UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 31, 2024

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-41443

NETCAPITAL INC.

(Exact name of registrant as specified in its charter)

Utah

87-0409951

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1 Lincoln Street

Boston MA 02111

(Address of principal executive offices)

(781) 925-1700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.001 per share	NCPL	The Nasdaq Stock Market LLC
Warrants to Purchase Common Stock	NCPLW	The Nasdaq Stock Market LLC

Indicate by check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 16, 2024 the registrant had 1,841,335 shares of its common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

	Page
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.	5
Condensed Consolidated Balance Sheets as of October 31, 2024 (unaudited) and April 30, 2024	5
Condensed Consolidated Statements of Operations for the three and six months ended October 31, 2024 and 2023 (unaudited)	6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended October 31, 2024 (unaudited) and the year ended April 30, 2024	7
Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2024 and 2023 (unaudited)	8
Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3. Quantitative and Qualitative disclosures about Market Risk.	29

Item 4. Controls and Procedures.	29

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.	30

Item1A. Risk Factors.	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	31

Item 3. Defaults Upon Senior Securities.	31

Item 4. Mine Safety Disclosures.	32

Item 5. Other Information.	32

Item 6. Exhibits.	33

Signatures.	34

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

●	capital requirements and the availability of capital to fund our growth and to service our existing debt;

●	difficulties executing our growth strategy, including attracting new issuers and investors;

●	our anticipated use of the net proceeds from our recent public offering;

●	economic uncertainties and business interruptions resulting from the coronavirus COVID-19 global pandemic and its aftermath;

●	as restrictions related to the coronavirus COVID-19 global pandemic are removed and face-to-face economic activities normalize, it may be difficult for us to maintain the recent sales gains that we have experienced;

●	all the risks of acquiring one or more complementary businesses, including identifying a suitable target, completing comprehensive due diligence uncovering all information relating to the target, the financial stability of the target, the impact on our financial condition of the debt we may incur in acquiring the target, the ability to integrate the target’s operations with our existing operations, our ability to retain management and key employees of the target, among other factors attendant to acquisitions of small, non-public operating companies;

●	difficulties in increasing revenue per issuer;

●	challenges related to hiring and training fintech employees at competitive wage rates;

●	difficulties in increasing the average number of investments made per investor;

●	shortages or interruptions in the supply of quality issuers;

●	our dependence on a small number of large issuers to generate revenue;

●	negative publicity relating to any one of our issuers;

●	competition from other online capital portals with significantly greater resources than we have;

●	changes in investor tastes and purchasing trends;

●	our inability to manage our growth;

●	our inability to maintain an adequate level of cash flow, or access to capital, to meet growth expectations;

●	changes in senior management, loss of one or more key personnel or an inability to attract, hire, integrate and retain skilled personnel;

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●	labor shortages, unionization activities, labor disputes or increased labor costs, including increased labor costs resulting from the demand for qualified employees;

●	our vulnerability to increased costs of running an online portal with any cloud partner;

●	our vulnerability to increasing labor costs;

●	the impact of governmental laws and regulation;

●	failure to obtain or maintain required licenses;

●	changes in economic or regulatory conditions and other unforeseen conditions that prevent or delay the development of a secondary trading market for shares of equity that are sold on our online portal; and

●	inadequately protecting our intellectual property or breaches of security of confidential user information.

You are cautioned that all forward-looking statements involve risks and uncertainties. We undertake no obligation to amend this Form 10-Q or our annual report on Form 10-K or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to applicable federal securities laws) to reflect subsequent events or circumstances.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NETCAPITAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	October 31, 2024 (Unaudited)			April 30, 2024 (Audited)
Assets:
Cash and cash equivalents	$	1,346,739		$	863,182
Accounts receivable net		17,151			134,849
Interest receivable		2,000			1,200
Note receivable		20,000			20,000
Prepaid expenses		30,120			23,304
Total current assets		1,416,010			1,042,535

Deposits		6,300			6,300
Notes receivable - related parties		202,000			202,000
Purchased technology, net		14,715,267			14,733,005
Investment in affiliate		240,080			240,080
Equity securities		25,358,261			25,333,386
Total assets	$	41,937,918		$	41,557,306

