Netcapital Inc. Debt Disclosure
3. Debt
The following table summarizes components debt as of April 30, 2023 and 2022:
| 2023 | 2022 | Interest Rate | ||||||||||
| Secured lender | $ | 350,000 | $ | 1,400,000 | 8.0% – 12.0 | % | ||||||
| Notes payable – related parties | 15,000 | 22,860 | 0.0 | % | ||||||||
| Convertible promissory notes | 300,000 | 8.0 | % | |||||||||
| U.S. SBA loan | 500,000 | 500,000 | 3.75 | % | ||||||||
| U.S. SBA loan | 1,885,800 | 1,885,800 | 1.0 | % | ||||||||
| Loan payable – bank | 34,324 | 34,324 | 10.0 | % | ||||||||
| Total debt | 2,785,124 | 4,142,984 | ||||||||||
| Less: current portion of long-term debt | 2,285,124 | 3,647,911 | ||||||||||
| Total long-term debt | $ | 500,000 | $ | 495,073 | ||||||||
As of April 30, 2023 and 2022, the Company owed its principal lender (“Lender”) $350,000 and $1,400,000, respectively, under a loan and security agreement (“Loan”) dated April 28, 2011, that was amended on July 26, 2014 and several times thereafter to extend the maturity date to October 31, 2023.
In connection with the financing, the Company has agreed to certain restrictive covenants, including, among others, that the Company may not convey, sell, lease, transfer or otherwise dispose of any part of its business or property, except as permitted in the agreement, dissolve, liquidate or merge with any other party unless, in the case of a merger, the Company is the surviving entity, incur any indebtedness except as defined in the agreement, create or allow a lien on any of its assets or collateral that has been pledged to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business, or make any material capital expenditures. To secure the payment of all obligations to the Lender, the Company granted the Lender a continuing security interest and first lien on all of the assets of the Company.
As of April 30, 2023 and 2022, the Company’s related-party unsecured notes payable totaled $15,000 and $22,860, respectively.
As of April 30, 2023 and 2022, the company owed $0 and $300,000 in convertible notes payable. On July 14, 2022, the Company issued 93,432 shares of common stock valued at $266,272 to retire the $300,000 in convertible promissory notes plus accrued interest of $10,192.
The Company also owes $34,324 as of April 30, 2023 and 2022 to Chase Bank. For the loan from Chase Bank, the Company pays interest only on a monthly basis, which is calculated at a rate of 10.0% per annum as of April 30, 2023.
On May 6, 2020, the Company borrowed $1,885,800 (the “May Loan”), on June 17, 2020 the Company borrowed $500,000 (the “June Loan”), and on February 2, 2021, the Company borrowed $1,885,800 (the “February Loan”) from a U.S. Small Business Administration (“SBA”) loan program.
The May loan bore interest at a rate of 1% per annum and the SBA postponed any installment payments until September 6, 2021. In November 2021 the May Loan was forgiven in its entirety, including accrued interest of $18,502. As a result, the Company recognized debt forgiveness of $1,904,296 in the year ended April 30, 2022.
The June Loan required installment payments of $2,594 monthly, beginning on June 17, 2021, over a term of thirty years. However, the SBA postponed the first installment payment for 18 months and the first payment became due on December 17, 2022. The monthly payments of $2,594 are first applied to accrued interest payable. The monthly payments will not be applied to any of the outstanding principal balance until August of 2026. Consequently, the entire loan balance of $500,000 is classified as a long term liability. Interest accrues at a rate of 3.75% per annum. The Company agreed to grant a continuing security interest in its assets to secure payment and performance of all debts, liabilities, and obligations to the SBA.
The February loan bears interest at a rate of 1% per annum and the due date of the first payment has been postposed by the SBA because the Company has applied for forgiveness of the February Loan in its entirety.
As of April 30, 2023, future payments under debt obligations over each of the next five years and thereafter were as follows:
| Twelve months ended April 30: | |||||
| 2024 | $ | 2,285,124 | |||
| 2025 | |||||
| 2026 | |||||
| 2027 | 9,837 | ||||
| 2028 | 13,971 | ||||
| Thereafter | 476,192 | ||||
| Minimum future payments of principal | $ | 2,785,124 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Jul 26, 2023 | Showing above |
| 2022 | Aug 8, 2022 | |
| 2021 | Aug 31, 2021 | |
| 2020 | Aug 11, 2020 | |
| 2019 | Aug 5, 2019 | |
| 2018 | Jul 30, 2018 | |
| 2017 | Sep 8, 2017 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 14, 2017 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.