Netcapital Inc
For the period ended Oct 31, 2024. Filed Dec 16, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 31, 2024 · Filed Dec 16, 2024
NCPL$1.26-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-31; filed 2024-09-16.
0001493152-24-036373
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-31; filed 2024-12-16.
0001493152-24-050235
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 61 previous paragraphs and 60 current paragraphs.
24 unchanged; 15 reworded; 19 added; 18 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
We generated revenues of $312,755, with costs of service of $30,001, in the six months ended October 31, 2024 for a gross profit of $282,754 in the six months ended October 31, 2024 as compared to revenues of $3,561,467, with costs of service of $38,187, in the six months ended October 31, 2023, for a gross profit of $3,523,280 (consisting of $2,626,667 in equity securities from Portfolio Companies for payment of services).
Current report
Broker-Dealer Business
Current report
On November 22, 2024, Netcapital Securities Inc. (“NSI”), received approval from FINRA to become a FINRA-member broker-dealer. This approval allows NSI to:
Current report
The FINRA approval positions the Company to support larger fundraises and expand the range of investment opportunities available to its investor base.
Current report
In the three months ended October 31, 2024, we recorded $170,372 in funding portal revenues, consisting of portal fees of $108,124, listing fees of $47,500, and equity fees of $14,748, as compared to funding portal revenues of $462,706 in the three months ended October 31, 2023, consisting of portal fees of $317,206, listing fees of $145,500 and equity fees of $0. The decrease in revenues was primarily attributed to a decrease in dollars invested in issuers listed on the funding portal, which decreased to $2,052,547 from the quarter ended October 31, 2024 from $6,288,508 for the quarter ended October 31, 2023. In the three months ended October 31, 2024, dollars invested were approximately one-third of the dollars invested in the three months ended October 31, 2023. New offerings launched amounted to 13 issuers in the three months ended October 31, 2024, as compared to 16 issuers in the three months ended October 31, 2023. The components of revenue were as follows:
Current report
Payroll and payroll related expenses decreased by $301,134, or approximately 29%, to $749,701 for the three months ended October 31, 2024, as compared to $1,050,835 during the three months ended October 31, 2023. The decrease was attributed to a decrease in the number of employees. As employees left the Company, given our decrease in revenues, we did not replace them.
Current report
Marketing expense decreased by $34,523, or approximately 74%, to $12,208 for the three months ended October 31, 2024, as compared to $46,731 during the three months ended October 31, 2023. The decrease in expense was primarily attributed to a decrease in marketing outlets that we utilized in the three months ended October 31, 2024.
Current report
Rent expense increased by $1,063, or approximately 6%, to $19,442 for the three months ended October 31, 2024, as compared to $18,379 during the three months ended October 31, 2023. The increase was primarily attributed to general inflationary costs.
Current report
Consulting expense decreased by $125,089, or approximately 61%, to $79,645 for the three months ended October 31, 2024 from $204,734 during the three months ended October 31, 2023. The decrease was primarily attributed to our efforts to control expenses associated with overseas programmers.
Current report
Comparison of the Six Months Ended October 31, 2024 and 2023
Current report
Our revenues for the six months ended October 31, 2024, decreased by $3,248,712, or approximately 92%, to $312,755, as compared to $3,561,467 during the six months ended October 31, 2023. The decrease in revenues was attributed to the lack of consulting service revenue in the six-month period ended October 31, 2024, as compared to revenue of $2,626,667 for consulting services for equity securities and $95,700 for consulting revenue in the six months ended October 31, 2023. In fiscal 2025, management has focused on establishing a broker-dealer subsidiary so that the Company may have additional sources of revenue, and we have not been pursuing the equity-based revenue contracts. Effective November 22, 2024, the Company received approval from FINRA to have a broker-dealer subsidiary.
Current report
In the six months ended October 31, 2024, we recorded $312,428 in funding portal revenues, consisting of portal fees of $197,553, listing fees of $90,000, and equity fees of $24,875, as compared to funding portal revenues of $838,562 in the six months ended October 31, 2023, consisting of portal fees of $539,062, listing fees of $299,500 and equity fees of $0. The decrease in revenues was primarily attributed to a decrease in investments in funding portal issuers, which decreased to $3,023,234 from the six months ended October 31, 2024 from $10,287,341 for the six months ended October 31, 2023. In the six months ended October 31, 2024, dollars invested were approximately 29% of the dollars invested in the six months ended October 31, 2023. New offerings launched amounted to 26 issuers in the six months ended October 31, 2024, as compared to 37 issuers in the six months ended October 31, 2023. The components of revenue were as follows:
Current report
Costs of revenues decreased by $8,186 to $30,001, or approximately 21%, for the six months ended October 31, 2024 from $38,187 during the six months ended October 31, 2023. The decrease was primarily attributed to lower revenues.