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,815,823		$	793,325
Accrued expenses		199,189			310,300
Deferred revenue		409			466
Interest payable		96,050			92,483
Current portion of SBA loans		1,885,800			1,885,800
Loan payable - bank		34,324			34,324
Total current liabilities		4,031,595			3,116,698

Long-term liabilities:
Long-term SBA loans, less current portion		500,000			500,000
Total liabilities		4,531,595			3,616,698

Commitments and contingencies		-			-

Stockholders’ equity:
Common stock, $.001 par value; 900,000,000 shares authorized,1,841,335 and 326,867 shares issued and outstanding		1,842			327
Shares to be issued		122,124			122,124
Capital in excess of par value		41,550,465			37,338,594
Retained earnings (deficit)		(4,268,108	)		479,563
Total stockholders’ equity		37,406,323			37,940,608
Total liabilities and stockholders’ equity	$	41,937,918		$	41,557,306

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	October 31, 2024			October 31, 2023			October 31, 2024			October 31, 2023

Revenues	$	170,528		$	2,041,658		$	312,755		$	3,561,467
Costs of services		19,781			20,134			30,001			38,187
Gross profit		150,747			2,021,524			282,754			3,523,280

Costs and expenses:
Consulting expense		79,645			204,734			177,026			368,676
Marketing		12,208			46,731			19,106			288,619
Rent		19,442			18,379			38,558			37,989
Payroll and payroll related expenses		749,701			1,050,835			1,886,294			2,087,877
General and administrative costs		1,492,182			648,625			2,872,438			1,436,919
Total costs and expenses		2,353,178			1,969,304			4,993,422			4,220,080
Operating income (loss)		(2,202,431	)		52,220			(4,710,668	)		(696,800	)

Other income (expense):
Interest expense		(9,601	)		(10,562	)		(20,065	)		(23,866	)
Interest income		400			-			800			-
Amortization of intangible assets		(8,869	)		(28,331	)		(17,738	)		(56,662	)
Total other income (expense)		(18,070	)		(38,893	)		(37,003	)		(80,528	)
Net income (loss) before taxes		(2,220,501	)		13,327			(4,747,671	)		(777,328	)
Income tax expense (benefit)		-			(326,289	)		-			(625,289	)
Net income (loss)	$	(2,220,501	)	$	339,616		$	(4,747,671	)	$	(152,039	)

Basic earnings (loss) per share	$	(2.34	)	$	2.52		$	(6.58	)	$	(1.26	)
Diluted earnings (loss) per share	$	(2.34	)	$	2.52		$	(6.58	)	$	(1.26	)

Weighted average number of common shares outstanding:
Basic		947,459			134,793			721,389			120,762
Diluted		947,459			134,796			721,389			120,762

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Six Months Ended October 31, 2024 (Unaudited) and the Year Ended April 30, 2024


	Common Stock				Shares to			Capital in Excess of			Retained Earnings			Total
	Shares		Amount		Be Issued			Par Value			(Deficit)			Equity
Balance April 30, 2023		92,008	$	93	$	183,187		$	30,507,292		$	5,465,880		$	36,156,452

Vesting of stock options		-		-		-			557,484			-			557,484
Stock-based compensation		1,429		1		-			143,999			-			144,000
Sale of common stock		108,929		109		-			5,535,530			-			5,535,639
Purchase of equity interest		535		-		-			366,377			-			366,377
Stock-based settlement		10,448		10		-			159,023			-			159,033
Reduction in shares to be issued		89		1		(61,063	)		61,062			-			-
Warrant exercise		113,429		113		-			7,827			-			7,940
Net loss year ended April 30, 2024		-		-		-			-			(4,986,317	)		(4,986,317	)
Balance April 30, 2024		326,867		327		122,124			37,338,594			479,563			37,940,608

Vesting of stock options		-		-		-			139,371			-			139,371
Round up of fractional shares						140			(140	)		-			-
Warrant exercise		252,286		252		-			1,955,392			-			1,955,644
Net loss July 31, 2024 quarter		-		-		-						(2,527,170	)		(2,527,170	)
Balance July 31, 2024		579,153		579		122,264			39,433,217			(2,047,607	)		37,508,453
Balance		579,153		579		122,264			39,433,217			(2,047,607	)		37,508,453

