What changed in Netcapital Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, Netcapital Inc. (NCPLW) added 217 paragraphs, removed 200, and edited 139 between the 2022 and 2023 10-K filings. The biggest movers are Item 1. Business (+73/−67), Item 1A. Risk Factors (+72/−82), Item 7. Management's Discussion & Analysis (+54/−41).

Did Netcapital Inc. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 72 new/edited paragraphs and 82 removed paragraphs versus the 2022 10-K.

What changed in Netcapital Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 54 new/edited paragraphs and 41 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Where does this NCPLW 10-K diff come from?

The source filings are Netcapital Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in Netcapital Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of Netcapital Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+217 added−200 removedSource: 10-K (2023-07-26) vs 10-K (2022-08-08)

Top changes in Netcapital Inc.'s 2023 10-K

217 paragraphs added · 200 removed · 139 edited across 5 sections

Item 1. Business+73 / −67 · 43 edited
Item 1A. Risk Factors+72 / −82 · 57 edited
Item 7. Management's Discussion & Analysis+54 / −41 · 30 edited
Item 5. Market for Registrant's Common Equity+16 / −8 · 7 edited
Item 2. Properties+2 / −2 · 2 edited

Item 1. Business

Business — how the company describes what it does

43 edited+30 added−24 removed25 unchanged

2022 filing

2023 filing

Biggest changeInformation contained on or accessible through our website is not, and should not be considered, part of, or incorporated by reference into, this prospectus and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus in deciding whether to purchase our securities. 11 We maintain a corporate website with the address http://www.netcapitalinc.com, our funding portal maintains a website with the address http://www.netcapital.com, Netcapital Advisors maintains a website at http://www.netcapitaladvisors.com and our valuation business maintains a website at https://valucorp.com/.

Biggest changeWe maintain a corporate website with the address http://www.netcapitalinc.com, our funding portal maintains a website with the address http://www.netcapital.com, Netcapital Advisors maintains a website at http://www.netcapitaladvisors.com and our valuation business maintains a website at https://valucorp.com/.

Industry: Marketing Caesar Media Group, Inc. is an advanced marketing and technology solutions provider. Caesar Media Group is designed to leverage its technology and data to provide lead generation, search engine optimization (SEO) website development, project development, digital marketing, content management, customer service, and sales management.

Caesar Media Group Inc. Industry: Marketing Caesar Media Group, Inc. is an advanced marketing and technology solutions provider. Caesar Media Group is designed to leverage its technology and data to provide lead generation, search engine optimization (SEO) website development, project development, digital marketing, content management, customer service, and sales management.

In addition, Boston Consulting Group estimates that there are $42 trillion held in retail investment accounts, which we believe represents a large pool of potential account holders for us. Our Technology The Netcapital platform is a scalable, real-time, transaction processing engine that runs without human intervention, 24 hours a day, seven days a week.

In addition, Boston Consulting Group estimates that there are $42 trillion held in retail investment accounts, which we believe represents a large pool of potential account holders for us. 8 Our Technology The Netcapital platform is a scalable, real-time, transaction-processing engine that runs without human intervention, 24 hours a day, seven days a week.

A partial list of our investment portfolio is described below: KingsCrowd Industry: Fintech Trusted by over 300,000 investors to vet startup investments, KingsCrowd, Inc. is a leader in ratings and analytics for online private markets. The company aggregates, analyzes, and rates companies raising on platforms like Netcapital to help investors make more informed decisions.

A partial list of our investment portfolio is described below: 10 KingsCrowd Industry: Fintech Trusted by over 300,000 investors to vet startup investments, KingsCrowd, Inc. is a leader in ratings and analytics for online private markets. The company aggregates, analyzes, and rates companies raising on platforms like Netcapital to help investors make more informed decisions.

Within this market, private equity represents the largest share, with assets in excess of $3 trillion and a 10-year CAGR of 10%. Since 2000, global PE net asset value has increased almost tenfold, nearly three times faster than the size of the public equity market.

Within this market, private equity represents the largest share, with assets in excess of $3 trillion and a 10-year CAGR of 10%. Since 2000, global private equity, or PE, net asset value has increased almost tenfold, nearly three times faster than the size of the public equity market.

Both entrepreneurs and investors can track and view their investments through their dashboard on netcapital.com. The platform currently has almost 100,000 users. Scalability was demonstrated in November 2021, when the platform processed more than 2,000 investments in less than two hours, totaling more than $2 million.

Both entrepreneurs and investors can track and view their investments through their dashboard on netcapital.com. The platform currently has more than 100,000 users. Scalability was demonstrated in November 2021, when the platform processed more than 2,000 investments in less than two hours, totaling more than $2 million.

ITEM 1. BUSINESS. 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 all investors the opportunity to access investments in private companies.

ITEM 1. BUSINESS. 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 virtually all investors the opportunity to access investments in private companies.

The Noobs are a unique and original intellectual property introduced to the world through mobile games, multimedia content, and strategic partnerships. 9 MustWatch Industry: Technology MustWatch LLC brings your friends and favorite shows together all in one place.

The Noobs are a unique and original intellectual property introduced to the world through mobile games, multimedia content, and strategic partnerships. MustWatch Industry: Technology MustWatch LLC brings your friends and favorite shows together all in one place.

Our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. We generate fees from listing private companies on our portals. Our consulting group, Netcapital Advisors, provides marketing and strategic advice in exchange for cash and equity positions.

Our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. We generate fees from listing private companies on our portal. Our consulting group, Netcapital Advisors, provides marketing and strategic advice in exchange for cash and equity positions.

In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including all of our filings. 12

Most of our CPU intensive data processing happens asynchronously through a worker/jobs system managed by AWS ElastiCache’s Redis endpoint. This component can be easily fine-tuned for any scale necessary.

Most of our central processing unit, or CPU, intensive data processing happens asynchronously through a worker/jobs system managed by AWS ElastiCache’s Redis endpoint. This component can be easily fine-tuned for any scale necessary.

This patent pending approach is designed to improve the efficacy of treating a broad range of cancers. Hiveskill LLC Industry: AI The product is an AI-powered database and CRM hybrid that uses data and emotionally intelligent AI to boost direct one-to-one marketing efforts. It also provides specialized experts who know how to leverage your company’s data. Caesar Media Group Inc.

This patent pending approach is designed to improve the efficacy of treating a broad range of cancers. Hiveskill LLC 11 Industry: AI The product is an AI-powered database and CRM hybrid that uses data and emotionally intelligent AI to boost direct one-to-one marketing efforts. It also provides specialized experts who know how to leverage your company’s data.

In addition to access to the funding portal, the Netcapital funding portal provides the following services: ● a fully automated onboarding process; ● automated filing of required regulatory documents; ● compliance review; ● 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. 4 Consulting Business Our consulting group, Netcapital Advisors helps companies at all stages to raise capital.

In addition to access to the Funding Portal, the Funding Portal provides the following services: ● a fully automated onboarding process; ● automated filing of required regulatory documents; ● compliance review; ● custom-built offering page on our portal website; ● third party transfer agent and custodial services; ● 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. 6 Consulting Business Our consulting group, Netcapital Advisors helps companies at all stages to raise capital.

Competitive Advantages We believe we provide the lowest cost solution for online capital raising versus our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc.and Republic Core LLC. We also believe that our access and onboarding of new clients are superior due to our facilitated technology platforms.

Competitive Advantages We believe we provide a low-cost solution for online capital raising versus our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc. and Republic Core LLC). We also believe that our access and onboarding of new clients are superior due to our facilitated technology platforms.

Our infrastructure is designed in a way that can horizontally scale to meet our capacity needs. Using Docker containers and Amazon ECS, we are able to automate the creation and launch of our production web and API endpoints in order to replicate them as needed behind Elastic Load Balancers (ELBs).

Our infrastructure is designed in a way that can horizontally scale to meet our capacity needs. Using Docker containers and Amazon Elastic Container Service, or Amazon ECS, we are able to automate the creation and launch of our production web and application programming interface, or API, endpoints in order to replicate them as needed behind Elastic Load Balancers (ELBs).

These amendments increased the offering limits for Reg CF, Regulation A and Rule 504 of Regulation D offerings as follows: the Reg CF limit increased to $5 million from $1.07 million, every twelve months. Rule 504 of Regulation D moved to $10 million from $5 million and Regulation A Tier 2 rose to $75 million from $50 million.

Netcapital Advisors’ services include: ● incubation of technology start-ups; ● investor introductions; ● online marketing; ● website design, software and software development; ● message crafting, including pitch decks, offering pages, and ad creation; ● strategic advice; and ● technology consulting.

We may pursue expansion to our model to include Regulation A and Regulation D offerings. Industry Tailwinds Two major tailwinds are driving accelerated growth in the shift to digital fundraising: the COVID-19 pandemic and regulatory enhancements to the Jobs Act. The pandemic drove a rapid need to bring as many processes as possible online.

Industry Tailwinds Two major tailwinds are driving accelerated growth in the shift to digital fundraising: the COVID-19 pandemic and regulatory enhancements to the Jobs Act. The pandemic drove a rapid need to bring as many processes as possible online.

Netcapital Advisors Inc. generates fees and equity stakes from consulting in select portfolio and non-portfolio clients. MSG Development Corp. provides corporate valuation services to businesses and individuals.

In addition, the Funding Portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors Inc. generates fees and equity stakes from consulting in select portfolio and non-portfolio clients. MSG Development Corp. provides corporate valuation services to businesses and individuals.

