Q1 2025 Netcapital Inc Earnings Call
Okay.
Speaker Change: Good day, everyone and welcome to the net capital Inc. Quarterly earnings call.
Speaker Change: At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
Speaker Change: It is now my pleasure to turn the floor over to your host Corrine Chrysler ma'am the floor is yours.
Speaker Change: Thank you Matt Good morning, everyone and thank you for joining that capital's first quarter fiscal 2025 financial results Conference call.
Speaker Change: It says Corrine Chrysler CFO of <unk> Capital Inc.
Speaker Change: I will begin with a review of our financial results following that our Chief Executive Officer, Martin K will deliver his prepared remarks before we open up the Q&A portion of our call.
Speaker Change: Before we begin I'd like to draw your attention to the customary safe Harbor disclosure regarding forward looking information.
Speaker Change: Management's discussion may include forward looking statements.
Speaker Change: These statements relate to future events or future financial performance and involve known and unknown risks uncertainties and other factors that may cause actual results to be materially different from any future results levels of activity performance or achievements expressed or implied by these forward looking.
Speaker Change: <unk>.
Speaker Change: Any forward looking statements reflect management's current views with respect to operations results of operations growth strategy liquidity and future events.
Speaker Change: That capital assumes no obligation to publicly update or revise these forward looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward looking statements.
Speaker Change: Even if new information becomes available in the future.
Speaker Change: Yeah.
Speaker Change: With that said I'd like to now turn to our financial results for the first quarter of fiscal 2025.
Speaker Change: Revenues for the first quarter of fiscal 2025 for the period ending July 31st 2024 decreased by almost 1.4 million or approximately 91% to $142227 compared to approximately $1 5 million in the first.
Speaker Change: Quarter of 2024.
Speaker Change: The decline in revenues was primarily attributed to a decrease in revenue for the services that we provide in exchange for equity securities. During the quarter. We had no revenues from equity based contracts as compared to over $1 1 million in such revenues in the three months ended July 31, 2023, where folk.
Speaker Change: Good thing on establishing our broker dealer subsidiary so that the company may have additional sources of revenue and we have not been pursuing equity based revenue contracts.
Speaker Change: Total funding portal revenues declined by $233800 or approximately 62%.
Speaker Change: It was $142056 during the first quarter of fiscal 2025.
Speaker Change: Total funding portal revenue consist of portal fees lift.
Speaker Change: Listing fees and a 1% equity fee.
Speaker Change: Revenue from portable fees decreased by $132427 or approximately 60%.
Speaker Change: Months ended July 31 2024.
Speaker Change: $449 from 221800.
Speaker Change: In the three months ended July.
Speaker Change: 2023.
Speaker Change: Revenues from portal fees.
Speaker Change: Facebook.
Speaker Change: The capital raise.
Speaker Change: Sure.
Speaker Change: Miscellaneous.
The fees such as a rolling.
Speaker Change: Salt Lake was embedded offerings statement the decline in portal fees as a result of a decrease in the amount of capital funding portal. During the period total funds raised in the offering decreased by almost $1 8 million or approximately.
Speaker Change: In the three months period in July 31st 2022.
Speaker Change: Thanks a million.
Speaker Change: Baird.
Speaker Change: One 6 million for the same period of 2023.
Speaker Change: Revenue from listing fees decreased $111500 or approximately.
Speaker Change: Sure.
Speaker Change: Three months ended July 31 2024.
Speaker Change: Two 154000 in the three months ended July 31, 2020 free listing fees are typically $5000 per issuer and they are the first form of revenue earned bar funding portal when an issuer signs a contract with us to sell securities on the portal.
Speaker Change: The drop in most movies.
Speaker Change: Yeah.
Speaker Change: Experienced sales.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thanks.
Speaker Change: Sure.
Speaker Change: But for Us Brian.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: Right.
Speaker Change: Thank you.
Speaker Change: Yeah.
