# Netcapital Inc.: Form 10-Q for the period ended Oct 31, 2023

- Company: [Netcapital Inc.](/companies/ncpl.md) (CIK 1414767)
- Form: 10-Q
- Filed: 2023-12-14
- Accepted by EDGAR: Dec 14, 2023, 16:06 ET
- Period: 2023-10-31
- Accession: 0001493152-23-044856
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1414767/000149315223044856/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1414767/000149315223044856/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-10-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2023-08-01 to 2023-10-31 | $20.1k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-05-01 to 2023-10-31 | $38.2k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-08-01 to 2023-10-31 | $2.0m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-05-01 to 2023-10-31 | $3.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-08-01 to 2023-10-31 | $648.6k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-05-01 to 2023-10-31 | $1.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-08-01 to 2023-10-31 | $52.2k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-05-01 to 2023-10-31 | −$696.8k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-08-01 to 2023-10-31 | $10.6k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-05-01 to 2023-10-31 | $23.9k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-08-01 to 2023-10-31 | −$326.3k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-05-01 to 2023-10-31 | −$625.3k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-08-01 to 2023-10-31 | $339.6k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-05-01 to 2023-10-31 | −$152.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-08-01 to 2023-10-31 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-05-01 to 2023-10-31 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-08-01 to 2023-10-31 | $0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-05-01 to 2023-10-31 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-08-01 to 2023-10-31 | 9,435,741 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-05-01 to 2023-10-31 | 8,453,349 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-05-01 to 2023-10-31 | −$1.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Current assets | at 2023-10-31 | $3.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-10-31 | $44.7m | us-gaap:Assets |
| Current liabilities | at 2023-10-31 | $5.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-10-31 | $5.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-10-31 | $500.0k | us-gaap:LongTermDebt |
| Current portion of debt | at 2023-10-31 | $1.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-10-31 | $1.9m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-10-31 | $39.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,705 characters.

This quarterly report on Form 10-Q and other reports filed by Netcapital Inc. (the “Company”) from time to time with the U.S. Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Unless the context otherwise requires, references in this prospectus to the “Company,” “we,” “us,” and “our” refer to Netcapital Inc. and its subsidiaries.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

### Overview

Netcapital Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited and non-accredited investors. We give investors the opportunity to access investments in private companies. We believe our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings. We generate fees from listing private companies on our funding portal located at www.netcapital.com. We generate fees from listing private companies on netcapital.com. We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors, Inc. (Netcapital Advisors), which is a wholly-owned subsidiary, provides marketing and strategic advice in exchange for equity positions and cash fees. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority, or FINRA, a registered national securities association, and provides investors with opportunities to invest in private companies. Neither Netcapital Advisors, nor any Netcapital entity or subsidiary, is a broker- dealer, nor do any of such entities operate as a broker-dealer with respect to any Reg A offering listed on the www.netcapital.com website.

We provide private company investment access to accredited and non-accredited investors through our online portal (www.netcapital.com), which is operated by our wholly owned subsidiary Netcapital Funding Portal, Inc. The Netcapital funding portal charges a $5,000 engagement fee and a 4.9% success fee for capital raised at closing. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors generates fees and equity stakes from consulting in select portfolio and non-portfolio clients. With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs. We generated revenues of $3,561,467, with costs of service of $38,187, in the six months ended October 31, 2023 for a gross profit of $3,523,280 (consisting of $2,626,667 in equity securities for payment of services and $934,000 in cash-based revenues, offset by $38,187 for costs of services) in the six months ended October 31, 2023 as compared to revenues of $3,119,546 with costs of service of $57,298 in the six months ended October 31, 2022 for a gross profit of $3,062,248 (consisting of $2,425,000 in equity securities for the payment of services and $694,546 in cash-based revenues, offset by $57,298 for costs of services) in the six months ended October 31, 2022. Our cash-based gross profits as a percentage of gross profits were approximately 2% and 2%, respectively in the six month periods ended October 31, 2023 and 2022, collected from two (2) and one (3) entities (for which we performed administrative services) in which we own equity during such periods The total number of offerings on the Netcapital funding portal in fiscal 2023 and 2022 that closed was 63 and 81, respectively, of which 13 and 17 offerings hosted on the Netcapital funding platform in fiscal 2023 and 2022, respectively terminated their listings without raising the required minimum dollar amount of capital. As of the date of this report, we own minority equity positions in 19 portfolio companies that have utilized the funding portal to facilitate their offerings, which equity was received as payment for services.