For the year ended April 30, 2021, the Company had one customer that constituted 30% of its revenues, a second customer that constituted 15% of its revenues, a third customer that constituted 14% of its revenues and a fourth customer that accounted for 11% of its revenues.

For example, we plan on developing a dedicated mobile app to make our platform more accessible. ● Incubate and Accelerate Our Advisory Portfolio Clients. The advisory portfolio and our equity interests in select advisory clients represent potential upside for our shareholders. We seek to grow this model of advisory clients. ● Expand Internationally.

For example, we plan on offering the ability to purchase securities sold under Regulation A. ● Incubate and Accelerate Our Advisory Portfolio Clients. The advisory portfolio and our equity interests in select advisory clients represent potential upside for our shareholders. We seek to grow this model of advisory clients. ● Expand Internationally.

The SEC then adopted Regulation Crowdfunding, or Reg CF, in order to implement the JOBS Act’s crowdfunding provisions. Reg CF has several important features that changed the landscape for private capital raising and investment.

Title III of the JOBS Act enabled early-stage companies to offer and sell securities to the general public for the first time. The SEC then adopted Regulation Crowdfunding, or Reg CF, in order to implement the JOBS Act’s crowdfunding provisions. Reg CF has several important features that changed the landscape for private capital raising and investment.

These amendments increased the offering limits for Reg CF, Regulation A and Regulation D Rule 504 offerings as follows; Reg CF increased to $5 million, Regulation D, Rule 504 increased to $10 million from $5 million; and Regulation A Tier 2 increased to $75 million from $50 million. 6 Reg CF private company investments accounted for approximately $490 million in 2021, according to KingsCrowd, versus $205 million during 2020.

These amendments increased the offering limits for Reg CF, Regulation A and Regulation D, Rule 504 offerings as follows: Reg CF increased to $5 million; Regulation D, Rule 504 increased to $10 million from $5 million; and Regulation A Tier 2 increased to $75 million from $50 million.

The Funding Portal provides private companies with access to investments from accredited and non-accredited retail investors through our online portal (www.netcapital.com). The Funding Portal charges a $5,000 engagement fee and a 4.9% success fee for capital raised at closing. In addition, the Funding Portal generates fees for other ancillary services, such as rolling closes.

The Funding Portal provides private companies with access to investments from accredited and non-accredited retail investors through our online portal (www.netcapital.com). The Funding Portal charges a $5,000 to $10,000 engagement fee, a 4.9% success fee for capital raised at closing and sometimes is paid with equity from the issuer that has listed on the Funding Portal.

When issuers advertise their offerings, they are generating new investor accounts for us at no cost to Netcapital. We plan to supplement our issuers’ spend on advertising by increasing our online marketing spend as well, which may include virtual conferences going forward. ● Hire Additional Business Development Staff.

We plan to supplement our issuers’ spend on advertising by increasing our online marketing spend as well, which may include virtual conferences going forward. ● Hire Additional Business Development Staff.

Funding Portal Netcapital.com is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from 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.

Funding Portal 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.

While these barriers will limit those able to enter or compete effectively in the market, it is likely that new competitors as well as laws and regulations of governmental authority will be established in the future, in addition to our known current competitors. 5 We face significant competition in every aspect of our business, including from companies that facilitate online capital formation and the sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other forms of media content, and companies that provide development platforms for applications developers.

We face significant competition in every aspect of our business, including from companies that facilitate online capital formation and the sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other forms of media content, and companies that provide development platforms for applications developers.

Our failure to comply with these requirements as applicable to us could have a material adverse effect on us. Our Market The traditional funding model restricts access to capital, investments and liquidity. According to Harvard Business Review, VCs invest in fewer than 1% of the companies they consider and only 10% of VC meetings are obtained through cold outreach.

Competition We compete with a number of public and private companies that provide assistance with capital raising, strategy, technology consulting, and digital marketing. Most of our competitors have significant financial resources and occupy entrenched positions in the market with name-brand recognition. The majority of our capital raising and digital marketing business is on the Internet.

Most of our competitors have significant financial resources and occupy entrenched positions in the market with name-brand recognition. The majority of our capital raising and digital marketing business is on the Internet. The barriers to entry into most Internet markets are relatively low, making them accessible to a large number of entities and individuals.

In addition, under 5% of VC funding went to women and minority-owned firms in 2020, according to Forbes. Furthermore, under the traditional model, the average investor lacked access to early-stage investments. Prior to the JOBS Act, almost 90% of U.S. households were precluded from investing in private deals, per dqydj.com.

Furthermore, under the traditional model, the average investor lacked access to early-stage investments. Prior to the JOBS Act, almost 90% of U.S. households were precluded from investing in private deals, per dqydj.com. Liquidity has also been an issue, as private investments are generally locked up until IPO or takeout.

There are numerous industry drivers and tailwinds that complement investor demand for access to investments in private companies. To capitalize on these, our strategy is to: ● Generate New Investor Accounts. Growing the number of investor accounts on our platform is a top priority. Investment dollars continuing to flow through our platform is a key revenue driver.

To capitalize on these, our strategy is to: ● Generate New Investor Accounts. Growing the number of investor accounts on our platform is a top priority. Investment dollars continuing to flow through our platform is a key revenue driver. When issuers advertise their offerings, they are generating new investor accounts for us at no cost to Netcapital.

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. As noted above, in 2014, we began our consulting business, and we now own a portion of several companies as a result of our consulting work.

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. Competition We compete with a number of public and private companies that provide assistance with capital raising, strategy, technology consulting, and digital marketing.

We compete to attract, engage, and retain customers, to attract and retain marketers, and to attract and retain developers to build compelling applications that integrate with our products. Increased competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial condition.

We compete to attract, engage, and retain customers, to attract and retain marketers, and to attract and retain developers to build compelling applications that integrate with our products.

The pandemic drove a rapid need to bring as many processes as possible online. With travel restrictions in place and most people in lockdown, entrepreneurs were no longer able to fundraise in person and have increasingly turned to online capital raising through funding portals.

With travel restrictions in place and most people in lockdown, entrepreneurs were no longer able to fundraise in person and have increasingly turned to online capital raising through funding portals. 9 There are numerous industry drivers and tailwinds that complement investor demand for access to investments in private companies.

Title III of the JOBS Act outlines Reg CF, which traditionally allowed private companies to raise up to $1.07 million from all Americans. In March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million.

The JOBS Act helped provide a solution to these issues by establishing the funding portal industry, which is currently in its infancy. Title III of the JOBS Act outlines Reg CF, which traditionally allowed private companies to raise up to $1.07 million from all Americans.

Companies can accept investment from anyone, including friends, family, customers, employees, etc. Customer accounts on our platform will not be permitted to hold digital securities.

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. Customer accounts on our platform are not permitted to hold digital securities.

Industry Regulation In an effort to enhance economic growth and to democratize access to private investment opportunities, Congress finalized the Jumpstart Our Business Startups Act (JOBS Act) in 2016. Title III of the JOBS Act enabled early-stage companies to offer and sell securities to the general public for the first time.

Increased competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial condition. 7 Industry Regulation In an effort to enhance economic growth and to democratize access to private investment opportunities, Congress finalized the Jumpstart Our Business Startups Act (JOBS Act) in 2016.

Given the rapid growth in the industry and its potential to disrupt the multi-billion dollar private capital market, we believe there is sufficient room for multiple players. 7 Our Strategy Three major tailwinds are driving accelerated growth in the shift to the use of online funding portals: (i) the COVID-19 pandemic; (ii) the increase in funding limits under Reg CF; and (iii) the recent private equity outperformance of public markets.

Our Strategy Two major tailwinds are driving accelerated growth in the shift to the use of online funding portals: (i) the COVID-19 pandemic; and (ii) the increase in funding limits under Reg CF. The pandemic drove a rapid need to bring as many processes as possible online.

Our network is rapidly expanding as a result of our enhanced marketing and broad distribution to reach new investors.

Our network is expanding as a result of our enhanced marketing and broad distribution to reach new investors. Given the rapid growth in the industry and its potential to disrupt the multi-billion dollar private capital market, we believe there is sufficient room for multiple players.

Our principal executive offices are located at State Street Financial Center, One Lincoln Street, Boston, Massachusetts and our telephone number is 781-925-1700. We maintain a website at www.netcapitalinc.com .

In conjunction with this offering, the Company issued the underwriter and its designees warrants to purchase 86,250 shares of our common stock at an exercise price of $0.875. Corporate Information Our principal executive offices are located at State Street Financial Center, One Lincoln Street, Boston, Massachusetts and our telephone number is 781-925-1700.

We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding portal. Private capital markets reached $7.4 trillion at the end of 2020, per Morgan Stanley, and this number is expected to reach $13 trillion over the next five years.

There was $494 million raised via Reg CF in 2022, according to Crowdwise. We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding portal. Private capital markets reached $12 trillion by the first half of 2022, per McKinsey.

We plan to open a Secondary Transfer Feature and are exploring various alternatives to provide potential liquidity for secondary offerings to investors who participate in our primary offerings on the Netcapital platform. ● New Verticals Represent a Compelling Opportunity. We operate in a regulated market supported by the JOBS Act.

A beta testing platform has been established and the functionality is currently being tested. ● New Verticals Represent a Compelling Opportunity. We operate in a regulated market supported by the JOBS Act. We may pursue expansion to our model to include Regulation A and Regulation D offerings.

Recent Developments Nasdaq Uplist Offering 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.

July 2023 Public Offering On July 24, 2023 the Company completed an underwritten public offering of 1,725,000 shares of the Company’s 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 the Company.

