NCPL 10-K & 10-Q changes, risk factors and insider trading
Netcapital Inc. (also NCPLW) · Nasdaq · Finance Services · CIK 1414767 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to Financial Position”
New heading “Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish certain rights.”
New heading “Our obligations to the U.S. Small Business Administration is secured by security interests in our assets, so if we default on those obligations, they could foreclose on some or all of our assets.”
New heading “The loan and security documents encompassing our secured obligations to the SBA contain restrictive covenants which limit management’s discretion to operate our business”
New heading “We recently recognized impairments totaling $17.9 million to the value of several of our portfolio company investments, which may adversely affect our financial condition and the value of our securities.”
Removed heading “Major health epidemics, such as the outbreak caused by the COVID-19 pandemic, and other outbreaks or unforeseen or catastrophic events could continue to disrupt and adversely affect our operations, financial condition and business.”
Removed heading “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.”
Largest changes
“Our obligations to the U.S. Small Business Administration is secured by security interests in our assets, so if we default on those obligations, they could foreclose on some or all of our assets.”see in full comparison
“Our obligations to the U.S. Small Business Administration (“SBA”) is secured by security interests in our assets. As of April 30, 2025. approximately $0.5 million was owed to the SBA. If we default on our obligations under these agreements, the SBA could foreclose on their security interests and liquidate some or all of these assets, which would harm our financial condition and results of operations and would require us to reduce or cease operations and possibly seek bankruptcy protection.”see in full comparison
“In order to obtain the SBA loan, we agreed to certain covenants that place significant restrictions on, among other things, our ability to incur additional indebtedness with any superior liens on the collateral, to create liens or other encumbrances, , and to sell or otherwise dispose of assets and merge or consolidate with other entities. Any failure to comply with these covenants i could result in an event of default, which could trigger an acceleration of the related debt. …”see in full comparison
“We recently recognized impairments totaling $17.9 million to the value of several of our portfolio company investments, which may adversely affect our financial condition and the value of our securities.”see in full comparison
“The loan and security documents encompassing our secured obligations to the SBA contain restrictive covenants which limit management’s discretion to operate our business”see in full comparison
“Major health epidemics, such as the outbreak caused by the COVID-19 pandemic, and other outbreaks or unforeseen or catastrophic events could continue to disrupt and adversely affect our operations, financial condition and business.”see in full comparison
Full comparison: every changed paragraph (53)
Risks Related to Financial Position
As of April 30, 2025, the Company had negative working capital of $5,096,163 and for the year ended April 30 2025, the Company had an operating loss of $8,321,317 and net cash used in operating activities amounted to $5,339,211. There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. Our management has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. To the extent that funds generated from any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. Accordingly, our management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve our business plan objectives or be able to achieve or maintain cash-flow-positive operating results. If we 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.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish certain rights.
We may seek additional capital through a combination of equity offerings, debt financings, strategic collaborations and alliances or licensing arrangements. To the extent that we raise additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Any indebtedness we incur could involve restrictive covenants, such as limitations on our ability to incur additional debt, acquire or license intellectual property rights, declare dividends, make capital expenditures and other operating restrictions that could adversely impact our ability to conduct our business. Furthermore, the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline. If we raise additional funds through strategic collaborations and alliances or licensing arrangements with third parties, or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Adequate additional financing may not be available to us on acceptable terms, or at all.
Our obligations to the U.S. Small Business Administration is secured by security interests in our assets, so if we default on those obligations, they could foreclose on some or all of our assets.
Our obligations to the U.S. Small Business Administration (“SBA”) is secured by security interests in our assets. As of April 30, 2025. approximately $0.5 million was owed to the SBA. If we default on our obligations under these agreements, the SBA could foreclose on their security interests and liquidate some or all of these assets, which would harm our financial condition and results of operations and would require us to reduce or cease operations and possibly seek bankruptcy protection.
The loan and security documents encompassing our secured obligations to the SBA contain restrictive covenants which limit management’s discretion to operate our business
In order to obtain the SBA loan, we agreed to certain covenants that place significant restrictions on, among other things, our ability to incur additional indebtedness with any superior liens on the collateral, to create liens or other encumbrances, , and to sell or otherwise dispose of assets and merge or consolidate with other entities. Any failure to comply with these covenants i could result in an event of default, which could trigger an acceleration of the related debt. If we were unable to repay the debt upon any such acceleration, the SBA could seek to foreclose on our assets in an effort to seek repayment under the loans. If the SBA was successful, we would be unable to conduct our business as it is presently conducted and our ability to generate revenues and fund our ongoing operations would be materially adversely affected.
We recently recognized impairments totaling $17.9 million to the value of several of our portfolio company investments, which may adversely affect our financial condition and the value of our securities.
On April 30, 2025, the Company completed a quarterly review of its equity investments in accordance with ASC 321 and disclosed on May 5, 2025 that it had recognized impairment losses totaling approximately $17,935,476 related to multiple portfolio companies. These impairments were based on qualitative indicators including the resignation of key personnel, cessation of operations, regulatory setbacks, failure to file required annual reports, or technological obsolescence, depending on the specific issuer.
These non-cash impairment charges materially reduced the Company’s total assets and shareholders’ equity. These charges may affect the Company’s ability to raise capital, impact investor confidence, and negatively influence the market price of its common stock. The Company does not expect to recover value from the impaired investments.
Additionally, the Company’s evaluation of remaining investments is ongoing, and further impairments may be recognized in future reporting periods if management concludes that other securities have experienced a decline in fair value that is not expected to recover. Future impairment losses may continue to have a material adverse effect on the Company’s financial position and operating results.
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. 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. Our management has determined, based on its recent history and the negative cash
flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant
conditions or events noted above. To the extent that funds generated from any private placements, public offerings and/or bank financing,
if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on acceptable terms. Accordingly, our management has concluded that these conditions raise
substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve its business
plan objectives or be able to achieve or maintain cash-flow-positive operating results. If we 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.
We
have a limited operating history and our profits havewere beenpreviously generated primarily by unrealized gains from equity securities we own
in other
companies. Although we havewere beenpreviously profitable, thewe likelihoodhave ofsuffered our success must be considered in light oflosses the problems,last expenses,few difficulties,
complicationsyears and delaysthere frequentlyis encounteredno byguarantee athat
we smallwill developingreturn company.to profitability.
We
were incorporated in the State of Utah in April 1984. We reported a net loss of $4,986,317$28,301,325 in the year ended April 30, 2024.2025. Although
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. These securities have a value on our books, but are not liquid.liquid, Furthermore,and thefurthermore, we recognized an impairment loss in fiscal
likelihood2025 of ourapproximately success$19.9 mustmillion be considered in light ofon the problems,equity expenses,securities difficulties,that complicationswe andown. delaysDespite frequentlyour prior reported earnings, there is no guarantee
encountered by a small developing company starting a new business enterprise and the highly competitive environment in whichthat we will
operate. Sinceever webecome haveprofitable ain limitedthe operating history, we cannot assure you that our business will maintain profitability.future.
We
currently derive a significant portion of our revenues from 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, 2025, the Company had
one customer that constituted 20% of its revenues, and a second customer that accounted for 11% of its revenues. 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. 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. It is not possible for us to predict the future level of demand for our services
services that will be generated by these customers or new customers, or the future demand for the products and services of these customers or
or new customers. If any of these customers experience declining or delayed sales due to market, economic or competitive conditions, we
we could be pressured to reduce the prices we charge for our products which could have an adverse effect on our margins and financial position
position and could negatively affect our revenues and results of operations and/or trading price of our common stock.
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. 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-ownedwholly owned subsidiary Netcapital Securities Inc hasis applied fora broker-dealer registrationthat is registered with FINRA. InIt the event Netcapital
Securities Inc. receives a broker-dealer license, it will becomeis 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). In addition, some
of the restrictions and rules applicable to our subsidiary could adversely affect and limit
some of our business plans.
Our
business model is one of innovation, including continuously working to expand our product lines and services to our clients. For example,
example, our subsidiary Netcapital Securities hasreceived applied forits broker-dealer registration with FINRA in November 2024 and we are continuing our relationship
relationship with Templum into becoming an alternative trading system. It is unclear whether these services will be successful.
Further, we continuously
try to offer additional types of services, and we cannot offer any assurance that any of them will be
successful. From time to time,
we may also modify aspects of our business model relating to our service offerings. 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
currently rely on First CitizensLuminate Bank to provide all escrow services related to offerings on our platform. Any change in this relationship
will require us to find another escrow agent and escrow bank. This change may cause us delays as well as additional costs in transitioning
our technology. We 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.
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. That strategy may result in us diverting management attention and advisory resources to do work for early-stage companies that pay for the work with equity, which becomes impaired in value or never becomes a liquid asset. For all of these early-stage companies, the future liquidity and value of our investments cannot be guaranteed, and no market may exist for us to generate gains from our investments in early-stage companies. As of April 30, 2025, we have recognized a non-cash loss of $19.9 million from the write-down of various equity securities that we own in these early-stage companies. Statistics show that early-stage companies are more likely to fail than to succeed.
Major
health epidemics, such as the outbreak caused by the COVID-19 pandemic, and other outbreaks or unforeseen or catastrophic events could
continue to disrupt and adversely affect our operations, financial condition and business.
Public
health epidemics or outbreaks could adversely impact our business. The extent to which the coronavirus impacts our operations will depend
on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new
information which may emerge concerning the severity of the coronavirus and the emergence of variants, among others. In particular, the
spread and treatment of the coronavirus globally could adversely impact our operations and could have an adverse impact on our business
and our financial results. To date, our business has not been impacted by COVID-19 but it could be in the future.
Our
revenues and profitsoperating results are subject to fluctuations.
A
significant portion of our total assets are held in equity securities of early-stage companies, which securities are illiquid and subject
to volatility, which factors
and could have a material adverse effect on our financial condition and results of operations.
Payment
related to the consulting and advisory services provided by Netcapital Advisors iswas often made through equity stakes from such customers.
As of April 30, 2024,2025, approximately $25.2$5.7 million of our holdingsassets are equity securities issued by companies whose securities do not trade
on public markets.
The securities issued are typically in private companies with no established trading market for their securities,
that often have limited
operating histories, limited operating cash, and negative cash flows. Additionally, these securities are primarily
restricted, and are
subject to legal holding periods pursuant to Rule 144 or other applicable exemptions. The stock price of such issuers
is often volatile,
unpredictable, and with limited liquidity, and the value of such securities on the date of receipt compared to the
date when we are able
to legally sell the securities may decrease significantly. The value ascribed to our assets in our financial statements
as of a particular
date may be materially greater than or less than the value that would be realized if our assets were to be liquidated
as of such date.
Accordingly, the value of such holdings may change over time due to factors that we do not control, such as issuance
of securities by
such companies at lower prices or other market factors. During the year ended April 30, 2024, we recognized an unrealized
loss of approximately
$2.7 million on the value of our equity securities due to the decline in value of a single issuer, which represented
an impairment of
more than 80% of the previous value of our holdings in such issuer, which resulted in a reduction of our retained earnings.
During the year ended April 30, 2025, we determined that the equity securities we held in twelve issuers had become worthless and we
recorded an impairment loss of $19.9 million. Changes to
the value of our holdings could have a material adverse effect on our financial
condition and results of operations.
The
40 Act and the rules thereunder (and similar legislation in other jurisdictions) provide certain protections to investors and impose
certain restrictions on companies that are registered as investment companies. Among other things, such rules limit or prohibit transactions
with affiliates, impose limitations on the issuance of debt and equity securities and impose certain governance requirements. We have
not been and do not intend to become regulated as an investment company and we intend to conduct our activities so we will not be deemed
to be an investment company under the 40 Act (and similar legislation in other jurisdictions). In order to ensure that we are not deemed
to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans related to us, we
will be limited in the types of acquisitions that we may make and we may need to modify our organizational structure or dispose of assets
that we would not otherwise dispose of. Moreover, if anything were to happen which would potentially cause us to be deemed an investment
company under the 40 Act, it would be impractical for us to operate as intended pursuant to our platform and our business, financial
condition and results of operations would be materially adversely affected. 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.
