UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: January 31, 2025

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

Commission file number: 001-41443

NETCAPITAL INC.

(Exact name of registrant as specified in its charter)

Utah

87-0409951

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1 Lincoln Street

Boston MA 02111

(Address of principal executive offices)

(781) 925-1700

(Registrant’s telephone number, including area code)

Not Applicable

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

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

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

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

Yes ☒ No ☐

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

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

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

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

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

As of March 17, 2025 the registrant had 2,192,046 shares of its common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

	Page
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.	5
Condensed Consolidated Balance Sheets as of January 31, 2025 (unaudited) and April 30, 2024	5
Condensed Consolidated Statements of Operations for the three and nine months ended January 31, 2025 and 2024 (unaudited)	6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended January 31, 2025 (unaudited) and the year ended April 30, 2024	7
Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2025 and 2024 (unaudited)	8
Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26

Item 3. Quantitative and Qualitative disclosures about Market Risk.	32

Item 4. Controls and Procedures.	32

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.	33

Item1A. Risk Factors.	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	34

Item 3. Defaults Upon Senior Securities.	34

Item 4. Mine Safety Disclosures.	35

Item 5. Other Information.	35

Item 6. Exhibits.	36

Signatures.	37

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

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

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

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

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

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

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

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

●	difficulties in increasing revenue per issuer;

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

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

●	shortages or interruptions in the supply of quality issuers;

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

●	negative publicity relating to any one of our issuers;

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

●	changes in investor tastes and purchasing trends;

●	our inability to manage our growth;

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

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

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

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

●	our vulnerability to increasing labor costs;

●	the impact of governmental laws and regulation;

●	failure to obtain or maintain required licenses;

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

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

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

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

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

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NETCAPITAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	January 31, 2025 (Unaudited)			April 30, 2024 (Audited)
Assets:
Cash and cash equivalents	$	614,304		$	863,182
Accounts receivable net		—			134,849
Other receivables		2,400			1,200
Note receivable		20,000			20,000
Prepaid expenses		36,115			23,304
Total current assets		672,819			1,042,535

Deposits		6,300			6,300
Notes receivable - related parties		202,000			202,000
Purchased technology, net		14,706,398			14,733,005
Investment in affiliate		240,080			240,080
Equity securities		24,073,080			25,333,386
Total assets	$	39,900,677		$	41,557,306

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,160,727		$	793,325
Accrued expenses		250,983			310,300
Deferred revenue		360			466
Interest payable		98,218			92,483
Current portion of SBA loans		1,885,800			1,885,800
Loan payable - bank		34,324			34,324
Total current liabilities		4,430,412			3,116,698

Long-term liabilities:
Long-term SBA loans, less current portion		500,000			500,000
Total liabilities		4,930,412			3,616,698

Commitments and contingencies		—			—

Stockholders’ equity:
Common stock, $.001 par value; 900,000,000 shares authorized, 2,112,488 and 326,867 shares issued and outstanding		2,113			327
Shares to be issued		122,124			122,124
Capital in excess of par value		42,120,673			37,338,594
Retained earnings (deficit)		(7,274,645	)		479,563
Total stockholders’ equity		34,970,265			37,940,608
Total liabilities and stockholders’ equity	$	39,900,677		$	41,557,306

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	January 31, 2025			January 31, 2024			January 31, 2025			January 31, 2024

Revenues	$	152,682		$	1,042,793		$	465,437		$	4,604,260
Costs of services		7,155			58,875			37,156			97,062
Gross profit		145,527			983,918			428,281			4,507,198

Costs and expenses:
Consulting expense		63,555			175,357			240,581			544,033
Marketing		12,887			32,198			31,993			320,817
Rent		20,178			19,544			58,736			57,533
Payroll and payroll related expenses		815,024			869,517			2,701,318			2,957,394
General and administrative costs		921,575			1,092,459			3,794,013			2,529,378
Total costs and expenses		1,833,219			2,189,075			6,826,641			6,409,155
Operating income (loss)		(1,687,692	)		(1,205,157	)		(6,398,360	)		(1,901,957	)

Other income (expense):
Interest expense		(10,376	)		(11,918	)		(30,441	)		(35,784	)
Interest income		400			—			1,200			—
Impairment expense		(1,300,000	)		—			(1,300,000	)		—
Amortization of intangible assets		(8,869	)		(28,331	)		(26,607	)		(84,993	)
Unrealized loss on equity securities		—			(2,696,135	)		—			(2,696,135	)
Total other income (expense)		(1,318,845	)		(2,736,384	)		(1,355,848	)		(2,816,912	)
Net income (loss) before taxes		(3,006,537	)		(3,941,541	)		(7,754,208	)		(4,718,869	)
Income tax expense (benefit)		—			(1,713,999	)		—			(2,339,288	)
Net income (loss)	$	(3,006,537	)	$	(2,227,542	)	$	(7,754,208	)	$	(2,379,581	)

Basic earnings (loss) per share	$	(1.57	)	$	(13.60	)	$	(6.93	)	$	(17.61	)
Diluted earnings (loss) per share	$	(1.57	)	$	(13.60	)	$	(6.93	)	$	(17.61	)

Weighted average number of common shares outstanding:
Basic		1,915,367			163,807			1,119,479			135,111
Diluted		1,915,367			163,807			1,119,479			135,111

