# Netcapital Inc.: Form 10-Q for the period ended Oct 31, 2024

- Company: [Netcapital Inc.](/companies/ncpl.md) (CIK 1414767)
- Form: 10-Q
- Filed: 2024-12-16
- Accepted by EDGAR: Dec 16, 2024, 16:30 ET
- Period: 2024-10-31
- Accession: 0001493152-24-050235
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1414767/000149315224050235/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1414767/000149315224050235/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-10-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-08-01 to 2024-10-31 | $170.5k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-05-01 to 2024-10-31 | $312.8k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-08-01 to 2024-10-31 | $19.8k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-05-01 to 2024-10-31 | $30.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-08-01 to 2024-10-31 | $150.7k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-05-01 to 2024-10-31 | $282.8k | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-08-01 to 2024-10-31 | $1.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-05-01 to 2024-10-31 | $2.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-08-01 to 2024-10-31 | −$2.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-05-01 to 2024-10-31 | −$4.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-08-01 to 2024-10-31 | $9.6k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-05-01 to 2024-10-31 | $20.1k | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2024-08-01 to 2024-10-31 | −$2.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-05-01 to 2024-10-31 | −$4.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-08-01 to 2024-10-31 | −$2.34 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-05-01 to 2024-10-31 | −$6.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-08-01 to 2024-10-31 | −$2.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-05-01 to 2024-10-31 | −$6.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-08-01 to 2024-10-31 | 947,459 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-05-01 to 2024-10-31 | 721,389 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-05-01 to 2024-10-31 | −$3.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Current assets | at 2024-10-31 | $1.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-10-31 | $41.9m | us-gaap:Assets |
| Current liabilities | at 2024-10-31 | $4.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-10-31 | $4.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-10-31 | $500.0k | us-gaap:LongTermDebt |
| Current portion of debt | at 2024-10-31 | $1.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2024-10-31 | $1.9m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-10-31 | $37.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,389 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% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. 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 (“Portfolio Companies”) 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 $312,755, with costs of service of $30,001, in the six months ended October 31, 2024 for a gross profit of $282,754 in the six months ended October 31, 2024 as compared to 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 from Portfolio Companies for payment of services).

The total number of offerings on the Netcapital funding portal in fiscal 2024 and 2023 that closed was 63 and 81, respectively, of which 13 and 17 offerings hosted on the Netcapital funding platform in fiscal 2024 and 2023, respectively terminated their listings without raising the required minimum amount of capital. For the three- and six-months periods ended October 31, 2024, 13 and 26 issuers have launched an offering on the portal, respectively, as compared to 16 and 37 issuers that launched an offering in the three- and six-month periods ended October 31, 2023, respectively. As of the date of this report, we have 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 funding portal 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 the final close date of an 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-

### Broker-Dealer Business

Our recently formed wholly owned subsidiary, Netcapital Securities Inc. has received approval from the Financial Industry Regulatory Authority (“FINRA”) to become a FINRA-member broker dealer. We believe that by having a registered broker-dealer, it may create opportunities to expand the Company’s revenue base by hosting and generating additional fees from Reg A and Reg D offerings on the Netcapital platform, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts.

### Recent Developments

On November 22, 2024, Netcapital Securities Inc. (“NSI”), received approval from FINRA to become a FINRA-member broker-dealer. This approval allows NSI to:

- Conduct private placements of securities and referral business;
- Support companies raising equity capital under Regulation A (“Reg A”) and Regulation D (“Reg D”);
- Partner with other broker-dealers to syndicate deals; and
- Charge fees on capital raised under Reg A and Reg D, as well as enter into fee-sharing agreements with other broker-dealers.

The FINRA approval positions the Company to support larger fundraises and expand the range of investment opportunities available to its investor base.

#### At-The-Market Agreement

On August 23, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with Wainwright to sell shares of our common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $2,100,000, from time to time, through an “at the market offering” program under which Wainwright acted as sales agent. The sales of the Shares made under the ATM Agreement were made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We paid Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. From August 23, 2024 through October 29, 2024, the Company sold 1,122,693 shares of its common stock pursuant to the ATM Agreement for gross proceeds of 2,099,667. No additional Shares will be sold under this ATM Agreement. Net proceeds amounted to approximately $2,029,000.

#### Regained Compliance with Nasdaq Continued Listing Requirements

On August 19, 2024, we received a notice from The Nasdaq Stock Market, LLC (“Nasdaq”), dated August 19, 2024, informing us that we had regained compliance with Nasdaq’s Listing Rule 5550(a)(2) (the “Bid Price Rule”) for continued listing on The Nasdaq Capital Market, as the bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days since August 2, 2024.