Current report
Payroll and payroll related expenses decreased by $201,583, or approximately 10%, to $1,886,294 for the six months ended October 31, 2024, as compared to $2,087,877 during the six months ended October 31, 2023. The decrease was attributed to a decrease in the number of employees. As employees left the Company, given our decrease in revenues, we did not replace them.
Current report
Marketing expense decreased by $269,513, or approximately 93%, to $19,106 for the six months ended October 31, 2024, as compared to $288,619 during the six months ended October 31, 2023. The decrease in expense was primarily attributed to a decrease in marketing outlets that we utilized in fiscal 2025.
Current report
Rent expense increased by $569, or approximately 2%, to $38,558 for the six months ended October 31, 2024, as compared to $37,989 during the six months ended October 31, 2023. The increase was primarily attributed to a new office-space agreement.
Current report
General and administrative expenses increased by $1,435,519, or approximately 100%, to $2,872,438 for the six months ended October 31, 2024, from $1,436,919 during the six months ended October 31, 2023. The increase was primarily attributed to professional and legal fees, which include fees for launching our broker-dealer subsidiary.
Current report
Consulting expense decreased by $191,650, or 52%, to $177,026 for the six months ended October 31, 2024 from $368,676 during the six months ended October 31, 2023. The decrease was primarily attributed to our efforts to control expenses associated with overseas programmers.
Current report
Net cash provided by investing activities amounted to $0 and $20,000 in the six months ended October 31, 2024 and 2023, respectively. The Company purchased a note receivable for $20,000 in the six months ended October 31, 2023.
Removed paragraphs (18)
Previous report
We generated revenues of $142,227, with costs of service of $10,220, in the three months ended July 31, 2024 for a gross profit of $132,007 (consisting of $10,127 in equity securities for payment of services and $132,100 in cash-based revenues, offset by $10,220 for costs of services), as compared to revenues of $1,519,809 with costs of service of $18,053 in the three months ended July 31, 2023 for a gross profit of $1,501,756 (consisting of $1,110,000 in equity securities for the payment of services and $409,809 in cash-based revenues, offset by $18,053 for costs of services). Our cash-based gross profits as a percentage of gross profits were approximately 0% and 2%, respectively in the three month periods ended July 31, 2024 and 2023, for Portfolio Companies. The total number of offerings on the Netcapital funding portal in the three months ended July 31, 2024 and 2023 that closed was 16 and 7, respectively, of which 4 and 3 offerings hosted on the Netcapital funding platform in the three months ended July 31, 2024 and 2023, respectively, terminated their listings without raising the required minimum dollar amount of capital.
Previous report
Proposed Broker-Dealer Business
Previous report
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 4:01pm 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 (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. The Reverse Stock Split is retroactively reflected in the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of changes in shareholders’ equity and loss per share data.
Previous report
Launch of Beta Version for Secondary Trading Platform
Previous report
In July 2024, we announced the launch of our beta version of a secondary trading platform through the Templum ATS to a closed group of users. This secondary trading platform has been designed to provide investors who purchase stock through the Netcapital funding portal with the potential for secondary trading through access to the Templum ATS.
Previous report
May 2024 Warrant Inducement
Previous report
Application for Broker-Dealer License
Previous report
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Previous report
The decrease of $1,110,000 in revenue from consulting services for equity securities in the three months ended July 31, 2024, as compared to the three months ended July 31, 2023, occurred because we provided no consulting services in exchange for equity in the July 31, 2024 quarter, as compared to 2 companies that received such services in the three months ended July 31, 2023. These services were provided by our consulting subsidiary, Netcapital Advisors, Inc. (“Advisors”), and Advisors did not earn any equity securities from consulting work in the first quarter of fiscal 2025. However, our 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 the Funding Portal earned equity securities from 7 clients in the three-months ended July 31, 2024, with an aggregate value of $10,127, as compared to $0 in the three months ended July 31, 2023.