Netcapital.com is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies can accept investment from virtually anyone, including friends, family, customers, employees, etc.

In addition to access to the funding portal, Netcapital provides the following services:

- a fully automated onboarding process;
- automated filing of required regulatory documents;
- compliance review;
- a custom-built offering page on our portal website;
- third party transfer agent and custodial services;
- email marketing to our proprietary list of investors;
- rolling closes, which provide potential access to liquidity before final close date of offering;
- assistance with annual filings; and
- direct access to our team for ongoing support.

Our consulting group, Netcapital Advisors helps companies at all stages to raise capital. Netcapital Advisors provides strategic advice, technology consulting and digital marketing services to assist with fundraising campaigns on the Netcapital platform. The company also acts as an incubator and accelerator for select disruptive start-ups.

Netcapital Advisors’ services include:

- incubation of technology start-ups;
- investor introductions;
- digital marketing;
- website design, software and software development;
- message crafting, including pitch decks, offering pages, and ad creation;
- strategic advice; and
- technology consulting.
- 24-

Our valuation group, MSG Development Corp., which is also a wholly-owned subsidiary, prepares valuations.

The valuation services include:

- business valuations;
- fairness and solvency opinions;
- ESOP feasibility and valuation;
- non-cash charitable contributions;
- economic analysis of damages;
- intellectual property appraisals; and
- compensation studies.

### Recent Developments

#### Notice from Nasdaq on Failure to Satisfy a Continued Listing Rule

On September 1, 2023, we were notified (the “Notification Letter”) by The Nasdaq Stock Market, LLC (“Nasdaq”) that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of our common stock between July 20, 2023 and August 31, 2023, we no longer meet the minimum bid price requirement. The Notification Letter has no immediate effect on the listing or trading of our common stock on The Nasdaq Capital Market and, at this time, the common stock will continue to trade on The Nasdaq Capital Market under the symbol “NCPL.”

The Notification Letter provides that we have 180 calendar days, or until February 28, 2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. If we do not regain compliance by February 28, 2024, an additional 180 days may be granted to regain compliance, so long as we meet The Nasdaq Capital Market continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement and notifies Nasdaq in writing of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If we do not qualify for the second compliance period or fails to regain compliance during the second 180-day period, then Nasdaq will notify us of its determination to delist our common stock, at which point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.

We intend to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.

### Results of Operations

#### Comparison of the Three Months Ended October 31, 2023 and 2022

Our revenues for the three months ended October 31, 2023, increased by $262,685, or approximately 15%, to $2,041,658, as compared to $1,778,973 during the three months ended October 31, 2022. The increase in revenues was primarily attributed to an increase in revenue of $278,611 generated by our funding portal. In the three months ended October 31, 2023, we recorded $462,706 in funding portal revenues, consisting of portal fees of $317,206 and listing fees of $145,500, as compared to funding portal revenues of $184,095 in the three months ended October 31, 2022, consisting of portal fees of $97,595 and listing fees of $86,500. The increase is funding portal revenues in the three months ended October 31, 2023 is primarily attributable to increased offering activity on the platform resulting in higher portal fees due to increased investments in offerings on the portal as well as greater number of offerings on the portal during such period resulting in higher listing fees during the period. The components of revenue were as follows:

|  | Oct. 31, 2023 | Oct. 31, 2022 |
| --- | ---: | ---: |
| Consulting services for equity securities | $1,516,667 | $1,400,000 |
| Consulting revenue | 62,000 | 194,560 |
| Portal fees | 317,206 | 97,595 |
| Listing fees | 145,500 | 86,500 |
| Other revenue | 285 | 318 |
| Total | $2,041,658 | $1,778,973 |

Costs of revenues decreased by $16,101 to $20,134, or approximately 44% for the three months ended October 31, 2023 from $36,235 during the three months ended October 31, 2022. The decrease was primarily attributed to a decrease in third-party services for business valuations during the three months ended October 31, 2023.

Payroll and payroll related expenses increased by $173,927, or 20%, to $1,050,835 for the three months ended October 31, 2023, as compared to $876,908 during the three months ended October 31, 2022. The increase was attributed to higher salaries and an increase in stock-based compensation expense for stock options granted to employees.