The Company holds minority equity interests in a number of early-stage companies, often received as compensation for advisory or platform services. These holdings are considered investment securities under the Investment Company Act of 1940 (the “1940 Act”) for purposes of evaluating investment company status. Section 3(a)(1)(C) of the 1940 Act generally defines an “investment company” as an issuer that holds investment securities with a value exceeding 40% of its total assets (excluding cash and U.S. government securities) on an unconsolidated basis.
Although the Company’s investment securities represented a significant portion of its assets in prior periods, the Company performed the 40% asset test each quarter and concluded that the 40% threshold was not met. Furthermore, on April 30, 2025, the Company recognized impairment losses totaling approximately $19.9 million, materially reducing the value of its investment securities portfolio. As a result, the Company does not currently hold investment securities in excess of the 40% threshold under the 1940 Act.
Even with the impairment loss, the Company remains subject to ongoing evaluation under the 1940 Act. However, the Company is primarily engaged in a business other than investing, reinvesting, or trading in securities and does not anticipate the need to register under the 1940 Act. It continues to assess eligibility for an exclusion from investment company status, including the exemption under Section 3(b)(1) for companies that are primarily engaged in a non-investment business.
In order to ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans related to us, we will be limited in the types of acquisitions that we may make and we may need to modify our organizational structure or dispose of assets that we would not otherwise dispose of. Moreover, if anything were to happen which would potentially cause us to be deemed an investment company under the 40 Act, it would be impractical for us to operate as intended pursuant to our platform and our business, financial condition and results of operations would be materially adversely affected. In addition, if we were deemed an investment company we could become subject to significant regulatory restrictions, including limitations on its capital structure, prohibitions on certain transactions with affiliates, and requirements to register under the 1940 Act. Further, this designation could be subject to civil enforcement actions and investors may have rescission rights, any of which could materially and adversely affect the Company’s financial condition, operations, and stockholder value. 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
consulting and advisory services arehave primarily been paid for in restricted shares of stock of our customers, which are often private
companies companies
with no established trading market for their securities.
For
our consulting and advisory services, payment ishas oftenpreviously primarily been made through issuance of equity securities of our customers
instead of cash. The securities issued
are were 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,investments, which will result in the loss of our investment.
We will be dependent on a third-party for operation of our proposed secondary trading platform. Any disruption in the services provided by such third-party provider could adversely affect our business. In addition, there is no guarantee that we will officially launch our secondary trading platform which could have a material adverse effect on our business.
In
January 2023, we entered into the Templum License Agreement, to provide issuers and investors on the Netcapital platform with the potential
for greater distribution and liquidity. 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.
We are currentlybegan working with Templum on the design of the required software to enable issuers and investors on the Netcapital platform
the ability
to access the Templum ATS in order to have the ability to engage in secondary trading of securities.securities, but we have paused our engagement
with them. We do not control the
operations of Templum or own the equipment used to provide such services. Further, the operation of
the Templum ATS is (or any similar ATS will be) subject to extensive
regulation and oversight. Accordingly, any regulatory delays or
objections will result in delays in our ability to launch the proposed
platform. 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. There is no obligation for Templum to renew their
agreements with us on commercially reasonable terms or at all. If we
are unable to renew our agreements on commercially reasonable terms,
we may be forced to identify another suitable operator or develop
our own secondary trading capabilities, and we may incur significant
costs and possible service interruption in connection with doing
so.
In July 2024, we announced the launch of our beta version for this secondary trading platform and our goal was to offer such secondary trading platform through the Templum ATS to all issuers and investors on the Netcapital funding portal before the end of 2025 subject to compliance with all regulatory requirements, As of the date of this report, we have paused further development and roll-out while we reevaluate evolving market conditions and customer expectations. There is no guarantee that we will officially launch our secondary trading platform which could have a material adverse effect on our business.
Risks
Related to our Proposed Broker-Dealer Activities
Regulatory
and legal uncertainties related to broker-dealers could harm our business.
The
securities and derivatives businesses are heavily regulated. Firms in financial service industries have been subject to an increasingly
regulated environment
over recent years, and penalties and fines sought by regulatory authorities have increased accordingly. Should
ourOur subsidiary,funding Netcapitalportal Securities Inc. receive itsand broker-dealer
subsidiaries license, it will becomeare subject to regulationsextensive in the U.S. and abroad
covering all aspects of their business.regulations. Regulatory bodies ininclude, U.S.,but includeare withoutnot limitation,limited to, the SECSEC, FINRA, and FINRA.the Nasdaq
Stock Market. Our mode of operation
and profitability may be directly affected by additional legislation changes in rules promulgated
by various government agencies and
self-regulatory organizations that oversee our businesses, and changes in the interpretation or enforcement
of existing laws and rules,
including the potential imposition of transaction taxes.rules. Noncompliance with applicable laws or regulations could result in sanctions
being levied against us, including
fines and censures, suspension or expulsion from a certain jurisdiction or market or the revocation
or limitation of licenses. Noncompliance
with applicable laws or regulations could adversely affect our reputation, prospects, revenues
and earnings. In addition, changes in
current laws or regulations or in governmental policies could adversely affect our business, financial
condition and results of operations.
DomesticStock
and foreign stock exchanges, other self-regulatory organizations and state and foreign securities commissions can censure, fine, issue
cease-and-desist orders, suspend
or expel a funding portal, broker-dealer or any of its officers or employees. Our ability to comply with all applicable
laws and rules
is largely dependent on our internal systems to ensure compliance, as well as our ability to attract and retain qualified compliance
compliance personnel. We could be subject to disciplinary or other actions in the future due to claimed noncompliance, which could have
a material
adverse effect on our business, financial condition and results of operations. To continue to operate and to expand our services
internationally,operate, we may have to comply with the
regulatory controls of each countryjurisdiction in which we conduct, or intend to conduct business,
the requirements of which may not be clearly
defined. The varying compliance requirements of these different regulatory jurisdictions,
which are often unclear, may limit our ability to continue existing international operations and further expand internationally.
ShouldNetcapital
our subsidiary Netcapital Securities Inc. receive its broker-license, it may be fined or subject to other disciplinary or corrective
actions if it does not maintain the capital and liquidity
levels required by regulators.
The
SEC, FINRA, and various other regulatory agencies have stringent rules with respect to the maintenance of specific levels of net capital
by securities broker-dealers. ShouldThe ourfailure subsidiary,of Netcapital Securities Inc. receive its broker-dealer license, failure to maintain
the required net capital could result in suspension
or revocation of registration by the SEC or suspension or expulsion by FINRA, and
could ultimately lead to liquidation of Netcapital
Securities Inc. If such net capital rules are changed or expanded, or if there is
an unusually large charge against net capital, operations
that require an intensive use of capital could be limited. Such operations
may include investing activities, marketing and the financing
of customer account balances. Also, our ability to withdraw capital from
our brokerage subsidiary could be restricted.
We
are currently listed on the Nasdaq Capital Market, a national securities exchange. Nasdaq requires companies desiring to list their common
stock to meet certain listing criteria including total number of shareholders: minimum stock price, total value of public float, and
in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could
prevent us from listingcontinuing to list our common stock on Nasdaq. In the event we are unable to have our shares traded on Nasdaq, our common
stock stock
could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than Nasdaq.
Our Our
failure to have our shares traded on the Nasdaq could make it more difficult for you to trade our shares, could prevent our common
stock stock
trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were
able able
to list our shares on Nasdaq.
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. 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. 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. 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”).
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”).
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.
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.
Notwithstanding the Company’s intention
to request a hearing, there can be no assurance that the Panel will grant the Company any compliance period or that the Company will
ultimately regain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market. The Company is monitoring
the closing bid price of its common stock and will consider options to regain compliance with Nasdaq’s minimum bid price requirement,
including effectuating a reverse stock split. On July 24, 2024, the Company’s stockholders approved the implementation of a reverse
stock split of the Company’s common stock at a ratio between 1-for-2 and 1-for-100, inclusive, with the ultimate ratio to be determined
by the Company’s board of directors in its sole discretion. On September 25, 2024, our Board approved a reverse split ratio of
1-for-70 for the reverse split of the issued shares of our common stock. The Company intends to promptly effectuate a reverse split to
regain compliance with Nasdaq Listing Rules related to minimum bid price for its common stock.
If
we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and warrants and
we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each
of which could have a material adverse effect on our shareholders:
As previously disclosed on a Current Report on Form 8-K filed by us, Nasdaq had previously notified us on September 1, 2023 that we were not in compliance with the Nasdaq’s Listing Rule 5550(a)(2) the “Bid Price Rule”) because it failed to maintain a minimum bid price of $1.00 per share for 30 consecutive business days. Further as of July 22, 2024, Nasdaq determined that that our securities had a closing bid price of $0.10 or less for ten consecutive trading days and as a result, Nasdaq delivered written notice to the Company on July 23, 2024 under which it advised us that Nasdaq has determined to delist our securities from The Nasdaq Capital Market. We requested a hearing to appeal Nasdaq’s delisting determination. On August 19, 2024, we received a notice from The Nasdaq Stock Market, LLC (“Nasdaq”), dated August 19, 2024, informing us that we had regained compliance with the “Bid Price Rule for continued listing on The Nasdaq Capital Market, as the bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive business days since August 2, 2024. As a result of our demonstrated compliance with Nasdaq’s continued listing requirements, such aforementioned hearing was cancelled.
Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:
We
recently sold a substantial number of shares of our common stock and warrants to purchase common stock in a public offering, which could
cause the price of our common stock to decline.
In
a December 2023 offering, we sold 4,800,000 shares of common stock, pre-funded warrants to purchase up to 11,200,000 shares of our common
stock and common stock warrants to purchase up to 32,000,000 shares of common stock. In May 2024, we induced some of the warrant holders
to exercise their warrants, and we issued additional warrants to purchase up to 28,640,000 shares of our common stock. The existence
of the potential additional shares of our common stock in the public market, or the perception that such additional shares may be in
the market, could adversely affect the 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.
WeAs
of April 30, 2025 we have issued options to purchase 2,202,00028,594 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. In June 2025, we amended our 2023 Plan to increase the shares available under such
2023 Plan to 1,547,556 shares. Following amendment of the 2023 Plan, we granted options to officers, directors, employees and consultants
to purchase 1,103,722 shares of common stock, which options are not exercisable until approval of the amendment to the 2023 Plan is approved
by shareholders. We intend to issue the shares available under the 2023 Plan, as amended, to officers, directors and consultants.. 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
forfeited, we plan to reissue options to other officers, directors,
employees and consultants.