Previous report
Consulting revenue consists of fees earned by Advisors. Revenue generated by Advisors decreased by $33,700 to $0 in the three months ended July 31, 2024, from $33,700 in the three months ended July 31, 2023.The decrease in consulting fees from Advisors in fiscal 2025 is the result of their focus on assisting with the launch of the proposed broker-dealer business.
Previous report
Revenue from portal fees decreased by $132,427, or 60%, in the three months ended July 31, 2024, to $89,429, from $221,856 in the three months ended July 31, 2023. 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 in portal fees is attributable to the decrease in the amount of capital raised on the Funding Portal. In the three-month periods ended July 31, 2024 and 2023, total dollars raised in offerings decreased by $1,790,844, or 60%, to $1,169,917 in the July 2024 quarter, from $2,960,761 in the July 2023 quarter. The total number of issuers on the Funding Portal in the three months ended July 31, 2024 and 2023 that successfully closed an offering was 11 and 4, respectively.
Previous report
The number of successful closings in a quarter is defined as an issuer that raised more than the targeted amount in its offering statement and stopped selling securities on the Funding Portal (a “Final Closing”). This number is not necessarily an indicator of quarterly revenue because an issuer may have several rolling closes in previous quarters before the Final Closing, and the Funding Portal receives its 4.9% portal fee for each rolling close.
Previous report
Revenue from listing fees decreased by $111,500, or approximately 72%, to $42,500 in the three months ended July 31, 2024 as compared to $154,000 in the three months ended July 31, 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. The drop in listing fees can be attributed to our loss of an experienced salesperson whose replacement has not yet been fully trained. 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.
Previous report
Payroll and payroll related expenses increased by $99,551, or 10%, to $1,136,593 for the three months ended July 31, 2024, as compared to $1,037,042 during the three months ended July 31, 2023. The increase was attributed to the salary increases and bonuses for certain key positions, to assist with employee retention, during the quarter ended July 31, 2024.
Previous report
Marketing expense decreased by $234,990, or approximately 97%, to $6,898 for the three months ended July 31, 2024, as compared to $241,888 during the three months ended July 31, 2023. The decrease in expense was primarily attributed to a special marketing program that was instituted in the July 31, 2023 quarter that was not repeated in the quarter ended July 31, 2024.
Previous report
Rent expense decreased by $494, or approximately 3%, to $19,116 for the three months ended July 31, 2024, as compared to $19,610 during the three months ended July 31, 2023. The decrease was primarily attributed to a decrease in variable costs charged to us in the current fiscal year.
Previous report
Consulting expense decreased by $66,561, or approximately 41%, to $97,381 for the three months ended July 31, 2024 from $163,942 during the three months ended July 31, 2023. The decrease was primarily attributed to a decrease in overseas programmers.
Previous report
Amortization expense decreased by $19,462, or 69% to $8,869 for the three months ended July 31, 2024 from $28,331 during the three months ended July 31, 2023. The decrease is the result of an impairment loss recognized in the fourth quarter of fiscal 2024 that reduced the value of the amortizable asset as of July 31, 2024.
Reworded paragraphs (15)
Previous wording
Netcapital Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited and non-accredited investors. We give investors the opportunity to access investments in private companies. We believe our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings. We generate fees from listing private companies on our funding portal located at www.netcapital.com. We generate fees from listing private companies on netcapital.com. We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors, Inc. (Netcapital Advisors), which is a wholly-owned subsidiary, provides marketing and strategic advice in exchange for equity positions and/or cash fees. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority, or FINRA, a registered national securities association, and provides investors with opportunities to invest in private companies. Neither Netcapital Advisors, nor any Netcapital entity or subsidiary, is a broker- dealer, nor do any of such entities operate as a broker-dealer with respect to any Reg A offering listed on the www.netcapital.com website. In May 2024, we announced that our wholly owned subsidiary, Netcapital Securities Inc. applied for broker-dealer registration. 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.
Current wording
Netcapital Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited and non-accredited investors. We give investors the opportunity to access investments in private companies. We believe our model is disruptive to traditional private equity investing and is based on Title III, Reg CF of the JOBS Act. In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings. We generate fees from listing private companies on our funding portal located at www.netcapital.com. We generate fees from listing private companies on netcapital.com. We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors, Inc. (Netcapital Advisors), which is a wholly-owned subsidiary, provides marketing and strategic advice in exchange for equity positions and cash fees. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority, or FINRA, a registered national securities association, and provides investors with opportunities to invest in private companies. Neither Netcapital Advisors, nor any Netcapital entity or subsidiary, is a broker- dealer, nor do any of such entities operate as a broker-dealer with respect to any Reg A offering listed on the www.netcapital.com website.