Marketing expense increased by $13,849, or approximately 42%, to $46,731 for the three months ended October 31, 2023, as compared to $32,882 during the three months ended October 31, 2022. The increase in expense was primarily attributed to an increase in marketing outlets that we utilized in the three months ended October 31, 2023.

Rent expense increased by $1,192, or approximately 7%, to $18,379 for the three months ended October 31, 2023, as compared to $17,187 during the three months ended October 31, 2022. The increase was primarily attributed to a new office-space agreement that became effective in the current fiscal year.

General and administrative expenses increased by $367,810, or 131%, to $648,625 for the three months ended October 31, 2022, from $280,815 during the three months ended October 31, 2022. The increase was primarily attributed to stock-based compensation utilized to pay for professional fees.

Consulting expense increased by $4,953, or approximately 3%, to $204,734 for the three months ended October 31, 2023 from $199,781 during the three months ended October 31, 2022. The increase was primarily attributed to an increase in overseas programmers.

Interest expense decreased by $12,416 to $10,562, or approximately 54%, for the three months ended October 31, 2023, as compared to $22,978 during the three months ended October 31, 2022. The decrease in interest expense was primarily attributed to lower debt amounts that resulted from paying off a secured term loan.

#### Comparison of the Six Months Ended October 31, 2023 and 2022

Our revenues for the six months ended October 31, 2023, increased by $441,921, or approximately 14%, to $3,561,467, as compared to $3,119,546 during the six months ended October 31, 2022. The increase in revenues is attributable to an increase in revenue of $475,967 generated by our funding portal. In the six months ended October 31, 2023, we recorded $838,562 in funding portal revenues, consisting of portal fees of $539,062 and listing fees of $299,500, as compared to funding portal revenues of $362,595 in the six months ended October 31, 2022, consisting of portal fees of $148,595 and listing fees of $214,000. The increase is funding portal revenues in the three months ended October 31, 2023 is primarily attributable to increased offering activity on the platform resulting in higher portal fees due to increased investments in offerings on the portal as well as greater number of offerings on the portal during such period resulting in higher listing fees during the period.

The components of revenue were as follows:

|  | Oct. 31, 2023 | Oct. 31, 2022 |
| --- | ---: | ---: |
| Consulting services for equity securities | $2,626,667 | $2,425,000 |
| Consulting revenue | 95,700 | 331,390 |
| Portal fees | 539,062 | 148,595 |
| Listing fees | 299,500 | 214,000 |
| Other revenue | 538 | 561 |
| Total | $3,561,467 | $3,119,546 |

Costs of revenues decreased by $19,111 to $38,187, or approximately 33%, for the six months ended October 31, 2023 from $57,298 during the six months ended October 31, 2022. The decrease was primarily attributed to a decrease in third-party services for business valuations during the six months ended October 31, 2023.

Payroll and payroll related expenses increased by $441,029, or approximately 27%, to $2,087,877 for the six months ended October 31, 2023, as compared to $1,646,848 during the six months ended October 31, 2022. The increase was attributed to higher wages in the six-month period ended October 31, 2023 and additional stock-based compensation.

Marketing expense increased by $247,957, or approximately 610%, to $288,619 for the six months ended October 31, 2023, as compared to $40,662 during the six months ended October 31, 2022. The increase was to bring awareness to the funding portal operations and the Company to attract new issuers and investors.

Rent expense increased by $3,590, or approximately 10%, to $37,989 for the six months ended October 31, 2023, as compared to $34,399 during the six months ended October 31, 2022. The increase was primarily attributed to a new office-space agreement that became effective in the current fiscal year.

General and administrative expenses increased by $763,807, or approximately 114%, to $1,436,919 for the six months ended October 31, 2023, from $673,112 during the six months ended October 31, 2022. The increase was primarily attributed to professional fees, including stock-based compensation.

Consulting expense increased by $43,284, or 13%, to $368,676 for the six months ended October 31, 2023 from $325,392 during the six months ended October 31, 2022. The increase was primarily attributed to increased payments of software engineers.

Interest expense decreased by $35,424 to $23,866, or approximately 60%, for the six months ended October 31, 2023, as compared to $59,290 during the six months ended October 31, 2022. The decrease in interest expense was primarily attributed to lower debt amounts that resulted from paying off a secured term loan.

### Liquidity and Capital Resources

At October 31, 2023, we had cash and cash equivalents of $528,827 and negative working capital of $1,131,275 as compared to cash and cash equivalents of $569,441 and negative working capital of $2,622,670 at April 30, 2023.