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Valuation Business Our valuation group, MSG Development Corp. prepares valuations that are always reviewed by an Accredited Senior Business Appraiser licensed by the American Society of Appraisers.

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While these barriers may limit those able to enter or compete effectively in the market, it is likely that new competitors as well as laws and regulations of governmental authority may be established in the future, in addition to our known current competitors.

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Many of these businesses operate solely on the Internet and many use the Internet to raise capital. We believe the value of our ownership interests in several of these companies may be significant. In 2016, we began consulting for companies seeking to raise capital via Reg CF.

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According to Harvard Business Review, venture capital firms, or VCs, invest in fewer than 1% of the companies they consider and only 10% of VC meetings are obtained through cold outreach. In addition, only 2% of VC funding went to women in 2022, according to PitchBook, while only 1% went to black-owned firms, according to TechCrunch.

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In 2020, we purchased Netcapital Funding Portal Inc., a regulated funding portal operating under the provisions of Reg CF. On November 5, 2020, we changed our name to Netcapital Inc. to leverage the strength of Netcapital’s well-established brand and unique private capital markets platform.

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In March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million.

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The barriers to entry into most Internet markets are relatively low, making them accessible to a large number of entities and individuals.

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The technology necessary to operate our funding portal is licensed from Netcapital Systems LLC, a Delaware limited liability company, of which Jason Frishman, Netcapital Founder, owns a 29% interest, under a license agreement with the Funding Portal. Payments under the licensing agreement amounted to $430,000 and $357,429 in the years ended April 30, 2023 and 2022, respectively.

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Liquidity has also been an issue, as private investments are generally locked up until IPO or takeout. The JOBS Act helped provide a solution to these issues by establishing the funding portal industry which is currently in its infancy.

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Proposed Alternative Trading System (“ATS”) Relationship On January 2, 2023, our wholly owned subsidiary, Netcapital Systems LLC entered into a software license and services agreement (“Templum License Agreement”) with Templum, Inc (“Templum”) to provide issuers and investors on the Netcapital funding portal with the potential for greater distribution and liquidity.

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The technology necessary to operate our funding portal is licensed from our affiliate, Netcapital Systems LLC under a license agreement with our wholly owned subsidiary Netcapital Funding Portal Inc., where we have the exclusive right to use the technology with respect to our funding portal, for an annual license fee of $380,000 paid in quarterly installments.

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Templum is a company that provides capital markets infrastructure for trading private equity securities and operates an ATS with approval in 53 U.S. states and territories for the trading of unregistered or private securities.

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Rule 504 of Regulation D moved to $10 million from $5 million and Regulation A Tier 2 rose to $75 million from $50 million. 8 Propelled by this rule change, Reg CF commitments of $56 million in March 2021 were more than five times higher than in March of the previous year.

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The Templum License Agreement allows us to launch a customized marketplace for the trading of private securities issued under an exemption to the Securities Act of 1933, as amended. Templum operates an alternative trading system under the provisions of Regulation ATS.

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We believe that the recent increase in offering limits in combination with pandemic-driven acceleration in the need for digital fundraising have been the primary drivers of the increase in Reg CF commitments.-.

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The Templum License Agreement is for an initial term of three (3) years and will automatically renew for consecutive terms of one (1) year unless (i) either party upon at least ninety (90) days prior to the expiration of the initial term or then-current renewal term, provides written notice to the other party of its intention not to renew, in which case the agreement and the applicable order and technology services and pricing outline will expire, as the case may be, at the end of the then current initial term or renewal term; or (ii) either party terminates the agreement pursuant to and in accordance with the terms and conditions set forth in the agreement.

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We expect these changes to continue to have a significant, positive impact on demand as they increase the attractiveness of digital fundraising options and pave the way for larger companies to utilize the exempt framework. This could also potentially drive higher demand for Netcapital Advisors’ services. In another important regulatory development, the U.S.

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Netcapital Systems paid Templum an implementation fee upon signing of the Agreement. The Templum License Agreement grants Netcapital Systems a limited, revocable, non-exclusive, non-transferable, and non-sublicensable right and license to use Templum’s software and to provide its users access to the software.

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Department of Labor, or DOL, recently expressed their support for retail investment in private equity. In 2020, the DOL released an information letter backing private equity as an investment option for defined contribution plans. As a result, large asset managers are working on adding private investment choices to their retirement products, according to a study conducted by BCG.

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Notwithstanding the foregoing, Netcapital Systems shall be Templum’s exclusive registered crowdfunding platform partner and Templum shall not provide services to any third-party whose primary business is providing services as a registered crowdfunding platform except as noted in the agreement.

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Deuce Drone Industry: Drone Delivery Technology Deuce Drone LLC solves the last mile delivery problem for “brick and mortar” retailers. The company designs, builds, and operates drone delivery systems, transforming retail stores into customer fulfillment centers. Deuce Drone LLC provides a cost-effective, technology-driven solution for same-day delivery that allows retailers to compete with major e-commerce players.

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Netcapital Systems agreed to pay Templum a discounted license fee in year 1, and a standard license fee in years 2 and 3. After conclusion of the initial 3-year term, the annual license fee will increase by the greater of CPI+3% or 5% for each renewal term.

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Investment Portfolio Company Progress KingsCrowd, Inc., a fintech company that provides ratings and analytics for online private markets, grew their subscriber base to 350,000, generated almost half a million in revenues last year, rated over half a billion dollars in transactions with their proprietary rating algorithm, and launched a $15 million Reg A+ round at a $45 million pre-money valuation.

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A beta testing platform has been established and the functionality is currently being tested.

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Deuce Drone recently secured an exclusive contract for food delivery at the BB&T Center, in Mobile, Alabama. They successfully completed their first food delivery run: Operation Smoothie.

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Additional milestones required to launch the platform to the public include, but are not limited to, development of the know-your-customer (KYC) and anti-money laundering (AML) functionality as well as a launch of the beta version to a closed group of users, which is currently expected in the fourth quarter of 2023.

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The Deuce Drone team was joined by several notable community leaders for the demo, including Representative Jerry Carl, the chief executive officer of the Mobile Chamber of Commerce, staff from Senator Tommy Tuberville’s office, and representatives from Innovation Portal, a local incubator that recently invested in the company. Local Fox 10 News and Alabama.com covered the event.

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Currently, we do not know when, or if, this platform will be fully completed and launched, as there are many details that remain to be completed as well as certain regulatory matters that are required to be satisfied regarding the proposed operation of the ATS.

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MustWatch launched their television show recommendation app in the Apple app store, which has been awarded a 5-star rating by users. They also added acclaimed Hollywood producer and screenwriter Jason Keller to their team. Keller brings nearly two decades of experience in the film and entertainment industry to the MustWatch team.

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Any regulatory delays or objections will result in delays in our ability to launch the proposed platform. It is currently contemplated that the Templum ATS will be integrated with the Netcapital funding platform, and that issuers and investors will not be able to directly access the Templum ATS.

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Most recently Keller wrote the Oscar winning film Ford vs. Ferrari (starring Christian Bale and Matt Damon) which was nominated for four Academy Awards, including Best Picture.

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Rather, we will be responsible for collecting and delivering any required information to the Templum ATS. Once an order request has been submitted and the Templum ATS has identified two-order (bid/ask) matching at the price level, it will inform us so that we can initiate the process of wallet reconciliation between the two proposed parties in the transaction.

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His other notable writing credits include Mirror, Mirror (starring Julia Roberts), Escape Plan (starring Arnold Schwarzenegger and Sylvester Stallone) and Machine Gun Preacher (starring Gerard Butler), as well as an executive producer for the fifth movie in the Die Hard franchise, A Good Day to Die Hard (starring Bruce Willis). 10 Zelgor completed a stability test launch of their first mobile game, Noobs in Space, and generated thousands of downloads in the first 48 hours.

Added

In January 2023, we entered into software license and services agreement with Templum Markets LLC, operator of an ATS with approval in 53 U.S. states and territories, for the trading of unregistered or private securities to provide issuers and investors on the Netcapital funding portal with the potential for greater distribution and liquidity.

Removed

They sold out their recent offering on the Netcapital platform. ChipBrain, which develops emotionally intelligent AI, has built out their core machine learning models and performed pilot programs with multiple customers. With the help of Netcapital Advisors, the Company sold out two rounds of financing on Netcapital, and just closed a venture round at a $20 million pre-money valuation.

Added

ScanHash LLC Industry: AI With the click of a button and the wallet owner’s permission, ScanHash’s innovative program launches and immediately integrates with customers' technology systems to search for clues and traces of their private key, digital wallets and other crypto-enabling logs and records. Thanks to ScanHash’s proprietary digital forensics technology, recovering lost cryptocurrency is affordable, accessible, and safe.

Removed

Working with Netcapital Advisors, C-Reveal raised over $1 million on the Netcapital platform, and then closed a $3 million venture round. Major Customers For the year ended April 30, 2022, the Company had one customer that constituted 22% of its revenues, a second customer that constituted 22% of its revenues, and a third customer that constituted 18% of its revenues.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+15 added−25 removed111 unchanged

2022 filing

2023 filing

Biggest changeNasdaq requires that the trading price of a company’s listed stock on Nasdaq remain above one dollar in order for such stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq.

Biggest changeThere can be no assurance that we will be able to comply with Nasdaq’s continued listing standards, a failure of which could result in a delisting of our common stock and warrants . Nasdaq requires that the trading price of a company’s listed stock on Nasdaq remain above one dollar in order for such stock to remain listed.