Vesting of stock options		-		-		-			139,371			-			139,371
Reduction in shares to be issued		139,489		140		(140	)		-			-			-
Sale of common stock		1,122,693		1,123		-			1,977,877			-			1,979,000
Net loss October 31, 2024 quarter		-		-		-			-			(2,220,501	)		(2,220,501	)
Net loss		-		-		-			-			(2,220,501	)		(2,220,501	)
Balance October 31, 2024		1,841,335	$	1,842	$	122,124		$	41,550,465		$	(4,268,108	)	$	37,406,323
Balance		1,841,335	$	1,842	$	122,124		$	41,550,465		$	(4,268,108	)	$	37,406,323

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended			Six Months Ended
	October 31, 2024			October 31, 2023
OPERATING ACTIVITIES
Net income (loss)	$	(4,747,671	)	$	(152,039	)
Adjustment to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		278,742			763,873
Receipt of equity in lieu of cash		(24,875	)		(1,170,000	)
Provision for bad debts		-			6,000
Changes in deferred taxes		-			57,000
Amortization of intangible assets		17,738			56,662
Changes in non-cash working capital balances:
Accounts receivable		117,698			(1,517,167	)
Other receivables		(800	)		(158,873	)
Prepaid expenses		(6,816	)		(12,329	)
Accounts payable and accrued expenses		911,387			365,115
Income taxes payable		-			(174,000	)
Deferred revenue		(57	)		(153	)
Accrued interest payable		3,567			(9,903	)
Net cash used in operating activities		(3,451,087	)		(1,945,814	)

INVESTING ACTIVITIES
Note receivable		-			(20,000	)
Net cash provided by (used in) investing activities		-			(20,000	)

FINANCING ACTIVITIES
Payment to secured lender		-			(350,000	)
Proceeds from exercise of warrants		1,955,644			-
Proceeds from sale of common stock		1,979,000			2,275,200
Net cash provided by financing activities		3,934,644			1,925,200

Net increase (decrease) in cash		483,557			(40,614	)
Cash and cash equivalents, beginning of the period		863,182			569,441
Cash and cash equivalents, end of the period	$	1,346,739		$	528,827

Supplemental disclosure of cash flow information:
Cash paid for taxes	$	-		$	-
Cash paid for interest	$	16,498		$	33,767

Supplemental Non-Cash Financing Information:
Common stock issued to purchase 10% interest in Caesar Media Group Inc.	$	-			183,188

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1– Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Netcapital Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended October 31, 2024, are not necessarily indicative of the results that may be expected for the fiscal year ended April 30, 2025. For further information, refer to the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended April 30, 2024.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after the elimination of significant intercompany balances and transactions. The wholly owned subsidiaries are Netcapital Funding Portal Inc., an equity-based funding portal registered with the SEC, Netcapital Advisors Inc., which provides marketing and strategic advice to select companies, MSG Development Corp, a business valuation company, which was acquired in November 2021, and Netcapital Securities Inc., which was organized in 2024 and was approved by FINRA to operate as a broker dealer.

Reverse Stock Split

On July 29, 2024, following shareholder approval we filed articles of amendment (the “Articles of Amendment”) to our Articles of Incorporation, as amended, with the Utah Department of Commerce, Division of Corporations and Commercial Code to effectuate a 1-for-70 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of common stock, which Articles of Amendment became effective on August 1, 2024. The Reverse Stock Split became effective at 4:01 pm Eastern Time on August 1, 2024, and our common stock began trading on a split-adjusted basis at the open of trading on The Nasdaq Capital Market on August 2, 2024. Upon effectiveness of the Reverse Stock Split, every seventy (70) shares of our common stock issued and outstanding were automatically reclassified and combined into one share of our common stock, without any change in the par value per share. Additionally, equitable adjustments corresponding to the Reverse Stock Split ratio were made to (i) the exercise prices of and number of shares of common stock underlying the Company’s public and private warrants in accordance with their terms, (ii) the number of shares of common stock underlying the Company’s outstanding equity awards in accordance with their terms, and (iii) the number of shares of common stock issuable under the Company’s equity incentive plan. No fractional shares were issued in connection with the Reverse Stock Split. Any stockholder who would otherwise be entitled to receive a fractional share instead became entitled to receive one whole share of Common Stock in lieu of such fractional share. Following the Reverse Stock Split, we had 718,934 shares of our common stock outstanding, which includes 139,781 shares of our common stock that were issued for rounding up fractional shares resulting from the Reverse Stock Split. All share and per share data in the accompanying financial statements have been retroactively adjusted to reflect the effect of the Reverse Stock Split.

