What changed in this filing

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Item 1. Business

2024-07-29 compared with 2023-07-26 · 557 added, 379 removed, 43 unchanged (96% of the section changed)

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.

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

Our model is disruptive to traditional private equity

investing and is based on Title III, Reg CF of the JOBS Act.

We generate fees from listing private companies on our portal.

Our consulting

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

The Netcapital funding

portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority, or FINRA, a registered national securities

association, and provides investors with opportunities to invest in private companies.

Development of Business

Company was incorporated in Utah in 1984 as DBS Investments, Inc., or DBS.

DBS merged with ValueSetters L.L.C.

in December 2003 and changed

its name to ValueSetters, Inc.

In November 2020, the Company purchased Netcapital Funding Portal Inc.

(the “Funding Portal”)

and changed the name of the Company from ValueSetters, Inc.

to Netcapital Inc.

The Company has three operating subsidiaries.

Funding Portal provides private companies with access to investments from accredited and non-accredited retail investors through our online

portal (www.netcapital.com).

The Funding Portal charges a $5,000 to $10,000 engagement fee, a 4.9% success fee for capital raised at closing

and sometimes is paid with equity from the issuer that has listed on the Funding Portal.

In addition, the Funding Portal generates fees

for other ancillary services, such as rolling closes.

Netcapital Advisors Inc.

generates fees and equity stakes from consulting in select

portfolio and non-portfolio clients.

MSG Development Corp.

provides corporate valuation services to businesses and individuals.

Funding Portal

Netcapital.com is an SEC-registered funding

portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at

any time, with just a few clicks.

Securities offerings on the portal are accessible through individual offering pages, where companies

include product or service details, market size, competitive advantages, and financial documents.

Companies can accept investment from

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

Customer accounts on our platform are not permitted to hold digital

In addition to access to the Funding Portal,

the Funding Portal provides the following services:

is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited and

non-accredited investors.

We give all investors the opportunity to access investments in private companies.

Our model is disruptive to

traditional private equity investing and is based on Title III, Regulation Crowdfunding (“Reg CF”) of the Jumpstart Our Business

Startups Act (“JOBS Act”).

In addition, we have recently expanded our model to include Regulation A (“Reg A”)

We generate fees from listing private companies on our funding portal located at www.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

(“Netcapital Advisors”), which is a wholly owned subsidiary, provides marketing and strategic advice to companies in

exchange for cash fees and/or equity positions.

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.

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.

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, 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.

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.

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).

We provided additional services for two (2) and four (4) of our Portfolio Companies during

the years ended April 30, 2024 and 2023, respectively, and our cash-based gross profits as a percentage of gross profits were approximately

1% in both fiscal years.

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.

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, employees, etc.

Customer accounts on our platform are

not permitted to hold digital securities.

addition to access to the Funding Portal, the Funding Portal provides the following services:

a fully automated onboarding process;

automated filing of required regulatory

automated filing of required regulatory documents;

compliance review;

custom-built offering page on our portal

third party transfer agent and custodial

rolling closes, which provide potential

access to liquidity before final close date of offering;

custom-built offering page on our portal website;

third party transfer agent and custodial services;

email marketing to our proprietary list of investors;

rolling closes, which provide potential access to liquidity

before final close date of offering;

assistance with annual filings;

direct access to our team for ongoing support.

Consulting Business

Our consulting group, Netcapital Advisors helps

companies at all stages to raise capital.

Netcapital Advisors provides strategic advice, technology consulting and online marketing services

to assist with fundraising campaigns on the Netcapital platform.

We also act as an incubator and accelerator, taking equity stakes in

select disruptive start-ups.

Netcapital Advisors’ services include:

consulting group, Netcapital Advisors helps companies at all stages to raise capital.

Netcapital Advisors provides strategic advice,

technology consulting and online marketing services to assist with fundraising campaigns on the Netcapital platform.

We also act as an

incubator and accelerator, taking equity stakes in select disruptive start-ups.

Advisors’ services include:

incubation of technology start-ups;

2 unchanged sentences

website design, software and software development;

message crafting, including pitch decks,

offering pages, and ad creation;

message crafting, including pitch decks, offering pages, and

strategic advice;

technology consulting.

Valuation Business

Our valuation group, MSG Development Corp.

prepares valuations.

The valuation services include:

business valuations;

fairness and solvency opinions;

ESOP feasibility and valuation;

non-cash charitable contributions;

economic analysis of damages;

intellectual property appraisals;

compensation studies.

We compete with a number of public and private companies

that provide assistance with capital raising, strategy, technology consulting, and digital marketing.

Most of our competitors have significant

financial resources and occupy entrenched positions in the market with name-brand recognition.

The majority of our capital raising and

digital marketing business is on the Internet.

The barriers to entry into most Internet markets are

relatively low, making them accessible to a large number of entities and individuals.

We believe the principal competitive factors in

our industry that create certain barriers to entry include but are not limited to reputation, technology, financial stability and resources,

proven track record of successful operations, critical mass, and independent oversight and transparency of business practices.

approval from FINRA to operate as a funding portal is also a barrier to entry due to the significant internal control and capital requirements.

While these barriers may limit those able to enter or compete effectively in the market, it is likely that new competitors as well as

laws and regulations of governmental authority may be established in the future, in addition to our known current competitors.