In particular, the spread and treatment of the coronavirus globally could adversely impact our operations and could have an adverse impact on our business and our financial results. To date, our business has not been impacted by COVID-19 but it could be in the future. 19 We may not be able to protect all of our intellectual property.

In particular, the spread and treatment of the coronavirus globally could adversely impact our operations and could have an adverse impact on our business and our financial results. To date, our business has not been impacted by COVID-19 but it could be in the future. We may not be able to protect all of our intellectual property.

There can also be no assurance that a third party will not assert infringement claims with respect to our products or technologies. Any litigation for both protecting our intellectual property or defending our use of certain technologies could have material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation.

There can also be no assurance that a third party will not assert infringement claims with respect to our products or technologies. Any litigation for both protecting our intellectual property or defending our use of certain technologies could have a material adverse effect on our business, operating results and financial condition, regardless of the outcome of such litigation.

Utah law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; ● we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; 26 ● we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; ● we will not be obligated pursuant to our bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors, or Board, or brought to enforce a right to indemnification; ● the rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and ● we may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

Utah law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; ● we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; ● we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; ● we will not be obligated pursuant to our bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors, or Board, or brought to enforce a right to indemnification; ● the rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and ● we may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

Our level of debt could have significant consequences to our shareholders, including the following: ● requiring the dedication of a substantial portion of cash flow from operations to make payments on debt, thereby reducing the availability of cash flow for working capital, capital expenditures and other general business activities; ● requiring a substantial portion of our corporate cash reserves to be held as a reserve for debt service, limiting our ability to invest in new growth opportunities; ● limiting the ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate and other activities; ● limiting the flexibility in planning for, or reacting to, changes in the business and industry in which we operate; 18 ● increasing our vulnerability to both general and industry-specific adverse economic conditions; ● putting us at a competitive disadvantage vs. less leveraged competitors; and ● increasing vulnerability to changes in the prevailing interest rates.

Our level of debt could have significant consequences to our shareholders, including the following: ● requiring the dedication of a substantial portion of cash flow from operations to make payments on debt, thereby reducing the availability of cash flow for working capital, capital expenditures and other general business activities; ● requiring a substantial portion of our corporate cash reserves to be held as a reserve for debt service, limiting our ability to invest in new growth opportunities; ● limiting the ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate and other activities; ● limiting the flexibility in planning for, or reacting to, changes in the business and industry in which we operate; ● increasing our vulnerability to both general and industry-specific adverse economic conditions; ● putting us at a competitive disadvantage vs. less leveraged competitors; and ● increasing vulnerability to changes in the prevailing interest rates.

Any acquisition that we pursue, whether successfully completed or not, involves risks, including: • material adverse effects on our operating results, particularly in the fiscal quarters immediately following the acquisition of acquired entities that are integrated into our operations; • risks associated with entering into markets or conducting operations where we have no or limited prior experience; • problems retaining key personnel; 20 • potential impairment of tangible and intangible assets and goodwill acquired in the acquisition; • potential unknown liabilities; • difficulties of integration and failure to realize anticipated synergies; and • disruption of our ongoing business, including diversion of management’s attention from other business concerns.

Any acquisition that we pursue, whether successfully completed or not, involves risks, including: ● material adverse effects on our operating results, particularly in the fiscal quarters immediately following the acquisition of acquired entities that are integrated into our operations; ● risks associated with entering into markets or conducting operations where we have no or limited prior experience; ● problems retaining key personnel; ● potential impairment of tangible and intangible assets and goodwill acquired in the acquisition; ● potential unknown liabilities; ● difficulties of integration and failure to realize anticipated synergies; and ● disruption of our ongoing business, including diversion of management’s attention from other business concerns.

We could be harmed by improper disclosure or loss of sensitive or confidential Company, employee, associate or customer data, including personal data. In connection with the operation of our business, we plan to store, process and transmit data, including personal and payment information, about our employees, customers, associates and candidates, a portion of which is confidential and/or personally sensitive.

We could be harmed by improper disclosure or loss of sensitive or confidential Company, employee, associate or customer data, including personal data. 21 In connection with the operation of our business, we plan to store, process and transmit data, including personal and payment information, about our employees, customers, associates and candidates, a portion of which is confidential and/or personally sensitive.

We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results. We may be liable for misstatements made by issuers.

We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results. 15 We may be liable for misstatements made by issuers.

At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. To date, the COVID-19 outbreak, has significantly impacted global markets, U.S. employment numbers, as well as the business prospects of many small business (our potential clients).

At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. To date, the COVID-19 outbreak has significantly impacted global markets, U.S. employment numbers, as well as the business prospects of many small businesses (our potential clients).

If we are required to indemnify, both for the costs of their defense in any action or to pay monetary damages upon a finding of a court or in any settlement, our business and financial condition could be materially and adversely affected.

Though this is a new market, we compete against a variety of entrants in the market as well likely new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them competitive advantages.

Though this is a new market, we compete against a variety of entrants in the market as well as new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them competitive advantages.

As a result, this stockholder will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions.

As a result, this stockholder will be able to exercise a significant level of control over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions.

Our business model is one of innovation, including continuously working to expand our product lines and services to our clients. For example, we are evaluating an expansion into the transfer agent and broker-dealer space as well as our foray into becoming an alternative trading system. It is unclear whether these services will be successful.

Our business model is one of innovation, including continuously working to expand our product lines and services to our clients. For example, we are evaluating an expansion into the broker-dealer space as well as our foray into becoming an alternative trading system. It is unclear whether these services will be successful.

While our business has not yet been impacted by COVID-19, to the extent COVID-19 continues and limits investment capital or personally impacts any of our key employees, it may have significant impact on our results and operations. Acquisitions may have unanticipated consequences that could harm our business and our financial condition.

While our business has not yet been impacted by COVID-19, to the extent COVID-19 continues and limits investment capital or personally impacts any of our key employees, it may have a significant impact on our results and operations. 20 Acquisitions may have unanticipated consequences that could harm our business and our financial condition.

As a result, we may not be able to meet a level of service that we have promised to our subscribers, and we may be in breach of our contractual commitments, which could materially adversely affect our business, revenues, operating results and financial condition. 16 We are dependent on general economic conditions.

Although we have reported earnings in the years ended April 30, 2022 and 2021, the majority of our earnings came from unrealized gains in equity securities that we own. These securities have observable prices but are not liquid.

Although we have reported earnings in the years ended April 30, 2023 and 2022, the majority of our earnings came from unrealized gains in equity securities that we own. These securities have observable prices but are not liquid.

As a publicly reporting company, we are faced with expensive, complicated and evolving disclosure, governance and compliance laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and the Dodd-Frank Act, and, following this offering, Nasdaq rules.

We currently rely on Silicon Valley Bank to provide all escrow services related to offerings on our platform. Any change in this relationship will require us to find another escrow agent and escrow bank. This change may cause us delays as well as additional costs in transitioning our technology.

We currently rely on First Citizens Bank to provide all escrow services related to offerings on our platform. Any change in this relationship will require us to find another escrow agent and escrow bank. This change may cause us delays as well as additional costs in transitioning our technology.

Our issuance of common stock upon the exercise of options granted under our 2021 Equity Incentive Plan may dilute all other stockholders.

Our issuance of common stock upon the exercise of options granted under our 2023 Omnibus Equity Incentive Plan may dilute all other stockholders.

Such companies may be able to attract significantly more subscribers because of new marketing ideas and user interface concepts. Increased competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial condition.

If we raise additional funds through strategic collaborations and alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to future therapeutic candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

If we raise additional funds through strategic collaborations and alliances or licensing arrangements with third parties, or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Further, our subsidiary Netcapital Funding Portal Inc is registered as a funding portal.

We operate in a highly regulated industry. We are subject to extensive regulation and failure to comply with such regulation could have an adverse effect on our business. Further, our subsidiary Netcapital Funding Portal Inc is registered as a funding portal.

Risk Factors Related to our Common Stock Concentration of ownership among our majority stockholders may prevent new investors from influencing significant corporate decisions. As of July 29 2022, Netcapital Systems LLC, our largest stockholder, beneficially owned, in the aggregate, approximately 40% of our outstanding shares of common stock.

Risk Factors Related to our Common Stock Concentration of ownership among our majority stockholders may prevent new investors from influencing significant corporate decisions. As of July 26 2023, Netcapital Systems LLC, our largest stockholder, beneficially owned, in the aggregate, approximately 18.2% of our outstanding shares of common stock.

Integration issues are complex, time consuming and expensive and, without proper planning and implementation, could significantly disrupt our business, including, but not limited to, the diversion of management's attention, the loss of key business and/or personnel from the acquired company, unanticipated events, and legal liabilities. Our future growth depends on our ability to develop and retain customers.

Our future success depends on the efforts of a small number of key personnel, including the founder of our subsidiary, Netcapital Funding Portal Inc. and Chief Executive Officer, and our compliance, engineering and marketing teams.

We depend on key personnel and face challenges recruiting needed personnel. Our future success depends on the efforts of a small number of key personnel, including the founder of our subsidiary, Netcapital Funding Portal Inc., our Chief Executive Officer, Chief Financial Officer, and our compliance, engineering and marketing teams.

Information posted on such platforms at any time may be adverse to our interests and/or may be inaccurate. The dissemination of information via social media could harm our business, reputation, financial condition, and results of operations, regardless of the information’s accuracy.