Use of Estimates

Preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, accounts receivable, valuation of equity securities, income taxes, and valuation of long-lived assets including intellectual property and purchased technology. These estimates are based on management’s knowledge of current events, interpretation of regulations, and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.

Significant Accounting Policies

There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.

The Company accounts for allowance for credit losses under the current expected credit loss (“CECL”) impairment model for its financial assets, including accounts receivable, and presents the net amount of the financial instrument expected to be collected. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, the Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, communications with its customers, and macro-economic conditions. Amounts are written off after considerable collection efforts have been made and the amounts are determined to be uncollectible.

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

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Note 2 – Concentrations

For the three and six months ended October 31, 2024, the Company had one customer that constituted 44% and 24% of revenues, respectively. For the three and six months ended October 31, 2023, the Company had one customer that constituted 27% and 31% of revenues, and a second customer that constituted 27% and 31% of revenues, and a third customer that constituted 20% and 11% of revenues, respectively.

Note 3 – Revenue Recognition

Revenue Recognition under ASC 606

The Company recognizes service revenue from its consulting contracts, funding portal and game website using the five-step model as prescribed by ASC 606:

●	Identification of the contract, or contracts, with a customer.

●	Identification of the performance obligations in the contract.

●	Determination of the transaction price.

●	Allocation of the transaction price to the performance obligations in the contract; and

●	Recognition of revenue when or as the Company satisfies a performance obligation.

The Company identifies performance obligations in contracts with customers, which primarily are professional services, listing fees on our funding portal, and a portal fee of 4.9% of the money raised on the funding portal. The transaction price is determined based on the amount the Company expects to be entitled to receive in exchange for transferring the promised services to the customer. The transaction price in the contract is allocated to each distinct performance obligation in an amount that represents the relative amount of consideration expected to be received in exchange for satisfying each performance obligation. Revenue is recognized when performance obligations are satisfied. The Company usually bills its customers before it provides any services and begins performing services after the first payment is received. Contracts are typically one year or less. For larger contracts, in addition to the initial payment, the Company may allow for progress payments throughout the term of the contract.

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Judgments and Estimates

The estimation of variable consideration for each performance obligation requires the Company to make subjective judgments. The Company enters into contracts with customers that regularly include promises to transfer multiple services, such as digital marketing, web-based videos, offering statements, and professional services. For arrangements with multiple services, the Company evaluates whether the individual services qualify as distinct performance obligations. In its assessment of whether a service is a distinct performance obligation, the Company determines whether the customer can benefit from the service on its own or with other readily available resources, and whether the service is separately identifiable from other services in the contract. This evaluation requires the Company to assess the nature of each individual service offering and how the services are provided in the context of the contract, including whether the services are significantly integrated, highly interrelated, or significantly modify each other, which may require judgment based on the facts and circumstances of the contract.

When agreements involve multiple distinct performance obligations, the Company allocates arrangement consideration to all performance obligations at the inception of an arrangement based on the relative standalone selling prices (SSP) of each performance obligation. Where the Company has standalone sales data for its performance obligations which are indicative of the price at which the Company sells a promised service separately to a customer, such data is used to establish SSP. In instances where standalone sales data is not available for a particular performance obligation, the Company estimates SSP by the use of observable market and cost-based inputs. The Company continues to review the factors used to establish list price and will adjust standalone selling price methodologies as necessary on a prospective basis.

Service Revenue

Service revenue from subscriptions to the Company’s game website is recognized over time on a ratable basis over the contractual subscription term beginning on the date that the platform is made available to the customer. Payments received in advance of subscription services being rendered are recorded as a deferred revenue. Professional services revenue is recognized over time as the services are rendered.