Previous wording
We provide private company investment access to accredited and non-accredited investors through our online portal (www.netcapital.com), which is operated by our wholly owned subsidiary Netcapital Funding Portal, Inc. The Netcapital funding portal charges a $5,000 listing fee and a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors generates fees and equity stakes from consulting in select portfolio (“Portfolio Companies”) and non-portfolio clients. With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.
Current wording
We provide private company investment access to accredited and non-accredited investors through our online portal (www.netcapital.com), which is operated by our wholly owned subsidiary Netcapital Funding Portal, Inc. The Netcapital funding portal charges a $5,000 engagement fee and a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors generates fees and equity stakes from consulting in select portfolio (“Portfolio Companies”) and non-portfolio clients. With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.
Previous wording
In fiscal 2024 and 2023, the average amount raised in an offering on the Netcapital funding portal was $280,978 and $128,170, respectively. 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 in 20 Portfolio Companies that have utilized the funding portal to facilitate their offerings, for which equity was received as payment for services.
Current wording
The total number of offerings on the Netcapital funding portal in fiscal 2024 and 2023 that closed was 63 and 81, respectively, of which 13 and 17 offerings hosted on the Netcapital funding platform in fiscal 2024 and 2023, respectively terminated their listings without raising the required minimum amount of capital. For the three- and six-months periods ended October 31, 2024, 13 and 26 issuers have launched an offering on the portal, respectively, as compared to 16 and 37 issuers that launched an offering in the three- and six-month periods ended October 31, 2023, respectively. As of the date of this report, we have minority equity positions in 19 Portfolio Companies that have utilized the funding portal to facilitate their offerings, which equity was received as payment for services.
Previous wording
Netcapital.com is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies can accept investments from virtually anyone, including friends, family, customers, and employees. Customer accounts on our platform are not permitted to hold or use digital securities to make an investment.
Current wording
Netcapital funding portal is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies can accept investment from virtually anyone, including friends, family, customers, employees, etc.
Previous wording
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 believe that by having a registered broker-dealer, it could 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.
Current wording
Our recently formed wholly owned subsidiary, Netcapital Securities Inc. has received approval from the Financial Industry Regulatory Authority (“FINRA”) to become a FINRA-member broker dealer. We believe that by having a registered broker-dealer, it may create opportunities to expand the Company’s revenue base by hosting and generating additional fees from Reg A and Reg D offerings on the Netcapital platform, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts.
Previous wording
On August 23, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), to sell shares of its common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $2,100,000, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent. The sales, if any, of the Shares made under the ATM Agreement will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. As of the date of this filing, the Company has sold 56,000 shares of its common stock pursuant to the ATM Agreement for net proceeds of approximately $148,294.
Current wording
On August 23, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with Wainwright to sell shares of our common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $2,100,000, from time to time, through an “at the market offering” program under which Wainwright acted as sales agent. The sales of the Shares made under the ATM Agreement were made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We paid Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. From August 23, 2024 through October 29, 2024, the Company sold 1,122,693 shares of its common stock pursuant to the ATM Agreement for gross proceeds of 2,099,667. No additional Shares will be sold under this ATM Agreement. Net proceeds amounted to approximately $2,029,000.
Previous wording
Our revenues for the three months ended July 31, 2024, decreased by $1,377,582, or approximately 91%, to $142,227 as compared to $1,519,809 during the three months ended July 31, 2023. The decrease in revenues was primarily attributed to a decrease in revenues for the services that we provide in exchange for equity securities during the quarter ended July 31, 2024, as compared to the quarter ended July 31, 2023. In the three months ended July 31, 2024, we had no revenues from equity-based contracts, as compared to $1,110,000 in such revenues in the three months ended July 31, 2023. Management is focusing on establishing a broker-dealer subsidiary so that the Company may have additional sources of revenue, and we have not been pursuing the equity-based revenue contracts.
Current wording
Our revenues for the three months ended October 31, 2024, decreased by $1,871,130, or approximately 92%, to $170,528, as compared to $2,041,658 during the three months ended October 31, 2023. The decrease in revenues was attributed to the lack of consulting service revenue in the quarter ended October 31, 2024, as compared to revenue of $1,516,667 for consulting services for equity securities and $62,000 for consulting revenue in the three months ended October 31, 2023. In fiscal 2025, management has focused on establishing a broker-dealer subsidiary so that the Company may have additional sources of revenue, and we have not been pursuing the equity-based revenue contracts. Effective November 22, 2024, the Company received approval from FINRA to have a broker-dealer subsidiary.