Management's Discussion & Analysis (MD&A)
New heading “July 2025 Registered Direct Offering and Concurrent Private Placement #2”
New heading “July 2025 Registered Direct Offering and Concurrent Private Placement #1”
New heading “Horizon License”
New heading “June 2025 Private Placement”
New heading “Amendment to Netcapital 2023 Omnibus Equity Incentive Plan”
New heading “Formation of Advisory Boards”
New heading “May 2025 Note Financings”
Removed heading “Nasdaq Delisting Determination”
Removed heading “Application for Broker-Dealer License”
Removed heading “Temporary Cessation of our Valuation Business”
Removed heading “April 2024 Common Stock Issuance”
Largest changes
“On June 26, 2025, the Company entered into a Horizon Software Agreement (the “Horizon Agreement’) with Horizon Globex GmbH, a company incorporated in Switzerland (“Horizon”) pursuant to which Horizon granted the Company a royalty free, paid-up, non-exclusive, perpetual, irrevocable, unrestricted license to use the Licensed Software (as defined in the Horizon Agreement) with our branding and image, in the United States to provide capital-raising and secondary trading services to its clients in consideration for the issuance of 500,0000 shares (the “Horizon Shares”) of the Company’s common …”see in full comparison
“On May 1, 2025, the Company completed a private financing transaction with a single accredited investor and issued an unsecured, non-convertible promissory note in the principal amount of $400,000. The note was issued at a 50% original issuance discount (“OID”) for gross proceeds of $200,000. The note bears interest at 8% per annum, matures three months from the issuance date, and is prepayable at any time without penalty. In the event of default, the interest rate increases to 20% per annum. The note is due on August 1, 2025.”see in full comparison
“On May 1, 2025, the Company completed a private financing transaction with a single accredited investor and issued an unsecured, non-convertible promissory note in the principal amount of $400,000. The note was issued at a 50% OID for gross proceeds of $200,000. The note bears interest at 8% per annum, matures three months from the issuance date, and is prepayable at any time without penalty. In the event of default, the interest rate increases to 20% per annum. The note is due on August 1, 2025.”see in full comparison
“On April 29, 2025, the Company entered into a private financing transaction with a single accredited investor and issued an unsecured, non-convertible promissory note in the principal amount of $200,000. The note was issued at a 50% OID for gross proceeds of $100,000. The note bears interest at 8% per annum, matures on July 31, 2025, and is prepayable at any time without penalty. In the event of default, the interest rate increases to 20% per annum. As of April 30, 2025, the unamortized OID was $98,350, and the note was recorded on the balance sheet at a net carrying amount of $101,650.”see in full comparison
see in full comparisonOurInnewlyNovemberformed2024, our wholly owned subsidiary, Netcapital Securities Inc.hasreceivedappliedapprovalforfrombroker-dealerFINRAregistrationtowithbecometheaFinancialFINRA-memberIndustrybroker dealer.RegulatoryWeAuthority (“FINRA”). Webelieve that by having a registered broker-dealer, itwillmay create opportunities to expand the Company’s revenue base by hosting and generating additional fees from Reg A+and Reg D offerings on the Netcapitalplatform;,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 capabilitiescapabilitiesby leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platformplatformto a wider range of investors in order to maximize market penetration and optimize capital raising efforts.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.As of the date of thisAnnualprospectus, NetcapitalReport, NetcapitalSecuritiesInc.hasnotbeenconductedengagedanybybusinessoneactivitiesissuerOur limited operating history and the uncertain nature of our future operations and the markets we address or intendseeking toaddressraisemakecapitalpredictions ofviaourafutureRegulationresultsAof operations difficult. Our operations may never generate significant revenues, and we may not consistently achieve profitable operations.offering.
Full comparison: every changed paragraph (96)
Netcapital
Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited
and and
non-accredited investors. We give virtually all investors the opportunity to access investments in private companies. We believe ourOur 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 ACrowdfunding (“Reg ACF”) offerings.of
the Jumpstart Our Business Startups Act (“JOBS Act”). We generate fees from listing private companies on our funding
portal 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,Advisors Inc. (“Netcapital
Advisors”), which is a
wholly wholly-ownedowned subsidiary, provides marketing and strategic advice to companies in exchange for cash fees and previously also received
equity positions and/orin cashcertain fees.
select portfolio companies. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory
Authority Authority, or FINRA,(“FINRA”), a registered
national securities association, and provides investors with opportunities to invest
in private companies. NeitherIn addition, we recently expanded our model to include Regulation A (“Reg A”) offerings, which are
conducted by our wholly owned subsidiary Netcapital Advisors,
norSecurities anyInc. “(“Netcapital entitySecurities”), or subsidiary,which is a broker- dealer, nor do any of such entities operate as a
licensed broker-dealer with respectFINRA. to
anyBoth A and Reg ACF offeringofferings listedare onmade available to investors via the www.netcapital.comCompany’s website.website,
www.netcapital.com.
We
provide private company investment access to accredited and non-accredited investors through (i) our online portal (www.netcapital.com),
which is operated by our wholly owned subsidiarysubsidiaries Netcapital Funding Portal, Inc.Inc and (ii) our broker-deal subsidiary, Netcapital Securities.
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 2024,2025, a 1% success fee paid for with equity of the
funding portal customer. In addition, the portal generates fees for other ancillary
services, such as rolling closes. Netcapital Advisors
generates previously generated fees and equity stakes from consulting in select portfolio
(“Portfolio Companies”) and non-portfolio clients. With respect to its services for Reg
A offerings, Netcapital AdvisorsSecurities charges
a listing fee of $25,000 and a monthly flatsuccess fee forof each4.9% monthof the offeringcapital israised listedby onan theissuer netcapital.comunder websiteReg as well
as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.A.
We generated revenues of $869,460, with costs of service of $40,344, in the year ended April 30, 2025 for a gross profit of $829,116 as compared to 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). In fiscal 2025 we did not provide consulting services to Portfolio Companies in exchange for equity, which accounts for the largest portion of our decline in revenues in fiscal 2025 as compared to fiscal 2024. However, our funding portal did charge a 1% fee of the capital raised, payable in securities, to every issuer that closed an offering. The dollar value of that fee amounted to $72,090 and $97,700 for the years ended April 30, 2025 and 2024, respectively.
Revenue from portal fees decreased by $285,294, or 33%, in fiscal 2025 to $589,074 from $874,368 in fiscal 2024. Revenue from portal fees consists of a 4.9% fee of the total capital raised by an issuer plus fixed miscellaneous charges for administrative fees, such as a rolling close, or the filing of an amended offering statement. The decrease is attributable to a 29% decrease in the total dollars invested through the portal, from $14.8 million in fiscal 2024 to $10.6 million in fiscal 2025. The total number of issuers on the Netcapital funding portal in fiscal 2025 and 2024 that successfully closed an offering was 49 and 53, respectively.
Revenue from listing fees decreased by $234,540, or 53%, to $207,500 in fiscal 2025 as compared to $442,040 in fiscal 2024. The decrease in listing revenue is directly attributable to the 54% decrease in offerings launched in fiscal 2025, as compared to fiscal 2024. New listings dropped from 82 in Fiscal 2024 to 38 in fiscal 2025. Listing fees are typically $5,000 per issuer, and they are the first form of revenue earned by our Funding Portal when an issuer signs a contract with us to sell securities on the funding portal. After the listing contract is signed, an issuer typically takes two months before it is ready to launch an offering. Most issuers remain on the funding portal, marketing their offering, for a period of six to nine months.
In fiscal 2025 and 2024, the average amount raised in an offering on the Netcapital funding portal was $215,745 and $280,978, respectively. The total number of offerings on the Netcapital funding portal in fiscal 2025 and 2024 that closed was 70 in each fiscal year, of which 21 and 17 offerings hosted on the Netcapital funding platform in fiscal 2025 and 2024, respectively, terminated their listings without raising the required minimum dollar amount of capital.
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). 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. 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. 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.
Netcapital.com
ishosts an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from
almost almost
anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual
offering offering
pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies
can can
accept investments from virtually anyone, including friends, family, customers and employees. Customer accounts on our platform are
not not
permitted to hold or use digital securities to make an investment.
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. TheIn Companythe past, Netcapital
Advisors also
acts acted as an incubator and accelerator, taking equity stakes in select disruptive start-ups.
ProposedBroker-Dealer
Broker-Dealer Business
OurIn
newlyNovember formed2024, our wholly owned subsidiary, Netcapital Securities Inc. hasreceived appliedapproval forfrom broker-dealerFINRA registrationto withbecome thea FinancialFINRA-member Industrybroker dealer.
RegulatoryWe Authority (“FINRA”). Webelieve that by having a registered broker-dealer, it willmay create opportunities to expand the Company’s revenue
base by hosting
and generating additional fees from Reg A+ and Reg D offerings on the Netcapital platform;,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
capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform
platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts. 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. As of the date of this Annualprospectus,
Netcapital Report, Netcapital
Securities Inc. has notbeen conductedengaged anyby businessone activitiesissuer Our
limited operating history and the uncertain nature of our future operations and the markets we address or intendseeking to addressraise makecapital predictions
ofvia oura futureRegulation resultsA of operations difficult. Our operations may never generate significant revenues, and we may not consistently achieve
profitable operations.offering.
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.
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. 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. 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. 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. 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 operationAs of the Templumdate ATS,of however,this remainsreport, subjectwe tohave extensivepaused regulationfurther development and oversight.roll-out Accordingly, any regulatory
delays or objections will result in delays in our ability to launch the proposed platform. Whilewhile we arereevaluate
evolving currentlymarket 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,conditions and Templum’scustomer approval. 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. 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.expectations.
The operation of the Templum ATS is (or any other similar ATS will be) subject to extensive regulation and oversight. Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed platform. 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. There is no obligation for Templum to renew its agreements with us on commercially reasonable terms or at all.
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. 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. 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. 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”).
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”).
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.
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.
Notwithstanding the Company’s intention
to request a hearing, there can be no assurance that the Panel will grant the Company any compliance period or that the Company will
ultimately regain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market. The Company is monitoring
the closing bid price of its common stock and will consider options to regain compliance with Nasdaq’s minimum bid price requirement,
including effectuating a reverse stock split. On July 24, 2024, the Company’s stockholders approved the implementation of a reverse
stock split of the Company’s common stock at a ratio between 1-for-2 and 1-for-100, inclusive, with the ultimate ratio to be determined
by the Company’s board of directors in its sole discretion. On September 25, 2024, our Board approved a reverse split ratio of
1-for-70 for the reverse split of the issued shares of our common stock. The Company intends to promptly effectuate a reverse split to
regain compliance with Nasdaq Listing Rules related to minimum bid price for its common stock.
MayJuly
20242025 Warrant InducementExercises
In July 2025, the Company issued an aggregate of 269,257 shares of its common stock to warrant holders that exercised warrants to purchase 418,510 shares of common stock on a net exercise basis.
July 2025 Registered Direct Offering and Concurrent Private Placement #2
On July 16, 2025, the Company entered into a securities purchase agreement (the “July 2025 Purchase Agreement #2”) with certain institutional investors, pursuant to which the Company agreed to sell 641,712 shares (the “July 2025 Shares #2”) of its common stock, at a purchase price of $7.00 per share (the “July 2025 Offering #2”) for gross proceeds of approximately $3 million, prior to deducting placement agent’s fees and other offering expenses payable by the Company. The Company intends to use approximately $250,000 of the net proceeds from the July 2025 Offering #2 for the repayment of certain outstanding promissory notes the remainder for working capital and other general corporate purposes. The July 2025 Shares #2 were offered pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities Exchange Commission on October 26, 2022.
Concurrently with the sale of July 2025 Shares #2 pursuant to the July 2025 Purchase Agreement #2 in a private placement, for each July 2025 Share #2 purchased by the investors, such investors received an unregistered warrant (the “July 2025 Investor Warrants #2”) to purchase one share of Common Stock, or 641,712 shares in the aggregate (the “July 2024 Investor Warrant Shares #2”). The July 2025 Investor Warrants #2 have an exercise price of $4.55 per share and are exercisable immediately upon issuance for a twenty-four month period following the date of effectiveness of resale registration statement providing for a resale of the shares underlying the July 2025 Investor Warrants #2, which resale registration statement is required to be filed within 30-days of the July 2025 Purchase Agreement #2.
In connection with the July 2025 Offering #2, the Company paid H.C. Wainwright & Co. LLC, as placement agent (“Wainwright”) an aggregate cash fee equal to 7.5% of the gross proceeds from the sale of securities in the July 2025 Offering #2 and a management fee equal to 1.0% of the gross proceeds raised in the July 2025 Offering #2. The Company also issued Wainwright (or its designees) a warrant (the “Placement Agent Warrants #2”) to purchase up to 7.5% of the aggregate number of July 2025 Shares #2 sold in the offering, or warrants to purchase up to 48,128 shares of the Company’s common stock, at an exercise price equal to 125.0% of the offering price per share of the Company’s common stock, or $5.8438 per share. In addition, upon the cash exercise of July 2025 Warrants #2, the Company also agreed to issue Wainwright (or its designees) additional Placement Agent Warrants #2 to purchase an amount of share of Common Stock equal to 7.5% of the aggregate number of July 2025 Investor Warrants Shares #2 issued upon cash exercise of the July 2025 Investor Warrants #2. The Placement Agent Warrants #2 are (or will be) exercisable immediately upon issuance for a period of five years following the commencement of the sales pursuant to the July 2025 Offering #2.