We face significant

competition in every aspect of our business, including from companies that facilitate online capital formation and the sharing of content

and information, companies that enable marketers to display advertising, companies that distribute video and other forms of media content,

and companies that provide development platforms for applications developers.

We compete to attract, engage, and retain customers,

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

Increased competition from current and future competitors

may in the future materially adversely affect our business, revenues, operating results and financial condition.

Industry Regulation

In an effort to enhance economic growth and

to democratize access to private investment opportunities, Congress finalized the Jumpstart Our Business Startups Act (JOBS Act) in 2016.

Title III of the JOBS Act enabled early-stage companies to offer and sell securities to the general public for the first time.

then adopted Regulation Crowdfunding, or Reg CF, in order to implement the JOBS Act’s crowdfunding provisions.

Reg CF has several important features that

changed the landscape for private capital raising and investment.

Broker-Dealer Business

recently formed wholly owned subsidiary, Netcapital Securities Inc.

has 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.

As of the date of this Annual Report, Netcapital

Securities Inc.

has not conducted any business activities.

compete with a number of public and private companies that provide assistance with capital raising, strategy, technology consulting,

and digital marketing.

Most of our competitors have significant financial resources and occupy entrenched positions in the market with

name-brand recognition.

The majority of our capital raising and digital marketing business is on the Internet.

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

We believe the principal competitive factors in our industry that create certain barriers to entry include but are not limited to reputation,

technology, financial stability and resources, proven track record of successful operations, critical mass, and independent oversight

and transparency of business practices.

Obtaining approval from FINRA to operate as a funding portal is also a barrier to entry due to

the significant internal control and capital requirements.

While these barriers may limit those able to enter or compete effectively

in the market, it is likely that new competitors as well as laws and regulations of governmental authority may be established in the

future, in addition to our known current competitors.

face significant competition in every aspect of our business, including from companies that facilitate online capital formation and the

sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other

forms of media content, and companies that provide development platforms for applications developers.

We compete to attract, engage,

and retain customers, to attract and retain marketers, and to attract and retain developers to build compelling applications that integrate

with our products.

competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results

and financial condition.

an effort to enhance economic growth and to democratize access to private investment opportunities, Congress finalized the Jumpstart

Our Business Startups Act (JOBS Act) in 2016.

Title III of the JOBS Act enabled early-stage companies to offer and sell securities to

the general public for the first time.

The SEC then adopted Regulation Crowdfunding, or Reg CF, in order to implement the JOBS Act’s

crowdfunding provisions.

CF has several important features that changed the landscape for private capital raising and investment.

For the first time, this regulation:

Allowed the general public

to invest in private companies, no longer limiting early-stage investment opportunities to less than 10% of the population;

Enabled private companies to

advertise their securities offerings to the public (general solicitation);

Conditionally exempted securities

sold under Section 4(a)(6) from the registration requirements of the Securities and Exchange Act of 1934.

We are subject, both directly and indirectly,

to various laws and regulations relating to our business.

If any of the laws are amended, compliance could become more expensive and

directly affect our income.

We intend to comply with such laws, but new restrictions may arise that could materially adversely affect

Specifically, the SEC regulates our funding portal business, and our funding portal is also a member of FINRA and is regulated

We are also subject to the USA Patriot Act of 2001, which contains anti-money laundering and financial transparency laws and

mandates various regulations applicable to financial services companies, including standards for verifying client identification at account

opening, and obligations to monitor client transactions and report suspicious activities.

Anti-money laundering laws outside of the United

States contain some similar provisions.

Our failure to comply with these requirements as applicable to us could have a material adverse

effect on us.

The traditional funding model restricts access

to capital, investments and liquidity.

According to Harvard Business Review, venture capital firms, or VCs, invest in fewer than 1% of

the companies they consider and only 10% of VC meetings are obtained through cold outreach.

In addition, only 2% of VC funding went to

women in 2022, according to PitchBook, while only 1% went to black-owned firms, according to TechCrunch.

Furthermore, under the traditional model, the

average investor lacked access to early-stage investments.

the general public to invest in private companies, no longer limiting early-stage investment opportunities to less than 10% of the

private companies to advertise their securities offerings to the public (general solicitation);

Conditionally

exempted securities sold under Section 4(a)(6) from the registration requirements of the Securities and Exchange Act of 1934.

SEC had also adopted rules to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act by expanding Reg A into two tiers

1, for securities offerings of up to $20 million in a 12-month period;

2, for securities offerings of up to $75 million in a 12-month period.

are subject, both directly and indirectly, to various laws and regulations relating to our business.

If any of the laws are amended,

compliance could become more expensive and directly affect our income.

We intend to comply with such laws, but new restrictions may arise

that could materially adversely affect our Company.

Specifically, the SEC regulates our funding portal business, and our funding portal

is also a member of FINRA and is regulated by FINRA.

We are also subject to the USA Patriot Act of 2001, which contains anti-money laundering

and financial transparency laws and mandates various regulations applicable to financial services companies, including standards for

verifying client identification at account opening, and obligations to monitor client transactions and report suspicious activities.

Anti-money laundering laws outside of the United States contain some similar provisions.

In the event that our wholly-owned subsidiary

receives a broker-dealer license, we will become subject to additional regulation and supervision of the SEC and FINRA, including without

limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule).

The Uniform Net Capital Rule specifies

minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers.

The Uniform Net Capital

Rule prohibits broker-dealers from paying cash dividends, making unsecured advances or loans or repaying subordinated loans if such payment

would result in a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.

