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What changed in Netcapital Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Netcapital Inc.'s 2023 and 2024 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 2024 report.

+385 added−205 removedSource: 10-K (2024-07-29) vs 10-K (2023-07-26)

Top changes in Netcapital Inc.'s 2024 10-K

385 paragraphs added · 205 removed · 132 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

42 edited+79 added−29 removed27 unchanged
Biggest changeRecent 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.
Biggest changeMay 2024 Warrant Inducement On May 24, 2024, we entered into inducement offer letter agreements with certain investors that hold certain outstanding Series A-2 warrants to purchase up to an aggregate of 14,320,000 shares of our common stock, originally issued in December 2023 at a reduced exercise price of $0.155 per share in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 14,320,000 shares of our common stock and (ii) new Series A-4 common stock purchase warrants to purchase up to 14,320,000 shares of our common stock for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company.
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.
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. 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.
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.
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.
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.
Additionally, all of our public facing endpoints live behind CloudFlare to ensure protection from large scale traffic fluctuations (including DDoS attacks). Our main database layer is built on Amazon RDS and features a Multi-AZ deployment that can also be easily scaled up or down as needed.
Additionally, all of our public facing endpoints live behind CloudFlare to ensure protection from large scale traffic fluctuations (including DDoS attacks). -7- Our main database layer is built on Amazon RDS and features a Multi-AZ deployment that can also be easily scaled up or down as needed.
Zelgor Industry: Mobile Games Backed by famous venture capitalist Tim Draper, napster founder, Shawn Fanning, and co-creator of Guitar Hero, Kai Huang, Zelgor Inc. is an interactive entertainment company featuring a new species of rambunctious alien characters called The Noobs.
Zelgor Industry: Mobile Games Backed by famous venture capitalist Tim Draper, napster founder, Shawn Fanning, and co-creator of Guitar Hero, Kai Huang, Zelgor Inc.(“Zelgor”) is an interactive entertainment company featuring a new species of rambunctious alien characters called The Noobs.
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.
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.
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.
Our failure to comply with these requirements as applicable to us could have a material adverse effect on us. -6- Our Market The traditional funding model restricts access to capital, investments and liquidity.
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. 13
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.
We plan to increase our marketing budget to help grow our portal and advisory clients. ● Invest in Technology. Technology is critical to everything that we do. We plan to invest in developing innovative technologies that enhance our platform and allow us to pursue additional service offerings.
We plan to increase our marketing budget to help grow our portal and advisory clients. ● Invest in Technology. Technology is critical to everything that we do. We plan to invest in developing innovative technologies that enhance our platform and allow us to pursue additional service offerings. ● Incubate and Accelerate Our Advisory Portfolio Clients.
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.
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 $195,000 and $430,000 in the years ended April 30, 2024 and 2023, respectively.
ChipBrain Industry: AI Effective communicators close more deals. ChipBrain LLC’s emotionally intelligent AI assistant provides real-time emotion, tone, and facial expression feedback in live conversations across text, voice, and video. Taking the guesswork out of identifying conversational cues, the company’s technology enables sales professionals to see at a glance how they are coming across to customers.
ChipBrain LLC’s emotionally intelligent AI assistant provides real-time emotion, tone, and facial expression feedback in live conversations across text, voice, and video. Taking the guesswork out of identifying conversational cues, the company’s technology enables sales professionals to see at a glance how they are coming across to customers.
In March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million.
In March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million every 12 months.
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.
Within this market, private equity represents the largest share, with assets in excess of $3 trillion and a 10-year compound annual growth rate (CAGR) of 10%. Since 2000, global private equity (“PE”), net asset value has increased almost tenfold, nearly three times faster than the size of the public equity market.
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. Valuation Business Our valuation group, MSG Development Corp. prepares valuations.
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.
Netcapital Advisors provides strategic advice, technology consulting and online marketing services to assist with fundraising campaigns on the Netcapital platform. We also act as an incubator and accelerator, taking equity stakes in select disruptive start-ups.
Consulting Business 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 also act as an incubator and accelerator, taking equity stakes in select disruptive start-ups.
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.
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 investments from virtually anyone, including friends, family, customers, employees, etc.
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.
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.
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.
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 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.
Templum is an 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 platform with the potential for greater distribution and liquidity.
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.
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.
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. Development of Business The Company was incorporated in Utah in 1984 as DBS Investments, Inc., or DBS.
The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority (“FINRA”), a registered national securities association, and provides investors with opportunities to invest in private companies.
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.
Customer accounts on our platform are not permitted to hold digital securities. -4- 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; ● 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.
It’s not a single streaming platform’s media catalog, but a cross-platform television guide, crowdsourced from your friends and family. C-Reveal Therapeutics Industry: Cancer Immunotherapy C-Reveal Therapeutics’s proprietary technology, developed at Massachusetts General Hospital and Harvard University, helps the body's immune system to identify and destroy cancer cells by inhibiting key enzymes that conceal the disease.
C-Reveal Therapeutics Industry: Cancer Immunotherapy C-Reveal Therapeutics’s (“C-Reveal”) proprietary technology, developed at Massachusetts General Hospital and Harvard University, helps the body’s immune system to identify and destroy cancer cells by inhibiting key enzymes that conceal the disease.
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.
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.
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.
The Noobs are a unique and original intellectual property introduced to the world through mobile games, multimedia content, and strategic partnerships.
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.
