What changed in this filing

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Item 1A. Risk Factors

2025-08-12 compared with 2024-07-29 · 292 added, 245 removed, 595 unchanged (47% of the section changed)

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and you could lose part or all of your investment.

Related to Our Business and Growth Strategy

Related to Financial Position

financial situation creates doubt whether we will continue as a going concern.

of April 30, 2025, the Company had negative working capital of $5,096,163 and for the year ended April 30 2025, the Company had an operating

loss of $3,442,388 and net cash used in operating activities amounted to $4,879,838.There can be no assurances that we will be able to

achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements,

loss of $8,321,317 and net cash used in operating activities amounted to $5,339,211.

There can be no assurances that we will be able

to achieve a level of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements,

public offerings and/or bank financing necessary to support our working capital requirements.

Our management has recently reduced its

operating expenses and we have turned our focus to our funding portal business, which generates cash revenues and has seen a growth in

revenues on a year-to-year basis.

We plan to continue operating with lower fixed overhead amounts and seek to raise money from private

placements, public offerings and/or bank financing.

Our management has determined, based on its recent history and the negative cash

flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant

conditions or events noted above.

To the extent that funds generated from any private placements, public offerings and/or bank financing,

if available, are insufficient, we will have to raise additional working capital.

No assurance can be given that additional financing

will be available, or if available, will be on acceptable terms.

Accordingly, our management has concluded that these conditions raise

substantial doubt about our ability to continue as a going concern.

There can be no assurance that we will be able to achieve its business

plan objectives or be able to achieve or maintain cash-flow-positive operating results.

If we are unable to generate adequate funds from

operations or raise sufficient additional funds, we may not be able to repay our existing debt, continue to operate our business network,

respond to competitive pressures or fund our operations.

As a result, we may be required to significantly reduce, reorganize, discontinue,

or shut down our operations.

have a limited operating history and our profits have been generated primarily by unrealized gains from equity securities we own in other

Although we have been profitable, the likelihood of our success must be considered in light of the problems, expenses, difficulties,

complications and delays frequently encountered by a small developing company.

Our management has determined, based on

its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate,

to a sufficient level, the relevant conditions or events noted above.

To the extent that funds generated from any private placements,

public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital.

can be given that additional financing will be available, or if available, will be on acceptable terms.

Accordingly, our management has

concluded that these conditions raise substantial doubt about our ability to continue as a going concern.

There can be no assurance that

we will be able to achieve our business plan objectives or be able to achieve or maintain cash-flow-positive operating results.

are unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay our existing

debt, continue to operate our business network, respond to competitive pressures or fund our operations.

As a result, we may be required

to significantly reduce, reorganize, discontinue, or shut down our operations.

additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish certain rights.

may seek additional capital through a combination of equity offerings, debt financings, strategic collaborations and alliances or licensing

arrangements.

To the extent that we raise additional capital through the sale of equity, convertible debt securities or other equity-based

derivative securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely

affect your rights as a stockholder.

Any indebtedness we incur could involve restrictive covenants, such as limitations on our ability

to incur additional debt, acquire or license intellectual property rights, declare dividends, make capital expenditures and other operating

restrictions that could adversely impact our ability to conduct our business.

Furthermore, the issuance of additional securities, whether

equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline.

If we raise additional

funds through strategic collaborations and alliances or licensing arrangements with third parties, or otherwise agree to terms unfavorable

to us, any of which may have a material adverse effect on our business, operating results and prospects.

Adequate additional financing

may not be available to us on acceptable terms, or at all.

obligations to the U.S.

Small Business Administration is secured by security interests in our assets, so if we default on those obligations,

they could foreclose on some or all of our assets.

obligations to the U.S.

Small Business Administration (“SBA”) is secured by security interests in our assets.

approximately $0.5 million was owed to the SBA.