We have been successful in raising capital by completing public offerings of our common stock.

On July 15, 2022, we completed an underwritten public offering of 1,205,000 shares of our common stock and warrants to purchase 1,205,000 shares of our common stock at a combined public offering price of $4.15 per share and warrant. The gross proceeds from the offering were $5,000,750 prior to deducting underwriting discounts, commissions, and other offering expenses. The warrants have a per share exercise price of $5.19, are exercisable immediately, and expire five years from the date of issuance. With the use of proceeds, we paid $1 million of debt to our secured lender, to reduce the outstanding principal balance to $400,000.

On December 16, 2022 we completed an underwritten public offering of 1,247,000 shares of our common stock, at a price to the public of $1.40 per share. In conjunction with this offering, we issued the underwriter and its designees warrants to purchase 62,350 shares of our common stock at an exercise price of $1.75. The underwriters exercised their over-allotment option and on January 5, 2023, we issued an additional 187,000 shares of its common stock at a price of $1.40 per share. We received net proceeds of $1,621,459 for the issuance of a total of 1,434,000 shares of common stock in both the initial and over-allotment offering. In conjunction with the exercise of the over-allotment, the Company issued the underwriter and its designees warrants to purchase 9,350 shares of our common stock with an exercise price of $1.75.

On May 23, 2023, we entered into a securities purchase agreement with certain institutional investors, pursuant to which sold to such investors, in a registered direct offering (the “Offering”), 1,100,000 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Common Stock”), at a price of $1.55 per Share, for aggregate gross proceeds of $1,705,000, before deducting the placement agent’s fees and other offering expenses payable by us. The Offering closed on May 25, 2023. The Shares were offered and issued and sold pursuant to our shelf registration statement on Form S-3 (File 333-267921), filed by us with the Securities and Exchange Commission under the Securities Act of 1933, as amended, on October 18, 2022 and declared effective on October 26, 2022.

With the use of proceeds, we paid our secured lender $350,000 in principal plus accrued interest of $17,167.23 to retire all outstanding obligations to the secured lender.

On July 24, 2023 we completed an underwritten public offering of 1,725,000 shares of our common stock, at a price to the public of $0.70 per share for aggregate gross proceeds of $1,207,500, before deducting underwriting discounts and offering expenses payable by us. In conjunction with this offering, we issued the underwriter, and its designees, warrants to purchase 86,250 shares of our common stock at an exercise price of $0.875.

We believe that our existing cash investment balances, our anticipated cash flows from operations and liquidity sources including offering of equity and/or debt securities and/or the sale of equity positions in certain portfolio companies for which we provide marketing and strategic advice may not be sufficient to meet our working capital and expenditure requirements for the next 12 months. Consequently, beginning in November 2023, we laid off some employees, and our executive officers agreed to defer one half of their cash salaries and are continuing efforts to reduce operating expenses. We plan to continue operating with lower fixed overhead amounts and seek to raise money from private placements, public offerings and/or bank financing. Our management has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. To the extent that funds generated from any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. Accordingly, the Company’s management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve our business plan objectives or be able to achieve or maintain cash-flow-positive operating results. If we are unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay our existing debt, continue to operate our business network, respond to competitive pressures or fund our operations. As a result, we may be required to significantly reduce, reorganize, discontinue or shut down our operations.

### Year over Year Changes

Net cash used in operating activities amounted to $1,965,814 and $2,054,600 for the six months ended October 31, 2023 and 2022, respectively. The principal source of cash from operating activities in the six months ended October 31, 2023 was a non-cash item, stock-based compensation of $763,873. However, the sources of cash were offset by a receipt of equity in lieu of cash of $1,170,000 and an increase in accounts receivable of $1,517,167. The principal sources of cash from operating activities for the six months ended October 31, 2022 was net income of $247,615, a realized loss on investments of $406,060 and stock-based compensation of $65,906. However, these sources of cash were offset by the receipt of equity securities in lieu of cash of $2,500,000, changes in deferred taxes of $198,000, a gain on a debt conversion of $224,260, and a decrease in accounts payable and accrued expenses of $64,294.

Net cash provided by investing activities amounted to $0 and $200,000 in the six months ended October 31, 2023 and 2022, respectively. Net cash provided by investing activities in the six months ended October 31, 2022 consisted of proceeds from the sale of 606,060 shares of an investment in KingsCrowd Inc.