And I do apologize if this is the operator your line is breaking up I'm going to attempt to dial up to your lines. So we can get a clear connection.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Karen Your line is live.
Speaker Change: Thank you we had an operating loss of approximately $2 $5 million for the first quarter of fiscal 2025 as compared to an operating loss of $749020 for the first quarter of fiscal 2024.
Speaker Change: Our net loss for the first quarter fiscal 2025 was $2 million 527, 170 as compared to 491665 for the same period prior.
Speaker Change: We reported a loss per share of $5.10 for the first quarter ended July 31, 2024 compared to a loss per share of $4 61 for the same period in the prior year.
Speaker Change: I'll now turn the call over to our CEO Martin K.
Martin K.: Thank you Corey I'd like to thank everyone for showing their interest in being on this call today.
We did see some challenges during the quarter, especially in regard to our operational and financial metrics.
Speaker Change: Climate for fundraising does slow down during the summertime and there is of course, some cyclicality and some unpredictability in our business with that said we've taken some important steps this quarter first the beta version launch of our secondary trading platform through the <unk> Ats.
Speaker Change: Which may offer investors another way to trade through the net capital funding portal temp.
Speaker Change: <unk> <unk> is now approved in over 50 U S States and territories in this partnership May provide our investors with better liquidity for secondary trading.
Speaker Change: The second thing is another key initiative is our application for broker dealer registration with FINRA, which Correne mentioned, we intend to use this to offer Reg a plus and Reg D deals and foreign broker dealer partnerships.
Speaker Change: It may help grow our revenues through hosting and fees and enhance our distribution capabilities, which may expand our current ecosystem and our addressable market.
Speaker Change: During the quarter. We also put in place an ATM agreement and regained compliance with Nasdaq's listing rule 5550, <unk> known as the bid price rule.
Speaker Change: Which will allow us to continue trading on NASDAQ, it's important for us to maintain our NASDAQ listing to further support shareholder value and confidence.
Speaker Change: So despite the challenges we face we very much remain committed to our vision.
Speaker Change: Entrepreneurs and investors by providing a streamlined platform for capital raising and investing in early stage and growth stage companies.
Speaker Change: Our portal facilitates access to capital through equity crowd funding and other investment opportunities.
Speaker Change: Democratizing, the investment process and fostering innovation and growth.
Speaker Change: By focusing on transparency efficiency and user engagement.
Speaker Change: Net capital seeks to create a more inclusive financial ecosystem.
Speaker Change: That benefits, both issuers and investors.
Speaker Change: And as always thank you for your interest and support of net capital operator, we are ready for questions.
Speaker Change: Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time we.
Speaker Change: We do ask that we're posing a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Speaker Change: Once again, if you have any questions or comments. Please press star one on your phone.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Thank you. Your first question is coming from John Gilliam from point clear your line is live.
Yeah.
Speaker Change: Yes, Mark. Thank you could you give us an idea of.
Speaker Change: The launch date.
Speaker Change: The secondary trading pool.
Speaker Change: Fully available to retail investors.
Speaker Change: I'm, sorry, I didn't quite catch the question now my phone Bleeped you were asking about the secondary.
Speaker Change: I'm asking about the launch date of the <unk>.
Speaker Change: Trading platform the secondary trading platform, yes, when will it be available for retail investors.
Speaker Change: Got it great. Thanks, Great question, and that's not something that we have specifically.
Speaker Change: Stated to the market at this point, we're still working through.
Speaker Change: Some issues with usability and so on and we want to make sure that when we go live with it to a broader group outside of our closed beta.
Speaker Change: We get.
Speaker Change: The impact from that launch so we have.
We are holding off for now on launching that.
Speaker Change: Broadly.
Speaker Change: At the Wainwright conference you've mentioned it with launch soon.
Speaker Change: I guess, what I'm looking for is ballpark idea are we talking Q4 are we talking 2025.
Speaker Change: Calendar year 2025, just a ballpark idea.