We have issued options to purchase 271,000 shares of common stock under our 2021 Equity Incentive Plan and we expect to issue options to purchase the remaining 29,000 shares of common stock in the future to officers, directors, employees and consultants under our 2021 Equity Incentive Plan.

We have issued options to purchase 1,950,000 shares of common stock under our 2023 Omnibus Equity Incentive Plan and we expect to issue options to purchase the remaining 50,000 shares of common stock in the future to officers, directors, employees and consultants under our 2023 Omnibus Equity Incentive Plan.

We recently sold a substantial number of shares of our common stock and warrants to purchase common stock in a public offering, which could cause the price of our common stock to decline . In a recent offering, we sold 1,205,000 shares of common stock. Additionally, we sold an equal number of warrants to purchase shares of common stock.

We recently sold a substantial number of shares of our common stock and warrants to purchase common stock in a public offering, which could cause the price of our common stock to decline . In our May 2023 offering, we sold 1,100,000 shares of common stock.

Furthermore, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will maintain profitability.

Further, existing laws and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our services and the types of securities that our clients can offer and sell on our platform. 13 We operate in a highly regulated industry.

New laws and regulations could be adopted in the United States and abroad. Further, existing laws and regulations may be interpreted in ways that would impact our operations, including how we communicate and work with investors and the companies that use our services and the types of securities that our clients can offer and sell on our platform.

Failure by us to use social media effectively or appropriately, particularly as compared to our brands’ respective competitors, could lead to a decline in brand value, customer visits and revenue.

In addition, social media is frequently used to communicate with our customers and the public in general. Failure by us to use social media effectively or appropriately, particularly as compared to our brands’ respective competitors, could lead to a decline in brand value, customer visits and revenue.

In addition, any failure of Netcapital Systems LLC to service the technology subject to the license agreement or to operate its website could result in our inability to operate our funding portal which would have a material adverse effect on our business, financial condition, and results of operations. 15 Netcapital Systems LLC relies on third-party software for the technology subject to the license agreement with Netcapital Funding Portal Inc. that may be difficult to replace or which could cause errors or failures of our funding portal.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities. In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.

If we fail to implement any required improvements to our disclosure controls and procedures, we may be obligated to report control deficiencies in which case, we could become subject to regulatory sanction or investigation. Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements.

We will need to attract, train and retain additional highly qualified senior executives and technical and managerial personnel in the future. We continue to seek technical and managerial staff members, although we have limited resources to compensate them until we have raised additional capital or developed a business that generates consistent cash flow from operations.

We continue to seek technical and managerial staff members, although we have limited resources to compensate them until we have raised additional capital or developed a business that generates consistent cash flow from operations.

The securities issued are in private companies with no established trading market for their securities In the absence of a trading market, we may be unable to liquidate our investment, which will result in the loss of our investment.

For our consulting and advisory services, payment is often made through equity securities of customers instead of cash. The securities issued are in private companies with no established trading market for their securities. In the absence of a trading market, we may be unable to liquidate our investment, which will result in the loss of our investment.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our securities adversely, the price of our common stock or warrants and trading volume could decline.

As a result, fewer broker-dealers may be willing to make a market in our common stock or our warrants, reducing a stockholder’s ability to resell shares of our common stock and warrants. 24 If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our securities adversely, the price of our common stock or warrants and trading volume could decline.

There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the future level of demand for our services that will be generated by these customers or new customers, or the future demand for the products and services of these customers or new customers.

It is not possible for us to predict the future level of demand for our services that will be generated by these customers or new customers, or the future demand for the products and services of these customers or new customers.

Most of our cash-flow generating services are variants on one type of service: providing a platform for online capital formation. Our revenues are therefore dependent upon the market for online capital formation. As such, any downturn in the market could have a material adverse effect of our business and financial condition.

Since we do not pay dividends, and if we are not successful in having our shares listed or quoted on an exchange, then you may have a limited ability to liquidate or receive any payment on your investment.

Since we do not pay dividends, then you may have a limited ability to liquidate or receive any payment on your investment. Therefore, our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations.

For the year ended April 30, 2022, the Company had one customer that constituted 22% of its revenues, a second customer that constituted 22% of its revenues, and a third customer that constituted 18% of its revenues. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.

We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues. We currently derive a significant portion of our revenues from a limited number of customers.

Since we have a limited operating history, we cannot assure you that our business will maintain profitability. 14 We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues. We currently derive a significant portion of our revenues from a limited number of customers.

If our wholly-owned subsidiary, Netcapital Funding Portal Inc., fails to comply with its obligations under the license agreement with Netcapital Systems LLC under which the technology to operate our funding portal is licensed to Netcapital Funding Portal Inc., we could lose rights necessary to operate our funding portal which are important to our business.

As such, if our relationship with our escrow agent is terminated, we may have difficulty finding a replacement which could have a material adverse effect on our business and results of operations. 16 If our wholly owned subsidiary, Netcapital Funding Portal Inc., fails to comply with its obligations under the license agreement with Netcapital Systems LLC under which the technology to operate our funding portal is licensed to Netcapital Funding Portal Inc., we could lose rights necessary to operate our funding portal which are important to our business.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. Our articles of incorporation and bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Utah law.

Our articles of incorporation and bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Utah law.

In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.

If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.

Any such issuances of common stock underlying stock options may cause stockholders to experience dilution of their ownership interests and the per share value of our common stock to decline. 25 Our compliance with complicated U.S. regulations concerning corporate governance and public disclosure is expensive and diverts management’s attention from our core business, which could adversely affect our business, results of operations, and financial condition.

Our compliance with complicated U.S. regulations concerning corporate governance and public disclosure is expensive and diverts management’s attention from our core business, which could adversely affect our business, results of operations, and financial condition.

For the year ended April 30, 2023, the Company had one customer that constituted 25% of its revenues, and four customers that each constituted 14% of its revenues.

This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders. 22 There can be no assurance that we will be able to comply with Nasdaq’s continued listing standards, a failure of which could result in a de-listing of our common stock and warrants .

We may conduct future offerings of our common stock and pay debt obligations with our common stock which may diminish our investors’ pro rata ownership and depress our stock price.

In addition, because we do not pay dividends we may have trouble raising additional funds, which could affect our ability to expand our business operations. We may conduct future offerings of our common stock and pay debt obligations with our common stock which may diminish our investors’ pro rata ownership and depress our stock price.

We are not allowed to operate our funding portal business without a qualified third-party escrow bank. There are a limited number of banks that provide this service. As such, if our relationship with our escrow agent is terminated, we may have difficulty finding a replacement which could have a material adverse effect on our business and results of operations.

We are not allowed to operate our funding portal business without a qualified third-party escrow bank. There are a limited number of banks that provide this service.

Accordingly, we would be required to take extraordinary steps to address the situation, such as the modification and restructuring of our platform, which would materially adversely affect our ability to derive revenue. 22 Our consulting and advisory services are primarily paid for in restricted shares of stock of our customers, which are often private companies with no established trading market for their securities.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have instituted class action securities litigation against those companies.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and a diversion of management attention and resources, which would significantly harm our profitability and reputation.

Our future growth depends to a large extent on our ability to effectively anticipate and adapt to customer requirements and offer services that meet customer demands. If we are unable to attract new customers and/or retain new customers, our business, results of operations and financial condition may be materially adversely affected.

Our future growth depends on our ability to develop and retain customers. 19 Our future growth depends to a large extent on our ability to effectively anticipate and adapt to customer requirements and offer services that meet customer demands.

Netcapital Systems LLC relies on software licensed from third parties for the technology subject to the license agreement with Netcapital Funding Portal Inc. This software may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.

Netcapital Systems LLC relies on third-party software for the technology subject to the license agreement with Netcapital Funding Portal Inc. that may be difficult to replace or which could cause errors or failures of our funding portal. Netcapital Systems LLC relies on software licensed from third parties for the technology subject to the license agreement with Netcapital Funding Portal Inc.

Adequate additional financing may not be available to us on acceptable terms, or at all.

This software may not continue to be available at reasonable prices or on commercially reasonable terms, or at all.

ITEM 1A. RISK FACTORS. Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus, before making your decision to invest in our securities.

ITEM 1A. RISK FACTORS. Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.

If any of such events were to happen, the trading price of our securities in any market that may develop for our securities could decline and you could lose all or part of your investment.

If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

Removed

We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and cash flows and, if so, our prospects would likely be materially and adversely affected.

Added

The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

Removed

New laws and regulations could be adopted in the United States and abroad.

Added

Risks Related to Our Need for Additional Capital We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate operations. Our cash balances at April 30, 2023 and July 25, 2023 were $569,441 and $1,256,200, respectively.

Removed

As such, any downturn in the market could have a material adverse effect of our business and financial condition. 14 We depend on key personnel and face challenges recruiting needed personnel.

Added

We will need to raise additional capital following the date of this report through the offering of additional equity and/or debt securities and/or the sale of equity positions in certain portfolio companies for which Netcapital Advisors provides marketing and strategic advice.

Removed

We will require our secured lender to cooperate with us and, among other things, not demand repayments of principal and interest until the business is capable of making such payments. We owe our secured lender, or the Lender, $400,000 in principal as of the date of this Report.

Added

In the event that we are not able to raise additional working capital through these methods, we do not expect that our cash on hand will be sufficient to fund our current operations for the next 12 months.

Removed

Our Lender holds a term note bearing interest at an annual rate of 8%. We have not paid interest on the note and it accrues each month. We have a loan and security agreement, or the Loan, with the Lender with a maturity date of April 30, 2023.