When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company estimates the amount to reserve for uncollectible amounts based on the aging of the contract balance, current and historical customer trends, and communications with its customers. These reserves are recorded as operating expenses against the contract assets.

Contract Assets

Contract assets are recorded for those parts of the contract consideration not yet invoiced but for which the performance obligations are completed. The revenue is recognized when the customer receives services. Contract assets are included in other current assets in the consolidated balance sheets and will be recognized during the succeeding twelve-month period.

Deferred Revenue

Deferred revenues represent billings or payments received in advance of revenue recognition and are recognized upon transfer of control. Balances consist primarily of annual plan subscription services and professional services not yet provided as of the balance sheet date. Deferred revenues that will be recognized during the succeeding twelve-month period are recorded as current deferred revenues in the consolidated balance sheets, with the remainder recorded as other non-current liabilities in the consolidated balance sheets.

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Costs to Obtain a Customer Contract

Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized as other current or non-current assets and amortized on a straight-line basis over the life of the contract, which approximates the benefit period. The benefit period was estimated by taking into consideration the length of customer contracts, technology lifecycle, and other factors. All sales commissions are recorded as consulting fees within the Company’s consolidated statement of operations.

Remaining Performance Obligations

The Company’s subscription terms are typically less than one year. All of the Company’s revenues in the three and six months ended October 31, 2024, which amounted to $170,528 and $312,755, respectively, are considered contract revenues. Contract revenue as of October 31, 2024 and April 30, 2024, which has not yet been recognized, amounted to $409 and $466, respectively, and is recorded on the balance sheet as deferred revenue. The Company expects to recognize revenue on all of its remaining performance obligations over the next 12 months.

Disaggregation of Revenue

Revenue is from U.S.-based companies with no notable geographical concentrations in any area. A distinction exists in revenue source; revenues are either generated online or from consulting services.

Revenues disaggregated by revenue source consist of the following:

Schedule of Disaggregation of Revenue

	Three Months Ended Oct. 31, 2024		Three Months Ended Oct. 31, 2023		Six Months Ended Oct. 31, 2024		Six Months Ended Oct. 31, 2023
Consulting services	$	-	$	1,578,667	$	-	$	2,722,367
Fees from online services		170,528		462,991		312,755		839,100
Total revenues	$	170,528	$	2,041,658	$	312,755	$	3,561,467

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Note 4 – Earnings Per Common Share

Net income per common and diluted share were calculated as follows for the three- and six-month periods ended October 31, 2024 and 2023:

Schedule of Earnings Per Share

	Three Months Ended October 31, 2024			Three Months Ended October 31, 2023		Six Months Ended October 31, 2024			Six Months Ended October 31, 2023
Net income (loss) attributable to common stockholders – basic	$	(2,220,501	)	$	339,616	$	(4,747,671	)	$	(152,039	)
Adjustments to net income		—			—		—			—
Net income (loss) attributable to common stockholders – diluted	$	(2,220,501	)	$	339,616	$	(4,747,671	)	$	(152,039	)

Weighted average common shares outstanding - basic		947,459			134,793		721,389			120,762
Effect of dilutive securities		-			3		—			—
Weighted average common shares outstanding – diluted		947,459			134,796		721,389			120,762

Earnings (loss) per common share - basic	$	(2.34	)	$	2.52	$	(6.58	)	$	(1.26	)
Earnings (loss) per common share - diluted	$	(2.34	)	$	2.52	$	(6.58	)	$	(1.26	)

3 shares of common stock that are issuable pursuant to a stock subscription agreement are included in the calculation of diluted earnings per share for the three months ended October 31, 2024. The 3 shares are not included in the calculation of diluted earnings per share for the three and six months ended October 31, 2024 or the six months ended October 31, 2023, because their effect is anti-dilutive.

Outstanding vested warrants to purchase 885,727 shares of common stock are not included in the calculation of earnings per share for the three- and six month periods ended October 31, 2024 because their effect is anti-dilutive. Outstanding vested warrants to purchase 16,024 shares of common stock are not included in the calculation of earnings per share for the three- and six-month periods ended October 31, 2023 because their effect is anti-dilutive.