Previous wording
Costs of revenues decreased by $7,833 to $10,220, or approximately 43% for the three months ended July 31, 2024 from $18,053 during the three months ended July 31, 2023. The decrease was attributed to the decline in Funding Portal revenues.
Current wording
Costs of revenues decreased by $353 to $19,781, or approximately 2% for the three months ended October 31, 2024 from $20,134 during the three months ended October 31, 2023. The decrease was attributed to lower revenues.
Previous wording
General and administrative expenses increased by $591,962, or 75%, to $1,380,256 for the three months ended July 31, 2024, from $788,294 during the three months ended July 31, 2023. The increase was primarily attributed to increased legal costs and proxy solicitation fees.
Current wording
General and administrative expenses increased by $843,557, or approximately 130%, to $1,492,182 for the three months ended October 31, 2024, from $648,625 during the three months ended October 31, 2023. The increase was primarily attributed to professional and legal fees, which include fees for launching our broker-dealer subsidiary.
Previous wording
Interest expense decreased by $2,840 to $10,464, or approximately 21%, for the three months ended July 31, 2024, as compared to $13,304 during the three months ended July 31, 2023. The decrease in interest expense was primarily attributed to lower debt amounts that resulted from paying off a secured term loan.
Current wording
Interest expense decreased by $961 to $9,601, or approximately 9%, for the three months ended October 31, 2024, as compared to $10,562 during the three months ended October 31, 2023. The decrease in interest expense was primarily attributed to lower debt amounts that resulted from paying off a secured term loan.
Previous wording
As of July 31, 2024, we had cash and cash equivalents of $855,181 and negative working capital of $2,507,576 as compared to cash and cash equivalents of $863,182 and negative working capital of $2,074,163 as of April 30, 2023.
Current wording
As of October 31, 2024, we had cash and cash equivalents of $1,346,739 and negative working capital of $2,615,585 as compared to cash and cash equivalents of $863,182 and negative working capital of $2,074,163 as of April 30, 2024.
Previous wording
On May 24, 2024, the Company entered into inducement offer letter agreements with certain investors that held certain outstanding Series A-2 warrants to purchase up to an aggregate of 204,572 shares of our common stock with an exercise price of $17.50 per share, originally issued in December 2023 at a reduced exercise price of $10.85 per share (which reduced exercise price was granted to all holders on Series A-2 warrants by the board on May 24, 2024) in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share and (ii) new Series A-4 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company. The Series A-3 Warrants and Series A-4 Warrants are exercisable beginning on the effective dates of stockholder approval of the issuance with such warrants expiring on (i) the five year anniversary of the initial exercise date for the Series A-3 Warrants and (ii) the eighteen month anniversary of the initial exercise date for the Series A-4 Warrants. This transaction closed on May 29, 2024. 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 19,048 shares of our common stock at an exercise price of $10.93 per share.
Current wording
On May 24, 2024, the Company entered into inducement offer letter agreements with certain investors that held certain outstanding Series A-2 warrants to purchase up to an aggregate of 204,572 shares of our common stock with an exercise price of $17.50 per share, originally issued in December 2023 at a reduced exercise price of $10.85 per share (which reduced exercise price was granted to all holders on Series A-2 warrants by the board on May 24, 2024) in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share and (ii) new Series A-4 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company. The Series A-3 Warrants and Series A-4 Warrants are exercisable beginning on the effective dates of stockholder approval of the issuance with such warrants expiring on (i) the five year anniversary of the initial exercise date for the Series A-3 Warrants and (ii) the eighteen month anniversary of the initial exercise date for the Series A-4 Warrants. This transaction closed on May 29, 2024. Wainwright was the exclusive agent for the transaction for which we paid them a cash fee equal to 7.5% from the exercise of the Series A-2 warrant at the reduced exercise price and a management fee equal to 1.0% of such aggregate gross proceeds. We also issued warrants to designees of H.C. Wainwright to purchase up to 19,048 shares of our common stock at an exercise price of $10.93 per share.