Added

Our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding or a combination of these approaches. Raising funds in the current economic environment may present additional challenges.

Removed

To secure the payment of all obligations to the Lender, the Company granted to the Lender a continuing security interest and first lien on all of the assets of the Company.

Added

Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. Any additional fundraising efforts may divert our management from their day-to-day activities.

Removed

In connection with the Loan, 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.

Added

In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.

Removed

If we default on our loan obligations with the Lender, it could exercise their rights and remedies under the applicable agreements, which could include seizing all of our assets. Any such action would have a material adverse effect on our business and prospects. 17 The Loan contains numerous restrictive covenants which limit management’s discretion to operate our business.

Added

Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares of common stock to decline.

Removed

In order to obtain the Loan, we agreed to certain covenants that place significant restrictions on, among other things, our ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments and investments, and to sell or otherwise dispose of assets and merge or consolidate with other entities.

Added

The sale of additional equity or convertible securities may dilute our existing stockholders.

Removed

Any failure to comply with the covenants included in the Loan could result in an event of default, which could trigger an acceleration of the related debt. If we were unable to repay the debt upon any such acceleration, the Lender could seek to foreclose on our assets in an effort to seek repayment under the loans.

Added

The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

Removed

If the Lender was successful, we would be unable to conduct our business as it is presently conducted and our ability to generate revenues and fund our ongoing operations would be materially adversely affected. We may require additional financing in the future to fund our operations.

Added

We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

Removed

If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our future therapeutic candidates that we would otherwise prefer to develop and market ourselves.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged

2022 filing

2023 filing

Biggest changeITEM 2. PROPERTIES We utilize an office at 1 Lincoln Street in Boston, Massachusetts. We currently pay a membership fee of approximately $5,700 a month, under a agreement that expires in September 2023, for a mailing address and a virtual office in an office-suite location. Our employees work remotely.

Biggest changeITEM 2. PROPERTIES We utilize an office at 1 Lincoln Street in Boston, Massachusetts. We currently pay rent of approximately $5,700 a month, and our lease agreement is through September 2023 for approximately 400 square feet in an office-suite location. The majority of our employees work remotely.

We believe our arrangements are suitable and adequate for business purposes and our near-term expansion plans.

We believe our current office space is suitable and adequate for its intended purposes and our near-term expansion plans.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+9 added−1 removed2 unchanged

2022 filing

2023 filing

Biggest changeThe Plan administrator may grant awards to any employee, director, consultant or other person providing services to us or our affiliates. As of July 29, 2022, we had awarded an aggregate of 271,000 options to purchase shares of common stock to directors and there remain 29,000 shares for grant under the Plan. The Plan is administered by our Board.

Biggest changeAn aggregate of 300,000 shares of our common stock is reserved for issuance and available for awards under the Plan, including incentive stock options granted under the Plan. The Plan administrator may grant awards to any employee, director, consultant or other person providing services to us or our affiliates.

Our Board may at any time amend or terminate the Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the Plan without the consent of the recipient. No awards may be made under the Plan after the tenth anniversary of its effective date.

Its telephone number is (212) 575-5757 and its email address is info@equitystock.com. (c) Dividends We have never paid dividends on our common stock and do not expect to do so in the foreseeable future. (d) Securities Authorized for Issuance under Equity Compensation Plans 2021 Equity Incentive Plan .

(c) Dividends We have never paid dividends on our common stock and do not expect to do so in the foreseeable future. (d) Securities Authorized for Issuance under Equity Compensation Plans 2021 Equity Incentive Plan . In November 2021, our Board adopted the 2021 Equity Incentive Plan, or the Plan.

Awards under the Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock units, performance share awards, stock bonuses and other stock-based awards and cash-based incentive awards. 28 ITEM 6. [RESERVED].

No awards may be made under the Plan after the tenth anniversary of its effective date. 28 Awards under the Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock units, performance share awards, stock bonuses and other stock-based awards and cash-based incentive awards. 2023 Omnibus Equity Incentive Plan .

(b) Holders There are 293 shareholders of record of our common stock as of July 29, 2022. Transfer Agent and Registrar The transfer agent and registrar for our common stock is Equity Stock Transfer LLC with its business address at 237 W 37 th Street, Suite 602, New York, NY 10018.

Transfer Agent and Registrar The transfer agent and registrar for our common stock is Equity Stock Transfer LLC with its business address at 237 W 37 th Street, Suite 602, New York, NY 10018. Its telephone number is (212) 575-5757 and its email address is info@equitystock.com.

Our common stock and warrants trade on the Nasdaq Capital Market under the symbols “NCPL” and “NCPLW,” respectively. Our common stock and warrants commenced trading on Nasdaq on July 13, 2022. Recent Issuances of Unregistered Securities On May 10, 2023, we issued 100,000 shares of our common stock for consulting services. We did not receive any proceeds from this issuance.

Recent Issuances of Unregistered Securities 37,500 shares of common stock were issued on April 28, 2022, in conjunction with an agreement to purchase a 10% equity interest in Caesar Media Group, Inc. We did not receive any proceeds from issuance. The issuance was exempt under Section 4(a)(2) of the Securities Act of 1933, as amended.

We did not receive any proceeds from this issuance. The issuance was exempt under Section 4(a)(2) of the Securities Act of 1933, as amended. (b) Holders There are 270 shareholders of record of our common stock as of July 26, 2023.

Removed

In November 2021, our Board adopted the 2021 Equity Incentive Plan, or the Plan. An aggregate of 300,000 shares of our common stock is reserved for issuance and available for awards under the Plan, including incentive stock options granted under the Plan.

Added

The issuance was exempt under Section 4(a)(2) of the Securities Act of 1933, as amended. On July 14, 2023, we issued 49,855 shares of our common stock in consideration of a release from an unrelated third party in conjunction with the settlement of an outstanding debt between such third party and Netcapital Systems LLC.

Added

As of July 26, 2023, we had awarded an aggregate of 252,000 options to purchase shares of common stock to directors and there remain 48,000 shares for grant under the Plan. The Plan is administered by our Board.

Added

On January 3, 2023, the Board of Directors of the Company approved and adopted the Netcapital Inc., 2023 Omnibus Equity Incentive Plan (the “2023 Plan”), which was subsequently approved by the Company’s stockholders.

Added

The total number of shares of common stock authorized for issuance under the 2023 Plan is (i) 2,000,000 shares of common stock plus (ii) an annual increase on the first day of each calendar year beginning with May 1, 2024 and ending with the last May 1 during the initial ten-year term of the 2023 Plan, equal to the lesser of (A) five percent (5%) of the shares of common stock outstanding (on an as-converted basis, which shall include shares issuable upon the exercise or conversion of all outstanding securities or rights convertible into or exercisable for shares of common stock, including without limitation, preferred stock, warrants and employee options to purchase any shares of common stock) on the final day of the immediately preceding calendar year and (B) such lesser number of shares of common stock as determined by the Board; provided, that, shares of common stock issued under the 2023 Plan with respect to an exempt award shall not count against such share limit.

Added

No more than 2,000,000 Shares, and as increased on an annual basis, on the first day of each calendar year beginning with May 1, 2024 and ending with the last May 1 during the initial ten-year term of the Plan, by the lesser of (A) five percent (5%) of the shares of common stock outstanding (on an as-converted basis, which shall include shares of common stock issuable upon the exercise or conversion of all outstanding securities or rights convertible into or exercisable for shares of common stock, including without limitation, preferred stock, warrants and employee options to purchase any shares of common stock) on the final day of the immediately preceding calendar year; (B) 300,000 shares of common stock, and (C) such lesser number of shares of common stock as determined by the Board, shall be issued pursuant to the exercise of ISOs.

Added

As of April 30, 2023, we had awarded an aggregate of 1,950,000 options to purchase shares of common stock to directors and there remain 50,000 shares for grant under the 2023 Plan. The 2023 Plan will be administered by the Board or a committee to which the Board delegates such responsibility (the “Administrator”).

Added

The 2023 Plan will be administered by the Administrator in accordance with Rule 16b-3 of the Securities Exchange Act of 1934, as amended. The Administrator may interpret the 2023 Plan and may prescribe, amend, and rescind rules and make all other determinations necessary or desirable for the administration of the 2023 Plan.

Added

The 2023 Plan permits the Administrator to select the eligible recipients who will receive awards, to determine the terms and conditions of those awards, including but not limited to the exercise price or other purchase price of an award, the number of shares of common stock or cash or other property subject to an award, the term of an award and the vesting schedule applicable to an award, to determine the terms and conditions of written instruments evidencing such awards and to amend the terms and conditions of outstanding awards.

Added

The 2023 Plan permits the grant of: (a) stock options, which may be intended as incentive stock options (“ISOs”) or as nonqualified stock options (options not meeting the requirements to qualify as ISOs); (b) stock appreciation rights (“SARs”); (c) restricted stock; (d) restricted stock units; (e) cash incentive awards; or (f) other awards, including: (i) stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire Shares, whether at a fixed or variable price or ratio related to the Common Stock, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof; or (ii) any similar securities with a value derived from the value of or related to the Common Stock and/or returns thereon.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

30 edited+24 added−11 removed13 unchanged

2022 filing

2023 filing

Biggest changeThe components of revenue are as follows: April 30, 2022 April 30, 2021 Consulting services for equity securities $ 3,375,000 $ 3,547,032 Consulting revenue 503,233 338,990 Portal fees 1,206,957 524,991 Listing fees 394,490 301,990 Other revenue 1,155 8,000 Total $ 5,480,835 $ 4,721,003 Our costs of revenues decreased by $649,043, or 85%, to $110,115 in fiscal 2022, from $759,158 in fiscal 2021.