Outstanding vested options to purchase 12,787 shares of common stock are not included in the calculation of earnings per share for the three- and six-month periods ended October 31, 2024 because their effect is anti-dilutive. Outstanding vested options to purchase 6,000 shares of common stock are not included in the calculation of earnings per share for the three- and six-month periods ended October 31, 2023 because their effect is anti-dilutive.

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Note 5 – Principal Financing Arrangements

The following table summarizes components debt as of October 31, 2024 and April 30, 2024:

Schedule of Debt

	October 31, 2024		April 30, 2024		Interest Rate

U.S. SBA loan		500,000		500,000		3.75	%
U.S. SBA loan		1,885,800		1,885,800		1.0	%
Loan payable – bank		34,324		34,324		10.9	%
Total Debt		2,420,124		2,420,124
Less: current portion of long-term debt		1,920,124		1,920,124
Total long-term debt	$	500,000	$	500,000

The Company owes $34,324 as of October 31, 2024 and April 30, 2024 to Chase Bank. For the loan from Chase Bank, the Company pays interest only on a monthly basis, which is calculated at a rate of 10.9% per annum as of October 31, 2024.

On June 17, 2020 the Company borrowed $500,000 (the “June Loan”), and on February 2, 2021, the Company borrowed $1,885,800 (the “February Loan”) from a U.S. Small Business Administration (“SBA”) loan program.

The June Loan required installment payments of $2,437 monthly, beginning on June 17, 2021, over a term of thirty years. However, the SBA postponed the first installment payment for 18 months, and the first payment became due on December 17, 2022. The monthly payments of $2,437 are first applied to accrued interest payable. The monthly payments will not be applied to any of the outstanding principal balance until 2026. Consequently, the entire loan balance of $500,000 is classified as a long term liability. Interest accrues at a rate of 3.75% per annum. The Company agreed to grant a continuing security interest in its assets to secure payment and performance of all debts, liabilities, and obligations to the SBA. The June Loan was personally guaranteed by the Company’s Chief Financial Officer.

The February loan bears interest at a rate of 1% per annum and the due date of the first payment has been postponed by the SBA because the Company has applied for forgiveness of the February Loan.

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Note 6 – Income Taxes

For the three and six months ended October 31, 2024, the Company recorded no income tax expense due to the net loss recorded in both periods. For the three and six months ended October 31, 2023, the Company recorded an income tax benefit of $326,289 and $625,289, respectively. Included in the income tax benefit for the three and six months ended October 31, 2023 is an employee retention credit (“ERC”) of $508,292, as provided under the Coronavirus Aid, Relief and Economic Security Act. The ERC is a tax incentive available to the Company for retaining employees during the economic challenges posed by the COVID-19 pandemic.

Note 7 – Related Party Transactions

Netcapital Systems LLC, a Delaware limited liability company (“Systems DE”), of which Jason Frishman, Founder, owns a 29% interest, owns 24,447 shares of common stock, or 1.3% of the Company’s 1,841,335 outstanding shares as of October 31, 2024. The company paid Systems DE $95,000 the three- and six-month periods ended October 31, 2024, and $5,000 in the three- and six-month periods ended October 31, 2023, for use of the software that runs the website www.netcapital.com. As of October 31, 2024 and April 30, 2024, the Company has accounts payable to Systems DE $115,000 and $0, respectively.

Cecilia Lenk, the Chief Executive Officer of Netcapital Advisors Inc., (“Advisors”), our wholly owned subsidiary, is a member of the board of directors of KingsCrowd Inc. As of October 31, 2024 and April 30, 2024, the Company owned 3,209,685 shares of KingsCrowd Inc., valued at $513,550.

Cecilia Lenk, the Chief Executive Officer of Advisors is a member of the board of directors of Deuce Drone LLC. As of October 31, 2024 and April 30, 2024, the Company owns 2,350,000 membership interest units of Deuce Drone LLC., valued at $2,350,000. The Company has notes receivable aggregating $152,000 from Deuce Drone LLC as of October 31, 2024 and April 30, 2024.

Compensation to officers in the three- and six-month periods ended October 31, 2024 consisted of stock-based compensation valued at $139,371 and $278,742, respectively, and cash salary of $184,623 and $525,017, respectively.