If we default on our obligations under these agreements, the SBA could foreclose

on their security interests and liquidate some or all of these assets, which would harm our financial condition and results of operations

and would require us to reduce or cease operations and possibly seek bankruptcy protection.

loan and security documents encompassing our secured obligations to the SBA contain restrictive covenants which limit management’s

discretion to operate our business

order to obtain the SBA loan, we agreed to certain covenants that place significant restrictions on, among other things, our ability

to incur additional indebtedness with any superior liens on the collateral, to create liens or other encumbrances, , and to sell or otherwise

dispose of assets and merge or consolidate with other entities.

Any failure to comply with these covenants i could result in an event

of default, which could trigger an acceleration of the related debt.

If we were unable to repay the debt upon any such acceleration,

the SBA could seek to foreclose on our assets in an effort to seek repayment under the loans.

If the SBA was successful, we would be

unable to conduct our business as it is presently conducted and our ability to generate revenues and fund our ongoing operations would

be materially adversely affected.

recently recognized impairments totaling $17.9 million to the value of several of our portfolio company investments, which may adversely

affect our financial condition and the value of our securities.

April 30, 2025, the Company completed a quarterly review of its equity investments in accordance with ASC 321 and disclosed on May 5,

2025 that it had recognized impairment losses totaling approximately $17,935,476 related to multiple portfolio companies.

These impairments

were based on qualitative indicators including the resignation of key personnel, cessation of operations, regulatory setbacks, failure

to file required annual reports, or technological obsolescence, depending on the specific issuer.

non-cash impairment charges materially reduced the Company’s total assets and shareholders’ equity.

These charges may affect

the Company’s ability to raise capital, impact investor confidence, and negatively influence the market price of its common stock.

The Company does not expect to recover value from the impaired investments.

Additionally,

the Company’s evaluation of remaining investments is ongoing, and further impairments may be recognized in future reporting periods

if management concludes that other securities have experienced a decline in fair value that is not expected to recover.

Future impairment

losses may continue to have a material adverse effect on the Company’s financial position and operating results.

Related to Our Business and Growth Strategy

have a limited operating history and our profits were previously generated primarily by unrealized gains from equity securities we own

in other companies.

Although we were previously profitable, we have suffered losses the last few years and there is no guarantee that

we will return to profitability.

were incorporated in the State of Utah in April 1984.

We reported a net loss of $28,301,325 in the year ended April 30, 2025.

Although we reported earnings in the years ended April 30, 2023 and 2022, the majority of our earnings came from unrealized gains in

equity securities that we own.

These securities have a value on our books, but are not liquid.

Furthermore, the

likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently

encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will

Since we have a limited operating history, we cannot assure you that our business will maintain profitability.

we reported earnings in the years ended April 30, 2023 and 2022, the majority of our earnings came from unrealized gains in equity securities

These securities have a value on our books, but are not liquid, and furthermore, we recognized an impairment loss in fiscal

2025 of approximately $19.9 million on the equity securities that we own.

Despite our prior reported earnings, there is no guarantee

that we will ever become profitable in the future.

have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our revenues.

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For the year ended April 30, 2025, the Company had

one customer that constituted 25% of its revenues, a second customer that constituted 22% of its revenues, and a third customer that

constituted 22% of its revenues.

For the year ended April 30, 2023, the Company had one customer that constituted 25% of its revenues,

and four customers that each constituted 14% of its revenues.

It is not possible for us to predict the future level of demand for our

services that will be generated by these customers or new customers, or the future demand for the products and services of these customers

or new customers.

If any of these customers experience declining or delayed sales due to market, economic or competitive conditions,

we could be pressured to reduce the prices we charge for our products which could have an adverse effect on our margins and financial

position and could negatively affect our revenues and results of operations and/or trading price of our common stock.

one customer that constituted 20% of its revenues, and a second customer that accounted for 11% of its revenues.

For the year ended April

30, 2024, the Company had one customer that constituted 25% of its revenues, a second customer that constituted 22% of its revenues,

and a third customer that constituted 22% of its revenues.

It is not possible for us to predict the future level of demand for our services

that will be generated by these customers or new customers, or the future demand for the products and services of these customers or

new customers.

