default if registration statement or shareholder approval deadlines are missed, triggering 150% acceleration.
• Warrant exercise at $0.50 adds further dilution if stock trades above that level.

Market Snapshot

Documents Analyzed

This report is based on 6 SEC documents filed with EDGAR.

US Market Status

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