As previously disclosed on a Current Report on Form 8-K filed by us, Nasdaq had previously notified us on September 1, 2023 that we were not in compliance with the Bid Price Rule because our common stock failed to maintain a minimum bid price of $1.00 per share for 30 consecutive business days. Further as of July 22, 2024, Nasdaq determined that that our securities had a closing bid price of $0.10 or less for ten consecutive trading days and as a result, Nasdaq delivered written notice to the Company on July 23, 2024 under which it advised us that Nasdaq has determined to delist our securities from The Nasdaq Capital Market. We requested a hearing to appeal Nasdaq’s delisting determination, but since the Company has regained compliance with Nasdaq’s continued listing requirements as described above, the hearing was cancelled.

### Results of Operations

#### Comparison of the Three Months Ended October 31, 2024 and 2023

Our revenues for the three months ended October 31, 2024, decreased by $1,871,130, or approximately 92%, to $170,528, as compared to $2,041,658 during the three months ended October 31, 2023. The decrease in revenues was attributed to the lack of consulting service revenue in the quarter ended October 31, 2024, as compared to revenue of $1,516,667 for consulting services for equity securities and $62,000 for consulting revenue in the three months ended October 31, 2023. In fiscal 2025, management has focused on establishing a broker-dealer subsidiary so that the Company may have additional sources of revenue, and we have not been pursuing the equity-based revenue contracts. Effective November 22, 2024, the Company received approval from FINRA to have a broker-dealer subsidiary.

In the three months ended October 31, 2024, we recorded $170,372 in funding portal revenues, consisting of portal fees of $108,124, listing fees of $47,500, and equity fees of $14,748, as compared to funding portal revenues of $462,706 in the three months ended October 31, 2023, consisting of portal fees of $317,206, listing fees of $145,500 and equity fees of $0. The decrease in revenues was primarily attributed to a decrease in dollars invested in issuers listed on the funding portal, which decreased to $2,052,547 from the quarter ended October 31, 2024 from $6,288,508 for the quarter ended October 31, 2023. In the three months ended October 31, 2024, dollars invested were approximately one-third of the dollars invested in the three months ended October 31, 2023. New offerings launched amounted to 13 issuers in the three months ended October 31, 2024, as compared to 16 issuers in the three months ended October 31, 2023. The components of revenue were as follows:

|  | Oct. 31, 2024 | Oct. 31, 2023 |
| --- | ---: | ---: |
| Consulting services for equity securities | $- | $1,516,667 |
| Consulting revenue | - | 62,000 |
| Portal fees | 108,124 | 317,206 |
| Listing fees | 47,500 | 145,500 |
| Portal 1% equity fee | 14,748 | - |
| Game site revenue | 156 | 285 |
| Total | $170,528 | $2,041,658 |

Costs of revenues decreased by $353 to $19,781, or approximately 2% for the three months ended October 31, 2024 from $20,134 during the three months ended October 31, 2023. The decrease was attributed to lower revenues.

Payroll and payroll related expenses decreased by $301,134, or approximately 29%, to $749,701 for the three months ended October 31, 2024, as compared to $1,050,835 during the three months ended October 31, 2023. The decrease was attributed to a decrease in the number of employees. As employees left the Company, given our decrease in revenues, we did not replace them.

Marketing expense decreased by $34,523, or approximately 74%, to $12,208 for the three months ended October 31, 2024, as compared to $46,731 during the three months ended October 31, 2023. The decrease in expense was primarily attributed to a decrease in marketing outlets that we utilized in the three months ended October 31, 2024.

Rent expense increased by $1,063, or approximately 6%, to $19,442 for the three months ended October 31, 2024, as compared to $18,379 during the three months ended October 31, 2023. The increase was primarily attributed to general inflationary costs.

General and administrative expenses increased by $843,557, or approximately 130%, to $1,492,182 for the three months ended October 31, 2024, from $648,625 during the three months ended October 31, 2023. The increase was primarily attributed to professional and legal fees, which include fees for launching our broker-dealer subsidiary.

Consulting expense decreased by $125,089, or approximately 61%, to $79,645 for the three months ended October 31, 2024 from $204,734 during the three months ended October 31, 2023. The decrease was primarily attributed to our efforts to control expenses associated with overseas programmers.