The closing of the sales of these securities under the July 2025 Purchase Agreement #2 took place on July 17, 2025.
July 2025 Registered Direct Offering and Concurrent Private Placement #1
On July 2, 2025, the Company entered into a securities purchase agreement (the “July 2025 Purchase Agreement #1”) with certain institutional investors, pursuant to which it agreed to sell 714,286 shares (the “July 2025 Shares #1”) of its common stock, at a purchase price of $7.00 per share (the “July 2025 Offering #1”) for gross proceeds of approximately $5 million, prior to deducting placement agent’s fees and other offering expenses payable by the Company. The Company used approximately $320,000 of the net proceeds from the July 2025 Offering #1 for the repayment of certain outstanding promissory notes and intend to use the remainder for working capital and other general corporate purposes. The July 2025 Shares #1 were offered pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities Exchange Commission on October 26, 2022.
Concurrently with the sale of July 2025 Shares #1 pursuant to the July 2025 Purchase Agreement #1 in a private placement, for each July 2025 Share #1 purchased by the investors, such investors received an unregistered warrant (the “July 2025 Investor Warrants #1”) to purchase one share of the Company’s common stock, or 714,286 shares in the aggregate (the “July 2024 Investor Warrant Shares #1”). The July 2025 Investor Warrants #1 have an exercise price of $6.88 per share and are exercisable immediately upon issuance for a twenty-four month period following the date of effectiveness of resale registration statement providing for a resale of the shares underlying the July 2025 Investor Warrants #1, which resale registration statement is required to be filed within 30-days of the July 2025 Purchase Agreement #1.
In connection with the July 2025 Offering #1, the Company paid Wainwright, as placement agent an aggregate cash fee equal to 7.5% of the gross proceeds from the sale of securities in the July 2025 Offering #1 and a management fee equal to 1.0% of the gross proceeds raised in the July 2025 Offering #1. We also issued Wainwright (or its designees) a warrant (the “Placement Agent Warrants #1”) to purchase up to 7.5% of the aggregate number of July 2025 Shares #1 sold in the offering, or warrants to purchase up to 53,571 shares of Common Stock, at an exercise price equal to 125.0% of the offering price per share of the Company’s common stock, or $8.75 per share. In addition, upon the cash exercise of July 2025 Warrants #1, the Company also agreed to issue Wainwright (or its designees) additional Placement Agent Warrants to purchase an amount of share of Common Stock equal to 7.5% of the aggregate number of July 2025 Investor Warrants Shares #2 issued upon cash exercise of the July 2025 Investor Warrants #1. The Placement Agent Warrants #! are (or will be) exercisable immediately upon issuance for a period of five years following the commencement of the sales pursuant to the July 2025 Offering #1.
The closing of the sales of these securities under the July 2025 Purchase Agreement #1 took place on July 7, 2025.
Horizon License
On June 26, 2025, the Company entered into a Horizon Software Agreement (the “Horizon Agreement’) with Horizon Globex GmbH, a company incorporated in Switzerland (“Horizon”) pursuant to which Horizon granted the Company a royalty free, paid-up, non-exclusive, perpetual, irrevocable, unrestricted license to use the Licensed Software (as defined in the Horizon Agreement) with our branding and image, in the United States to provide capital-raising and secondary trading services to its clients in consideration for the issuance of 500,0000 shares (the “Horizon Shares”) of the Company’s common stock to Horizon or its affiliate. The Horizon Agreement may be terminated by either party upon a default in the performance of any material obligation under the Agreement is not cured within 30-days after receipt of such notice. In addition, the Horizon Agreement may be terminated immediately by either party in the event the other party files or has filed against it any petition for relief under any bankruptcy statute or similar statute of any jurisdiction, or an order for relief in any bankruptcy or reorganization proceeding is entered against the other party and such order remains undischarged for a period of sixty (60) days; or a receiver is appointed for the other Party; or the other party is dissolved or liquidated, or ceases to carry on its business, or makes an assignment for the benefit of its creditors.
ATM Increase
On June 23, 2025, the Company filed a prospectus supplement under our At-The-Market-Offering Agreement with Wainwright for an aggregate of $975,000 of additional shares of our common stock. From June 23, 2025 to June 25, 2025, we sold 229,404 shares of our common stock through Wainwright at an average price of approximately $4.25 per share, resulting in aggregate gross proceeds of approximately $974,747, for which it paid Wainwright approximately $29,242 in commissions and other issuance costs of $1,428, resulting in net proceeds to the Company of approximately $944,067.
June 2025 Private Placement
On June 10, 2025, the Company entered into subscription agreements (the “Subscription Agreements”) with ten accredited investors to issue an aggregate of 118,750 shares (the “June 2025 Shares”) of common stock at a purchase price of $4.00 per share (the “Purchase Price”) in a private placement, for gross proceeds of $475,000. The Company has agreed to file a registration statement on providing for the resale of the June 2025 Shares (the “Resale Registration Statement”) within 60 calendar days of the initial closing of the private placement (the “Filing Date”) and to use reasonable best efforts to cause the Resale Registration Statement to be declared effective by the SEC within 90 calendar days following the final closing of the private placement date of the Filing Date. Until the June 2025 Shares are sold in accordance with applicable law, each subscriber agreed to vote the shares in favor of all resolutions recommended by the Company’s Board of Directors, and to deliver any proxy or voting instruction required by the Company to effectuate this obligation. The Subscription Agreements include a price adjustment provision whereby if the Company issues additional shares at a price lower than the Purchase Price during the period beginning on the date of the Subscription Agreements and prior to the date that is 6-months following the Filing Date, investors will receive additional shares to reflect the lower price, subject to the minimum price as defined under Nasdaq Rule 5635(d) on the date the Subscription Agreements were signed, which was $2.56. The Company intends to use the net proceeds from the offering for general corporate purposes.
Amendment to Netcapital 2023 Omnibus Equity Incentive Plan
On June 6, 2025, the Company’s board of directors approved an amendment (the “Plan Amendment”) to the Netcapital 2023 Omnibus Equity Incentive Plan (the “Plan”) subject to stockholder approval, to: (i) increase the number of shares authorized for issuance under the Plan to 1,547,556 shares, and (ii) crease the evergreen limit from 5% to 10% of our outstanding shares, to allow for greater flexibility in future equity awards.
Formation of Advisory Boards
On June 6, 2025, the Company’s board of directors approved the formation of two strategic advisory boards: the Crypto Advisory Board and the Game Advisory Board, The Company entered into advisory agreements with each member of the Crypto and Game Advisory Boards. Under these advisory agreements, each advisor will provide the Company with sector-specific strategic guidance, marketing insight, partnership referrals, and other advisory services relevant to their industry expertise. The initial term of each advisory agreement is eighteen months and may be extended by mutual agreement of the parties. In consideration of the services rendered under these advisory agreements, we issued a total of 783,722 non-qualified stock options to the advisors of the Crypto and Game Advisory Boards under the Plan as amended by the Plan Amendment. Such options are not exercisable unless and until our stockholders approve the Plan Amendment.
May 2025 Note Financings
In May 2025, the Company completed the sale of debt pursuant to two separate securities purchase agreements with 1800 Diagonal Lending LLC, a Virginia limited liability company, under which it issued the following convertible promissory notes:
On May 1, 2025, the Company completed a private financing transaction with a single accredited investor and issued an unsecured, non-convertible promissory note in the principal amount of $400,000. The note was issued at a 50% OID for gross proceeds of $200,000. The note bears interest at 8% per annum, matures three months from the issuance date, and is prepayable at any time without penalty. In the event of default, the interest rate increases to 20% per annum. The note is due on August 1, 2025.
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. The Series A-3 Warrants and
Series A-4 Warrants are exercisable beginning on the effective dates of stockholder approval of the issuance with such warrants expiring
on (i) the five year anniversary of the initial exercise date for the Series A-3 Warrants and (ii) the eighteen month anniversary of
the initial exercise date for the Series A-4 Warrants. This transaction closed on May 29, 2024. H.C. Wainwright was the exclusive agent
for the transaction for which we paid them a cash fee equal to 7.5% from the exercise of the Series A-2 warrant at the reduced exercise price
and a management fee equal to 1.0% of such aggregate gross proceeds. We also issued warrants to designees of H.C. Wainwright to purchase
up to 1,074,000 shares of our common stock at an exercise price of $0.1938 per share.
Application
for Broker-Dealer License
In
May 2024, we announced that our wholly-owned subsidiary, Netcapital Securities Inc. applied for broker-dealer registration with the Financial
Industry Regulatory Authority (“FINRA”). 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. 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.
Temporary
Cessation of our Valuation Business
In
April 2024, we determined to cease activities with respect to our valuation business conducted by our subsidiary MSG Development Corp.
The person who operated MSG Development Corp. retired in fiscal 2024 due to health reasons and we were unsuccessful in transitioning
the valuation consulting work performed by MSG Development Corp. to another person. Consequently, in fiscal 2024, we recorded an impairment
loss for the intangible assets associated with our acquisition of MSG. We intend to re-start valuation activities through MSG Development
Corp. in the future if we can find and hire the necessary personnel although there is no current timeframe for when we could re-start
such activities and we may ultimately never continue such valuation activities.
April
2024 Common Stock Issuance
On
April 24, 2024, we issued an aggregate of 681,198 shares of our common stock at a price per share of $0.1324 to Steven Geary, a member
of the Company’s board of directors, and Paul Riss, a member of the board of directors of Netcapital Funding Portal, Inc. our wholly-owned
subsidiary, in consideration of the cancellation of $90.204 in outstanding indebtedness owed to Mr. Geary and Mr. Riss by us. The shares
were issued as restricted securities as defined in Rule 144 of the Securities Act of 1933, as amended. We did not receive any proceeds
from these issuances.
Our
revenues for fiscal 20242025 decreased by $3,542,550,$4,081,975, or 42%,82.4%, to $4,951,435,$869,460, as compared to $8,493,985$4,951,435 reported for fiscal 2023.2024. The
decrease 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$3,440,000 52%to $0 in fiscal 2025 as compared to $3,440,000 in fiscal 2024 as compared to $7,105,000 in fiscal 2023.2024. The components of revenue are as
follows:
The
aggregate decrease of $3,665,000$3,440,000 in consulting services for equity securities in fiscal 20242025 occurred because we provided no consulting services
servicesin exchange for equity securities, as compared to only 3 companies in fiscal 2024,2024 asthat comparedpaid tofor 6services companieswith equity securities. We have focused
on online revenue products in fiscal 2023.2025 Weand strivewill continue to providedo more than $1 million worth
of consulting services to this type of client, and the average fee that we earned per clientso in fiscal 20242026. and 2023 amounted to $1,146,667
and $1,184,167, respectively. These services are provided by our consulting subsidiary, Netcapital Advisors, Inc. (“Advisors”),
and Advisors did not earn any equity securities from consulting work in the fourth quarter of fiscal 2024 or the first quarter of fiscal
2025. However, ourOur subsidiary Netcapital Funding Portal Inc. (“Funding
Portal”) began charging a fee of 1% of the equity
raised by issuers that engage with the Funding Portal and in fiscal 2024, the
Funding Portal earned equity securities from 30 clients,
with an aggregate value of $97,700,$72,090, as compared to $0$97,700 in fiscal 2023.2024.
Consulting revenue consists of fees earned by a subsidiary Netcapital Advisors Inc., which earned $96,200 in revenue in fiscal 2024 and $0 in fiscal 2025. Given our limited staff, we did not seek consulting engagements in fiscal 2025 and we do not plan to seek them in fiscal 2026.