Our failure to comply with these requirements as applicable to us could have a material adverse effect on us.

traditional funding model restricts access to capital, investments and liquidity.

According to Harvard Business Review, venture capital

firms, or VCs, invest in fewer than 1% of the companies they consider and only 10% of VC meetings are obtained through cold outreach.

In addition, only 2% of VC funding went to women in 2022, according to PitchBook, while only 1% went to black-owned firms, according

to TechCrunch.

under the traditional model, the average investor lacked access to early-stage investments.

Prior to the JOBS Act, almost 90% of U.S.

households were precluded from investing

in private deals, per dqydj.com.

Liquidity has also been an issue, as private investments are generally locked up until IPO or takeout.

The JOBS Act helped provide a solution to these

issues by establishing the funding portal industry, which is currently in its infancy.

Title III of the JOBS Act outlines Reg CF, which

traditionally allowed private companies to raise up to $1.07 million from all Americans.

In March 2021, regulatory enhancements by the

SEC went into effect and increased the limit to $5 million.

These amendments increased the offering limits for Reg CF, Regulation A and

Regulation D, Rule 504 offerings as follows:

households were precluded from investing in private deals, per dqydj.com.

Liquidity has also been an issue, as private investments are

generally locked up until IPO or takeout.

JOBS Act helped provide a solution to these issues by establishing the funding portal industry, which is currently in its infancy.

III of the JOBS Act outlines Reg CF, which traditionally allowed private companies to raise up to $1.07 million from all Americans.

March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million every 12 months.

These amendments

increased the offering limits for Reg CF, Regulation A and Regulation D, Rule 504 offerings as follows:

Reg CF increased to $5 million;

1 unchanged sentence

and Regulation A Tier 2 increased to $75 million from $50 million.

There was $494 million raised via Reg CF in

2022, according to Crowdwise.

We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding

Private capital markets reached $12 trillion

by the first half of 2022, per McKinsey.

Within this market, private equity represents the largest share, with assets in excess of $3

trillion and a 10-year CAGR of 10%.

Since 2000, global private equity, or PE, net asset value has increased almost tenfold, nearly three

times faster than the size of the public equity market.

Both McKinsey and Boston Consulting Group predict that this strong growth will

continue, as investors allocate increasing amounts to private equity, due to historically higher returns and lower volatility than public

In addition, Boston Consulting Group estimates that there are $42 trillion held in retail investment accounts, which we believe

represents a large pool of potential account holders for us.

Our Technology

The Netcapital platform is a scalable, real-time,

transaction-processing engine that runs without human intervention, 24 hours a day, seven days a week.

For companies raising capital, the technology provides

fully automated onboarding with integrated regulatory filings.

Funds are collected from investors and held in escrow until the offering

was $494 million raised via Reg CF in 2022, according to Crowdwise.

We believe a significant opportunity exists to disrupt private capital

markets via the Netcapital funding portal.

Private capital markets reached $12 trillion by the first half of 2022, per McKinsey.

this market, private equity represents the largest share, with assets in excess of $3 trillion and a 10-year compound annual growth rate

(CAGR) of 10%.

Since 2000, global private equity (“PE”), net asset value has increased almost tenfold, nearly three times

faster than the size of the public equity market.

Both McKinsey and Boston Consulting Group predict that this strong growth will continue,

as investors allocate increasing amounts to private equity, due to historically higher returns and lower volatility than public markets.

In addition, Boston Consulting Group estimates that there are $42 trillion held in retail investment accounts, which we believe represents

a large pool of potential account holders for us.

Netcapital platform is a scalable, real-time, transaction-processing engine that runs without human intervention, 24 hours a day, seven

companies raising capital, the technology provides fully automated onboarding with integrated regulatory filings.

Funds are collected

from investors and held in escrow until the offering closes.

For entrepreneurs, the technology facilitates access to capital at low cost.

For investors, the platform provides access to investments

in private, early-stage companies that were previously unavailable to the general public.

Both entrepreneurs and investors can track and

view their investments through their dashboard on netcapital.com.

The platform currently has more than 100,000 users.

Scalability was demonstrated in November 2021, when

the platform processed more than 2,000 investments in less than two hours, totaling more than $2 million.

Our infrastructure is designed in a way that can horizontally

scale to meet our capacity needs.

Using Docker containers and Amazon Elastic Container Service, or Amazon ECS, we are able to automate

the creation and launch of our production web and application programming interface, or API, endpoints in order to replicate them as needed

behind Elastic Load Balancers (ELBs).

Additionally, all of our public facing endpoints live

behind CloudFlare to ensure protection from large scale traffic fluctuations (including DDoS attacks).

Our main database layer is built on Amazon RDS and

features a Multi-AZ deployment that can also be easily scaled up or down as needed.

General queries are cached in our API layer, and we

monitor to optimize very complex database queries that are generated by the API.

Additionally, we cache the most complex queries (such

as analytics data) in our NoSQL (Mongo) data store for improved performance.

Most of our central processing unit, or CPU, intensive

data processing happens asynchronously through a worker/jobs system managed by AWS ElastiCache’s Redis endpoint.

This component

can be easily fine-tuned for any scale necessary.

The technology necessary to operate our funding portal

is licensed from Netcapital Systems LLC, a Delaware limited liability company, of which Jason Frishman, Netcapital Founder, owns a 29%

interest, under a license agreement with the Funding Portal.