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Nine Months Ended January 31, 2025 (Unaudited) and the Year Ended April 30, 2024

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

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

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

Vesting of stock options		—		—		—			139,371			—			139,371
Reduction in shares to be issued		139,781		140		(140	)		—			—			—
Sale of common stock		1,122,693		1,123		—			1,977,877			—			1,979,000
Net loss October 31, 2024 quarter		—		—		—			—			(2,220,501	)		(2,220,501	)
Balance October 31, 2024		1,841,627		1,842		122,124			41,550,465			(4,268,108	)		37,406,323
Balance		1,841,627		1,842		122,124			41,550,465			(4,268,108	)		37,406,323

Vesting of stock options		—		—		—			139,371			—			139,371
Warrant exercise		270,861		271		—			430,837			—			431,108
Net loss January 31, 2025 quarter		—		—		—			—			(3,006,537	)		(3,006,537	)
Net loss		—		—		—			—			(3,006,537	)		(3,006,537	)
Balance January 31, 2025		2,112,488	$	2,113	$	122,124		$	42,120,673		$	(7,274,645	)	$	34,970,265
Balance		2,112,488	$	2,113	$	122,124		$	42,120,673		$	(7,274,645	)	$	34,970,265

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	January 31, 2025			January 31, 2024
	Nine Months Ended			Nine Months Ended
	January 31, 2025			January 31, 2024
OPERATING ACTIVITIES
Net loss	$	(7,754,208	)	$	(2,379,581	)
Adjustment to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		418,113			1,044,395
Receipt of equity in lieu of cash		(39,694	)		(1,219,012	)
Provision for bad debts		—			6,000
Changes in deferred taxes		—			(1,657,000	)
Amortization of intangible assets		26,607			84,993
Unrealized (gain) loss on equity securities		—			2,696,135
Impairment of assets		1,300,000			—
Changes in non-cash working capital balances:		—			—
Accounts receivable		134,849			(2,319,001	)
Other receivables		(1,200	)		—
Prepaid expenses		(12,811	)		1,113
Accounts payable and accrued expenses		1,308,085			360,351
Income taxes payable		—			(174,000	)
Deferred revenue		(106	)		(174	)
Accrued interest payable		5,735			(10,172	)
Net cash used in operating activities		(4,614,630	)		(3,565,953	)

INVESTING ACTIVITIES
Note receivable		—			(20,000	)
Net cash used in investing activities		—			(20,000	)

FINANCING ACTIVITIES
Payment to secured lender		—			(350,000	)
Proceeds from exercise of warrants		2,386,752			—
Proceeds from sale of common stock		1,979,000			5,538,611
Net cash provided by financing activities		4,365,752			5,188,611

Net increase (decrease) in cash		(248,878	)		1,602,658
Cash and cash equivalents, beginning of the period		863,182			569,441
Cash and cash equivalents, end of the period	$	614,304		$	2,172,099

Supplemental disclosure of cash flow information:
Cash paid for taxes	$	—		$	—
Cash paid for interest	$	24,703		$	34,710

Supplemental Non-Cash Financing Information:
Common stock issued to purchase 10% interest in Caesar Media Group Inc.	$	—			366,377

See Accompanying Notes to the Condensed Consolidated Financial Statements

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NETCAPITAL INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1– Summary of Significant Accounting Policies

Basis of Presentation

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

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

Reverse Stock Split

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

Use of Estimates

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

Significant Accounting Policies

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

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

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

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Note 2 – Concentrations

For the three months ended January 31, 2025, the Company had one customer that constituted 17% of its revenues, and for the nine months ended January 31, 2025, the Company had one customer that constituted 16% of its revenues. For the three and nine months ended January 31, 2024, the Company had one customer that constituted 78% and 27% of revenues, and a second customer that constituted 0% and 24% of revenues, and a third customer that constituted 0% and 24% of revenues, respectively.

Note 3 – Revenue Recognition

Revenue Recognition under ASC 606

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

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

●	Identification of the performance obligations in the contract.

●	Determination of the transaction price.

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

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

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

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Judgments and Estimates

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

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

Service Revenue

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

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

Contract Assets

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

Deferred Revenue

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

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Costs to Obtain a Customer Contract

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

Remaining Performance Obligations

The Company’s subscription terms are typically less than one year. All of the Company’s revenues in the three and nine months ended January 31, 2025, which amounted to $152,682 and $465,437, respectively, are considered contract revenues. Contract revenue as of January 31, 2025 and April 30, 2024, which has not yet been recognized, amounted to $360 and $466, respectively, and is recorded on the balance sheet as deferred revenue. The Company expects to recognize revenue on all of its remaining performance obligations over the next 12 months.

Disaggregation of Revenue

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

Revenues disaggregated by revenue source consist of the following:

Schedule of Disaggregation of Revenue

	Three Months Ended January 31, 2025		Three Months Ended January 31, 2024		Nine Months Ended January 31, 2025		Nine Months Ended January 31, 2024
Consulting services	$	—	$	862,846	$	—	$	3,585,213
Fees from online services		152,682		179,947		465,437		1,019,047
Total revenues	$	152,682	$	1,042,793	$	465,437	$

SEC Form 10-Q filed by Netcapital Inc.