Biggest changeThe components of revenue are as follows: 31 April 30, 2023 April 30, 2022 Consulting services for equity securities $ 7,105,000 $ 3,375,000 Consulting revenue 455,320 503,233 Portal fees 418,513 1,206,957 Listing fees 513,960 394,490 Other revenue 1,192 1,155 Total $ 8,493,985 $ 5,480,835 In fiscal 2023 and 2022, the average dollars raised in a successful offering on the funding portal amounted to $128,170 and $369,478, respectively, and the number of offerings that closed successfully amounted to 49 and 64, respectively.

Management considers an accounting estimate to be critical if: ● it requires assumptions to be made that were uncertain at the time the estimate was made; and ● changes in the estimate, or the use of different estimating methods, could have a material impact on our consolidated results of operations or financial condition. Actual results could differ from those estimates.

The following critical accounting policies are not intended to be a comprehensive list of all of our accounting policies or estimates: Revenue Recognition The Company recognizes service revenue from its consulting contracts and its game website using the five-step model as prescribed by ASC 606: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when or as, the Company satisfies a performance obligation. 34 Allowance for Doubtful Accounts In order to record the Company’s accounts receivable at their net realizable value, the Company must assess their collectability.

The following critical accounting policies are not intended to be a comprehensive list of all of our accounting policies or estimates: Revenue Recognition The Company recognizes service revenue from its consulting contracts and its game website using the five-step model as prescribed by ASC 606: ● Identification of the contract, or contracts, with a customer; ● Identification of the performance obligations in the contract; ● Determination of the transaction price; ● Allocation of the transaction price to the performance obligations in the contract; and ● Recognition of revenue when or as, the Company satisfies a performance obligation. 35 Allowance for Doubtful Accounts In order to record the Company’s accounts receivable at their net realizable value, the Company must assess their collectability.

Impairment loss estimates are primarily based upon management’s analysis and review of the carrying value of long-lived assets at each balance sheet date, utilizing an undiscounted future cash flow calculation. We did not recognize an impairment loss in fiscal 2022 and 2021.

The most significant estimates include: ● revenue recognition and estimating allowance for doubtful accounts; ● valuation of long-lived assets; and ● income tax valuation allowance. We continually evaluate our accounting policies and the estimates we use to prepare our financial statements.

The most significant estimates include: ● revenue recognition and estimating allowance for doubtful accounts; ● valuation of long-lived assets; and ● valuation of intangible assets. We continually evaluate our accounting policies and the estimates we use to prepare our financial statements.

We have not made any sales, purchases or commitments with foreign entities which would expose us to currency risks. 35

We have not made any sales, purchases or commitments with foreign entities which would expose us to currency risks. 36

Up to this point in time, we believe the pandemic has helped drive people to online investing, as we see regular monthly increases in users and dollars invested, and an increase in issuers seeking to use online fund-raising services in lieu of face-to-face meetings. 32 Year over Year Changes Net cash used in operating activities amounted to $3,006,667 in fiscal 2022, as compared to net cash used in operating activities of $3,250,868 in fiscal 2021.

Up to this point in time, we believe the pandemic has helped drive people to online investing, as we see regular monthly increases in users and dollars invested, and an increase in issuers seeking to use online fund-raising services in lieu of face-to-face meetings. 33 Year over Year Changes Net cash used in operating activities amounted to $4,617,200 in fiscal 2023, as compared to net cash used in operating activities of $3,006,667 in fiscal 2022.

THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.

In fiscal 2022, net cash used in investing activities amounted to $319,166, consisting of loans to affiliates of $202,000 and an investment in an affiliate of $117,166. In fiscal 2021, net cash provided by investing activities amounted to $242,025.

In fiscal 2022, net cash used in investing activities amounted to $319,166, consisting of loans to affiliates of $202,000 and an investment in an affiliate of $117,166.

Net accounts receivable of $2,433,900 and $1,356,932 were recorded at April 30, 2022 and 2021, respectively, and an allowance for doubtful accounts of $136,955 and $60,325 were recorded at April 30, 2022 and 2021, respectively.

Net accounts receivable of $1,388,500 and $2,433,900 were recorded at April 30, 2023 and 2022, respectively, and an allowance for doubtful accounts of $91,955 and $136,955 were recorded at April 30, 2023 and 2022, respectively.

We generate fees from listing private companies on our portal. Our consulting group, Netcapital Advisors, 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 FINRA and provides investors with opportunities to invest in private companies.

Our consulting group, Netcapital Advisors, provides marketing and strategic advice in exchange for cash and equity positions. 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.

In fiscal 2022, the primary sources of cash were net income of $3,503,530 and stock-based compensation of $1,176,058. However, these items were offset by non-cash revenue from the receipt of equity of $2,387,500, an unrealized gain on equity securities of $3,275,745 debt forgiveness of $1,904,302 and an increase in accounts receivable of $1,153,598.

However, these items were offset by non-cash revenue from the receipt of equity of $8,110,000, and an unrealized gain on equity securities of $1,857,500. In fiscal 2022, the primary sources of cash were net income of $3,503,530 and stock-based compensation of $1,176,058.

Liquidity and Capital Resources As of April 30, 2022, we had cash and cash equivalents of $473,925 and negative working capital of $3,113,403 as compared to cash and cash equivalents of $2,473,959 and negative working capital of $4,666,833 as of April 30, 2021. 31 We have been successful in raising capital by selling restricted common stock and by completing a public offering of our common stock.

Liquidity and Capital Resources As of April 30, 2023, we had cash and cash equivalents of $569,441 and negative working capital of $2,622,670 as compared to cash and cash equivalents of $473,925 and negative working capital of $3,113,403 of April 30, 2022. We have been successful in raising capital by completing public offerings of our common stock.

Significant accounting policies are described in Note 1 to our financial statements, which are included in this Report. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

Our consulting group, Netcapital Advisors helps companies at all stages to raise capital. Netcapital Advisors provides strategic advice, technology consulting and online marketing services to assist with fundraising campaigns on the Netcapital platform.

We provide private company investment access to accredited retail and non-accredited retail investors through our online portal (www.netcapital.com). 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.

We provide private company investment access to accredited retail and non-accredited retail investors through our online portal (www.netcapital.com). The Funding Portal charges a $5,000 to $10,000 engagement fee, a 4.9% success fee for capital raised at closing and sometimes is paid with equity from the issuer that has listed on the Funding Portal.

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 all investors the opportunity to access investments in private companies. Our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act.

We give virtually all investors the opportunity to access investments in private companies. Our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. We generate fees from listing private companies on our portal.

In fiscal 2022 and 2021, there were no expenditures for capital assets. We do not anticipate any capital expenditures in the next fiscal year. New Accounting Standards The new accounting pronouncements in Note 1 to our financial statements, which are included in this Report, are incorporated herein by reference thereto.

New Accounting Standards The new accounting pronouncements in Note 1 to our financial statements, which are included in this Report, are incorporated herein by reference thereto.

We believe that our existing cash investment balances, and our anticipated cash flows from operations will be sufficient to meet our working capital and expenditure requirements for the next 12 months.

We believe that our existing cash investment balances, our anticipated cash flows from operations and liquidity sources including o ffering of equity and/or debt securities and/or the sale of equity positions in certain portfolio companies for which Netcapital Advisors provides marketing and strategic advice will be sufficient to meet our working capital and expenditure requirements for the next 12 months.

General and administrative expenses increased by $1,137,076, or 245%, to $1,602,031 for the year ended April 30, 2022, as compared to $464,955 for the prior fiscal year. The primary increase in expenses is attributable to legal costs, professional fees and software usage fees.

General and administrative expenses increased by $138,667 or 9%, to $1,740,698 for the year ended April 30, 2023, as compared to $1,602,031 for the prior fiscal year. The primary increase in expenses is attributable to professional fees. Interest expense decreased by $32,530 to $93,842 for the year ended April 30, 2023, as compared to $126,372 for the prior fiscal year.

There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. 33 Certain of our accounting policies are deemed “critical”, as they require management's highest degree of judgment, estimates and assumptions.

Certain of our accounting policies are deemed “critical”, as they require management's highest degree of judgment, estimates and assumptions.

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 anyone, including friends, family, customers, employees, etc.

In addition, the Funding Portal generates fees for other ancillary services, such as rolling closes. 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.

The Company also acts as an incubator and accelerator, taking equity stakes in select disruptive start-ups. 29 Our limited operating history and the uncertain nature of our future operations and the markets we address or intend to address make predictions of our future results of operations difficult.

Our limited operating history and the uncertain nature of our future operations and the markets we address or intend to address make predictions of our future results of operations difficult. Our operations may never generate significant revenues, and we may not consistently achieve profitable operations.

These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 30 Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 Our revenues for fiscal 2022 increased by $759,832, or 16%, to $5,480,835 as compared to $4,721,003 reported for fiscal 2021.

THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. 29 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.

In fiscal 2021, the primary sources of cash were net income of $1,469,660 and stock-based compensation of $680,611. However, these items were offset by non-cash revenue from the receipt of equity of $2,319,532, an unrealized gain on equity securities of $2,571,494 and an increase in accounts receivable of $1,417,257.

However, these items were offset by non-cash revenue from the receipt of equity of $2,387,500, an unrealized gain on equity securities of $3,275,745 debt forgiveness of $1,904,302 and an increase in accounts receivable of $1,153,598. In fiscal 2023, net cash provided by investing activities amounted to $200,000 from the sale of an investment.