If any of these customers experience declining or delayed sales due to market, economic or competitive conditions, we

could be pressured to reduce the prices we charge for our products which could have an adverse effect on our margins and financial position

and could negatively affect our revenues and results of operations and/or trading price of our common stock.

debt level could negatively impact our financial condition, results of operations and business prospects.

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regulations, and the operation of our funding portal is frequently subject to examination, constraints on its business, and in some cases

Our wholly-owned subsidiary Netcapital Securities Inc has applied for broker-dealer registration with FINRA.

In the event Netcapital

Securities Inc.

receives a broker-dealer license, it will become subject to additional regulation and supervision of the SEC and FINRA,

including without limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule).

In addition, some

of the restrictions and rules applicable to our subsidiary could adversely affect and limit some of our business plans.

Our wholly owned subsidiary Netcapital Securities Inc is a broker-dealer that is registered with FINRA.

It is subject to additional

regulation and supervision of the SEC and FINRA, including without limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the

Uniform Net Capital Rule).

In addition, some of the restrictions and rules applicable to our subsidiary could adversely affect and limit

some of our business plans.

funding portal’s service offerings are relatively new in an industry that is still quickly evolving .

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business model is one of innovation, including continuously working to expand our product lines and services to our clients.

example, our subsidiary Netcapital Securities has applied for broker-dealer registration with FINRA and we are continuing our

relationship with Templum into becoming an alternative trading system.

our subsidiary Netcapital Securities received its broker-dealer registration with FINRA in November 2024 and we are continuing our relationship

with Templum into becoming an alternative trading system.

It is unclear whether these services will be successful.

Further, we continuously try to offer additional types of services, and we cannot offer any assurance that any of them will be

From time to time, we may also modify aspects of our business model relating to our service offerings.

We cannot offer

any assurance that these or any other modifications will be successful or will not result in harm to the business.

We may not be

able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating

Further, we continuously

try to offer additional types of services, and we cannot offer any assurance that any of them will be successful.

From time to time,

we may also modify aspects of our business model relating to our service offerings.

We cannot offer any assurance that these or any other

modifications will be successful or will not result in harm to the business.

We may not be able to manage growth effectively, which could

damage our reputation, limit our growth, and negatively affect our operating results.

compliance is focused on U.S.

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funding portal relies on one escrow agent to hold investment commitments for issuers.

currently rely on First Citizens Bank to provide all escrow services related to offerings on our platform.

currently rely on Luminate Bank to provide all escrow services related to offerings on our platform.

Any change in this relationship

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our investments cannot be guaranteed, and no market may exist for us to generate gains from our investments in early-stage companies.

As of April 30, 2025, we have recognized a non-cash loss of $19.9 million from the write-down of various equity securities that we own

in these early-stage companies.

Statistics show that early-stage companies are more likely to fail than to succeed.

business depends on the reliability of the infrastructure that supports the Internet and the viability of the Internet.

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positions, it may have an adverse effect on our business.

health epidemics, such as the outbreak caused by the COVID-19 pandemic, and other outbreaks or unforeseen or catastrophic events could

continue to disrupt and adversely affect our operations, financial condition and business.

health epidemics or outbreaks could adversely impact our business.

The extent to which the coronavirus impacts our operations will depend

on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new

information which may emerge concerning the severity of the coronavirus and the emergence of variants, among others.

In particular, the

spread and treatment of the coronavirus globally could adversely impact our operations and could have an adverse impact on our business

and our financial results.

To date, our business has not been impacted by COVID-19 but it could be in the future.

may not be able to protect all of our intellectual property.

profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for

our brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade

secrets, as well as our ability to operate without inadvertently infringing on the proprietary rights of others.

There can be no

assurance that we will be able to obtain future protections for our intellectual property or defend our current trademarks and

future trademarks and patents.

Further, policing and protecting our intellectual property against unauthorized use by third parties

is time-consuming and expensive, and certain countries may not even recognize our intellectual property rights.

There can also be no

assurance that a third party will not assert infringement claims with respect to our products or technologies.