In order to try to address what we believe is a large, unmet need, our wholly-owned subsidiary, Netcapital Systems LLC, a Utah limited liability company (“Netcapital UT LLC”), entered into a software license and services agreement on January 2, 2023 (the “Templum License Agreement”) with Templum Markets LLC (“Templum”), to provide issuers and investors on the Netcapital platform with the potential for greater distribution and liquidity.
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. In addition, exempt offering regulatory enhancements proposed by the SEC in 2020 went into effect in March 2021.
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.
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.
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.
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.
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. -9- 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.
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.
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.
Investment Portfolio A key part of our story involves the potential value creation driven by our portfolio companies. In our portfolio, we focus on companies with emerging, disruptive technologies.
No assurance can be given as to when or if such approvals may be granted or when, if at all, Netcapital will be able to expand the services it offers. -10- Investment Portfolio A key part of our story involves the potential value creation driven by our portfolio companies. In our portfolio, we focus on companies with emerging, disruptive technologies.
We believe there is a significant opportunity to expand into Europe and Asia as an appetite abroad grows for U.S. stocks. ● Open ATS/Secondary Transfer Feature. Lack of liquidity is a key issue for investors in private companies as private markets lack a liquidity feature in our targeted market.
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. We believe there is a significant opportunity to expand into Europe and Asia as an appetite abroad grows for U.S. stocks. ● Provide a secondary trading feature.
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.
The operation of the Templum ATS is subject to extensive regulation and oversight. Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed platform.
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.
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.
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.
We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors Inc. (“Netcapital Advisors”), which is a wholly owned subsidiary, provides marketing and strategic advice to companies in exchange for cash fees and/or equity positions.
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.
Competitive Advantages Based upon publicly available information either published on the websites of our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc. and Republic Core LLC) or included in offering statements of issuers hosted on such offering platforms, we believe that we provide the lowest cost solution for online capital raising.
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.
Milestones required to launch the platform include, but are not limited to, plug-in of Templum’s KYC and AML requirements to enable interested users to directly send to the Templum ATS any KYC/AML information required by Templum for review and approval, as well as the launch of a beta version to a closed group of users.
DBS merged with ValueSetters L.L.C. in December 2003 and changed its name to ValueSetters, Inc. In November 2020, the Company purchased Netcapital Funding Portal Inc. (the “Funding Portal”) and changed the name of the Company from ValueSetters, Inc. to Netcapital Inc. The Company has three operating subsidiaries.
In November 2020, the Company purchased Netcapital Funding Portal Inc. and changed the name of the parent company from ValueSetters, Inc. to Netcapital Inc., while the name of the consulting business was changed to Netcapital Advisors. In November 2021, the Company purchased MSG Development Corp.
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.
In July 2024, we announced the launch of our beta version for this secondary trading platform and our goal is to offer such secondary trading platform through the Templum ATS to all issuers and investors on the Netcapital funding portal before the end of 2024 subject to compliance with all regulatory requirements, however, we do not know when, or if, this feature will be fully completed and launched, as there are many details that remain to be completed.
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.
Netcapital Advisors generates fees and equity stakes from consulting in select portfolio (“portfolio Companies”) and non-portfolio clients.
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 formed Netcapital Securities Inc. in 2024. -15- Our principal executive offices are located at One Lincoln Street, Boston, Massachusetts and our telephone number is 781-925-1700.
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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.
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Our model is disruptive to traditional private equity investing and is based on Title III, Regulation Crowdfunding (“Reg CF”) of the Jumpstart Our Business Startups Act (“JOBS Act”). In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings. We generate fees from listing private companies on our funding portal located at www.netcapital.com.
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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.
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Neither Netcapital Advisors, nor any Netcapital entity or subsidiary, is a broker- dealer, nor do any of such entities operate as a broker-dealer with respect to any Reg A offering listed on the www.netcapital.com website.
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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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Our Business We provide private company investment access to accredited and non-accredited investors through our online portal (www.netcapital.com), which is operated by our wholly owned subsidiary Netcapital Funding Portal, Inc.
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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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The Netcapital funding portal charges a $5,000 listing fee, a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes.
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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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With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.
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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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We generated revenues of $4,951,435, with costs of service of $108,060, in the year ended April 30, 2024 for a gross profit of $4,843,375 (consisting of $3,537,700 in equity securities for payment of services and $1,413,736 in cash-based revenues, offset by $108,060 for costs of services) as compared to revenues of $8,493,985 with costs of service of $85,038 in the year ended April 30, 2023 for a gross profit of $8,408,947 (consisting of $7,105,000 in equity securities for the payment of services and $1,388,985 in cash-based revenues, offset by $85,038 for costs of services).
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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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We provided additional services for two (2) and four (4) of our Portfolio Companies during the years ended April 30, 2024 and 2023, respectively, and our cash-based gross profits as a percentage of gross profits were approximately 1% in both fiscal years.
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A beta testing platform has been established and the functionality is currently being tested.
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In fiscal 2024 and 2023, the average amount raised in an offering on the Netcapital funding portal was $280,978 and $128,170, respectively.
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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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The total number of offerings on the Netcapital funding portal in fiscal 2024 and 2023 that closed was 70 and 63, respectively, of which 17 and 13 offerings hosted on the Netcapital funding platform in fiscal 2024 and 2023, respectively, terminated their listings without raising the required minimum dollar amount of capital.
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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.
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As of the date of this report, we own minority equity positions in 20 Portfolio Companies that have utilized the funding portal to facilitate their offerings, for which equity was received as payment for services.
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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.