Cash proceeds were received of $300,000 from the sale of two convertible notes, $400,000 from borrowing from our secured lender and $625,799 from the sale of stock subscriptions. In fiscal 2021, net cash provided by financing activities totaled $5,471,596. Proceeds from loans amounted to $4,271,600 and proceeds from stock subscriptions totaled $1,199,996.

Cash proceeds were received of $300,000 from the sale of two convertible notes, $400,000 from borrowing from our secured lender and $625,799 from the sale of stock subscriptions. In fiscal 2023 and 2022, there were no expenditures for capital assets. We do not anticipate any capital expenditures in the next fiscal year.

Our operations may never generate significant revenues, and we may not consistently achieve profitable operations. Recent Developments Nasdaq Uplist Offering 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.

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.

Proceeds from the purchase of a subsidiary provided cash of $364,939, which was offset by a use of cash of $122,914 as an investment in an affiliate. In fiscal 2022, net cash provided by financing activities amounted to $1,325,799.

In fiscal 2023, net cash provided from financing activities amounted to $4,512,716, which included proceeds from the sale of common stock of $5,570,576, which was offset by a payment of $7,860 for a related party note, and payment of $1,050,000 to a secured lender. In fiscal 2022, net cash provided by financing activities amounted to $1,325,799.

The increase is attributed to an increase in contractors in fiscal 2022 for back-office support. Payroll and payroll related expenses increased by $646,770, or 21%, to $3,763,845 in fiscal 2022, as compared to $3,117,075 in fiscal 2021. Additional payroll expenses are attributable to the need for more personnel to support the increased issuers, investors and users in fiscal 2022.

The decrease was primarily attributed to a decrease in overseas programmers. Payroll and payroll related expenses decreased by $117,355, or 3%, to $3,646,490 in fiscal 2023, as compared to $3,763,845 in fiscal 2022. The decrease was attributed to a decrease in staff and wages.

The increase in revenues is primarily attributable to increased revenues from our funding portal, which recorded an increase of portal fees of $681,966, or 130% to $1,206,957 in fiscal 2022 as compared to $524,991 in fiscal 2021, in addition to an increase in listing fees of $92,500, or 31%, to $394,490 is fiscal 2022, as compared to $301,990 in fiscal 2021.

The increase in revenues is attributable to increased revenues from consulting services for equity securities, which recorded an increase in fees of $3,730,000, or 111% to $7,105,000 in fiscal 2023 as compared to $3,375,000 in fiscal 2022.

Removed

Netcapital Advisors generates fees and equity stakes from consulting in select portfolio and non-portfolio clients. Netcapital.com is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from anywhere in the world, at any time, with just a few clicks.

Added

THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE.

Removed

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.

Added

Companies can accept investment from virtually anyone, including friends, family, customers, employees, etc., at any time, with just a few clicks.

Removed

In conjunction with this offering, the shares and warrants began trading on The Nasdaq Capital Market on July 13, 2022, under the ticker symbols “NCPL” and “NCPLW,” respectively. In addition, we granted the underwriter a 45-day option to purchase up to an additional 180,750 shares of common stock and/or up to 180,750 additional warrants to cover over-allotments, if any.

Added

Recent Developments May 2023 Registered Direct Offering On May 23, 2023, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to issue and sell to such investors, in a registered direct offering (the “Offering”), 1,100,000 shares (the “Shares”) of our 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 the Company.

Removed

In connection with the closing of the offering, the underwriter partially exercised its over-allotment option and purchased an additional 111,300 warrants. The underwriter retains the right to exercise the balance of its over-allotment option within the 45-day period.

Added

The Offering closed on May 25, 2023 and we received aggregate net proceeds of $1,468,700.

Removed

Repayment of Secured Debt On July 21, 2022 the company paid $1 million to its secured lender, Vaxstar LLC, to reduce the principal balance on its debt from $1,400,000 to $400,000.

Added

The Shares were offered and issued and sold pursuant to the Company’s shelf registration statement on Form S-3 (File 333-267921) filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on October 18, 2022 and declared effective on October 26, 2022. 30 In connection with the Offering, on May 23, 2023, we entered into a placement agency agreement with ThinkEquity (the “Placement Agent”), pursuant to which (i) the Placement Agent agreed to act as placement agent on a “best efforts” basis in connection with the Offering, (ii) we agreed to pay the Placement Agent an aggregate fee equal to 8.0% of the gross proceeds raised in the Offering, and to reimburse the Placement Agent for certain expenses, and (iii) we agreed to issue to the Placement Agent warrants to purchase up to 55,000 shares of Common Stock at an exercise price of $1.94 (the “Placement Agent Warrants”), which were issued on May 25, 2023.

Removed

The decrease is primarily attributable to labor costs that were incurred for revenue-generating projects in fiscal 2021 that were not required for our customers in fiscal 2022. Consulting expense increased by $205,376, or 30%, to $892,567 for fiscal 2022 from $687,191 reported in the prior fiscal year.

Added

The Placement Agent Warrants (and the shares of Common Stock issuable upon the exercise of the Placement Agent Warrants) were not registered under the Securities Act, and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.

Removed

Interest expense increased by $39,039 to $126,372 for the year ended April 30, 2022, as compared to $87,333 for the prior fiscal year.

Added

Repayment of Secured Debt On May 25, 2023 the Company paid $367,167 to its secured lender, Vaxstar LLC, to pay off the remaining $350,000 principal balance and $17,167 in interest. Recent Common Stock Issuances. In April and May 2023, we issued an aggregate of 450,000 shares of common stock to consultants in consideration of services rendered.

Removed

Although our debt balances decreased from $5,328,784 as of April 30, 2021 to $4,142,984 as of April 30, 2022 due to the forgiveness of an SBA loan of $1,904,296, bearing interest at an annual rate of 1%, we increased our borrowings in fiscal 2022 by $700,000 with new borrowings that carried an annual interest rate of 8%.

Added

In addition, in July 2023, we issued 49,855 shares of common stock to an unrelated third party, in consideration of a release from such third party related to settlement of an outstanding debt between such third-party and Netcapital DE LLC. We did not receive any proceeds from these issuances.

Removed

Debt forgiveness was $0 in fiscal 2021. In fiscal 2022, we identified that one of our equity holdings had an observable price change.

Added

Such shares were issued as restricted securities and were issued pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

Removed

The result of the price change was an increase in the fair value of the equity securities totaling $3,275,745 in the fiscal year ended April 30, 2022, which was recorded in the income statement as an unrealized gain on equity securities. In fiscal 2021, there were observable price changes in two securities.

Added

Removed

The result of these price changes was an increase in the fair value of the equity securities totaling $2,571,494 in the fiscal year ended April 30, 2021, which was recorded in the income statement as an unrealized gain on equity securities.

Added

In conjunction with this offering, the Company issued the underwriter and its designees warrants to purchase 86,250 shares of our common stock at an exercise price of $0.875.

Added

Results of Operations Fiscal Year 2023 Compared to Fiscal Year 2022 Our revenues for fiscal 2023 increased by $3,013,150, or 55%, to $8,493,985 as compared to $5,480,835 reported for fiscal 2022.

Added

Our costs of revenues decreased by $25,077, or 23%, to $85,038 in fiscal 2023, from $110,115 in fiscal 2022. The decrease is attributable to lower costs of sales from our non-funding portal sources of income. Consulting expenses decreased by $303,218, or 34%, to $589,349 for fiscal 2023 from $892,567 reported in the prior fiscal year.

Added

The decrease in interest expense is attributed to a reduction in debt owed to our secured lender. A realized loss of $406,060 was recorded in the year ended April 30, 2023, as compared to no realized losses in the year ended April 30, 2022.

Added

The Company sold 606,060 shares of KingsCrowd Inc. in June 2022 for proceeds of $200,000 that had been valued at $606,060 and recorded a realized loss on the sale of the investment of $406,060.

Added

Unrealized gains on equity securities for the years ended April 30, 2023 decreased by $1,418,245, or approximately 43%, to $1,857,500, as compared to $3,275,745 during the year ended April 30, 2022.

Added

The decrease in unrealized gains is attributable to the sale of common stock at $1.00 per share in a public offering by Kingscrowd Inc., which exceeded the carrying value on our books by $3,275,745, during the year ended April 30, 2022, as compared to a net gain of $1,857,500 from observable price changes in investment securities of three investments held by the Company during the year ended April 30, 2023.

Added

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.

Added

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. 32 On May 23, 2023, we entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell to such investors, in a registered direct offering (the “Offering”), 1,100,000 shares (the “Shares”) of the Company’s 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 the Company.

Added

The Offering closed on May 25, 2023. The Shares were offered and issued and sold pursuant to the Company’s shelf registration statement on Form S-3 (File 333-267921), filed by the Company 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.

Added

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.

Added

On July 24, 2023 the Company completed an underwritten public offering of 1,725,000 shares of the Company’s 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 the Company.

Added

In conjunction with this offering, the Company issued the underwriter, and its designees, warrants to purchase 86,250 shares of our common stock at an exercise price of $0.875.

Added

In fiscal 2023, the primary sources of cash were net income of $2,954,972, changes in deferred taxes of 680,000, a realized loss on the sale of investments of 406,060, a decrease in accounts receivable of $1,039,957 and stock-based compensation of $269,577.

Top changes in Netcapital Inc.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Other NCPLW 10-K year-over-year comparisons