Netcapital Inc. Reports 91% Revenue Decline, Operating Loss, and Liquidity Issues in Q2 2024

Netcapital Inc. reported significant financial challenges for the three months ended July 31, 2024, with total revenues of $142,227, a dramatic decline of approximately 91% from $1,519,809 in the same period of 2023. The decrease in revenue was primarily attributed to a lack of consulting services, which generated no income compared to $1,143,700 in the prior year. Additionally, fees from online services fell to $142,227 from $376,109, reflecting a broader downturn in the company's funding portal activities.

The company's gross profit for the quarter was $132,007, down from $1,501,756 in the previous year. This resulted in an operating loss of $(2,508,237), compared to a loss of $(749,020) in the same quarter of 2023. The net loss before taxes also increased to $(2,527,170) from $(790,655) year-over-year, with a net loss attributable to common stockholders of $(2,527,170), up from $(491,655) in the prior year.

Total current assets decreased to $924,941 as of July 31, 2024, from $1,042,535 as of April 30, 2024. Total liabilities rose to $3,932,517 from $3,616,698, while total stockholders’ equity fell to $37,508,453 from $37,940,608. The company reported negative working capital of $2,507,576, indicating ongoing liquidity issues.

In response to these financial difficulties, Netcapital has implemented cost-cutting measures, including layoffs, and has focused on its funding portal business, which has seen year-over-year revenue growth. The company also executed a 1-for-70 reverse stock split effective August 1, 2024, to regain compliance with Nasdaq's listing requirements after previously being notified of non-compliance due to a low bid price.

Cash and cash equivalents at the end of the reporting period were $855,181, a slight decrease from $863,182 at the beginning of the quarter. The company reported net cash used in operating activities of $(1,963,645), compared to $(1,464,023) in the same period of 2023. However, net cash provided by financing activities was $1,955,644, primarily from the exercise of warrants.

Strategically, Netcapital has entered into an At The Market Offering Agreement to sell shares of common stock with an aggregate sales price of up to $2,100,000. The company is also awaiting regulatory approval for its wholly owned subsidiary, Netcapital Securities Inc., which has applied for broker-dealer registration to expand its revenue base through Regulation A+ and Regulation D offerings.