Payments under the licensing agreement amounted to $430,000 and $357,429

in the years ended April 30, 2023 and 2022, respectively.

Proposed Alternative Trading System (“ATS”)

On January 2, 2023, our wholly owned subsidiary, Netcapital

Systems LLC entered into a software license and services agreement (“Templum License Agreement”) with Templum, Inc (“Templum”)

to provide issuers and investors on the Netcapital funding portal with the potential for greater distribution and liquidity.

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.

The Templum License Agreement allows us to launch

a customized marketplace for the trading of private securities issued under an exemption to the Securities Act of 1933, as amended.

operates an alternative trading system under the provisions of Regulation ATS.

The Templum License Agreement is for an initial term of

three (3) years and will automatically renew for consecutive terms of one (1) year unless (i) either party upon at least ninety (90) days

prior to the expiration of the initial term or then-current renewal term, provides written notice to the other party of its intention

not to renew, in which case the agreement and the applicable order and technology services and pricing outline will expire, as the case

may be, at the end of the then current initial term or renewal term;

or (ii) either party terminates the agreement pursuant to and in

accordance with the terms and conditions set forth in the agreement.

Netcapital Systems paid Templum an implementation fee upon signing

of the Agreement.

The Templum License Agreement

grants Netcapital Systems a limited, revocable, non-exclusive, non-transferable, and non-sublicensable right and license to use Templum’s

software and to provide its users access to the software.

Notwithstanding the foregoing, Netcapital Systems shall be Templum’s exclusive

registered crowdfunding platform partner and Templum shall not provide services to any third-party whose primary business is providing

services as a registered crowdfunding platform except as noted in the agreement.

Netcapital Systems agreed to pay Templum a discounted

license fee in year 1, and a standard license fee in years 2 and 3.

After conclusion of the initial 3-year term, the annual license fee

will increase by the greater of CPI+3% or 5% for each renewal term.

A beta testing platform has been established and the

functionality is currently being tested.

Additional milestones required to launch the platform to the public include, but are not limited

to, development of the know-your-customer (KYC) and anti-money laundering (AML) functionality as well as a launch of the beta version

to a closed group of users, which is currently expected in the fourth quarter of 2023.

Currently, we do not know when, or if, this platform

will be fully completed and launched, as there are many details that remain to be completed as well as certain regulatory matters that

are required to be satisfied regarding the proposed operation of the ATS.

Any regulatory delays or objections will result in delays in

our ability to launch the proposed platform.

It is currently contemplated that the Templum ATS

will be integrated with the Netcapital funding platform, and that issuers and investors will not be able to directly access the Templum

Rather, we will be responsible for collecting and delivering any required information to the Templum ATS.

Once an order request

has been submitted and the Templum ATS has identified two-order (bid/ask) matching at the price level, it will inform us so that we can

initiate the process of wallet reconciliation between the two proposed parties in the transaction.

Competitive Advantages

We believe we provide a low-cost solution for

online capital raising versus our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc.

For investors, the platform provides access to investments in private, early-stage companies that were previously unavailable to the

general public.

Both entrepreneurs and investors can track and view their investments through their dashboard on netcapital.com.

platform currently has more than 100,000 users.

was demonstrated in November 2021, when the platform processed more than 2,000 investments in less than two hours, totaling more than

infrastructure is designed in a way that can horizontally scale to meet our capacity needs.

Using Docker containers and Amazon Elastic

Container Service, or Amazon ECS, we are able to automate the creation and launch of our production web and application programming interface,

or API, endpoints in order to replicate them as needed behind Elastic Load Balancers (ELBs).

Additionally,

all of our public facing endpoints live behind CloudFlare to ensure protection from large scale traffic fluctuations (including DDoS

main database layer is built on Amazon RDS and features a Multi-AZ deployment that can also be easily scaled up or down as needed.

queries are cached in our API layer, and we monitor to optimize very complex database queries that are generated by the API.

Additionally,

we cache the most complex queries (such as analytics data) in our NoSQL (Mongo) data store for improved performance.

of our central processing unit, or CPU, intensive data processing happens asynchronously through a worker/jobs system managed by AWS

ElastiCache’s Redis endpoint.

This component can be easily fine-tuned for any scale necessary.

technology necessary to operate our funding portal is licensed from Netcapital Systems LLC, a Delaware limited liability company, of

which Jason Frishman, Netcapital Founder, owns a 29% interest, under a license agreement with the Funding Portal.

Payments under the

licensing agreement amounted to $195,000 and $430,000 in the years ended April 30, 2024 and 2023, respectively.

Alternative Trading (“ATS”) Relationship

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

The operation of the Templum ATS, however, remains subject to extensive regulation and oversight.

Accordingly, any regulatory

delays or objections will result in delays in our ability to launch the proposed platform.

While we are currently working with Templum

on the design of the required software to enable the access to secondary trading on the Templum ATS, no assurance can be given as to

when, or if, we will be able to successfully complete this project in order to enable access to a secondary trading feature beta (testing)

version to a closed group of users for testing before any final launch is made to the public, and Templum’s approval.

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.

operation of the Templum ATS is subject to extensive regulation and oversight.

Accordingly, any regulatory delays or objections will

result in delays in our ability to launch the proposed platform.

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.

and individual investors may face significant risk when buying securities on our proposed secondary trading platform.