Consulting
revenue consists of fees earned by two of our subsidiaries, Advisors and MSG Development Corp. (“MSG”). Revenue generated
by Advisors decreased by $109,320 to $96,200 in fiscal 2024 from $205,520 in fiscal 2023 and revenues generated by MSG decreased to $0
in fiscal 2024 from $249,800 in fiscal 2023. The person who operated MSG retired in fiscal 2024 due to health reasons and we were unsuccessful
in transitioning the valuation consulting work performed by MSG to another person. Consequently, in fiscal 2024, we recorded an impairment
loss for the intangible assets associated with our acquisition of MSG. The decrease in consulting fees from Advisors in fiscal 2024 is
the result of fewer consulting engagements and personnel cuts.
Revenue
from portal fees increaseddecreased by $455,855,$285,294, or 109%,33%, in fiscal 20242025 to $874,368,$589,074 from $418,513$874,368 in fiscal 2023.2024. Revenue from portal fees consists
of a 4.9% fee of the total capital raised by an issuer plus fixed miscellaneous charges for administrative fees, such as a rolling close,
or the filing of an amended offering statement. The increase in portal feesdecrease is attributable to thea increase29% decrease in the amounttotal ofdollars capitalinvested through
raised on the Netcapitalportal, fundingfrom portal$14.8 and the increasemillion in the number of issuers that completed an offering. In fiscal 2024 andto 2023,
the$10.6 average amount raisedmillion in anfiscal offering on the Netcapital funding portal was $280,978 and $128,170, respectively.2025. The total number of
issuers on the Netcapital funding
portal in fiscal 20242025 and 20232024 that successfully closed an offering was 5349 and 50,53, respectively Revenue
from listing fees decreased by $71,920, or 14%, to $442,040 in fiscal 2024 as compared to $513,960 in fiscal 2023. Listing fees
are typically $5,000 per issuer, and they are the first form of revenue earned by our Funding Portal when an issuer signs a contract
with us to sell securities on the funding portal. After the listing contract is signed, an issuer typically takes two months before
it is ready to launch an offering. Most issuers remain on the funding portal, marketing their offering, for a period of six to nine months.respectively.
Revenue from listing fees decreased by $234,540, or 53%, to $207,500 in fiscal 2025 as compared to $442,040 in fiscal 2024. The decrease in listing revenue is directly attributable to the 54% decrease in offerings launched in fiscal 2025, as compared to fiscal 2024. New listings dropped from 82 in Fiscal 2024 to 38 in fiscal 2025. Listing fees are typically $5,000 per issuer, and they are the first form of revenue earned by our Funding Portal when an issuer signs a contract with us to sell securities on the funding portal. After the listing contract is signed, an issuer typically takes two months before it is ready to launch an offering. Most issuers remain on the funding portal, marketing their offering, for a period of six to nine months.
Our
costs of revenues increaseddecreased by $23,022$67,716 or 27%,63%, to $40,344 in fiscal 2025 from $108,060 in fiscal 2024,2024. fromThe $85,038decrease is attributable to
the 82% decrease in revenues in fiscal 2023.2025, Theas increasecompared is attributable
to Funding Portal, which experienced an increase in revenues from portal fees of $455,855 in fiscal 2024.
Consulting
expenses increaseddecreased by $20,860,$295,262, or 4%,48%, to $610,209$314,947 for fiscal 20242025 from $589,349$610,209 reported in the prior fiscal year. The increaseCompany isdecreased
its consistent
withuse inflationof costs.individual independent contractors in fiscal 2025. Consulting expenses are payments for services rendered by non-employees.
What changed in the latest 10-Q
Risk Factors
New heading “We are involved in an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows”
New heading “We recently recognized impairments totaling $19.9 million to the value of several of our portfolio company investments. If we are required to impair the value of additional portfolio companies in the future, it could have a material adverse effect on our financial condition and result of operations.”
New heading “Fluctuations in the Fair Value of Our Portfolio Company Investments Could Cause Significant Volatility in Our Financial Results and May Not Be Indicative of Operating Performance.”
New heading “We recently stopped taking equity from portfolio clients, and if we are unable to replace the revenue generated by taking equity in select portfolio clients, it could have a material adverse effect on our financial position and results of operations”
New heading “We have experienced net losses in every fiscal period since July 31, 2023. We cannot assure you that we can or will be able to operate profitably.”
New heading “If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.”
New heading “The market for securities and real-world asset tokenization is highly competitive and fragmented.”
New heading “Tokenization of securities and RWAs involves novel technological, operational, and cybersecurity risks.”
Largest changes
“The Company cannot predict the results of the investigation and the Wells Notice process and any corresponding enforcement action against the Company and/or any of the identified individuals, and the costs, timing and other potential consequences of responding and complying therewith with any certainty. If the final determination is detrimental to the Company, we may lose business cooperation with our actual and/or potential customers and vendors, and it may be more difficult for the Company to obtain additional financing on favorable terms, if at all. …”see in full comparison
“On March 4, 2026, the Company and certain of its current and former officers and other parties associated with it, including the Company’s former Chief Executive Officer and director and current consultant, Coreen Kraysler, Chief Financial Officer of the Company, John Fanning Sr., husband of Coreen Kraysler and advisor to the Company, Cecilia Lenk, director of the Company and Chief Executive Officer of the Company’s Netcapital Advisors Inc. subsidiary and Paul Riss, a director of the Company’s Netcapital Funding Portal, Inc. …”see in full comparison
“We recently recognized impairments totaling $19.9 million to the value of several of our portfolio company investments. If we are required to impair the value of additional portfolio companies in the future, it could have a material adverse effect on our financial condition and result of operations.”see in full comparison
“We are involved in an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows”see in full comparison
“If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.”see in full comparison
“We recently stopped taking equity from portfolio clients, and if we are unable to replace the revenue generated by taking equity in select portfolio clients, it could have a material adverse effect on our financial position and results of operations”see in full comparison
Full comparison: every changed paragraph (29)
We are involved in an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows
On March 4, 2026, the Company and certain of its current and former officers and other parties associated with it, including the Company’s former Chief Executive Officer and director and current consultant, Coreen Kraysler, Chief Financial Officer of the Company, John Fanning Sr., husband of Coreen Kraysler and advisor to the Company, Cecilia Lenk, director of the Company and Chief Executive Officer of the Company’s Netcapital Advisors Inc. subsidiary and Paul Riss, a director of the Company’s Netcapital Funding Portal, Inc. subsidiary, received “Wells Notices” from the staff of the SEC (the “SEC Staff”) stating that the SEC Staff made a preliminary determination to recommend that the SEC file an enforcement action against the Company and the individuals alleging, in the case of the Company violations of Section 17(a) of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(3)(B) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5, 12b-20, 12a-1, 13a-11, and 13a-13 thereunder, and in the case of the individuals violations of Section 17(a) of the Securities Act and Sections 10(b) and 13(b)(5) of the Exchange Act and Rules 10b-5, and 13b2-1 thereunder, as well as aiding and abetting the Company in their violations. The Wells Notices informed the Company and the individuals that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the individuals that would allege certain violations of the federal securities laws. A Wells Notice is neither a formal allegation nor a finding of wrongdoing. Instead, it is a preliminary determination by the SEC Staff to recommend that the SEC file a civil enforcement action or administrative proceeding against the recipient. Under the SEC’s procedures, a recipient of a Wells Notice has an opportunity to respond in the form of a Wells submission that seeks to persuade the SEC that such an action should not be brought. Accordingly, the Company intends to make a submission to the SEC Staff in response to the Wells Notice setting forth why the factual record does not support the enforcement action recommended by the SEC Staff all of our transactions and filings were entered into and made in good faith. Although the Company intends to defend itself vigorously should the SEC authorize any legal action that does not comport with our view of the facts, we cannot predict the outcome of any legal action or whether the matters will result in any settlement. The ultimate outcome of the SEC investigation, any legal action by the SEC or any settlement could have a material adverse effect on our financial condition, results of operations and/or cash flows.
The Company cannot predict the results of the investigation and the Wells Notice process and any corresponding enforcement action against the Company and/or any of the identified individuals, and the costs, timing and other potential consequences of responding and complying therewith with any certainty. If the final determination is detrimental to the Company, we may lose business cooperation with our actual and/or potential customers and vendors, and it may be more difficult for the Company to obtain additional financing on favorable terms, if at all. Further, it may become more difficult for the Company to attract and retain key members of management, our board of directors and other key employees. The investigation, including any potential SEC enforcement action, continues to be expensive and disruptive, and the Company is obligated to indemnify each of the individuals for their costs associated with the investigation, the Wells Notices, and any resulting litigation with the SEC or related litigation brought by other parties, which may cause financial distress to the Company. Our insurance, to the extent maintained, may not cover all claims that may be asserted against the Company or the specified individuals, and the Company is unable to predict how long the investigation and any potential SEC enforcement action will continue. In addition, because the Company depends on Messrs. Fanning and Riss and Mss. Kraysler and Lenk, the loss of their services may adversely impact the achievement of the Company’s objectives. An unfavorable outcome may have an adverse impact on the Company’s business, financial condition, results of operations, prospects, reputation and/or the Company’s stock price. In addition, Nasdaq has broad discretion and may determine to delist our securities from the Nasdaq Capital Market or other applicable trading market within the U.S. Any proceeding could also negatively impact our reputation among our stakeholders.
At
OctoberJanuary 31, 2025,2026, we had negative working capital of $1,500,153$2,922,843 and for the sixnine months ended OctoberJanuary 31, 2025,2026, we had an operating loss
of $5,405,105$7,579,440 and net cash used in operating activities amounted to $6,792,561.$7,661,306. There can be no assurances that we will be able to achieve
a level of revenuesrevenue adequate to generate sufficient cash flow from operations or additional financing through private placements, public
offerings and/or bank financing necessary to support our working capital requirements. Our management has turned our focus to our funding
portal business, and we plan to use our funding portal experience to build a broker-dealer business, initially for Regulation A and Regulation
D offerings. We plan to continue to seek to raise money from private placements, public offerings and/or bank financing. Our management
has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently
alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. To the extent that funds generated from
any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working
capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. Accordingly,
our management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can
be no assurance that we will be able to achieve our business plan objectives or be able to achieve or maintain cash-flow-positive operating
results. If we are unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay
our our
existing debt, continue to operate our business network, respond to competitive pressures or fund our operations. As a result, we
may may
be required to significantly reduce, reorganize, discontinue or shut down our operations.
We recently recognized impairments totaling $19.9 million to the value of several of our portfolio company investments. If we are required to impair the value of additional portfolio companies in the future, it could have a material adverse effect on our financial condition and result of operations.
On April 30, 2025, we conducted its quarterly evaluation of equity investments under Accounting Standards Codification (ASC) Topic 321, Investments – Equity Securities. Based on this review, we identified multiple investments that were impaired and recognized a total impairment expense of approximately $17.9 million and we recorded a total impairment expense of approximately $19.9 million in the year ended April 30, 2025. These impairments were based on qualitative indicators including the resignation of key personnel, cessation of operations, regulatory setbacks, failure to file required annual reports, or technological obsolescence, depending on the specific issuer. If we are required to impair the value of additional portfolio companies in the future, it could have a material adverse effect on our financial condition and result of operations.
Fluctuations in the Fair Value of Our Portfolio Company Investments Could Cause Significant Volatility in Our Financial Results and May Not Be Indicative of Operating Performance.
We hold minority equity interests in companies that were received as consideration for services, including equity securities received by our funding portal as a 1% equity fee from issuers that raise capital on our platform. These equity interests are generally illiquid, represent minority positions in early-stage companies, and are not traded on active public markets. Under U.S. GAAP, we measure these securities at fair value based on observable transaction prices when available, with changes in fair value recognized in earnings.
As of January 31, 2026, we owned equity interests in a total of 91 companies. Of these investments, 12 equity securities were determined to be impaired and carried at a fair value of $0. The remaining equity securities had an aggregate fair value of $5,810,496, including $282,185 attributable to issuers that paid a 1% equity fee to the funding portal.
The fair value of these investments may fluctuate materially from period to period due to changes in observable prices, issuer-specific developments, market conditions, and the limited nature of observable transactions for many of these securities. Because many of these investments lack active markets, the prices used to determine fair value may not reflect the amounts we could realize in an actual sale, if any, and declines in fair value could require us to recognize additional losses that materially and adversely affect our results of operations.