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Proposed Broker-Dealer Business Our recently formed wholly owned subsidiary, Netcapital Securities Inc. has applied for broker-dealer registration with the Financial Industry Regulatory Authority (“FINRA”).
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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.
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We that by having a registered broker-dealer, it will create opportunities to expand revenue base by hosting and generating additional fees from Reg A+ and Reg D offerings on the Netcapital platform;, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts.
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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.
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Netcapital Securities Inc.’s application to become a registered broker-dealer remains subject to regulatory approval and/or licensing from the Financial Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). No assurance can be given as to when or if such approvals may be granted or when, if at all, Netcapital will be able to expand the services it offers.
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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.
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As of the date of this Annual Report, Netcapital Securities Inc. has not conducted any business activities. -5- 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.
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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.
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The SEC had also adopted rules to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act by expanding Reg A into two tiers ● Tier 1, for securities offerings of up to $20 million in a 12-month period; and ● Tier 2, for securities offerings of up to $75 million in a 12-month period.
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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.
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In the event that our wholly-owned subsidiary receives a broker-dealer license, we will become subject to additional regulation and supervision of the SEC and FINRA, including without limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule).
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Although each of the above companies possesses potential to be a valuable liquid asset for our Company, they are subject to swings in their valuation and on a quarter-to-quarter basis, may create extreme volatility in our earnings report, as we mark the value of the investment to the most recent observable price.
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The Uniform Net Capital Rule specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers.
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Some of our investments may decrease to a value of zero dollars. Major Customers 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.
Added
The Uniform Net Capital Rule prohibits broker-dealers from paying cash dividends, making unsecured advances or loans or repaying subordinated loans if such payment would result in a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.
Removed
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.
Added
Proposed Alternative Trading (“ATS”) Relationship We believe that lack of liquidity is a key issue for investors in private companies in our targeted market. We also recognize that secondary trading of securities in private companies is subject to extensive regulation and oversight.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny 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.
Biggest changeAny 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. -23- Future acquisitions may be accomplished through a cash purchase transaction, the issuance of our equity securities or a combination of both, could result in potentially dilutive issuances of our equity securities, the incurrence of debt and contingent liabilities and impairment charges related to goodwill and other intangible assets, any of which could harm our business and financial condition.
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.
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 on our business and financial condition.
Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this prospectus, are: ● actual or anticipated fluctuations in quarterly funding portal revenues or operating results, whether in our operations or in those of our competitors; ● changes in financial estimates or opinions by research analysts, either with respect to us or other fintech companies; ● our failure to accelerate user growth or new issuer growth; ● any failure to meet investor or analyst expectations; ● the public’s reaction to our press releases, other public announcements and our filings with the SEC; ● actual or anticipated changes in domestic or worldwide economic, political or market conditions, such as recessions; ● changes in the consumer spending environment; ● terrorist acts; ● changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to our business; ● changes in accounting standards, policies, guidance, interpretations or principles; ● short sales, hedging and other derivative transactions in the shares of our common stock; ● future sales or issuances of our common stock, including sales or issuances by us, our directors or executive officers and our significant stockholders; ● our dividend policy; ● changes in the market valuations of other fintech companies; ● actions by stockholders; ● various market factors or perceived market factors, including rumors, involving us, our vendors and clients, whether accurate or not; ● announcements by us or our competitors of new locations, technological advances, significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives; and ● a loss of a key member of management.
Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this prospectus, are: ● actual or anticipated fluctuations in quarterly funding portal revenues or operating results, whether in our operations or in those of our competitors; -29- ● changes in financial estimates or opinions by research analysts, either with respect to us or other fintech companies; ● our failure to accelerate user growth or new issuer growth; ● any failure to meet investor or analyst expectations; ● the public’s reaction to our press releases, other public announcements and our filings with the SEC; ● actual or anticipated changes in domestic or worldwide economic, political or market conditions, such as recessions; ● changes in the consumer spending environment; ● terrorist acts; ● changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to our business; ● changes in accounting standards, policies, guidance, interpretations or principles; ● short sales, hedging and other derivative transactions in the shares of our common stock; ● future sales or issuances of our common stock, including sales or issuances by us, our directors or executive officers and our significant stockholders; ● our dividend policy; ● changes in the market valuations of other fintech companies; ● actions by stockholders; ● various market factors or perceived market factors, including rumors, involving us, our vendors and clients, whether accurate or not; ● announcements by us or our competitors of new locations, technological advances, significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives; and ● a loss of a key member of management.
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 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.
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.
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. Acquisitions may have unanticipated consequences that could harm our business and our financial condition.
Any violation of foreign laws may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulations may limit our business operations and plans for future expansion. Our cash flow is reliant on one main type of service.
Any violation of foreign laws may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulations may limit our business operations and plans for future expansion. -18- Our cash flow is reliant on one main type of service.
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. 26
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.
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. 17 We are dependent on general economic conditions.
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. -20- We are dependent on general economic conditions.
Our software engineer team, as well as our compliance team and our marketing team are critical to continually innovate and improve our products while operating in a highly regulated industry. In addition, due to the specialized expertise required, we may not be able to recruit the individuals needed for our business needs.
Our software engineering team, as well as our compliance team and our marketing team are critical to continually innovate and improve our products while operating in a highly regulated industry. In addition, due to the specialized expertise required, we may not be able to recruit the individuals needed for our business needs.
Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements. 25 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.
Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements. -31- 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.
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.