Interest expense decreased by $961 to $9,601, or approximately 9%, for the three months ended October 31, 2024, as compared to $10,562 during the three months ended October 31, 2023. 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, 2024 and 2023

Our revenues for the six months ended October 31, 2024, decreased by $3,248,712, or approximately 92%, to $312,755, as compared to $3,561,467 during the six months ended October 31, 2023. The decrease in revenues was attributed to the lack of consulting service revenue in the six-month period ended October 31, 2024, as compared to revenue of $2,626,667 for consulting services for equity securities and $95,700 for consulting revenue in the six months ended October 31, 2023. In fiscal 2025, management has focused on establishing a broker-dealer subsidiary so that the Company may have additional sources of revenue, and we have not been pursuing the equity-based revenue contracts. Effective November 22, 2024, the Company received approval from FINRA to have a broker-dealer subsidiary.

In the six months ended October 31, 2024, we recorded $312,428 in funding portal revenues, consisting of portal fees of $197,553, listing fees of $90,000, and equity fees of $24,875, as compared to funding portal revenues of $838,562 in the six months ended October 31, 2023, consisting of portal fees of $539,062, listing fees of $299,500 and equity fees of $0. The decrease in revenues was primarily attributed to a decrease in investments in funding portal issuers, which decreased to $3,023,234 from the six months ended October 31, 2024 from $10,287,341 for the six months ended October 31, 2023. In the six months ended October 31, 2024, dollars invested were approximately 29% of the dollars invested in the six months ended October 31, 2023. New offerings launched amounted to 26 issuers in the six months ended October 31, 2024, as compared to 37 issuers in the six months ended October 31, 2023. The components of revenue were as follows:

The components of revenue were as follows:

|  | Oct. 31, 2024 | Oct. 31, 2023 |
| --- | ---: | ---: |
| Consulting services for equity securities | $- | $2,626,667 |
| Consulting revenue | - | 95,700 |
| Portal fees | 197,553 | 539,062 |
| Listing fees | 90,000 | 299,500 |
| Portal 1% equity fee | 24,875 | - |
| Game site revenue | 327 | 538 |
| Total | $312,755 | $3,561,467 |

Costs of revenues decreased by $8,186 to $30,001, or approximately 21%, for the six months ended October 31, 2024 from $38,187 during the six months ended October 31, 2023. The decrease was primarily attributed to lower revenues.

Payroll and payroll related expenses decreased by $201,583, or approximately 10%, to $1,886,294 for the six months ended October 31, 2024, as compared to $2,087,877 during the six months ended October 31, 2023. The decrease was attributed to a decrease in the number of employees. As employees left the Company, given our decrease in revenues, we did not replace them.

Marketing expense decreased by $269,513, or approximately 93%, to $19,106 for the six months ended October 31, 2024, as compared to $288,619 during the six months ended October 31, 2023. The decrease in expense was primarily attributed to a decrease in marketing outlets that we utilized in fiscal 2025.

Rent expense increased by $569, or approximately 2%, to $38,558 for the six months ended October 31, 2024, as compared to $37,989 during the six months ended October 31, 2023. The increase was primarily attributed to a new office-space agreement.

General and administrative expenses increased by $1,435,519, or approximately 100%, to $2,872,438 for the six months ended October 31, 2024, from $1,436,919 during the six months ended October 31, 2023. The increase was primarily attributed to professional and legal fees, which include fees for launching our broker-dealer subsidiary.

Consulting expense decreased by $191,650, or 52%, to $177,026 for the six months ended October 31, 2024 from $368,676 during the six months ended October 31, 2023. The decrease was primarily attributed to our efforts to control expenses associated with overseas programmers.

Interest expense decreased by $3,801 to $20,065, or approximately 16%, for the six months ended October 31, 2024, as compared to $23,866 during the six months ended October 31, 2023. 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

As of October 31, 2024, we had cash and cash equivalents of $1,346,739 and negative working capital of $2,615,585 as compared to cash and cash equivalents of $863,182 and negative working capital of $2,074,163 as of April 30, 2024.