We recently stopped taking equity from portfolio clients, and if we are unable to replace the revenue generated by taking equity in select portfolio clients, it could have a material adverse effect on our financial position and results of operations
We recently stopped taking equity positions in select portfolio clients. We generated $3,440,000 in revenue from consulting services for equity securities in the fiscal year ended April 30, 2024 as compared to $0 in the fiscal year ended April 30, 2025. We have focused on online revenue products in fiscal 2025 and will continue to do so in fiscal 2026. However, if we are unable to replace the revenue we received from taking equity in select portfolio clients, it could have a material adverse effect on our financial position and results of operations.
We have experienced net losses in every fiscal period since July 31, 2023. We cannot assure you that we can or will be able to operate profitably.
We have incurred net losses in every fiscal period since July 31, 2023. During the nine months ended January 31, 2026 and the years ended April 30, 2025 and 2024, we incurred net losses of approximately $7.6 million, $28.3 million and $4.98 million, respectively, on a consolidated basis. There can be no assurance that we will not continue to incur net losses in the future. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, or even continue our operations.
In
addition, the securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past
years, there has been an increasing incidence of litigation involving the securities industry, including class action suits that generally
seek substantial damages, including in some cases punitive damages. Compliance problems that are reported to federal, state and provincial
regulators, exchanges or other self-regulatory organizations by dissatisfied customers are investigated by such regulatory bodies, and,
if pursued by such regulatory bodybodies or such customers, may rise to the level of arbitration or disciplinary action. We are also subject
to periodic regulatory audits and inspections for various federal, self-regulatory and state regulators. Any such audits and inspections
could require significant amounts of management time, result in the diversion of significant operational resources, require us to change
our business practices or products, result in sanctions being levied against us, including fines and censures, suspension or expulsion
from a certain jurisdiction or market or the revocation or limitation of licenses, result in negative publicity, or otherwise harm our
business and financial results.
We receive many regulatory inquiries each year in addition to being subject to frequent regulatory examinations. The great majority of these inquiries do not lead to fines or any further action against us. We are routinely the subject of regulatory inquiries regarding subjects including, but not limited to: anti-money laundering, compliance, registration, record-keeping, disclosure and other topics of recent regulatory interest. We have procedures for evaluating whether potential regulatory fines are probable, estimable and material and for updating its contingency reserves and disclosures accordingly. In the current climate, we expect that we may, from time to time, be subject to regulatory fines on various topics on an ongoing basis, as other regulated financial services businesses do. The amount of any fines, or operating restrictions on any or all of our licensed operations, and when and if they will be incurred, typically is impossible to predict given the nature of the regulatory process, and the cost of responding to such inquiries and matters can be significant.
An adverse proceeding or settlement as a result of regulatory inquiries could result in our with the SEC Uniform Net Capital Rule, which specifies minimum capital requirements intended to ensure general financial soundness and adequate liquidity Our failure to maintain the required net capital levels and protect customer assets could potentially result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation of our broker-dealer entity and winding down of our broker-dealer business. In addition, adverse proceedings or settlement as a result of regulatory inquiries could result in the loss of our registration as a funding portal at which point we would not be able to help issuers raise capital online which could have a material adverse effect on our business.
We
have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.revenue.
We
currently derive a significant portion of our revenuesrevenue from a limited number of customers. There are inherent risks whenever a large percentage
percentage of total revenuesrevenue are concentrated with a limited number of customers. For the three months ended July 31, 2025, we had one
customer that
constituted 73% of our revenues.revenue. For the three months ended OctoberJanuary 31, 2025, the2026, we had one customer that constituted
23% of revenues,revenue, a second
customer that constituted 13% of revenuesrevenue and a third customer that accounted for 10% of revenues.revenue. For the
six nine months ended OctoberJanuary 31, 2025,
2026, we had one customer that constituted 58% of revenues.revenue. For the three and sixnine months ended OctoberJanuary 31,
2024, 2025, we had one customer
that constituted 44% and 24% of revenues,revenue, respectively.
It
is not possible for us to predict the future level of demand for our services that will be generated by these customers or new customers,
or the future demand for the products and services of these customers or new customers. If any of these customers experience declining
or delayed sales due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our products
which could have an adverse effect on our margins and financial position and could negatively affect our revenuesrevenue and results of operations
and/or trading price of our common stock.
A
significant portion of our total assets are held in equity securities of early-stage companies, which securities are illiquid and subject
to volatility, which factors could have a material adverse effect on our financial condition and results of operations.
Payment
related to the consulting and advisory services provided by Netcapital Advisors was often made through equity stakes from such customers.
As of OctoberJanuary 31, 20252026 and April 30, 2025, approximately $5,856,700$5,810,495 and $5,748,050, respectively, of our holdings are issued by companies
whose securities do not trade on public markets. The securities issued are typically in private companies with no established trading
market for their securities, that often have limited operating histories, limited operating cash, and negative cash flows. Additionally,
these securities are primarily restricted and are subject to legal holding periods pursuant to Rule 144 or other applicable exemptions.
The stock price of such issuers is often volatile, unpredictable, and with limited liquidity, and the value of such securities on the
date of receipt compared to the date when we are able to legally sell the securities may decrease significantly. The value ascribed to
our assets in our financial statements as of a particular date may be materially greater than or less than the value that would be realized
if our assets were to be liquidated as of such date. Accordingly, the value of such holdings may change over time due to factors that
we do not control, such as issuance of securities by such companies at lower prices or other market factors. One such example of a change
in value occurred in the period ended January 31, 2024,2025, we recognized an unrealized loss of approximately $2.7 million on the value of
our equity securities due to the decline in value of a single issuer, which represented an impairment of more than 80% of the previous
value of our holdings in such issuer, which resulted in a reduction of our retained earnings. Changes to the value of our holdings could
have a material adverse effect on our financial condition and results of operations.
If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.
The SEC, FINRA, and various state regulators have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers. For example, our broker dealer is subject to the SEC Uniform Net Capital Rule, which specifies minimum capital requirements intended to ensure general financial soundness and adequate liquidity. Our failure to maintain the required net capital levels and protect customer assets could potentially result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation of our broker-dealer entities and winding down of our broker-dealer business. If such net capital rules are changed or expanded, if there is an unusually large charge against net capital, or if we make changes in our business operations that increase our capital requirements, capital-intensive operations could be limited. A large operating loss or charge against net capital could adversely affect our ability to maintain or expand our business.
The market for securities and real-world asset tokenization is highly competitive and fragmented.
The market for tokenization of securities and RWAs is highly competitive, rapidly evolving, and fragmented. Numerous established financial institutions, fintech companies, and emerging blockchain platforms are seeking to develop and commercialize tokenization products and services. While we believe our technology, experienced personnel, and reputation with customers provide competitive advantages, there can be no assurance that we will be able to achieve or maintain the market position we anticipate. Some of our competitors currently or may in the future have significantly greater financial, technical, and marketing resources, broader customer bases, and longer operating histories. As competition intensifies, we may be required to increase expenditures on research and development, marketing, or incentives, which could adversely affect our profitability. If we are unable to differentiate our offerings or maintain customer confidence in our platform, our growth prospects, financial condition, and results of operations could be materially and adversely affected.
Tokenization of securities and RWAs involves novel technological, operational, and cybersecurity risks.
Our efforts to tokenize securities and RWAs rely on emerging technologies that are untested at scale and subject to significant uncertainty. These activities expose us to risks including technological and operational risk, as blockchain networks, smart contracts, and related infrastructure may fail, contain errors, or become obsolete; (iii) cybersecurity and fraud risk, as tokenized assets and underlying blockchains may be targeted by malicious actors, subject to vulnerabilities, or used in connection with illicit activity; and (iv) valuation and volatility risk, as tokenized securities and RWAs may not maintain or increase in value and may be difficult to price accurately.
Transaction fees, network congestion, or failures in smart contract code could also impair our ability to support tokenized securities and RWAs. Any such technological or operational failures could lead to financial losses, customer disputes, or reputational damage, and could materially and adversely affect our business and prospects
Management's Discussion & Analysis (MD&A)
New heading “Iverson Design Asset Purchase”
Removed heading “Plans to Expand Platform”
Removed heading “Appointment of General Counsel”
Largest changes
“General and administrative expenses decreased by $47,030, or approximately 5%, to $874,545 for the three months ended January 31, 2026, from $921,575 during the three months ended January 31, 2025. The decrease was partially attributable to lower legal fees in fiscal 2026. We incurred approximately $412,000 in legal costs in the three months ended January 31, 2026, of which approximately 86% were related to legal fees responding to ongoing investigations by the U.S. …”see in full comparison
“General and administrative expenses decreased by $147,091, or approximately 4%, to $3,646,761 for the nine months ended January 31, 2026, from $3,794,013 during the nine months ended January 31, 2025. The decrease was primarily attributable to lower professional fees in fiscal 2026, which amounted to $543,282 in the nine months ended January 31, 2026 as compared to $1,157,939 in the nine months ended January 31, 2025. This decrease was offset by an increase in legal fees. …”see in full comparison
“On December 7, 2025, the Company appointed Rich Wheeless as its Chief Executive Officer and entered into an employment agreement with Rich Wheeless (the “Employment Agreement”), pursuant to which Mr. Wheeless will serve as the Company’s Chief Executive Officer for a twelve-month term commencing on December 7, 2025, unless earlier terminated in accordance with its terms. Under the Employment Agreement, Mr. Wheeless is entitled to an annual base salary of $180,000, payable in accordance with the Company’s regular payroll practices. …”see in full comparison
Interest expense increased bysee in full comparison$2,603$13,700 to$12,204,$24,076, or approximately27%,132%, for the three months endedOctoberJanuary 31,2025,2026, as compared to$9,601$10,376 during the three months endedOctoberJanuary 31,2024,2025, due toshort-termdefaultborrowingsinterestinonAprilretiredand May 2025.notes.
“On December 7, 2025, the Board appointed Kevin Kilduff, as its General Counsel. In addition, on December 7, 2025 the Company granted Mr. Kilduff 1,000,000 shares of its common stock (“Restricted Stock”) as a Restricted Stock Award under the Company’s 2023 Omnibus Equity Incentive Plan (the “Plan”) in accordance with NASDAQ Listing Rule 5635(c)(4) to Kevin Kilduff to induce him to accept employment with the Company as its General Counsel. …”see in full comparison
Full comparison: every changed paragraph (59)
Our
financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments,
and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of
the date of the financial statements as well as the reported amounts of revenuesrevenue and expenses during the periods presented. Our financial
statements would be affected to the extent there are material differences between these estimates and actual results. In many cases,
the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment
in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce
a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto
appearing elsewhere in this report.
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. We believe 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”). We generate fees from listing private companies on our funding portal
located at www.netcapital.com. 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, we recently expanded our model to include Regulation A (“Reg A”) offerings, which are conducted
by our wholly owned subsidiary Netcapital Securities Inc. “(“Netcapital Securities”), which is a licensed broker-dealer
with FINRA. Both Reg A and Reg CF offerings are made available to investors via the Company’s website, www.netcapital.com.
We
provide private company investment access to accredited and non-accredited investors through (i) our online portal (www.netcapital.com),
which is operated by our wholly owned subsidiaries Netcapital Funding Portal, Inc and (ii) our broker-dealbroker-dealer subsidiary, Netcapital Securities.
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 2024,2025, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary
services, such as rolling closes. Netcapital Advisors previously generated fees and equity stakes from consulting in select portfolio
companies (“Portfolio Companies”) and non-portfolio clients. Given our limited staff, we did not seek consulting engagements in fiscal
2025 and we do not plan to seek them in fiscal 2026. With respect to services for Reg A offerings, Netcapital Securities
charges a listing
fee of $25,000 and a success fee of 4.9% of the capital raised by an issuer under Reg A. Both Reg A and Reg CF offerings are made available
to investors via the Company’s website, www.netcapital.com.