Speaker Change: I can't give you any anything too specific.
Speaker Change: But we're.
Speaker Change: We're moving as quickly as we can with both the regulators and our customers are issuers and investors to make sure that.
Speaker Change: We get that.
Speaker Change: We launched that to have its maximum effect in the marketplace.
Speaker Change: That's not very good either.
Really looking for I mean is it going to be in the next year is it going to be two years.
Speaker Change: It's certainly not it's been 18 months since it was announced 18 months ago. There is.
Speaker Change: This one is announced so just trying to get an idea of I mean, what are we looking at.
It's a very fair question.
Speaker Change: Again, it's.
Speaker Change: We have had as we've announced we've had the end to end platform in partnership with <unk> with the <unk>.
Speaker Change: As Tim Glenn we've had that that technology and that platform built out for some months now we've been doing some testing with a closed group.
Speaker Change: Beta users I think.
Speaker Change: I would like to be able to.
Speaker Change: We would hope to be able to launch before the end of this calendar year, but again there is there are factors as we've stated in the.
Speaker Change: All of the filings we've made on this topic. There there are factors that are.
Speaker Change: Somewhat beyond our control with respect to regulations and so.
Speaker Change: So I can't really be much more specific than that unfortunately.
Speaker Change: Alright.
Speaker Change: With regard to the companies that are listed on our balance sheet as well.
Speaker Change:
Speaker Change: Hum.
Speaker Change: At the price that they've had.
Speaker Change: Offerings recently.
Speaker Change: Well all of those securities would be available to trade on the secondary trading platform when it opens.
Speaker Change: That is the intention yes.
Speaker Change: That's what we have stated.
Speaker Change: Hey did you know filings.
Speaker Change: Thank you. Your next question is coming from Patrick Rooney from Crosby Capital. Your line is live.
Speaker Change: Hi, Matt.
Speaker Change: Hum.
Speaker Change: On your ATM.
Speaker Change: To do a press release.
Speaker Change: Largely complete that or only one it's totally sleep. That's one second question what is your monthly burn rate.
Speaker Change: And I think he meant the ATM right Pat you were asking about.
Speaker Change: Yes.
Speaker Change: Youre not a retiree if it gets partially done youre doing about $2 1 million, but you do 300 dogs will you make the press release.
Speaker Change: We don't do we didn't we did not we did not announce a usage of the ATM you will you will see it in our quarterly filings.
Speaker Change: You will not make an announcement.
Speaker Change: So we don't we don't put out we're not required to put out a press release or an 8-K, when we use the ATM, but we do.
Speaker Change: We do disclose the ATM usage in our quarterly filings.
Speaker Change: Okay.
Speaker Change: And the burn rate.
Speaker Change: Well go ahead.
Speaker Change: But in the past we've said in the past that our burn rate is 300000, plus a month.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Appreciate it thanks.
Speaker Change: Yeah.
Speaker Change: Thank you. Your next question is coming from Robert topping from <unk> capital. Your line is live.
Speaker Change: Hey, Hey, everybody I'm, sorry for the background noise here I'm on the street, but.
Speaker Change: I'll, probably just kind of extended the two earlier questions.
Speaker Change: Other manner.
Speaker Change: On the operating burn.
Speaker Change: Given all the investment.
Speaker Change: Yes.
Speaker Change: You see that.
Speaker Change: Our trailing I mean, when you effectively do a full launch.
Speaker Change: Bert on that slow down pretty dramatically I mean, how much of that 300000 the monthly.
Speaker Change: Dedicated towards that and then.
Speaker Change: The other question I had and I may circle back with two more but the other question Matt Yes. It is.
Speaker Change: On the Ats launch.
Speaker Change: Because some of the friction regulatory or is it just the beta group and the technology.
Speaker Change: Working through that.
Speaker Change: I'll start us off and corrington can jump in for sure.