These risks include

the following:

companies are not required to make periodic public filings, and therefore certain capitalization, operational and financial information

may not be available for evaluation;

investment may only be appropriate for investors with a long-term investment horizon and a capacity to absorb a loss of some or all

of their investment;

securities, when purchased, are generally highly illiquid, are often subject to further transfer restrictions, and no public market

exists for such securities;

may fail to settle, which could harm our reputation.

we may become involved in disputes and litigation matters between customers with respect to transactions on our proposed secondary trading

There is a risk that clients may increasingly look to us to make them whole for delayed and/or broken trades.

Customers may

litigate over a failure of sellers to deliver securities or over the untimely deliveries of securities.

Any litigation to which we are

a party could be expensive and time consuming, regardless of the ultimate outcome, and the potential costs and risks of such litigation

may incentivize us to settle, which could harm our reputation or have a material adverse effect on our business or results or operations.

estimate that the cost for developing this platform will not exceed $1.0 million, most of which has already been incurred and consists

of salaries or fees paid to engineers and consultants.

We have and continue to pay these expenses from our working capital.

currently have a revenue model associated with the sales of securities on the proposed ATS.

However, we may seek incorporate this revenue

model in the future, provided that we determine any such revenue model is in strict compliance with all regulatory guidelines.

currently anticipate that we will also be able to sell our interests in any portfolio company using the Templum ATS provided such sales

are made in a regulatorily compliant matter.

We expect to place a restriction on any sales during any period in which an issuer is offering

its securities for sale on the Netcapital funding platform.

In addition, securities issued in a Reg CF transaction generally cannot be

resold for a period of one year, unless the securities are transferred:

(1) to the issuer of the securities;

(2) to an “accredited

(3) as part of an offering registered with the SEC;

or (4) to a member of the family of the purchaser or the equivalent,

to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent,

or in connection with the death or divorce of the purchaser or other similar circumstance.

Accordingly, any shares owned by us would

also be subject to these restrictions.

Additional restrictions may be implemented, and there can be no assurance that we will ever sell

any of our interests in any portfolio company using the Templum ATS.

Further, our insider trading policy prohibits all of our employees,

officers, consultants and directors from buying or selling securities while in possession of material non-public information and all

such parties are also required to maintain strict confidentiality of all such information.

In addition, in order to maintain compliance

with our insider trading policies, any affiliate or employee seeking to trade securities in any issuer listed on the funding portal must

receive prior approval and clearance from our Chief Financial Officer and all such requests for clearance will be documented and maintained

with our compliance department.

Netcapital funding portal is currently registered with the SEC and is a member of FINRA.

For so long as we continue to operate our Netcapital

platform solely for primary offerings by issuers under Reg CF, we believe that we are not required to register under Regulation ATS.

upon publicly available information either published on the websites of our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc.

and Republic Core LLC) or included in offering statements of issuers hosted on such offering platforms, we believe that we provide the

lowest cost solution for online capital raising.

We also believe, based upon our facilitated technology platforms, our strong emphasis

on customer support, and feedback received from clients that have onboarded to our platform, that our access and onboarding of new clients

are superior due to our facilitated technology platforms.

Our network continues to rapidly expand as a result of our enhanced marketing

and broad distribution to reach new investors.

competitors include StartEngine Crowdfunding, Inc., Wefunder Inc.

and Republic Core LLC.

We also believe that

our access and onboarding of new clients are superior due to our facilitated technology platforms.

Our network is expanding as a result

of our enhanced marketing and broad distribution to reach new investors.

Given the rapid growth in the industry and its potential to disrupt

the multi-billion dollar private capital market, we believe there is sufficient room for multiple players.

Two major tailwinds are driving accelerated

growth in the shift to the use of online funding portals:

Given the rapid growth in the industry and

its potential to disrupt the multi-billion dollar private capital market, we believe there is sufficient room for multiple players.

major tailwinds are driving accelerated growth in the shift to the use of online funding portals:

(i) the COVID-19 pandemic;

and (ii) the increase in funding limits under Reg

the increase in funding limits under Reg CF.

The pandemic drove a rapid need to bring as many processes as possible online.

With travel restrictions in place and most people

in lockdown, entrepreneurs were no longer able to fundraise in person and have increasingly turned to online capital raising through

funding portals.

There are numerous industry drivers and tailwinds that complement investor demand for access to investments in private companies.

capitalize on these, our strategy is to:

Generate New Investor Accounts.

restrictions in place and most people in lockdown, entrepreneurs were no longer able to fundraise in person and have increasingly turned

to online capital raising through funding portals.

are numerous industry drivers and tailwinds that complement investor demand for access to investments in private companies.

To capitalize

on these, our strategy is to:

New Investor Accounts.

Growing the number of investor accounts on our platform is a top priority.

Investment dollars continuing to flow through our platform is a key revenue driver.

When issuers advertise their offerings, they are generating new investor accounts for us at no cost to Netcapital.

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

Hire Additional Business Development Staff.

We seek to hire additional business development staff that is technology and financially passionate about capital markets to handle our growing backlog of potential customers.

Increase the Number of Companies on Our Platform via Marketing.

When a new company lists on our platform, they bring their customers, supporters, and brand ambassadors as new investors to Netcapital.

We plan to increase our marketing budget to help grow our portal and advisory clients.

Invest in Technology.