Compensation to officers in the three- and six-month periods ended October 31, 2023 consisted of stock-based compensation valued at $93,526 and $187,058, respectively, and cash salary of $288,700 and $533,017 respectively.

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Compensation to a related party consultant, John Fanning Jr., son of our CFO, in the three- and six-month periods ended October 31, 2024 consisted of cash wages of $9,239 and $22,017, respectively, and for the three- and six-month periods ended October 31, 2023 consisted of cash wages of $13,854 and $30,017, respectively This consultant is also the controlling shareholder of Zelgor Inc., and $16,500 and $33,000 of the Company’s revenues in the three- and six-month periods ended October 31, 2023, respectively, were from Zelgor Inc. As of October 31, 2024 and April 30, 2024, the Company has a noted receivable of $50,000 and the Company owned 1,400,000 shares of Zelgor, which are valued at $1,400,000.

As of October 31, 2024 and April 30, 2024, the Company has invested $240,080 in an affiliate, 6A Aviation Alaska Consortium, Inc., in conjunction with a land lease in an airport in Alaska. The Chief Executive Officer of Advisors is also the Chief Executive Officer of 6A Aviation Alaska Consortium, Inc.

In January 2023 we granted stock options to purchase an aggregate of 22,860 shares of our common stock to four related parties as follows: our Chief Executive Officer, Martin Kay, 14,286 shares; our Chief Financial Officer, Coreen Kraysler 2,858 shares; our Founder, Jason Frishman, 2,858 shares; and a director of Netcapital Funding Portal, Inc., Paul Riss, 2,858 shares. The options have an exercise price of $100.10, vest monthly on a straight-line basis over a 4-year period and expire in 10 years.

On April 25, 2023, the Company granted an aggregate of 1,144 options, or 286 options each to the following board members: Cecilia Lenk, Avi Liss, Steven Geary and Arnold Scott, to purchase shares of our common stock at an exercise price of $98.00 per share. The options vest monthly on a straight-line basis over a 4-year period and expire in 10 years.

Coreen Kraysler, our Chief Financial Officer, has personally guaranteed a $500,000 promissory note from the U.S. Small Business Administration. The note bears interest at an annual rate of 3.75%, has a 30-year term, and monthly payments of $2,437 began on December 17, 2022.

Note 8 – Stockholders’ Equity

The Company is authorized to issue 900,000,000 shares of its common stock, par value $0.001. 1,841,335 and 326,867 shares were outstanding as of October 31, 2024 and April 30, 2024, respectively.

In May 2023, the Company issued 1,429 shares of its common stock, valued at $144,000, in conjunction with a consulting agreement with a business.

On May 23, 2023, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell to such investors, in a registered direct offering (the “Offering”), 15,715 shares of the Company’s common stock, par value $0.001 per share, at a price of $108.50 per Share, for aggregate gross proceeds of $1,705,000, before deducting the placement agent’s fees and other offering expenses payable by the Company. The Offering closed on May 25, 2023.

Also, in connection with the Offering, on May 23, 2023, the Company entered into a placement agency agreement with ThinkEquity LLC, pursuant to which, the Company issued warrants to purchase up to 983 shares of common stock at an exercise price of $109.40, which were issued on May 25, 2023.

In July 2023, the Company issued 713 shares of its common stock in consideration of a release from an unrelated third party in conjunction with the settlement of an outstanding debt between such third party and Systems DE.

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On July 24, 2023 the Company completed an underwritten public offering of 24,643 shares of the Company’s common stock, at a price to the public of $49.00 per share for aggregate gross proceeds of $1,207,500, before deducting underwriting discounts and offering expenses payable by the Company. In conjunction with this offering, the Company issued the underwriter, and its designees, warrants to purchase 1,537 shares of the Company’s common stock at an exercise price of $49.34.

On July 31, 2023 and on October 26, 2023, the Company issued 268 shares of its common stock in conjunction with the purchase of a 10% interest in Caesar Media Group Inc. October 26, 2023, the Company issued 89 shares of its common stock in conjunction with its purchase of MSG Development Corp. (“MSG”), a wholly owned subsidiary. As a result of the issuance to MSG, the equity account for shares to be issue

SEC Form 10-Q filed by Netcapital Inc.