Speaker Change: With respect to the secondary and then yes. There is there is some relationship I would say.
Speaker Change: One of the things that we're we're doing is we're spending a lot of time and resources and energy of our own and with third parties educating regulators.
Speaker Change: What we're doing why we're doing it why we're allowed to do it why it's part of the regulatory framework that we operate within.
Speaker Change: So yes.
Speaker Change: I think Rob.
Speaker Change: Thanks for the questions I think there is.
Speaker Change: There is a relationship there, but maybe not the one you suspected around building out the platform a lot of the technology all of the technology.
Speaker Change: As you guys know, it's never done a product is never done there's always improvements as always enhancements, but we have.
Speaker Change: A launch ready beta that's why we're.
Speaker Change: Announced it to a closed group.
Speaker Change: So.
Speaker Change: There's there's always work to be done to enhance the product as we go forward and there always will be but a lot of what we're spending time and money on right now is making sure that from a regulatory perspective, the various regulators that we deal with understand what we're doing why we're doing it.
Speaker Change: Does that answer part of your question on I'm, sorry, yes. It does.
Speaker Change: Sorry about that and then I'll circle back with my list of questions here.
James.
Speaker Change: So with respect to the burn just I think you had a question about that Rob as well.
Speaker Change: Again, as we've talked about in May we announced our broker dealer application process.
Speaker Change: And attempt to move upscale into into big <unk>.
Speaker Change: <unk> transactions.
Speaker Change: So obviously, a boon as a function of of revenue minus minus cost and and so we will we expect and hope that that will allow.
Speaker Change: Allow us to generate incremental.
Speaker Change: Incremental revenue streams beyond where we are today.
Speaker Change: But it seems like from what <unk> said that I think is.
Speaker Change: $1 million a quarter burn is kind of a fair conservative the amount is that correct because it because there's operating and then a lot of other numbers that show up but I think I just heard 300 a month so.
Speaker Change: This mindset of $1 million a quarter that would be.
Speaker Change: Good number on the operating burn.
Speaker Change: I think that's right I think.
Speaker Change: I'm not going to say wildcards, but the things that can change that for us on the on the revenue side are there are it is a little unpredictable we.
Speaker Change: We have whales that come through our model and you know raise big amounts of capital in certain quarters, and so that can make a difference.
Speaker Change: And then yes.
Speaker Change: We have responses to regulatory inquiries.
Speaker Change: As as everyone does.
Speaker Change: Both financial services in general and in our industry, specifically that that tap resources.
Speaker Change: But thank you gentlemen, general rule of thumb, yes, that's that's what we've said in the past and that's still true.
Speaker Change: Yeah.
Speaker Change: Thank you once again, everyone. If you have any questions or comments. Please press star one on your phone.
Speaker Change: Your next question is coming from John Wheeler from Resurgent Realty. Your line is live.
Speaker Change: Good morning, Ladies and gentlemen, Martin. This question is for you Sir how are you doing this morning.
Speaker Change: Good to talk to you.
Speaker Change: So I.
Speaker Change: I have a couple of questions and I I think the first question would be.
Speaker Change: At the current stock price why as management.
Speaker Change: And the board of directors.
Speaker Change: Not really stepping up to buy the shares to support the company at this time, so I'm not going to give you two or three questions at one time, but if you could answer that question. That's my first question.
Speaker Change: Yeah.
Yeah.
Speaker Change: Can you hear me.
Speaker Change: Yeah.
Speaker Change: Yes.
Hello, Hello, I'll answer that John are you there.
Speaker Change: Yes, I think you all we've had a bad connection all morning. So can you hear me now.
Speaker Change: I can hear so my answer to your question would be a bus.
Speaker Change: Were severely restricted in what we can do in terms of management purchasing shares themselves.
Speaker Change: Due to the nature of the fund raising that we have been doing so we've been very severely restricted in doing that so far.
Speaker Change: What's your next question please.
Speaker Change: So the next question is.