Any litigation for

both protecting our intellectual property or defending our use of certain technologies could have a material adverse effect on our

business, operating results and financial condition, regardless of the outcome of such litigation.

revenues and profits are subject to fluctuations.

profitability may depend in part on our ability to effectively protect our proprietary rights, including obtaining trademarks for our

brand names, protecting our products and websites, maintaining the secrecy of our internal workings and preserving our trade secrets,

as well as our ability to operate without inadvertently infringing on the proprietary rights of others.

There can be no assurance that

we will be able to obtain future protections for our intellectual property or defend our current trademarks and future trademarks and

Further, policing and protecting our intellectual property against unauthorized use by third parties is time-consuming and expensive,

and certain countries may not even recognize our intellectual property rights.

There can also be no assurance that a third party will

not assert infringement claims with respect to our products or technologies.

Any litigation for both protecting our intellectual property

or defending our use of certain technologies could have a material adverse effect on our business, operating results and financial condition,

regardless of the outcome of such litigation.

revenues and operating results are subject to fluctuations.

is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors.

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Related to Receipt of Securities for Services

significant portion of our total assets are held in equity securities of early-stage companies, which securities are illiquid and subject

to volatility, which factors could have a material adverse effect on our financial condition and results of operations.

related to the consulting and advisory services provided by Netcapital Advisors is often made through equity stakes from such customers.

As of April 30, 2024, approximately $25.2 million of our holdings are issued by companies whose securities do not trade on public markets.

The securities issued are typically in private companies with no established trading market for their securities, that often have limited

operating histories, limited operating cash, and negative cash flows.

Additionally, these securities are primarily restricted, and are

subject to legal holding periods pursuant to Rule 144 or other applicable exemptions.

The stock price of such issuers is often volatile,

unpredictable, and with limited liquidity, and the value of such securities on the date of receipt compared to the date when we are able

to legally sell the securities may decrease significantly.

The value ascribed to our assets in our financial statements as of a particular

date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date.

Accordingly, the value of such holdings may change over time due to factors that we do not control, such as issuance of securities by

such companies at lower prices or other market factors.

During the year ended April 30, 2024, we recognized an unrealized loss of approximately

$2.7 million on the value of our equity securities due to the decline in value of a single issuer, which represented an impairment of

more than 80% of the previous value of our holdings in such issuer, which resulted in a reduction of our retained earnings.

the value of our holdings could have a material adverse effect on our financial condition and results of operations.

significant portion of our total assets are held in equity securities of early-stage companies, which are illiquid and subject to volatility,

and could have a material adverse effect on our financial condition and results of operations.

related to the consulting and advisory services provided by Netcapital Advisors was often made through equity stakes from such customers.

As of April 30, 2025, approximately $5.7 million of our assets are equity securities issued by companies whose securities do not trade

on public markets.

The securities issued are typically in private companies with no established trading market for their securities,

that often have limited operating histories, limited operating cash, and negative cash flows.

Additionally, these securities are primarily

restricted, and are subject to legal holding periods pursuant to Rule 144 or other applicable exemptions.

The stock price of such issuers

is often volatile, unpredictable, and with limited liquidity, and the value of such securities on the date of receipt compared to the

date when we are able to legally sell the securities may decrease significantly.

The value ascribed to our assets in our financial statements

as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated

as of such date.

Accordingly, the value of such holdings may change over time due to factors that we do not control, such as issuance

of securities by such companies at lower prices or other market factors.

During the year ended April 30, 2024, we recognized an unrealized

loss of approximately $2.7 million on the value of our equity securities due to the decline in value of a single issuer, which represented

an impairment of more than 80% of the previous value of our holdings in such issuer, which resulted in a reduction of our retained earnings.

During the year ended April 30, 2025, we determined that the equity securities we held in twelve issuers had become worthless and we

recorded an impairment loss of $19.9 million.

Changes to the value of our holdings could have a material adverse effect on our financial

condition and results of operations.

are not, and do not intend to become, regulated as an investment company under the U.S.

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to be an investment company under the 40 Act (and similar legislation in other jurisdictions).

In order to ensure that we are not deemed

to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans related to us, we

will be limited in the types of acquisitions that we may make and we may need to modify our organizational structure or dispose of assets

that we would not otherwise dispose of.