Though this is a new market, we compete against a variety of entrants in the market as well as likely new entrants into the market. Some of these follow a regulatory model that is different from ours and might provide them with competitive advantages.
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.
Since we have a limited operating history, we cannot assure you that our business will maintain profitability. -16- 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.
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.
There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. For the year ended April 30, 2024, the Company had one customer that constituted 25% of its revenues, a second customer that constituted 22% of its revenues, and a third customer that constituted 22% of its revenues.
Further, our potential market may not be as large, or our industry may not grow as rapidly as anticipated. Success will likely be a factor of investing in the development and implementation of marketing campaigns, repeat business from both issuer companies and investors, and favorable changes in the regulatory environment. We have an evolving business model.
Further, our potential market may not be as large, or our industry may not grow as rapidly as anticipated. Success will likely be a factor of investing in the development and implementation of marketing campaigns, repeat business from both issuer companies and investors, and favorable changes in the regulatory environment.
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.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities. 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.
Our revenues and profits are subject to fluctuations. It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors.
It is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors.
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.
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 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.
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 .
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.
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.
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 have issued options to purchase 2,202,000 shares of common stock under our 2021 Equity Incentive Plan and our 2023 Omnibus Equity Incentive Plan and we expect to issue options to purchase the remaining 98,000 shares of common stock in the future to officers, directors, employees and consultants under our 2023 Omnibus Equity Incentive Plan.
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.
These securities have a value on our books, but are not liquid. 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.
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. The damage may be immediate without affording us an opportunity for redress or correction.
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.
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.
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. We have an evolving business model.
It is our strategy to sometimes purchase, at an affordable price, part or all of early-stage companies and cross pollinate the ideas, technology and expertise within these companies to enhance the operations, profits and market share of all the entities.
Our strategy to purchase a portion of early-stage companies may provide us with investments that have no liquidity. It is our strategy to sometimes purchase, at an affordable price, part or all of early-stage companies and cross pollinate the ideas, technology and expertise within these companies to enhance the operations, profits and market share of all the entities.
In addition, disputes may arise regarding the technology subject to a license agreement, including: ● the scope of rights granted under the license agreement and other interpretation-related issues; ● the extent to which our processes infringe on the technology of Netcapital Systems LLC that is not subject to the license agreement; ● the ownership of inventions and know-how resulting from the joint creation or use of technology by Netcapital Systems LLC and us.
In addition, disputes may arise regarding the technology subject to a license agreement, including: ● the scope of rights granted under the license agreement and other interpretation-related issues; ● the extent to which our processes infringe on the technology of Netcapital Systems LLC that is not subject to the license agreement; ● the ownership of inventions and know-how resulting from the joint creation or use of technology by Netcapital Systems LLC and us. -19- Disputes over technology under the license agreement with Netcapital Systems LLC may prevent or impair our ability to maintain our current license agreement on acceptable terms, and we may be unable to successfully operate our funding portal.
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.
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 the event that any such future sales of securities are affected or we use our common stock to pay principal or interest on our debt obligations, an investor’s pro rata ownership interest may be reduced to the extent of any such future sales. 23 The market price of our common stock is highly volatile and could be subject to volatility related or unrelated to our operations.
In the event that any such future sales of securities are affected or we use our common stock to pay principal or interest on our debt obligations, an investor’s pro rata ownership interest may be reduced to the extent of any such future sales.
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 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.
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.
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. As options are forfeited we plan to reissue options to other officers, directors, employees and consultants.
If any analyst who may cover us was to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or warrants or trading volume to decline.
If any analyst who may cover us was to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our common stock or warrants or trading volume to decline. -30- Our issuance of common stock upon the exercise of options granted under our 2021 Equity Incentive Plan and our 2023 Omnibus Equity Incentive Plan may dilute all other stockholders.
You should consider an investment in our securities to be risky, and you should invest in our securities only if you can withstand a significant loss and wide fluctuations in the market value of your investment.
The market price of our common stock is highly volatile and could be subject to volatility related or unrelated to our operations. You should consider an investment in our securities to be risky, and you should invest in our securities only if you can withstand a significant loss and wide fluctuations in the market value of your investment.
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.
Our business model is one of innovation, including continuously working to expand our product lines and services to our clients. For example, our subsidiary Netcapital Securities has applied for broker-dealer registration with FINRA and we are continuing our relationship with Templum into becoming an alternative trading system. It is unclear whether these services will be successful.
We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.
We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock. We do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.
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.
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.
Our funding portal’s service offerings are relatively new in an industry that is still quickly evolving . The principal securities regulations that we work with, Rule 506(c) and Reg CF, have only been in effect in their current form since 2013 and 2016, respectively.
The principal securities regulations that we work with, Rule 506(c) and Reg CF, have only been in effect in their current form since 2013 and 2016, respectively.
Under the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”), issuers making offerings through our funding portal may be liable for inappropriate disclosures, including untrue statements of material facts or for omitting information that could make the statements misleading. This liability may also extend in Reg CF offerings to funding portals, such as our subsidiary.
We may be liable for misstatements made by issuers in offerings through our funding portal. Under the Securities Act and the Exchange Act, issuers making offerings through our funding portal may be liable for inappropriate disclosures, including untrue statements of material facts or for omitting information that could make the statements misleading.
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.
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.
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.
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.
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.
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. For our consulting and advisory services, payment is often made through equity securities of customers instead of cash.