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

On December 27, 2023, the Company completed a public offering of (i) 68,572 shares of common stock, par value $0.001 per share, of the Company (the “Common Share”); (ii) 160,000 prefunded warrants (the “Prefunded Warrants”) to purchase 160,000 shares of Common Stock of the Company (the “Prefunded Warrant Shares”); (iii) 228,572 Series A-1 warrants (the “Series A-1 Common Warrants”) to purchase 228,572 shares of Common Stock of the Company (the “Series A-1 Common Warrant Shares”) and (iv) 228,572 Series A-2 warrants (the “Series A-2 Common Warrants,” together with the Series A-1 Warrants, the “Common Warrants”) to purchase 228,572 shares of Common Stock of the Company (the “Series A-2 Common Warrant Shares,” together with the Series A-1 Common Warrants Shares, the “Common Warrant Shares”). The offering price of each Common Share and accompanying Series A-1 Common Warrant and Series A-2 Common Warrant was $17.50, and the offering price of each Prefunded Warrant and accompanying Series A-1 Common Warrant and Series A-2 Common Warrant was $17.43. The Series A-1 Warrants have a current exercise price of $14.10 per share and are exercisable until February 23, 2029 and the Series A-2 Common Warrants have a current exercise price of $8.74 per share and are exercisable until August 23, 2025. Following adjustments in connection with the August 2024 reverse stock split, there are currently Series A-1 Warrants to purchase 283,752 shares of Common Stock outstanding and Series A-2 Warrant to purchase 28,386 shares of Common Stock outstanding.

On May 24, 2024, the Company entered into inducement offer letter agreements with certain investors that held certain outstanding Series A-2 warrants to purchase up to an aggregate of 204,572 shares of our common stock with an exercise price of $17.50 per share, originally issued in December 2023 at a reduced exercise price of $10.85 per share (which reduced exercise price was granted to all holders on Series A-2 warrants by the board on May 24, 2024) in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share and (ii) new Series A-4 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company. The Series A-3 Warrants and Series A-4 Warrants are exercisable beginning on the effective dates of stockholder approval of the issuance with such warrants expiring on (i) the five year anniversary of the initial exercise date for the Series A-3 Warrants and (ii) the eighteen month anniversary of the initial exercise date for the Series A-4 Warrants. This transaction closed on May 29, 2024. Wainwright was the exclusive agent for the transaction for which we paid them a cash fee equal to 7.5% from the exercise of the Series A-2 warrant at the reduced exercise price and a management fee equal to 1.0% of such aggregate gross proceeds. We also issued warrants to designees of H.C. Wainwright to purchase up to 19,048 shares of our common stock at an exercise price of $10.93 per share.

On August 23, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with Wainwright to sell shares of our common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $2,100,000, from time to time, through an “at the market offering” program under which Wainwright acted as sales agent. The sales of the Shares made under the ATM Agreement were made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We paid Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. From August 23, 2024 through October 29, 2024, the Company sold 1,122,693 shares of its common stock pursuant to the ATM Agreement for gross proceeds of 2,099,667. No additional Shares will be sold under this ATM Agreement. Net proceeds amounted to approximately $2,029,000.

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 took other steps 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 $3,451,087 and $1,945,814 for the six months ended October 31, 2024 and 2023, respectively. The principal sources of cash from operating activities in the six months ended October 31, 2024 was a non-cash item, stock-based compensation of $278,742 and an increase in accounts payable and accrued expenses of $911,387. These amounts were offset by a loss of $4,747,671. 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.

Net cash provided by investing activities amounted to $0 and $20,000 in the six months ended October 31, 2024 and 2023, respectively. The Company purchased a note receivable for $20,000 in the six months ended October 31, 2023.

For the six months ended October 31, 2024, net cash provided by financing activities amounted to $3,934,644, which consisted of proceeds from the sale of common stock of $1,979,000 and proceeds from the exercise of warrants of $1,955,644. 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.

In the six months ended October 31, 2024 and 2023, there were no expenditures for capital assets. We do not anticipate any capital expenditures in fiscal 2025.

### Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. For a discussion of our critical accounting estimates, please read Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended April 30, 2024 filed with the SEC on July 29, 2024. There have been no material changes to the critical accounting estimates previously disclosed in such report.

### Recently Issued Accounting Standards Not Yet Effective or Adopted

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying unaudited condensed consolidated financial statements.

## 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, 2,571 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, 2024. Based on that evaluation, the PEO and the PFO concluded that, as of October 31, 2024 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, 2024.

The Company’s annual report on Form 10-K for the year ended April 30, 2024 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 12,504 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, 2024 as filed with the SEC on July 29, 2024 (“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, 2024, we had negative working capital of $2,615,585 and for the six months ended October 31, 2024, we had an operating loss of $4,747,671 and net cash used in operating activities amounted to $3,451,087. 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 turned our focus to our funding portal business, and we plan to use our funding portal experience to build a broker-dealer business, initially for Regulation A and Regulation D offerings. We plan to continue to 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 our 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 business and operations could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock price.***

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of our Common Stock or other reasons may in the future cause us to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s attention and the attention and resources of our board of directors (our “Board”) from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.