For the six months ended October 31, 2023, net cash provided by financing activities amounted to $1,925,200, which consisted of proceeds from the sale of common stock of $2,275,200, which was offset by repayment of $350,000 in principal to our secured lender. For the six months ended October 31, 2022, net cash provided from financing activities amounted to $2,945,917, which included proceeds from the sale of common stock of $3,949,117, which was offset by a payment of $3,200 for a related party note, and payment of $1,000,000 to a secured lender.

In the six months ended October 31, 2023 and 2022, there were no expenditures for capital assets. We do not anticipate any capital expenditures in fiscal 2023.

## Market risk

As filed, 162 characters.

The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

## Controls and procedures

As filed, 2,572 characters.

#### (a) Disclosure Controls and Procedures.

The Company’s management, with the participation of the Principal Executive Officer (the “PEO”) and Principal Financial Officer (the “PFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rule 13a-15(e)) as of October 31, 2023. Based on that evaluation, the PEO and the PFO concluded that, as of October 31, 2023, such controls and procedures were effective.

#### (b) Management’s Assessment of Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f). A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of management, including the PEO and the PFO, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of October 31, 2023, based on the criteria established in a report entitled “2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929. Based on this evaluation, the Company’s management has evaluated and concluded that the Company’s internal control over financial reporting was effective as of October 31, 2023.

The Company’s annual report on Form 10-K for the year ended April 30, 2023 does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s registered public accounting firm was not required to issue an attestation on its internal controls over financial reporting pursuant to the rules of the SEC. The Company will continue to evaluate the effectiveness of internal controls and procedures on an ongoing basis.

#### (c) Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act) during the quarter ended October 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 6,578 characters.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended April 30, 2023 as filed with the SEC on July 27, 2023 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report, except as discussed below. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

***Our financial situation creates doubt whether we will continue as a going concern.***

At October 31, 2023, we had negative working capital of $1,131,275 and for the six months ended October 31, 2023, we had an operating loss of $696,800 and net cash used in operating activities amounted to $1,965,814. There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. Our management has recently reduced its operating expenses and we have turned our focus to our funding portal business, which generates cash revenues and has seen a growth in revenues on a year-to-year and quarter-to-quarter basis. We plan to continue operating with lower fixed overhead amounts and seek to raise money from private placements, public offerings and/or bank financing. Our management has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. To the extent that funds generated from any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. Accordingly, our management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve its business plan objectives or be able to achieve or maintain cash-flow-positive operating results. If we unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay our existing debt, continue to operate our business network, respond to competitive pressures or fund our operations. As a result, we may be required to significantly reduce, reorganize, discontinue or shut down our operations.

***Our ability to have our securities traded on the Nasdaq Capital Market is subject to us meeting applicable listing criteria.***

We are currently listed on the Nasdaq Stock Market, LLC (“Nasdaq”), a national securities exchange. The Nasdaq requires companies desiring to list their common stock to meet certain listing criteria including total number of shareholders: minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could prevent us from listing our common stock on the Nasdaq. In the event we are unable to have our shares traded on Nasdaq, our common stock could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than the Nasdaq. Our failure to have our shares traded on the Nasdaq could make it more difficult for you to trade our shares, could prevent our common stock trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were able to list our shares on the Nasdaq.

On September 1, 2023, we received written notice from Nasdaq that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810, we have a period of 180-calendar days, or until February 8, 2024, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least 10 consecutive business days during this 180-calendar day period. In the event we do not regain compliance by February 8, 2024, we may be eligible for an additional 180-calendar day grace period if we meet the continued listing standards, with the exception of bid price, for the Nasdaq Capital Market, and we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period. If we do not qualify for or fail to regain compliance during the second compliance period, then Nasdaq will notify us of its determination to delist our common stock, at which point we would have an option to appeal the delisting determination to a Nasdaq hearings panel. We intend to actively monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price under the Nasdaq Listing Rules.

If we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

- the liquidity of our common stock;
- the market price of our common stock;
- our ability to obtain financing for the continuation of our operations;
- the number of institutional and general investors that will consider investing in our common stock;
- the number of investors in general that will consider investing in our common stock;
- the number of market makers in our common stock;
- the availability of information concerning the trading prices and volume of our common stock; and
- the number of broker-dealers willing to execute trades in shares of our common stock.

Filed Dec 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-044856. Last ingested by Listed: Oct 30, 2026, 13:01 ET. No prices; not investment advice.