Adequate additional financing may not be available to us on acceptable terms, or at all. 18 Our debt level could negatively impact our financial condition, results of operations and business prospects. As of April 30, 2023, we had approximately $2,735,800 of principal indebtedness outstanding and we have borrowed money on three occasions from the SBA.
Our debt level could negatively impact our financial condition, results of operations and business prospects. As of April 30, 2024, we had $2,420,124 of principal indebtedness outstanding and we have borrowed money on three occasions from the SBA.
The inappropriate use of social media by our customers or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation and adversely affect our results of operations. Risks Related to Receipt of Securities for Services We are not, and do not intend to become, regulated as an investment company under the U.S.
The inappropriate use of social media by our customers or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation and adversely affect our results of operations.
Many of these services have experienced service outages in the past and could experience service outages, delays and other difficulties due to system failures, stability or interruption.
End-users of our software depend on Internet Service Providers (“ISPs”), online service providers and our system infrastructure for access to the Internet sites that we operate. Many of these services have experienced service outages in the past and could experience service outages, delays and other difficulties due to system failures, stability or interruption.
Although we have been profitable, 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. We were incorporated in the State of Utah in April 1984.
We have a limited operating history and our profits have been generated primarily by unrealized gains from equity securities we own in other companies. Although we have been profitable, 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.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. We may make acquisitions or form joint ventures that are unsuccessful. Our ability to grow is partially dependent on our ability to successfully acquire other companies, which creates substantial risk.
Adequate additional financing may not be available to us on acceptable terms, or at all. -21- We may make acquisitions or form joint ventures that are unsuccessful. Our ability to grow is partially dependent on our ability to successfully acquire other companies, which creates substantial risk.
As a funding portal we have to comply with stringent regulations, and the operation of our funding portal is frequently subject to examination, constraints on its business, and in some cases fines. In addition, some of the restrictions and rules applicable to our subsidiary could adversely affect and limit some of our business plans.
Further, our subsidiary Netcapital Funding Portal Inc is registered as a funding portal. As a funding portal we have to comply with stringent regulations, and the operation of our funding portal is frequently subject to examination, constraints on its business, and in some cases fines. Our wholly-owned subsidiary Netcapital Securities Inc has applied for broker-dealer registration with FINRA.
Moreover, even if we are not liable or a party to a lawsuit or enforcement action, some of our clients have been and will be subject to such proceedings. Any involvement we may have, including responding to document production requests, may be time-consuming and expensive as well.
Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business. Moreover, even if we are not liable or a party to a lawsuit or enforcement action, some of our clients have been and will be subject to such proceedings.
We operate in a regulatory environment that is evolving and uncertain. The regulatory framework for online capital formation or crowdfunding is very new. The regulations that govern our operations have been in existence for a very few years. Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment.
Any involvement we may have, including responding to document production requests, may be time-consuming and expensive as well. We operate in a regulatory environment that is evolving and uncertain. The regulatory framework for online capital formation or crowdfunding is very new. The regulations that govern our operations have been in existence for a very few years.
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.
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.
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.
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.
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.
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.
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.
We were incorporated in the State of Utah in April 1984. We reported a net loss of $4,986,317 in the year ended April 30, 2024. Although we 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.
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.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. 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.
Any errors or defects in third-party software could result in errors or a failure of our funding portal which could harm our business. Our strategy to purchase a portion of early-stage companies may provide us with investments that have no liquidity.
Any errors or defects in third-party software could result in errors or a failure of our funding portal which could harm our business. We may not be able to protect all of our intellectual property.
Even though due diligence defenses may be available, there can be no assurance that if we were sued, we would prevail. Further, even if we do succeed, lawsuits are time consuming and expensive, and being a party to such actions may cause us reputational harm that would negatively impact our business.
This liability may also extend in Reg CF offerings to funding portals, such as our subsidiary. Even though due diligence defenses may be available, there can be no assurance that if we were sued, we would prevail.
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 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.
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. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq.
Removed
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.
Added
Risks Related to Our Business and Growth Strategy Our financial situation creates doubt whether we will continue as a going concern.
Removed
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.
Added
As of April 30, 2024, the Company had negative working capital of $2,074,163 and for the year ended April 30 2024, the Company had an operating loss of $3,442,388 and net cash used in operating activities amounted to $4,879,838.There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements.
Removed
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.
Added
Our management has recently reduced its operating expenses and we have turned our focus to our funding portal business, which generates cash revenues and has seen a growth in revenues on a year-to-year basis. We plan to continue operating with lower fixed overhead amounts and seek to raise money from private placements, public offerings and/or bank financing.
Removed
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.
Added
Our management has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above.
Removed
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.
Added
To the extent that funds generated from any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.
Removed
In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.
Added
Accordingly, our management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve its business plan objectives or be able to achieve or maintain cash-flow-positive operating results.
Removed
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.
Added
If we are unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay our existing debt, continue to operate our business network, respond to competitive pressures or fund our operations. As a result, we may be required to significantly reduce, reorganize, discontinue, or shut down our operations.
Removed
The sale of additional equity or convertible securities may dilute our existing stockholders.
Added
In the event Netcapital Securities Inc. receives a broker-dealer license, it will become subject to additional regulation and supervision of the SEC and FINRA, including without limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule).
Removed
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.
Added
In addition, some of the restrictions and rules applicable to our subsidiary could adversely affect and limit some of our business plans. -17- Our funding portal’s service offerings are relatively new in an industry that is still quickly evolving .
Removed
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.
Added
Further, there are constant discussions among legislators and regulators with respect to changing the regulatory environment. New laws and regulations could be adopted in the United States and abroad.