In addition, in November 2025, we announced plans to expand its platform to include support for compliant blockchain-based digital assets, amid accelerating interest in tokenized securities and tokenized real-world assets (RWAs) like real estate.
We provide private company investment access to accredited and non-accredited investors through (i) our online portal (www.netcapital.com), which is operated by our wholly owned subsidiaries Netcapital Funding Portal, Inc and (ii) our broker-deal subsidiary, Netcapital Securities. The Netcapital funding portal typically 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. Netcapital Advisors generated fees and equity stakes from consulting in select portfolio companies (“Portfolio Companies”) and non-portfolio clients. Given our limited staff, we did not seek consulting engagements in fiscal 2025 and we do not plan to seek them in fiscal 2026. With respect to services for Reg A offerings, Netcapital Securities charges a listing fee of up to $25,000 and a success fee of 4.9% of the capital raised by an issuer under Reg A.
We generated revenue of $335,481, with costs of service of $11,109, in the nine months ended January 31, 2026, for a gross profit of $324,372 as compared to revenue of $465,437, with costs of service of $37,156, in the nine months ended January 31, 2025, for a gross profit of $428,281.
We
generated revenues of $241,134, with costs of service of $9,286, in the six months ended October 31, 2025, for a gross profit of $231,848
as compared to revenues of $312,755, with costs of service of $30,001, in the six months ended October 31, 2024, for a gross profit of
$282,754.
The
total number of offerings on the Netcapital funding portal in fiscal 2025 and 2024 that closed was 70 in each fiscal year, of which 21
and 17 offerings hosted on the Netcapital funding platform in fiscal 2025 and 2024, respectively, terminated their listings without raising
the required minimum dollar amount of capital. For the three- and six-monthsnine-month periods ended OctoberJanuary 31, 2025,2026, 58 and 1018 issuers have launched
an offering on the portal, respectively, as compared to 1627 and 3764 issuers that launched an offering in the three- and six-monthnine-month periods
ended OctoberJanuary 31, 2024,2025, respectively. As of the date of this report, we have minority equity positions in 19 Portfolio Companies that
have utilized the funding portal to facilitate their offerings, which equity was received as payment for services.
For the three months ended January 31, 2026, the Company had one customer that constituted 22% of revenue, a second customer that constituted 15% of revenue and a third customer that accounted for 14% of revenue. For the nine months ended January 31, 2026, the Company had one customer that constituted 43% of revenue. For the three months ended January 31, 2025, the Company had one customer that constituted 17% of its revenue, and for the nine months ended January 31, 2025, the Company had one customer that constituted 16% of its revenue.
For
the three months ended October 31, 2025, the Company had one customer that constituted 23% of revenues, a second customer that constituted
13% of revenues and a third customer that accounted for 10% of revenues. For the six months ended October 31, 2025, the Company had one
customer that constituted 58% of revenues. For the three and six months ended October 31, 2024, the Company had one customer that constituted
44% and 24% of revenues, respectively.
In
November 2024, our wholly owned subsidiary, Netcapital Securities Inc. received approval from FINRA to become a FINRA-member broker dealer.
We believe that by having a registered broker-dealer, it may create opportunities to expand the Company’s revenue base by hosting
and generating additional fees from Reg A and Reg D offerings on the Netcapital platform, earning additional fees in connection with
offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities
by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform
to a wider range of investors in order to maximize market penetration and optimize capital raising efforts. As of the date of this prospectus,report,
Netcapital Securities has been engaged by onefive issuerissuers seeking to raise capital via a Regulation D offering and one issuer seeking to
raise capital via a Regulation A offering.
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,revenue, and we may not consistently achieve
profitable operations.
Plans
to Expand Platform
On
November 19, 2025, the Company announced plans to expand its platform to include support for compliant blockchain-based digital assets,
amid accelerating interest in tokenized securities and tokenized real-world assets (RWAs) like real estate. As of the date of this report,
the expansion has not yet occurred.
On
December 3, 2025, the Companywe purchased substantially all of Rivetz Corp.’s (“Rivetz”) assets related to its “Rivetz
Network”
which develops technology combining hardware-based cybersecurity with blockchain services for mobile and other computing
devices (the “Purchased Assets”) pursuant
to an asset purchase agreement for 950,000 shares of the Company’sour common
stock, par value $0.001 per share. In addition, the Company assumed only specified liabilities of Rivetz relating to the Purchased Assets
and certain contracts, subject to an aggregate cap of $100,000 for liabilities other than those arising under assumed contracts. All
other liabilities of Rivetz, including liabilities relating to Rivetz tokens, employee-related obligations, and indebtedness for borrowed
money, remain with Rivetz.
While we believe the Rivetz Network assets and related technology may enhance our ability to support offerings of tokenized securities under existing registration exemptions, we expect that generating revenue from these capabilities will require additional development, integration, compliance and commercialization efforts. These efforts may require additional financial resources, including funding for personnel, technology development, third-party service providers, and legal and regulatory compliance. We may seek additional capital to fund these efforts and there can be no assurance that such financing will be available on acceptable terms, or at all, or that we will generate revenue from these capabilities.
On December 3, 2025, Martin Kay resigned as our Chief Executive Officer, director and all other officer, director, board and committee positions with us.
On
December 3, 2025, Martin Kay resigned as Chief Executive Officer, director and all other officer, director, board and committee positions
with the Company pursuant to a CEO Separation, Severance and Consulting Agreement (the “Separation Agreement”) with the Company.
In consideration of Mr. Kay’s service and execution of the Separation Agreement, the Company agreed to pay Mr. Kay a one-time severance
payment equal to 3-months’ salary ($98,750). All options previously granted to Mr. Kay shall be fully vested and Mr. Kay shall
have 4 years from the date of the Separation Agreement to exercise his options. Mutual releases and non-disparagement clauses were also
agreed to by the parties in the Separation Agreement. The Company also agreed to engage Mr. Kay as a consultant for a period of 12 months
following the date of the Separation Agreement under which Mr. Kay will be paid $10,000 per month.
Appointment
of Chief Executive Officer and EmploymentGeneral AgreementCounsel
On December 7, 2025, we appointed Rich Wheeless as our Chief Executive Officer and Kevin Kilduff as our General Counsel.
Iverson Design Asset Purchase
In January 2026, we acquired substantially all assets from Iverson Design that primarily relate to its digital design studio business, including assets which facilitate providing creative services including graphic design, motion graphics, 2D/3D animation, visual effects, and related design and visualization services that incorporate AI-driven design methods. As consideration for the purchased assets, the Company issued 980,000 shares of our common stock, par value $0.001 per share.
On
December 7, 2025, the Company appointed Rich Wheeless as its Chief Executive Officer and entered into an employment agreement with Rich
Wheeless (the “Employment Agreement”), pursuant to which Mr. Wheeless will serve as the Company’s Chief Executive Officer
for a twelve-month term commencing on December 7, 2025, unless earlier terminated in accordance with its terms. Under the Employment
Agreement, Mr. Wheeless is entitled to an annual base salary of $180,000, payable in accordance with the Company’s regular payroll
practices. He is eligible to receive periodic bonuses throughout the year, or additional salary in excess of the base salary, in each
case as may be approved by the Company’s Board of Directors or its Compensation Committee. Mr. Wheeless will also be eligible to
receive one or more grants of stock options under the Company’s stock option plan, subject to approval by the Company’s Board
of Directors or its Compensation Committee and a majority of the Company’s shareholders, with the amount, timing and terms of any
such grants to be determined in the sole discretion of the Board or such committee. For the period of his employment and for two years
thereafter, Mr. Wheeless is subject to certain non-competition and non-solicitation covenants, including restrictions on engaging in
or assisting competitive businesses and on soliciting certain customers, clients, suppliers and employees of the Company and its affiliates,
subject to customary limited exceptions. The Agreement also contains customary provisions relating to non-disparagement, remedies, severability,
waiver, governing law and other matters.
Appointment
of General Counsel
On
December 7, 2025, the Board appointed Kevin Kilduff, as its General Counsel. In addition, on December 7, 2025 the Company granted Mr.
Kilduff 1,000,000 shares of its common stock (“Restricted Stock”) as a Restricted Stock Award under the Company’s 2023
Omnibus Equity Incentive Plan (the “Plan”) in accordance with NASDAQ Listing Rule 5635(c)(4) to Kevin Kilduff to induce him
to accept employment with the Company as its General Counsel. The shares of Restricted Stock will have voting rights upon issuance and
will vest in whole or in part on March 15, 2027 with the number of shares of Restricted Stock that will vest on the vesting date will
be determined based on the Company’s revenue during the period beginning on February 1, 2026 and ending on January 31, 2027. Specifically,
in the event that the revenue during the measuring period is below $900,000, none of the shares of Restricted Stock shall vest and in
the event that the revenue during the measuring period is at least equal to $1,500,000, one hundred percent (100%) of the shares of Restricted
Stock shall vest as of the vesting date, with pro-rata vesting for results between the minimum and maximum revenue targets. The Restricted
Stock Award will be an Exempt Award (as defined in the Plan) under the Plan by reason of being an award granted as an inducement grant
pursuant to NASDAQ Listing Rule 5635(c), as this award is specifically made to induce Mr. Kilduff to become an employee of the Company.
Comparison
of the Three Months Ended OctoberJanuary 31, 20252026 and 20242025
Our
revenuesrevenue for the three months ended OctoberJanuary 31, 2025,2026, decreased by $119,452,$58,335, or approximately 70%,38%, to $51,076,$94,347, as compared to $170,528$152,682
during the three months ended OctoberJanuary 31, 2024.2025. The decrease in revenuesrevenue was attributed to the lack of new issuers signing up for funding
portal services. Only fiveeight new issuers launched a crowdfunding campaign in the three months ended OctoberJanuary 31, 2025,2026, as compared to 1628
offerings launched in the three months ended OctoberJanuary 31, 2024.2026.
In
the three months ended OctoberJanuary 31, 2025,2026, we recorded $51,076$84,137 in funding portal revenues,revenue, consisting of portal fees of $14,461,$34,582, listing
fees of $35,000,$45,809, and equity fees of $1,510,$3,746, as compared to funding portal revenuesrevenue of $170,528$152,406 in the three months ended OctoberJanuary 31, 2025,
2024, consisting of portal fees of $108,124,$100,087, listing fees of $47,500$37,500 and equity fees of $14,748.$14,819. TwoFive issuers successfully closed offerings
in the three months ended OctoberJanuary 31, 2025,2026, as compared to 13eight issuers in the three months ended OctoberJanuary 31, 2024.2025. The components of
revenue revenue
were as follows:
Cost
of revenuesrevenue decreased by $17,904$5,332 to $1,877,$1,823, or approximately 91%75% for the three months ended OctoberJanuary 31, 2025,2026, from $19,781$7,155 during the three
three months ended OctoberJanuary 31, 2024.2025. The decrease was attributed to lower revenues.revenue.
Payroll
and payroll related expenses increased by $106,732,$282,974, or approximately 14%,35%, to $856,433$1,097,998 for the three months ended OctoberJanuary 31, 2025,2026,
as as
compared to $749,701$815,024 during the three months ended OctoberJanuary 31, 2024.2025. The increase was attributed to the hiring of an AI specialist
and a general counsel, in addition to salary increases for certain
key positions, to assist with employee retention.
Rent
expense increased by $1,858,$1,122, or approximately 10%,6%, to $21,300 for the three months ended OctoberJanuary 31, 2025,2026, as compared to $19,442$20,178 during
the three months ended OctoberJanuary 31, 2024.2025. The increase was primarily attributed to a new office-space agreement.