Moreover, if anything were to happen which would potentially cause us to be deemed an investment

company under the 40 Act, it would be impractical for us to operate as intended pursuant to our platform and our business, financial

condition and results of operations would be materially adversely affected.

Company holds minority equity interests in a number of early-stage companies, often received as compensation for advisory or platform

These holdings are considered investment securities under the Investment Company Act of 1940 (the “1940 Act”) for

purposes of evaluating investment company status.

Section 3(a)(1)(C) of the 1940 Act generally defines an “investment company”

as an issuer that holds investment securities with a value exceeding 40% of its total assets (excluding cash and U.S.

government securities)

on an unconsolidated basis.

the Company’s investment securities represented a significant portion of its assets in prior periods, the Company performed the

40% asset test each quarter and concluded that the 40% threshold was not met.

Furthermore, on April 30, 2025, the Company recognized

impairment losses totaling approximately $19.9 million, materially reducing the value of its investment securities portfolio.

the Company does not currently hold investment securities in excess of the 40% threshold under the 1940 Act.

with the impairment loss, the Company remains subject to ongoing evaluation under the 1940 Act.

However, the Company is primarily engaged

in a business other than investing, reinvesting, or trading in securities and does not anticipate the need to register under the 1940

It continues to assess eligibility for an exclusion from investment company status, including the exemption under Section 3(b)(1)

for companies that are primarily engaged in a non-investment business.

order to ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our

operations or plans related to us, we will be limited in the types of acquisitions that we may make and we may need to modify our organizational

structure or dispose of assets that we would not otherwise dispose of.

Moreover, if anything were to happen which would potentially cause

us to be deemed an investment company under the 40 Act, it would be impractical for us to operate as intended pursuant to our platform

and our business, financial condition and results of operations would be materially adversely affected.

In addition, if we were deemed

an investment company we could become subject to significant regulatory restrictions, including limitations on its capital structure,

prohibitions on certain transactions with affiliates, and requirements to register under the 1940 Act.

Further, this designation could

be subject to civil enforcement actions and investors may have rescission rights, any of which could materially and adversely affect

the Company’s financial condition, operations, and stockholder value.

Accordingly, we would be required to take extraordinary steps

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to derive revenue.

consulting and advisory services are primarily paid for in restricted shares of stock of our customers, which are often private companies

with no established trading market for their securities.

our consulting and advisory services, payment is often made through equity securities of customers instead of cash.

The securities issued

are in private companies with no established trading market for their securities.

In the absence of a trading market, we may be unable

to liquidate our investment, which will result in the loss of our investment.

consulting and advisory services have primarily been paid for in restricted shares of stock of our customers, which are often private

companies with no established trading market for their securities.

our consulting and advisory services, payment has previously primarily been made through issuance of equity securities of our customers

instead of cash.

The securities issued were in private companies with no established trading market for their securities.

In the absence

of a trading market, we may be unable to liquidate our investments, which will result in the loss of our investment.

Related to Operation of our Proposed Secondary Trading Platform

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by such third-party provider could adversely affect our business.

In addition, there is no guarantee that we will officially launch our

secondary trading platform which could have a material adverse effect on our business.

January 2023, we entered into the Templum License Agreement, to provide issuers and investors on the Netcapital platform with the potential

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states and territories for the trading of unregistered or private securities.

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 have the ability to engage in secondary trading of securities.

We do not control the

operations of Templum or own the equipment used to provide such services.

Further, the operation of the Templum ATS is subject to extensive

regulation and oversight.

Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed

In addition, because we cannot easily switch between operators of secondary trading platforms of this nature, any disruption

of or interference, whether due to regulatory issues or natural disasters, cyber-attacks, terrorist attacks, power losses, telecommunications

failures, or other similar events, would impact our operations and may adversely affect the ability of issuers and investors to utilize

this platform.