Removed
Risks Related to Our Business and Growth Strategy We have a limited operating history and our profits have been generated primarily by unrealized gains from equity securities we own in other companies.
Added
There can be no assurance that we will be able to obtain future protection for our intellectual property or defend our current trademarks and future trademarks and patents. Further, policing and protecting our intellectual property against unauthorized use by third parties is time-consuming and expensive, and certain countries may not even recognize our intellectual property rights.
Removed
Disputes over technology under the license agreement with Netcapital Systems LLC may prevent or impair our ability to maintain our current license agreement on acceptable terms, and we may be unable to successfully operate our funding portal.
Added
Our profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for our brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade secrets, as well as our ability to operate without inadvertently infringing on the proprietary rights of others.
Removed
The Internet’s viability could be affected if the necessary infrastructure is not sufficient, or if other technologies and technological devices eclipse the Internet as a viable channel. End-users of our software depend on Internet Service Providers (“ISPs”), online service providers and our system infrastructure for access to the Internet sites that we operate.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
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.
Biggest changeITEM 2. PROPERTIES We utilize an office at 1 Lincoln Street in Boston, Massachusetts. We currently pay rent of approximately $6,400 a month, and our membership agreement is through March 2025 for approximately 400 square feet in a virtual office-suite location. Almost all of our employees work remotely.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES Not applicable 27 PART II
Biggest changeWe are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. -33- PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−2 removed10 unchanged
Biggest changeAs 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”).
Biggest changeAs of April 30, 2024, we had awarded an aggregate of 1,950,000 options to purchase shares of common stock, 58,500 options have been forfeited and there remain 108,500 shares for grant under the 2023 Plan.
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.
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.
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 .
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. -34- 2023 Omnibus Equity Incentive Plan .
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.
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.
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.
As of July 29, 2024, outstanding option grants, net of forfeitures, amounted to 187,000 options to purchase shares of common stock and there remain 113,000 shares for grant under the Plan. The Plan is administered by our Board.
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.
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 (a) None (b) Holders There are 270 shareholders of record of our common stock as of July 29, 2024.
Removed
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
On May 1, 2024, pursuant to the annual increase provision described above, the amount reserved for issuance under the Plan increased by 3,154,105 shares based on the fully diluted shares outstanding as of April 30, 2024, or 3,262,605 shares in the aggregate.
Removed
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.
Added
The 2023 Plan will be administered by the Board or a committee to which the Board delegates such responsibility (the “Administrator”). The 2023 Plan will be administered by the Administrator in accordance with Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
Added
Purchase of Equity Securities No repurchase of equity securities were made during the 2024 fiscal year. ITEM 6. [RESERVED].

Item 7. Management's Discussion & Analysis

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

27 edited+99 added−22 removed18 unchanged
Biggest changeIn 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.
Biggest changeMay 2024 Warrant Inducement On May 24, 2024, we entered into inducement offer letter agreements with certain investors that hold certain outstanding Series A-2 warrants to purchase up to an aggregate of 14,320,000 shares of our common stock, originally issued in December 2023 at a reduced exercise price of $0.155 per share in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 14,320,000 shares of our common stock and (ii) new Series A-4 common stock purchase warrants to purchase up to 14,320,000 shares of our common stock for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company.
In addition to access to the Funding Portal, Netcapital provides the following services: ● a fully automated onboarding process; ● automated filing of required regulatory documents; ● compliance review; ● 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.
In addition to access to the Funding Portal, Netcapital provides the following services: ● a fully automated onboarding process; ● automated filing of required regulatory documents; ● compliance review; ● custom-built offering page on our portal website; ● third party transfer agent and custodial services; ● email marketing to our proprietary list of investors; -36- ● 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.
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. 34 Actual results could differ from those estimates.
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.
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.
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. -35- 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 have not made any sales, purchases or commitments with foreign entities which would expose us to currency risks. 36
We have not made any sales, purchases or commitments with foreign entities which would expose us to currency risks.
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.
On July 24, 2023 we completed an underwritten public offering of 1,725,000 shares of our common stock, at a price to the public of $0.70 per share for aggregate gross proceeds of $1,207,500, before deducting underwriting discounts and offering expenses payable by us.
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 2023 and 2022.
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 recorded an impairment loss $1,048,430 in fiscal 2024. We did not recognize an impairment loss in fiscal 2023.
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.
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.
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.
(Netcapital Advisors), which is a wholly-owned subsidiary, provides marketing and strategic advice in exchange for equity positions and/or cash fees. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority, or FINRA, a registered national securities association, and provides investors with opportunities to invest in private companies.
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.
We believe that our existing cash investment balances, our anticipated cash flows from operations and liquidity sources including offering of equity and/or debt securities and/or the sale of equity positions in certain portfolio companies for which we provide marketing and strategic advice may not be sufficient to meet our working capital and expenditure requirements for the next 12 months.
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.
Liquidity and Capital Resources As of April 30, 2024, we had cash and cash equivalents of $863,182 and negative working capital of $2,074,163 as compared to cash and cash equivalents of $569,441 and negative working capital of $2,622,670 as of April 30, 2023. We have been successful in raising capital by completing public offerings of our common stock.
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.
The decrease in interest expense is attributed to a reduction in debt owed to a secured lender that was paid in full during the first quarter of fiscal 2024. 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, 2024.
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.
For the year ended April 30, 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 2024 and 2023, there were no expenditures for capital assets.