Previous wording
Net cash used in operating activities amounted to $1,963,645 and $1,464,023 for the three months ended July 31, 2024 and 2023, respectively. The principal sources of cash from operating activities in the three months ended July 31, 2024 were increase in account payable and accrued expense of $313,620, collection of accounts receivable of $134,849, and stock-based compensation of $139,371. However, the sources of cash were offset by a net loss of $2,527,170, a receipt of equity in lieu of cash of $10,127, and an increase in prepaid expenses of $24,856. The principal uses of cash from operating activities in the three months ended July 31, 2023 were a net loss of $491,655 and the receipt of equity securities in lieu of cash amounting to $1,170,000. These uses of cash were partially offset by a non-cash item, stock-based compensation of $483,351.
Current wording
Net cash used in operating activities amounted to $3,451,087 and $1,945,814 for the six months ended October 31, 2024 and 2023, respectively. The principal sources of cash from operating activities in the six months ended October 31, 2024 was a non-cash item, stock-based compensation of $278,742 and an increase in accounts payable and accrued expenses of $911,387. These amounts were offset by a loss of $4,747,671. The principal source of cash from operating activities in the six months ended October 31, 2023 was a non-cash item, stock-based compensation of $763,873. However, the sources of cash were offset by a receipt of equity in lieu of cash of $1,170,000 and an increase in accounts receivable of $1,517,167.
Previous wording
For the three months ended July 31, 2024, net cash provided by financing activities amounted to $1,955,644, which consisted of proceeds from the exercise of warrants. For the three months ended July 31, 2023, cash provided by financing activities amounted to $1,925,200, which consisted of proceeds of $2,275,200 for the sale of common stock, offset by a $350,000 payment to retire debt from a secured lender.
Current wording
For the six months ended October 31, 2024, net cash provided by financing activities amounted to $3,934,644, which consisted of proceeds from the sale of common stock of $1,979,000 and proceeds from the exercise of warrants of $1,955,644. For the six months ended October 31, 2023, net cash provided by financing activities amounted to $1,925,200, which consisted of proceeds from the sale of common stock of $2,275,200, which was offset by repayment of $350,000 in principal to our secured lender.
Previous wording
In the three months ended July 31, 2024 and 2023, there were no expenditures for capital assets. We do not anticipate any capital expenditures in fiscal 2024.
Current wording
In the six months ended October 31, 2024 and 2023, there were no expenditures for capital assets. We do not anticipate any capital expenditures in fiscal 2025.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Interest expense decreased by $3,801 to $20,065, or approximately 16%, for the six months ended October 31, 2024, as compared to $23,866 during the six months ended October 31, 2023. The decrease in interest expense was primarily attributed to lower debt amounts that resulted from paying off a secured term loan.
Current report — wording carried from elsewhere
On August 23, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with Wainwright to sell shares of our common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $2,100,000, from time to time, through an “at the market offering” program under which Wainwright acted as sales agent. The sales of the Shares made under the ATM Agreement were made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We paid Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares. From August 23, 2024 through October 29, 2024, the Company sold 1,122,693 shares of its common stock pursuant to the ATM Agreement for gross proceeds of 2,099,667. No additional Shares will be sold under this ATM Agreement. Net proceeds amounted to approximately $2,029,000.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Our recently formed wholly owned subsidiary, Netcapital Securities Inc. has applied for broker-dealer registration with the Financial Industry Regulatory Authority (“FINRA”). 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. 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 Quarterly Report, Netcapital Securities Inc. has not conducted any business activities
Previous report — wording carried elsewhere
On May 24, 2024, we entered into inducement offer letter agreements with certain investors that held certain outstanding Series A-2 warrants to purchase up to an aggregate of 204,572 shares of our common stock with an exercise price of $17.50 per share, originally issued in December 2023 at a reduced exercise price of $10.85 per share (which reduced exercise price was granted to all holders on Series A-2 warrants by the board on May 24, 2024) in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-3 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share and (ii) new Series A-4 common stock purchase warrants to purchase up to 253,947 shares of our common stock at an exercise price of $8.74 per share for aggregate gross proceeds of approximately $2.2 million from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company. The Series A-3 Warrants and Series A-4 Warrants are exercisable beginning on the effective dates of stockholder approval of the issuance with such warrants expiring on (i) the five year anniversary of the initial exercise date for the Series A-3 Warrants and (ii) the eighteen month anniversary of the initial exercise date for the Series A-4 Warrants. This transaction closed on May 29, 2024. 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 19,048 shares of our common stock at an exercise price of $10.93 per share.
Previous report — wording carried elsewhere
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
In the three months ended July 31, 2024 and 2023, there were no investing activities.