General and administrative expenses decreased by $47,030, or approximately 5%, to $874,545 for the three months ended January 31, 2026, from $921,575 during the three months ended January 31, 2025. The decrease was partially attributable to lower legal fees in fiscal 2026. We incurred approximately $412,000 in legal costs in the three months ended January 31, 2026, of which approximately 86% were related to legal fees responding to ongoing investigations by the U.S. Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), including subpoenas and testimony requests issued to the Company and certain current and former officers and employees as compared to approximately $428,000 in legal costs in the three months ended January 31, 2025 of which approximately 65% were related to legal fees responding to the ongoing investigations by the SEC and FINRA discussed above. The Company anticipates that its legal fees will increase in future periods in response to the Wells Notice received on March 4, 2025. See “Part II-Item 1A. Risk Factors – We are involved in an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows” for additional information.
General
and administrative expenses decreased by $302,102, or approximately 20%, to $1,202,288 for the three months ended October 31, 2025, from
$1,504,390 during the three months ended October 31, 2024. The decrease was primarily attributable to lower legal costs in fiscal 2026.
Consulting
expense increased by $8,990,$204,477, or approximately 11%,322%, to $88,635$268,032 for the three months ended OctoberJanuary 31, 2025,2026, from $79,645$63,555 during the
three three
months ended OctoberJanuary 31, 2024.2025. The increase was primarily attributed to corporatea needsnew dueconsultant hired for the tokenization of real world
assets, and payments to lackour offormer hiringCEO, full-timewho employees.is consulting for us over a one-year period.
Interest
expense increased by $2,603$13,700 to $12,204,$24,076, or approximately 27%,132%, for the three months ended OctoberJanuary 31, 2025,2026, as compared to $9,601$10,376 during
the three months ended OctoberJanuary 31, 2024,2025, due to short-termdefault borrowingsinterest inon Aprilretired and May 2025.notes.
During the three months ended January 31, 2026, the Company recorded no impairment expense, compared to $1,300,000 during the three months ended January 31, 2025. The impairment recorded in the prior-year period related to the Company’s investment in Netwire LLC, which management determined was impaired following significant changes in the investee’s management and operating outlook.
During the three months ended January 31, 2026, the Company recognized $500,000 of insurance recovery proceeds, compared to none in the three months ended January 31, 2025. The proceeds relate to the partial resolution of an insurance claim.
Comparison
of the SixNine Months Ended OctoberJanuary 31, 20252026 and 20242025
Our
revenuesrevenue for the sixnine months ended OctoberJanuary 31, 2025,2026, decreased by $71,621,$129,956, or approximately 23%,28%, to $241,134,$335,481, as compared to $312,755$465,437
during the sixnine months ended OctoberJanuary 31, 2024.2025.
In
the sixnine months ended OctoberJanuary 31, 2025,2026, we recorded $241,134$335,481 in funding portal revenues,revenue, consisting of portal fees of $137,189,$171,771, listing
fees of $40,000,$95,809, and equity fees of $63,705,$67,451, as compared to funding portal revenuesrevenue of $312,755$465,437 in the sixnine months ended OctoberJanuary 31, 2024,2025,
consisting of portal fees of $197,553,$297,627, listing fees of $90,000$127,500 and equity fees of $24,875.$39,694. The decrease in revenuesrevenue was primarily attributed
to a decrease in the number of issuers raising capital on the funding portal’s platform. New offerings launched amounted to 1018
issuers in the sixnine months ended OctoberJanuary 31, 2025,2026, as compared to 3764 issuers in the sixnine months ended OctoberJanuary 31, 2024.2025. Five10 issuers successfully
closed offerings in the sixnine months ended OctoberJanuary 31, 2025,2026, as compared to 1725 issuers in the sixnine months ended OctoberJanuary 31, 2024.The2025.The components
of revenue were as follows:
Cost
of revenuesrevenue decreased by $20,715$26,047 to $9,286,$11,109 or approximately 69%,70%, for the sixnine months ended OctoberJanuary 31, 20252026 from $30,001$37,156 during the sixnine
months ended OctoberJanuary 31, 2024.2025. The decrease was primarily attributed to lower revenues.revenue.
Payroll
and payroll related expenses increased by $763,589,$1,046,563, or approximately 41%,35%, to $2,649,883$3,747,881 for the sixnine months ended OctoberJanuary 31, 2025,2026,
as as
compared to $1,886,294$2,701,318 during the sixnine months ended OctoberJanuary 31, 2024.2025. The increase was attributed to the hiring of an AI specialist
and a general counsel, in addition to salary increases and bonuses
for certain key positions, to assist with employee retention.
Rent
expense increased by $5,594,$6,716, or approximately 15%,11%, to $44,152$65,452 for the sixnine months ended OctoberJanuary 31, 2025,2026, as compared to $38,558$58,78 during
the sixnine months ended OctoberJanuary 31, 2024.2025. The increase was primarily attributed to a new office-space agreement.
General and administrative expenses decreased by $147,091, or approximately 4%, to $3,646,761 for the nine months ended January 31, 2026, from $3,794,013 during the nine months ended January 31, 2025. The decrease was primarily attributable to lower professional fees in fiscal 2026, which amounted to $543,282 in the nine months ended January 31, 2026 as compared to $1,157,939 in the nine months ended January 31, 2025. This decrease was offset by an increase in legal fees. We incurred approximately $2,161,000 in legal costs in the nine months ended January 31, 2026, of which approximately 91% were related to legal fees responding to ongoing investigations by the SEC and FINRA, including subpoenas and testimony requests issued to the Company and certain current and former officers and employees as compared to approximately $1,442,000 in legal costs in the nine months ended January 31, 2025 of which approximately 83% were related to legal fees responding to ongoing investigations by the SEC and FINRA discussed above. The Company anticipates that its legal fees will increase in future periods in response to the Wells Notice received on March 4, 2025. See “Part II-Item 1A. Risk Factors – We are involved in an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows” for additional information.
General
and administrative expenses decreased by $109,312, or approximately 4%, to $2,782,232 for the six months ended October 31, 2025, from
$2,891,544 during the six months ended October 31, 2024. The decrease was primarily attributable to lower legal costs in fiscal 2026.
Consulting
expenseexpenses decreasedincreased by $16,340,$188,137, or approximately 9%,78%, to $160,686$428,718 for the sixnine months ended OctoberJanuary 31, 20252026 from $177,026$240,581 during the
nine six
months ended OctoberJanuary 31, 2024.2025. The decreaseincrease was primarily attributed to oura effortsnew consultant hired for the tokenization of real world
assets, and payments to controlour expensesformer associatedCEO, withwho overseasis programmers.consulting for us over a one-year period.
Interest
expense increased by $28,206$41,906 to $48,271,$72,347, or approximately 141%,138%, for the sixnine months ended OctoberJanuary 31, 2025,2026, as compared to $20,065$30,441 during
the sixnine months ended OctoberJanuary 31, 2024.2025. The increase resulted from short-term borrowings in April and May 2025 that were paid off in
September September
2025.
The
Company owned 8,989 shares of a funding portal issuer at a cost of $5.00 per share. On May 30, 2025, the issuer closed an offering at
a price of $10.00 per share. As a result, the Company marked its investment to market and recorded an unrealized gain of $44,945 in the
six-monthnine-month period ended OctoberJanuary 31, 2025.2026. NoThis gain was netted against an unrealized gainsloss orof losses$49,050 werefrom recordeda mark-to-market adjustment
of equity securities held by the Company, resulting in thea firstnet twounrealized quartersloss of fiscalequity 2025.securities of $5,005 for the nine months ended
January 31, 2026.
During the nine months ended January 31, 2026, the Company recorded no impairment expense, compared to $1,300,000 during the nine months ended January 31, 2025. The impairment recorded in the prior-year period related to the Company’s investment in Netwire LLC, which management determined was impaired following significant changes in the investee’s management and operating outlook.
During the nine months ended January 31, 2026, the Company recognized $500,000 of insurance recovery proceeds, compared to none in the nine months ended January 31, 2025. The proceeds relate to the partial resolution of an insurance claim, and the Company expects to recognize additional proceeds in the fourth quarter of fiscal 2026 as the claim continues to be resolved.
Accretion
on short-term notes increased to $356,413 for the sixnine months ended OctoberJanuary 31, 2025.2026. There was no accretion on short-term notes recorded
during the sixnine months ended OctoberJanuary 31, 2024.2025. During 2025, the Company sold 4 notes, and each note contained an original issuance discount
that was accreted during the sixnine months ended OctoberJanuary 31, 2025.2026.
As
of OctoberJanuary 31, 2025,2026, we had cash and cash equivalents of $1,684,188$715,443 and negative working capital of $1,500,153$2,922,843 as compared to cash and
cash equivalents of $289,428 and negative working capital of $5,096,155 as of April 30, 2025.
On
July 16, 2025, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to sell
641,712 shares of our common stock, at a purchase price of $4.675 per share for gross proceeds of approximately $3 million, prior to
deducting placement agent’s fees and other offering expenses payable by us. Each share of commonscommon stock was also sold with a warrant
to purchase one share of common stock with an exercise price of $4.55 per share. The shares were offered pursuant to our shelf registration
statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities Exchange Commission on October 26, 2022.
This offering closed on July 17, 2025.
On
July 2, 2025, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to sell
714,286 shares of our common stock, at a purchase price of $7.00 per share for gross proceeds of approximately $5 million, prior to deducting
placement agent’s fees and other offering expenses payable by us. Each share of commonscommon stock was also sold with a warrant to purchase
one share of common stock with an exercise price of $6.88 per share. We used approximately $320,000 of the net proceeds for repayment
of outstanding promissory notes and intend to use the remainder for working capital and other general corporate purposes. The shares
were offered pursuant to our shelf registration statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities
Exchange Commission on October 26, 2022. The offering closed on July 7, 2025.
Net
cash used in operating activities amounted to $6,792,561$7,661,306 and $3,451,087$4,614,630 for the sixnine months ended OctoberJanuary 31, 20252026 and 2024,2025, respectively.
The principal source of cash used in operating activities in the sixnine months ended OctoberJanuary 31, 20252026 was a decrease in accounts payable
and accrued expenses of $1,734,036$1,281,568 .and an increase in prepaid expenses of $282,041. The principal sources of cash from operating activities
in the sixnine months ended OctoberJanuary 31, 2025
was2026 awere non-cash item,items, including stock-based compensation of $655,444$1,023,967 and an increase in accretion of short-term
notes of $356,413. These amounts
were offset by a loss of $5,771,541. The principal source of cash from operating activities in the six months ended October 31, 2024
was a non-cash item, stock-based compensation of $278,742 and an increase in accounts payable and accrued expenses of $911,387. These
amounts were offset by a loss of $4,747,671.$7,584,385.
The principal sources of cash from operating activities in the nine months ended January 31, 2025 were non-cash items, including stock-based compensation of $418,113 and an increase in accounts payable and accrued expenses of $1,308,085. These amounts were offset by a loss of $7,754,208.
Net cash used in investing activities amounted to $100,000 for the nine months ended January 31, 2026. The cash used in investing activities consisted of a $100,000 cash payment related to the acquisition of assets associated with the Rivetz Network. The total purchase price for the Rivetz assets was $1,040,000, consisting of $100,000 in cash and $940,000 in shares of the Company’s common stock. The issuance of common stock was a non-cash investing activity and therefore did not impact the statement of cash flows. There were no investing activities during the nine months ended January 31, 2025.
For
the sixnine months ended OctoberJanuary 31, 2025,2026, net cash provided by financing activities amounted to $8,187,321, which consisted primarily of
proceeds proceeds
from the sale of common stock of $8,507,171 and proceeds from short-term notes of $300,000. However,These thisamounts waswere off-setpartially offset
by paymentrepayments of short-term
notes of $619,850. For the sixnine months ended OctoberJanuary 31, 2024,2025, net cash provided by financing activities
amounted to $3,934,644,$4,365,752, which
consisted of proceeds from the sale of common stock of $1,979,000 and proceeds from the exercise of warrants
of $1,955,644.$2,386,752.
In
the sixnine months ended OctoberJanuary 31, 20252026 and 2024,2025, there were no expenditures for capital assets. WeThe doCompany does not anticipate any capital
expenditures expenditures
in fiscal 2026.
NCPL insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding NCPL (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 54,283 | $29.1K | 0.0% | Added 41% |