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.
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, funding portal and 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.
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 do not anticipate any capital expenditures in the next fiscal year. -42- 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.
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.
The decrease in revenues is attributable to decreased revenues from consulting services for equity securities, which recorded a decrease in fees of $3,665,000, or 52% to $3,440,000 in fiscal 2024 as compared to $7,105,000 in fiscal 2023.
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.
We give investors the opportunity to access investments in private companies. We believe our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings.
Impairment of Long-Lived Assets Financial Accounting Standards Board (“FASB”) authoritative guidance requires that certain assets be reviewed for impairment and, if impaired, remeasured at fair value whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Net accounts receivable of $134,849 and $1,388,500 were recorded as of April 30, 2024 and 2023, respectively, and an allowance for doubtful accounts of $353,455 and $91,955 was recorded as of April 30, 2023 and 2022, respectively. -44- Impairment of Long-Lived Assets Financial Accounting Standards Board (“FASB”) authoritative guidance requires that certain assets be reviewed for impairment and, if impaired, remeasured at fair value whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
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.
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. Net cash used in investing activities in fiscal 2024 consisted of a $20,000 note receivable.
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.
Results of Operations Fiscal Year 2024 Compared to Fiscal Year 2023 Our revenues for fiscal 2024 decreased by $3,542,550, or 42%, to $4,951,435, as compared to $8,493,985 reported for fiscal 2023.
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.
As of the date of this Annual Report, Netcapital Securities Inc. has not conducted any business activities 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.
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.
In conjunction with this offering, we issued the underwriter, and its designees, warrants to purchase 86,250 shares of our common stock at an exercise price of $0.875. -41- On December 27, 2023, we completed a public offering of (i) 4,800,000 shares of our common stock; (ii) 11,200,000 prefunded warrants to purchase 11,200,000 shares of our common stock; (iii) 16,000,000 Series A-1 warrants to purchase 16,000,000 shares of our common and (iv) 16,000,000 Series A-2 warrants to purchase 16,000,000 shares of our common stock of the Company for gross proceeds of $4 million, before deducting underwriting discounts and offering expenses payable by us.
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.
Netcapital.com is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents.
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.
The increase was attributed to pay increases to keep up with inflation. General and administrative expenses increased by $1,686,328 or 97%, to $3,427,026 for the year ended April 30, 2024, as compared to $1,740,698 for the prior fiscal year.
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.
We provide private company investment access to accredited and non-accredited investors through our online portal (www.netcapital.com), which is operated by our wholly owned subsidiary Netcapital Funding Portal, Inc.
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.
Wainwright, who served as placement agent for this offering to purchase up to 1,200,000 shares of our common stock, which warrants have substantially the same terms as the Series A-1 warrants and Series A-2 warrants, except that warrants issued to the designees of the placement agent have an exercise price equal to $0.3125 per share and expire on December 27, 2028.
The 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.
The components of revenue are as follows: April 30, 2024 April 30, 2023 Consulting services for equity securities $ 3,440,000 $ 7,105,000 Consulting revenue 96,200 455,320 Portal fees 874,368 418,513 Listing fees 442,040 513,960 Portal 1% equity fee 97,700 - Game website revenue 1,127 1,192 Total $ 4,951,435 $ 8,493,985 -39- The aggregate decrease of $3,665,000 in consulting services for equity securities in fiscal 2024 occurred because we provided consulting services to only 3 companies in fiscal 2024, as compared to 6 companies in fiscal 2023.
Removed
Companies can accept investment from virtually anyone, including friends, family, customers, employees, etc., at any time, with just a few clicks.
Added
We generate fees from listing private companies on our funding portal located at www.netcapital.com. We generate fees from listing private companies on netcapital.com. We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors, Inc.
Removed
The Offering closed on May 25, 2023 and we received aggregate net proceeds of $1,468,700.
Added
Neither Netcapital Advisors, nor any Netcapital entity or subsidiary, is a broker- dealer, nor do any of such entities operate as a broker-dealer with respect to any Reg A offering listed on the www.netcapital.com website.
Removed
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.
Added
The Netcapital funding portal charges a $5,000 listing fee, a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes.
Removed
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.
Added
Netcapital Advisors generates fees and equity stakes from consulting in select portfolio and non-portfolio clients. With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.
Removed
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.
Added
We generated revenues of $4,951,435, with costs of service of $108,060, in the year ended April 30, 2024 for a gross profit of $4,843,375 (consisting of $3,537,700 in equity securities for payment of services and $1,413,736 in cash-based revenues, offset by $108,060 for costs of services) as compared to revenues of $8,493,985 with costs of service of $85,038 in the year ended April 30, 2023 for a gross profit of $8,408,947 (consisting of $7,105,000 in equity securities for the payment of services and $1,388,985 in cash-based revenues, offset by $85,038 for costs of services).
Removed
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.
Added
Our cash-based gross profits as a percentage of gross profits were approximately 1% and 1%, respectively, in the years ended April 30, 2024 and 2023, for entities (for which we performed services) in which we own equity during such periods.
Removed
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.
Added
The total number of offerings on the Netcapital funding portal in fiscal 2024 and 2023 that closed was 70 and 63, respectively, of which 17 and 13 offerings hosted on the Netcapital funding platform in fiscal 2024 and 2023, respectively, terminated their listings without raising the required minimum dollar amount of capital.
Removed
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
As of the date of this report, we own minority equity positions of greater than 1% in 20 portfolio companies that have utilized the funding portal to facilitate their offerings, which equity was received as payment for services.