Investment dollars continuing to

flow through our platform is a key revenue driver.

When issuers advertise their offerings, they are generating new investor accounts

for us at no cost to Netcapital.

We plan to supplement our issuers’ spend on advertising by increasing our online marketing

spend as well, which may include virtual conferences going forward.

Additional Business Development Staff.

We seek to hire additional business development staff that is technology and financially passionate

about capital markets to handle our growing backlog of potential customers.

the Number of Companies on Our Platform via Marketing.

When a new company lists on our platform, they bring their customers, supporters,

and brand ambassadors as new investors to Netcapital.

We plan to increase our marketing budget to help grow our portal and advisory

in Technology.

Technology is critical to everything that we do.

We plan to invest in developing innovative technologies that enhance our platform and allow us to pursue additional service offerings.

For example, we plan on offering the ability to purchase securities sold under Regulation A.

Incubate and Accelerate Our Advisory Portfolio Clients.

The advisory portfolio and our equity interests in select advisory clients represent potential upside for our shareholders.

We plan to invest in developing innovative technologies that enhance

our platform and allow us to pursue additional service offerings.

and Accelerate Our Advisory Portfolio Clients.

The advisory portfolio and our equity interests in select advisory clients represent

potential upside for our shareholders.

We seek to grow this model of advisory clients.

Expand Internationally.

Internationally.

We believe there is a significant opportunity to expand into Europe and Asia as an appetite abroad grows for U.S.

Open ATS/Secondary Transfer Feature.

Lack of liquidity is a key issue for investors in private companies as private markets lack a liquidity feature in our targeted market.

In January 2023, we entered into software license and services agreement with Templum Markets LLC, operator of an ATS with approval in 53 U.S.

states and territories, for the trading of unregistered or private securities to provide issuers and investors on the Netcapital funding portal with the potential for greater distribution and liquidity.

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

New Verticals Represent a Compelling Opportunity.

a secondary trading feature.

We believe that lack of liquidity is a key issue for investors in private companies in our targeted

Accordingly, we are exploring ways in which we can provide our clients with the ability to access a secondary trading

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 an operator of an ATS with approval in 53 U.S.

territories for the trading of unregistered or private securities to provide issuers and investors on the Netcapital platform with

the potential for greater distribution and liquidity.

We are currently 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 engage in secondary

trading of securities.

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.

Verticals Represent a Compelling Opportunity.

We operate in a regulated market supported by the JOBS Act.

We may pursue expansion to our model to include Regulation A and Regulation D offerings.

Industry Tailwinds

Two major tailwinds are driving accelerated growth

in the shift to digital fundraising:

the COVID-19 pandemic and regulatory enhancements to the Jobs Act.

The pandemic drove a rapid need

to bring as many processes as possible online.

With travel restrictions in place and most people in lockdown, entrepreneurs were no longer

able to fundraise in person and have increasingly turned to online capital raising through funding portals.

In addition, exempt offering regulatory enhancements

proposed by the SEC in 2020 went into effect in March 2021.

These amendments increased the offering limits for Reg CF, Regulation A and

Rule 504 of Regulation D offerings as follows:

the Reg CF limit increased to $5 million from $1.07 million, every twelve months.

504 of Regulation D moved to $10 million from $5 million and Regulation A Tier 2 rose to $75 million from $50 million.

Investment Portfolio

A key part of our story involves the potential value

creation driven by our portfolio companies.

In our portfolio, we focus on companies with emerging, disruptive technologies.

list of our investment portfolio is described below:

We are working on expanding

our model to include Regulation A and Regulation D offerings.

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.

key part of our story involves the potential value creation driven by our portfolio companies.

In our portfolio, we focus on companies

with emerging, disruptive technologies.

A partial list of our investment portfolio is described below:

by over 300,000 investors to vet startup investments, KingsCrowd, Inc.

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The company aggregates, analyzes, and rates companies raising on platforms like Netcapital to help investors make more informed decisions.

related to an investment in KingsCrowd include, but are not limited to the following:

of the key responsibilities of KingsCrowd’s business have been assigned to one individual, and its ability to implement adequate

internal controls depends, in part, on its ability to attract trained professional staff that allows it to segregate duties among

several individuals.

may become subject to any number of laws and regulations that may be adopted with respect to the Internet and electronic commerce;

success depends in part on its ability to grow and take advantage of efficiencies of scale;

communicators close more deals.

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the company’s technology enables sales professionals to see at a glance how they are coming across to customers.

the click of a button and the wallet owner’s permission, ScanHash’s innovative program launches and immediately integrates

with customers' technology systems to search for clues and traces of their private key, digital wallets and other crypto-enabling logs

Thanks to ScanHash’s proprietary digital forensics technology, recovering lost cryptocurrency is affordable, accessible,

by famous venture capitalist Tim Draper, napster founder, Shawn Fanning, and co-creator of Guitar Hero, Kai Huang, Zelgor Inc.

is an interactive

entertainment company featuring a new species of rambunctious alien characters called The Noobs.

The Noobs are a unique and original intellectual

property introduced to the world through mobile games, multimedia content, and strategic partnerships.

MustWatch LLC brings

your friends and favorite shows together all in one place.

The Watch Party app makes it easy to find new shows, see what your friends

are watching, and recommend great shows to each other.

The company’s platform delivers targeted show recommendations based on the

television viewing tastes of users’ friends and family.