You are publicly traded.
Speaker Change: And it seems to be at some point in time.
Speaker Change: Dealing with reality and the associated public cost to be publicly traded.
Speaker Change: Your $300000 per month burn rate.
Speaker Change: When you looked at your last filing it says you have a little over $800000 cash on hand.
Speaker Change: What point in time.
Speaker Change: Do you all face reality from the standpoint, maybe it's not best.
Speaker Change: To be in a public platform and more so private maybe.
Speaker Change: Maybe more so associated with some of your peer groups.
Speaker Change: I feel like every.
Speaker Change: Six months, there's another warranty conversion $2 million extreme deletion and now you put up a ATM with rain right, which will be another dilution at what point in time does the treadmill stock from potentially moving from public to private.
Speaker Change: That's a question too.
Speaker Change: Yes.
Speaker Change: Hey, Ken Hey, John Sorry, I lost you for a little bit there in your last your last question, but I heard that one.
Speaker Change: Look you know for us we as I've as I've said in the past we are.
Speaker Change: 100% committed to our vision in this business, we believe in the business and we believe in the value that we can create and can be created in the business. So we're in this for the long term we succeed.
Speaker Change: When our issuers succeed where.
Speaker Change: Every quarter. There are there are more examples of our issuers coming out of that like I like to say the back end of our process and having success.
Speaker Change: In progressing to the next level, we had a company Aberdeen that raised I think $4 5 million on our platform in the fall.
Speaker Change: And just announced a couple of weeks ago, they've they are and the graphene business that.
Speaker Change: Supplies.
Speaker Change: Electric vehicle companies and they just added Henry for the third to their board Who's the chairman of Abalone is obviously on the board of the Ford Motor Company. So.
Speaker Change: That along with the others that we always talk about and you and the others that are getting added is examples from our perspective of <unk>.
Speaker Change: Growing market awareness more success stories, this becoming more of a mainstream.
Speaker Change: Market and something again, where we really believe in the long term value here and we appreciate that.
Speaker Change: The investors the shareholders, who have stuck with us along this process.
Speaker Change: To your question of when does it change, yes, theres a theres a.
Yeah, Theres a gradual.
Speaker Change: The momentum of swelling momentum that I, just talked about in the industry and in the marketplace. They're also obviously.
Speaker Change: We have a portfolio of minority positions. We've also started as of FY 'twenty for taking 1% of equity issued.
Speaker Change: Hmm.
Speaker Change #100: From every issuer on our platform. So I believe I'm right in saying I think we have 37 of those.
Small equity positions alongside the 22 portfolio because it was a what we call portfolio companies. So there are obviously, there is optionality and all of that portfolio, especially.
Speaker Change #100: As we as we broaden it now to include everyone who comes through our platform. So any one of those minority positions are.
Speaker Change #100: Becoming liquid or getting to the next level is obviously a way that the sort of proves out our model to those that don't believe it.
Speaker Change #101: <unk> generates liquidity for us.
Speaker Change #101: In the same way in the core business, we're talking to some marquee what I call marquee issuers. So.
Speaker Change #101: Folks who.
Speaker Change #101: It would be newsworthy and noteworthy.
Speaker Change #101: Participants on our platform. So so there are sort of quantum.
Speaker Change #101: Quantum steps that we can take as we as we progress down this path and obviously I can't necessarily predict.
Speaker Change #101: Any of those but what I can say is that the groundswell of activity in our space is is maturing and as it matures.
Speaker Change #102: These are these are early stage private companies it takes a while but they do get there in some subset of them will be successful and that's what will drive the value that we're creating.
Speaker Change #103: Thank you that concludes our Q&A session I will now hand, the conference back to our host for closing remarks. Please go ahead.
Speaker Change #103: Thank you for joining everyone. We really appreciate your support and we look forward to speaking with you again soon thank you.
Speaker Change #104: Thank you well thank you Richard thank.
Speaker Change #105: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.