There is no obligation for Templum to renew their agreements with us on commercially reasonable terms or at all.

are unable to renew our agreements on commercially reasonable terms, we may be forced to identify another suitable operator or develop

our own secondary trading capabilities, and we may incur significant costs and possible service interruption in connection with doing

We began working with Templum on the design of the required software to enable issuers and investors on the Netcapital platform the ability

to access the Templum ATS in order to have the ability to engage in secondary trading of securities, but we have paused our engagement

We do not control the operations of Templum or own the equipment used to provide such services.

Further, the operation of

the Templum ATS is (or any similar ATS will be) subject to extensive regulation and oversight.

Accordingly, any regulatory delays or

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

In addition, because we cannot easily switch between

operators of secondary trading platforms of this nature, any disruption of or interference, whether due to regulatory issues or natural

disasters, cyber-attacks, terrorist attacks, power losses, telecommunications failures, or other similar events, would impact our operations

and may adversely affect the ability of issuers and investors to utilize this platform.

There is no obligation for Templum to renew their

agreements with us on commercially reasonable terms or at all.

If we are unable to renew our agreements on commercially reasonable terms,

we may be forced to identify another suitable operator or develop our own secondary trading capabilities, and we may incur significant

costs and possible service interruption in connection with doing so.

addition, Templum may take actions beyond our control that could seriously harm our business, including:

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or interpreting its terms of service or other policies in a manner that impacts our ability to run our business and operations.

July 2024, we announced the launch of our beta version for this secondary trading platform and our goal was to offer such secondary trading

platform through the Templum ATS to all issuers and investors on the Netcapital funding portal before the end of 2025 subject to compliance

with all regulatory requirements, As of the date of this report, we have paused further development and roll-out while we reevaluate

evolving market conditions and customer expectations.

There is no guarantee that we will officially launch our secondary trading platform

which could have a material adverse effect on our business.

customers may encounter difficulties with investing through our proposed secondary trading platform.

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material adverse effect on our business or results of operations.

Related to our Proposed Broker-Dealer Activities

and legal uncertainties related to broker-dealers could harm our business.

securities and derivatives businesses are heavily regulated.

Firms in financial service industries have been subject to an increasingly

regulated environment over recent years, and penalties and fines sought by regulatory authorities have increased accordingly.

our subsidiary, Netcapital Securities Inc.

receive its broker-dealer license, it will become subject to regulations in the U.S.

covering all aspects of their business.

Regulatory bodies in U.S., include without limitation, the SEC and FINRA.

Our mode of operation

and profitability may be directly affected by additional legislation changes in rules promulgated by various government agencies and

self-regulatory organizations that oversee our businesses, and changes in the interpretation or enforcement of existing laws and rules,

including the potential imposition of transaction taxes.

Noncompliance with applicable laws or regulations could result in sanctions

being levied against us, including fines and censures, suspension or expulsion from a certain jurisdiction or market or the revocation

or limitation of licenses.

Noncompliance with applicable laws or regulations could adversely affect our reputation, prospects, revenues

and earnings.

In addition, changes in current laws or regulations or in governmental policies could adversely affect our business, financial

condition and results of operations.

and foreign stock exchanges, other self-regulatory organizations and state and foreign securities commissions can censure, fine, issue

cease-and-desist orders, suspend or expel a broker-dealer or any of its officers or employees.

Our ability to comply with all applicable

laws and rules is largely dependent on our internal systems to ensure compliance, as well as our ability to attract and retain qualified

compliance personnel.

We could be subject to disciplinary or other actions in the future due to claimed noncompliance, which could have

a material adverse effect on our business, financial condition and results of operations.

To continue to operate and to expand our services

internationally, we may have to comply with the regulatory controls of each country in which we conduct, or intend to conduct business,

the requirements of which may not be clearly defined.

The varying compliance requirements of these different regulatory jurisdictions,

which are often unclear, may limit our ability to continue existing international operations and further expand internationally.

our subsidiary Netcapital Securities Inc.

receive its broker-license, it may be fined or subject to other disciplinary or corrective

actions if it does not maintain the capital and liquidity levels required by regulators.

Related to our Broker-Dealer Activities

and legal uncertainties could harm our business.

securities businesses are heavily regulated.