It’s not a single streaming platform’s media catalog, but a

cross-platform television guide, crowdsourced from your friends and family.

C-Reveal Therapeutics

related to an investment in ChipBrain include, but are not limited to the following:

future growth depends to a large extent on its ability to effectively anticipate and adapt to customer requirements and offer services

that meet customer demands;

failure to attract and retain key employees could hurt the business, and the management team does not have extensive experience in

the operation of businesses such as ChipBrain;

intentional or unintentional disruption, failure, misappropriation or corruption of its network and information systems could severely

affect its business.

by famous venture capitalist Tim Draper, napster founder, Shawn Fanning, and co-creator of Guitar Hero, Kai Huang, Zelgor Inc.(“Zelgor”)

is an interactive entertainment company featuring a new species of rambunctious alien characters called The Noobs.

The Noobs are a unique

and original intellectual property introduced to the world through mobile games, multimedia content, and strategic partnerships.

related to an investment in Zelgor include, but are not limited to the following:

of the key responsibilities of Zelgor’s business have been assigned to four individuals;

may become subject to any number of laws and regulations that may be adopted with respect to the Internet and electronic commerce;

business of mobile applications is competitive and is expected to become increasingly competitive in the future.

LLC (“MustWatch”) brings your friends and favorite shows together all in one place.

The Watch Party app makes it easy to

find new shows, see what your friends are watching, and recommend great shows to each other.

The company’s platform delivers targeted

show recommendations based on the television viewing tastes of users’ friends and family.

It’s not a single streaming platform’s

media catalog, but a cross-platform television guide, crowdsourced from your friends and family.

related to an investment in MustWatch include, but are not limited to the following:

inability to use software licensed from third parties, or to use open source software under license terms that interfere with its

proprietary rights, could disrupt its business;

business depends on continued, unimpeded access to the Internet by MustWatch and its users, but Internet access providers and Internet

backbone providers may be able to block, degrade or charge for access to or bandwidth use of certain of our products and services,

which could lead to additional expenses and the loss of users;

to comply with laws and contractual obligations related to data privacy and protection could have a material adverse effect on the

business, financial condition and operating results of MustWatch.

Cancer Immunotherapy

Therapeutics’s proprietary technology, developed at Massachusetts General Hospital and Harvard University, helps the body's immune

system to identify and destroy cancer cells by inhibiting key enzymes that conceal the disease.

This patent pending approach is designed

to improve the efficacy of treating a broad range of cancers.

Hiveskill LLC

Therapeutics’s (“C-Reveal”) proprietary technology, developed at Massachusetts General Hospital and Harvard University,

helps the body’s immune system to identify and destroy cancer cells by inhibiting key enzymes that conceal the disease.

pending approach is designed to improve the efficacy of treating a broad range of cancers.Risks related to an investment in C-Reveal

include, but are not limited to the following:

may not be able to secure and maintain relationships with research institutions and clinical investigators that are capable of conducting

and have access to necessary patient populations for the conduct of C-Reveal’s clinical trials;

product development programs will be based on novel technologies and are inherently risky;

clinical trials may not be successful.

product is an AI-powered database and CRM hybrid that uses data and emotionally intelligent AI to boost direct one-to-one marketing efforts.

It also provides specialized experts who know how to leverage your company’s data.

Caesar Media Group Inc.

related to an investment in Hiveskill LLC (“Hiveskill”) include, but are not limited to the following:

in the markets in which Hiveskill competes could prevent it from generating or sustaining revenue growth and generating or maintaining

profitability;

operates in an emerging market that is characterized by rapid changes in customer requirements, frequent introductions of new and

enhanced products, and continuing and rapid technological advancement;

its reputation is critical to Hiveskill’s ability to attract and retain clients, and any failure, or perceived failure, to

appropriately operate its business or deal with matters that give rise to reputation risk may materially and adversely harm the business,

prospects and results of operations

Media Group Inc.

Media Group, Inc.

is an advanced marketing and technology solutions provider.

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management, customer service, and sales management.

Although each of the above companies possesses potential

to be a valuable liquid asset for our Company, they are subject to swings in their valuation and on a quarter-to-quarter basis, may create

extreme volatility in our earnings report, as we mark the value of the investment to the most recent observable price.

Some of our investments

may decrease to a value of zero dollars.

Major Customers

For the year ended April 30, 2023,

the Company had one customer that constituted 25% of its revenues, and four customers that each constituted 14% of its revenues.

year ended April 30, 2022, the Company had one customer that constituted 22% of its revenues, a second customer that constituted 22% of

its revenues, and a third customer that constituted 18% of its revenues.

Recent Developments

May 2023 Registered Direct

On May 23, 2023, we entered

into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to issue and sell to such investors,

in a registered direct offering (the “Offering”), 1,100,000 shares (the “Shares”) of our common stock at a price

of $1.55 per Share, for aggregate gross proceeds of $1,705,000, before deducting the placement agent's fees and other offering expenses

payable by the Company.

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

The Shares were offered

and issued and sold pursuant to the Company’s shelf registration statement on Form S-3 (File 333-267921) filed by the Company with

the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on October 18, 2022 and declared effective on

October 26, 2022.

We used approximately $365,000

of the net proceeds from the Offering to repay certain indebtedness, and the remainder of net proceeds for working capital and general

corporate purposes.