Removed
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.
Added
Companies can accept investments from virtually anyone, including friends, family, customers and employees. Customer accounts on our platform are not permitted to hold or use digital securities to make an investment.
Removed
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
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.
Removed
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
Proposed Broker-Dealer Business Our newly formed wholly owned subsidiary, Netcapital Securities Inc. has applied for broker-dealer registration with the Financial Industry Regulatory Authority (“FINRA”).
Removed
On July 15, 2022, the Company completed an underwritten public offering of 1,205,000 shares of the Company’s common stock and warrants to purchase 1,205,000 shares of the Company’s common stock at a combined public offering price of $4.15 per share and warrant. The gross proceeds from the offering were $5,000,750 prior to deducting underwriting discounts, commissions, and other offering expenses.
Added
We that by having a registered broker-dealer, it will create opportunities to expand revenue base by hosting and generating additional fees from Reg A+ and Reg D offerings on the Netcapital platform;, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts.
Removed
The warrants have a per share exercise price of $5.19, are exercisable immediately, and expire five years from the date of issuance. With the use of proceeds, we paid $1 million of debt to our secured lender, to reduce the outstanding principal balance to $400,000.
Added
Netcapital Securities Inc.’s application to become a registered broker-dealer remains subject to regulatory approval and/or licensing from the Financial Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). No assurance can be given as to when or if such approvals may be granted or when, if at all, Netcapital will be able to expand the services it offers.
Removed
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
Our operations may never generate significant revenues, and we may not consistently achieve profitable operations. Proposed Alternative Trading (“ATS”) Relationship We believe that lack of liquidity is a key issue for investors in private companies in our targeted market. We also recognize that secondary trading of securities in private companies is subject to extensive regulation and oversight.
Removed
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
Such regulation and oversight includes, but is not limited to, the need to be a registered broker-dealer that is licensed to operate an ATS, or to partner with an entity that is licensed to do so.
Removed
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 order to try to address what we believe is a large, unmet need, our wholly-owned subsidiary, Netcapital Systems LLC, a Utah limited liability company (“Netcapital UT LLC”), entered into a software license and services agreement on January 2, 2023 (the “Templum License Agreement”) with Templum Markets LLC (“Templum”), to provide issuers and investors on the Netcapital platform with the potential for greater distribution and liquidity.
Removed
Although we believe we have adequate sources of liquidity over the next 12 months, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets, in each case, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic, among other factors, could impact our business and liquidity.
Added
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.
Removed
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.
Added
We are currently working with Templum to design the software required to allow issuers and investors on the Netcapital platform to access the Templum ATS in order to engage in secondary trading of securities in a regulatorily compliant manner. The operation of the Templum ATS, however, remains subject to extensive regulation and oversight.
Removed
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.
Added
Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed platform.
Removed
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.
Added
While we are currently working with Templum on the design of the required software to enable the access to secondary trading on the Templum ATS, no assurance can be given as to when, or if, we will be able to successfully complete this project in order to enable access to a secondary trading feature beta (testing) version to a closed group of users for testing before any final launch is made to the public, and Templum’s approval.
Removed
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.
Added
Milestones required to launch the platform include, but are not limited to, plug-in of Templum’s KYC and AML requirements to enable interested users to directly send to the Templum ATS any KYC/AML information required by Templum for review and approval, as well as the launch of a beta version to a closed group of users.
Removed
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.
Added
In July 2024, we announced the launch of our beta version for this secondary trading platform and our goal is to offer such secondary trading platform through the Templum ATS to all issuers and investors on the Netcapital funding portal before the end of 2024 subject to compliance with all regulatory requirements, however, we do not know when, or if, this feature will be fully completed and launched, as there are many details that remain to be completed.
Added
The operation of the Templum ATS is subject to extensive regulation and oversight. Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed platform.
Added
In addition, because we cannot easily switch between operators of secondary trading platforms of this nature, any disruption of or interference, whether due to regulatory issues or natural disasters, cyber-attacks, terrorist attacks, power losses, telecommunications failures, or other similar events, would impact our operations and may adversely affect the ability of issuers and investors to utilize this platform.
Added
There is no obligation for Templum to renew its agreements with us on commercially reasonable terms or at all. -37- Recent Developments Nasdaq Delisting Determination As previously disclosed on a Current Report on Form 8-K filed by the Company on September 1, 2023, the Company received a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that it was not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market.
Added
Specifically, Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.
Added
Therefore, in accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until February 28, 2024, to regain compliance with the Rule. Subsequently, on February 29, 2024, Nasdaq determined the Company was eligible for an additional 180 calendar days, or until August 26, 2024, to regain compliance with the Rule.
Added
Since then, Nasdaq has determined that as of July 22, 2024, the Company’s securities had a closing bid price of $0.10 or less for ten consecutive trading days.1 Accordingly, the Company is subject to the provisions contemplated under Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stocks Rule”).
Added
As a result, on July 23, 2024, Nasdaq delivered written notice to the Company under which it advised the Company that Nasdaq has determined to delist the Company’s securities from The Nasdaq Capital Market (the “Nasdaq Letter”).
Added
The Company may appeal Nasdaq’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series. A hearing request will stay any further action pending final resolution of the Hearing Panel or any extension provided by the Panel.
Added
The Company intends to appeal Nasdaq’s determination and will timely submit a plan to a hearing panel to regain compliance to the Nasdaq Listing Qualifications Department.

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