Firms in financial service industries have been subject to an increasingly regulated environment

over recent years, and penalties and fines sought by regulatory authorities have increased accordingly.

Our funding portal and broker-dealer

subsidiaries are subject to extensive regulations.

Regulatory bodies include, but are not limited to, the SEC, FINRA, and the Nasdaq

Stock Market.

Our mode of operation and profitability may be directly affected by additional legislation changes in rules promulgated

by various government agencies and self-regulatory organizations that oversee our businesses, and changes in the interpretation or enforcement

of existing laws and rules.

Noncompliance with applicable laws or regulations could result in sanctions being levied against us, including

fines and censures, suspension or expulsion from a certain jurisdiction or market or the revocation or limitation of licenses.

Noncompliance

with applicable laws or regulations could adversely affect our reputation, prospects, revenues and earnings.

In addition, changes in

current laws or regulations or in governmental policies could adversely affect our business, financial condition and results of operations.

exchanges, other self-regulatory organizations and state securities commissions can censure, fine, issue cease-and-desist orders, suspend

or expel a funding portal, broker-dealer or any of its officers or employees.

Our ability to comply with all applicable laws and rules

is largely dependent on our internal systems to ensure compliance, as well as our ability to attract and retain qualified compliance

We could be subject to disciplinary or other actions in the future due to claimed noncompliance, which could have a material

adverse effect on our business, financial condition and results of operations.

To continue to operate, we may have to comply with the

regulatory controls of each jurisdiction in which we conduct, or intend to conduct business, the requirements of which may not be clearly

Securities Inc.

may be fined or subject to other disciplinary or corrective actions if it does not maintain the capital and liquidity

levels required by regulators.

SEC, FINRA, and various other regulatory agencies have stringent rules with respect to the maintenance of specific levels of net capital

by securities broker-dealers.

Should our subsidiary, Netcapital Securities Inc.

receive its broker-dealer license, failure to maintain

the required net capital could result in suspension or revocation of registration by the SEC or suspension or expulsion by FINRA, and

could ultimately lead to liquidation of Netcapital Securities Inc.

If such net capital rules are changed or expanded, or if there is

an unusually large charge against net capital, operations that require an intensive use of capital could be limited.

Such operations

may include investing activities, marketing and the financing of customer account balances.

Also, our ability to withdraw capital from

our brokerage subsidiary could be restricted.

The failure of Netcapital Securities Inc.

to maintain the required net capital could result in suspension

or revocation of registration by the SEC or suspension or expulsion by FINRA, and could ultimately lead to liquidation of Netcapital

Securities Inc.

If such net capital rules are changed or expanded, or if there is an unusually large charge against net capital, operations

that require an intensive use of capital could be limited.

Such operations may include investing activities, marketing and the financing

of customer account balances.

Also, our ability to withdraw capital from our brokerage subsidiary could be restricted.

Factors Related to our Common Stock

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Our failure to meet such applicable listing criteria could

prevent us from listing our common stock on Nasdaq.

In the event we are unable to have our shares traded on Nasdaq, our common stock

could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than Nasdaq.

failure to have our shares traded on the Nasdaq could make it more difficult for you to trade our shares, could prevent our common stock

trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were able

to list our shares on Nasdaq.

As previously disclosed on a Current Report on Form 8-K filed by the Company on September 1, 2023, the Company received

a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying the Company that it was not in compliance with the minimum

bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market.

Specifically, Nasdaq

Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A)

provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business

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.

we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and warrants and

we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each

of which could have a material adverse effect on our shareholders:

liquidity of our common stock;

market price of our common stock;

ability to obtain financing for the continuation of our operations;

number of institutional and general investors that will consider investing in our common stock;

number of investors in general that will consider investing in our common stock;

number of market makers in our common stock;

availability of information concerning the trading prices and volume of our common stock;

number of broker-dealers willing to execute trades in shares of our common stock.

prevent us from continuing to list our common stock on Nasdaq.

In the event we are unable to have our shares traded on Nasdaq, our common

stock could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than Nasdaq.