***A significant portion of our total assets are held in equity securities of early-stage companies, which securities are illiquid and subject to volatility, which factors could have a material adverse effect on our financial condition and results of operations.***

Payment related to the consulting and advisory services provided by Netcapital Advisors is often made through equity stakes from such customers. As of October 31, 2024 and April 30, 2024, approximately $25.4 million and $25.3 million, respectively, of our holdings are issued by companies whose securities do not trade on public markets. The securities issued are typically in private companies with no established trading market for their securities, that often have limited operating histories, limited operating cash, and negative cash flows. Additionally, these securities are primarily restricted, and are subject to legal holding periods pursuant to Rule 144 or other applicable exemptions. The stock price of such issuers is often volatile, unpredictable, and with limited liquidity, and the value of such securities on the date of receipt compared to the date when we are able to legally sell the securities may decrease significantly. The value ascribed to our assets in our financial statements as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. Accordingly, the value of such holdings may change over time due to factors that we do not control, such as issuance of securities by such companies at lower prices or other market factors. One such example of a change in value occurred in the period ended January 31, 2024, we recognized an unrealized loss of approximately $2.7 million on the value of our equity securities due to the decline in value of a single issuer, which represented an impairment of more than 80% of the previous value of our holdings in such issuer, which resulted in a reduction of our retained earnings. Changes to the value of our holdings could have a material adverse effect on our financial condition and results of 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. 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.

As previously disclosed on a Current Report on Form 8-K filed by us, Nasdaq had previously notified us on September 1, 2023 that we were not in compliance with the Nasdaq’s Listing Rule 5550(a)(2) the “Bid Price Rule”) because it failed to maintain a minimum bid price of $1.00 per share for 30 consecutive business days. Further as of July 22, 2024, Nasdaq determined that that our securities had a closing bid price of $0.10 or less for ten consecutive trading days and as a result, Nasdaq delivered written notice to the Company on July 23, 2024 under which it advised us that Nasdaq has determined to delist our securities from The Nasdaq Capital Market. We requested a hearing to appeal Nasdaq’s delisting determination. On August 19, 2024, we received a notice from The Nasdaq Stock Market, LLC (“Nasdaq”), dated August 19, 2024, informing us that we had regained compliance with the “Bid Price Rule for continued listing on The Nasdaq Capital Market, as the bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days since August 2, 2024. As a result of our demonstrated compliance with Nasdaq’s continued listing requirements, such aforementioned hearing was cancelled.

Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its exchange 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.

### Regulatory and legal uncertainties could harm our business.

The securities businesses are heavily regulated. Firms in financial service industries have been subject to an increasingly regulated environment over recent years, and penalties and fines sought by regulatory authorities have increased accordingly. Our funding portal and proposed broker-dealer subsidiaries are subject to extensive regulations. Regulatory bodies include, but are not limited to, the SEC, FINRA, and the Nasdaq Stock Market. Our mode of operation and profitability may be directly affected by additional legislation changes in rules promulgated by various government agencies and self-regulatory organizations that oversee our businesses, and changes in the interpretation or enforcement of existing laws and rules. Noncompliance with applicable laws or regulations could result in sanctions being levied against us, including fines and censures, suspension or expulsion from a certain jurisdiction or market or the revocation or limitation of licenses. Noncompliance with applicable laws or regulations could adversely affect our reputation, prospects, revenues and earnings. In addition, changes in current laws or regulations or in governmental policies could adversely affect our business, financial condition and results of operations.

Stock exchanges, other self-regulatory organizations and state securities commissions can censure, fine, issue cease-and-desist orders, suspend or expel a funding portal, broker-dealer or any of its officers or employees. Our ability to comply with all applicable laws and rules is largely dependent on our internal systems to ensure compliance, as well as our ability to attract and retain qualified compliance personnel. We could be subject to disciplinary or other actions in the future due to claimed noncompliance, which could have a material adverse effect on our business, financial condition and results of operations. To continue to operate, we may have to comply with the regulatory controls of each jurisdiction in which we conduct, or intend to conduct business, the requirements of which may not be clearly defined.

Filed Dec 16, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-050235. Last ingested by Listed: Oct 30, 2026, 13:01 ET. No prices; not investment advice.