Also in connection with the

Offering, on May 23, 2023, we entered into a placement agency agreement with ThinkEquity (the “Placement Agent”), pursuant

to which (i) the Placement Agent agreed to act as placement agent on a “best efforts” basis in connection with the Offering,

(ii) we agreed to pay the Placement Agent an aggregate fee equal to 8.0% of the gross proceeds raised in the Offering, and to reimburse

the Placement Agent for certain expenses, and (iii) we agreed to issue to the Placement Agent warrants to purchase up to 55,000 shares

of Common Stock at an exercise price of $1.94 (the “Placement Agent Warrants”), which were issued on May 25, 2023.

The Placement

Agent Warrants (and the shares of Common Stock issuable upon the exercise of the Placement Agent Warrants) were not registered under the

Securities Act, and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section

4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder.

Repayment of Secured Debt

On May 25, 2023, we paid $367,167 to our secured lender,

Vaxstar LLC, to pay off the remaining $350,000 principal balance and $17,167 in interest, using a portion of the net proceeds of the Offering.

Following repayment to Vaxstar LLC the facility was closed and all related agreements were terminated in accordance with their terms.

Recent Common Stock Issuances.

In April and May 2023, we issued an aggregate of 450,000

shares of common stock to consultants in consideration of services rendered.

In addition, in July 2023, we issued 49,855 shares of common

stock to an unrelated third party, in consideration of a release from such third party related to settlement of an outstanding debt between

such third-party and Netcapital DE LLC.

We did not receive any proceeds from these issuances.

Such shares were issued as restricted securities

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

July 2023 Public Offering

On July 24, 2023 the Company completed an underwritten

public offering of 1,725,000 shares of the Company’s common stock, at a price to the public of $0.70 per share for aggregate gross

proceeds of $1,207,500, before deducting underwriting discounts and offering expenses payable by the Company.

In conjunction with this

offering, the Company issued the underwriter and its designees warrants to purchase 86,250 shares of our common stock at an exercise price

Corporate Information

Our principal executive offices

are located at State Street Financial Center, One Lincoln Street, Boston, Massachusetts and our telephone number is 781-925-1700.

related to an investment in Caesar Media include, but are not limited to the following:

Media has a ability to prevent competitors from marketing similar products or services;

parties may infringe on its technology.

following table summarizes the components of investments as of April 30, 2024 and 2023:

April 30, 2024

April 30, 2023

Netcapital DE LLC

MustWatch LLC

ChipBrain LLC

C-Reveal Therapeutics LLC

Deuce Drone LLC

Hiveskill LLC

Caesar Media Group Inc.

CountSharp LLC

StockText LLC

RealWorld LLC

30 issuers that paid a 1% equity fee to the funding portal

KingsCrowd Inc.

Total Investments at fair value

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.

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

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.

of Beta Version for Secondary Trading Platform

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.

2024 Warrant Inducement

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.

Wainwright was the exclusive agent

for 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.

for Broker-Dealer License

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 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.

Cessation of our Valuation Business

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

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.

2024 Common Stock Issuance

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.

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.

of April 30, 2024, the Company had three members of its senior corporate personnel.

As of April 30, 2024, we had approximately 21 employees,

all of which were full time.

None of our employees are unionized or covered by collective bargaining agreements, and we consider our

current employee relations to be good.

History and Information

Company was incorporated in Utah in 1984 as DBS Investments, Inc.

(“DBS”), merged with ValueSetters L.L.C.

in December of

2003 and changed its name to ValueSetters, Inc.

In November 2010, the Company purchased NetGames.com to drive subscription revenue through

online games such as chess.net.

In the summer of 2017, Dr.

Cecilia Lenk and Coreen Kraysler, CFA were hired to bring in consulting and

advisory business.

In November 2020, the Company purchased Netcapital Funding Portal Inc.

and changed the name of the parent company

from ValueSetters, Inc.

to Netcapital Inc., while the name of the consulting business was changed to Netcapital Advisors.

2021, the Company purchased MSG Development Corp.

We formed Netcapital Securities Inc.

principal executive offices are located at One Lincoln Street, Boston, Massachusetts and our telephone number is 781-925-1700.

a corporate website with the address http://www.netcapitalinc.com, our funding portal maintains a website with the address http://www.netcapital.com,

Netcapital Advisors maintains a website at http://www.netcapitaladvisors.com and our valuation business maintains a website at https://valucorp.com/.

have not incorporated by reference into this Report on Form 10-K the information on any of our websites and you should not consider any

of such information to be a part of this document.

We have not incorporated by reference into this Report on Form 10-K the information on any of our websites and you should not consider

any of such information to be a part of this document.

Our website addresses are included in this document for reference only.

We make available free of charge through our corporate

website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports

through a link to the EDGAR database as soon as reasonably practicable after we electronically file such material with, or furnish such

material to the SEC.

You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100

F Street, NE, Washington, DC 20549.

You can obtain additional information about the operation of the Public Reference Room by calling

the SEC at 1.800.SEC.0330.

In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements,

and other information regarding issuers that file electronically with the SEC, including all of our filings.

make available free of charge through our corporate website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current

Reports on Form 8-K, and amendments to these reports through a link to the EDGAR database as soon as reasonably practicable after we

electronically file such material with, or furnish such material to the SEC.

You can also read and copy any materials we file with the

SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.

You can obtain additional information about the

operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330.

In addition, the SEC maintains a website (www.sec.gov) that

contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including

all of our filings.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business