Our failure to have our shares traded on the Nasdaq could make it more difficult for you to trade our shares, could prevent our common

stock trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were

able to list our shares on Nasdaq.

can be no assurance that we will be able to comply with Nasdaq’s continued listing standards, a failure of which could result in

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or prevent future non-compliance with the listing requirements.

recently sold a substantial number of shares of our common stock and warrants to purchase common stock in a public offering, which could

cause the price of our common stock to decline .

a December 2023 offering, we sold 4,800,000 shares of common stock, pre-funded warrants to purchase up to 11,200,000 shares of our common

stock and common stock warrants to purchase up to 32,000,000 shares of common stock.

In May 2024, we induced some of the warrant holders

to exercise their warrants, and we issued additional warrants to purchase up to 28,640,000 shares of our common stock.

The existence

of the potential additional shares of our common stock in the public market, or the perception that such additional shares may be in

the market, could adversely affect the price of our common stock.

We cannot predict the effect, if any, that market sales of those shares

of common stock or the availability of those shares of common stock for sale will have on the market price of our common stock.

previously disclosed on a Current Report on Form 8-K filed by us, Nasdaq had previously notified us on September 1, 2023 that we were

not in compliance with the Nasdaq’s Listing Rule 5550(a)(2) the “Bid Price Rule”) because it failed to maintain a minimum

bid price of $1.00 per share for 30 consecutive business days.

Further as of July 22, 2024, Nasdaq determined that that our securities

had a closing bid price of $0.10 or less for ten consecutive trading days and as a result, Nasdaq delivered written notice to the Company

on July 23, 2024 under which it advised us that Nasdaq has determined to delist our securities from The Nasdaq Capital Market.

a hearing to appeal Nasdaq’s delisting determination.

On August 19, 2024, we received a notice from The Nasdaq Stock Market, LLC

(“Nasdaq”), dated August 19, 2024, informing us that we had regained compliance with the “Bid Price Rule for continued

listing on The Nasdaq Capital Market, as the bid price of our common stock closed at or above $1.00 per share for a minimum of 10 consecutive

business days since August 2, 2024.

As a result of our demonstrated compliance with Nasdaq’s continued listing requirements, such

aforementioned hearing was cancelled.

our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange’s minimum listing requirements

or those of any other national exchange.

The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order

to remain listed on its exchange.

If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should

delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction

in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

liquidity of our common stock;

market price of our common stock;

ability to obtain financing for the continuation of our operations;

number of institutional and general investors that will consider investing in our common stock;

number of investors in general that will consider investing in our common stock;

number of market makers in our common stock;

availability of information concerning the trading prices and volume of our common stock;

number of broker-dealers willing to execute trades in shares of our common stock.

do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.

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Plan may dilute all other stockholders.

have issued options to purchase 2,202,000 shares of common stock under our 2021 Equity Incentive Plan and our 2023 Omnibus Equity Incentive

Plan and we expect to issue options to purchase the remaining 98,000 shares of common stock in the future to officers, directors, employees

and consultants under our 2023 Omnibus Equity Incentive Plan.

Any such issuances of common stock underlying stock options may cause stockholders

to experience dilution of their ownership interests and the per share value of our common stock to decline.

As options are forfeited

we plan to reissue options to other officers, directors, employees and consultants.

of April 30, 2025 we have issued options to purchase 28,594 shares of common stock under our 2021 Equity Incentive Plan (“2023

Plan) and our 2023 Omnibus Equity Incentive Plan.

In June 2025, we amended our 2023 Plan to increase the shares available under such

2023 Plan to 1,547,556 shares.

Following amendment of the 2023 Plan, we granted options to officers, directors, employees and consultants

to purchase 1,103,722 shares of common stock, which options are not exercisable until approval of the amendment to the 2023 Plan is approved

by shareholders.

We intend to issue the shares available under the 2023 Plan, as amended, to officers, directors and consultants..

such issuances of common stock underlying stock options may cause stockholders to experience dilution of their ownership interests and

the per share value of our common stock to decline.

As options are forfeited, we plan to reissue options to other officers, directors,

employees and consultants.

compliance with complicated U.S.

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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 1A. Risk Factors