Netcapital Inc S-1, filed Apr 15, 2025
Netcapital Inc. (NCPL)
As filed with the U.S. Securities and Exchange Commission on April 15, 2025
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
Netcapital Inc.
(Exact name of registrant as specified in its charter)
| Utah | 6199 | 87-0409951 | ||
| (State
or other jurisdiction of incorporation or organization) |
(Primary
Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1 Lincoln Street
Boston, MA 02111
Phone: (781) 925-1700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Coreen Kraysler
Chief Financial Officer
1 Lincoln Street
Boston, MA 02111
Phone: (781) 925-1700
(Name, address including zip code, and telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule l2b-2 of the Exchange Act.
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 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offeror sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED APRIL 15, 2025 |
Netcapital Inc.
Up to 721,153 Shares of Upon Exercise of Certain Common Stock Purchase Warrants
This prospectus relates to the offer and resale by certain selling shareholders named herein (each, a “Selling Shareholder” and collectively, the “Selling Shareholders” of up to an aggregate of 721,153 shares (the “Shares”) of common stock, par value $0.001 per share (“Common Stock”), of Netcapital Inc. (the “Company”, “we”, “us” or “our”), consisting of shares of Common Stock issuable upon the exercise of various common stock purchase warrants, defined below as the “Warrants.” Specifically:
(i) common stock purchase warrants (the “A-5 Inducement Warrants”), to purchase up to 361,148 shares of Common Stock (the “A-5 Inducement Warrant Shares”), at an exercise price of $2.07 per share; issued by us to certain accredited investors on January 13, 2025 pursuant to an inducement offer letter agreement, dated as of January 9, 2025 (the “January 2025 Inducement Letter”);
(ii) common stock purchase warrants (the “A-6 Inducement Warrants”), to purchase up to 180,574 shares of Common Stock (the “A-6 Inducement Warrant Shares”), at an exercise price of $2.07 per share; issued by us to certain accredited investors on January 13, 2025 pursuant to the January 2025 Inducement Letter;
(iii) common stock purchase warrants (the “Placement Agent Warrants”) to purchase up to 20,315 shares of Common Stock (the “Placement Agent Warrant Shares”) issued by us on January 13, 2025 to designees of H.C. Wainwright & Co., LLC, as exclusive placement agent (“Wainwright”), at an exercise price of $2.25 per share pursuant to an engagement letter dated November 7, 2024 between the Company and Wainwright;
(iv) common stock purchase warrants (the “A-7 Inducement Warrants”), to purchase up to 79,558 shares of Common Stock (the “A-7 Inducement Warrant Shares”), at an exercise price of $2.03 per share; issued by us to certain accredited investors on March 5, 2025 pursuant to an inducement offer letter agreement, dated as of March 5, 2025 (the “March 2025 Inducement Letter”); and
(v) common stock purchase warrants (the “A-8 Inducement Warrants”), to purchase up to 79,558 shares of Common Stock (the “A-8 Inducement Warrant Shares”), at an exercise price of $2.03 per share; issued by us to certain accredited investors on March 5, 2025 pursuant to the March 2025 Inducement Letter.
For the purposes of this prospectus, the term “Warrants” collectively refers to the A-5 Inducement Warrants, A-6 Inducement Warrants, A-7 Inducement Warrants, A-8 Inducement Warrants, and the Placement Agent Warrants.
The shares issuable upon the exercise of these Warrants are collectively referred to as the “Warrant Shares,” with each type of Warrant having its corresponding Warrant Shares as defined in the paragraphs above.
The A-5 Inducement Warrants are exercisable on July 15, 2025 and expire on July 15, 2030. The A-6 Inducement Warrants are exercisable on July 13, 2025 and expire on January 13, 2027. The Placement Agent Warrants are exercisable on July 15, 2025 and expire on July 15, 2030. The A-7 Inducement Warrants are exercisable on September 5, 2025 and expire on September 5, 2030. The A-8 Inducement Warrants are exercisable on September 5, 2025 and expire on March 5, 2027
This prospectus describes the general manner in which the Shares may be offered and sold. If necessary, the specific manner in which the Warrant Shares may be offered and sold will be described in a supplement to this prospectus. The Warrants were each issued to the applicable Selling Shareholders in connection with private placement offerings pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder. For additional information regarding the issuance of the Warrants and Warrant Shares, see “Issuance of Warrants” beginning on page 14.
The Shares will be resold from time to time by the Selling Shareholders listed in the section titled “Selling Shareholders” beginning on page 15.
The Selling Shareholders, or their respective transferees, pledgees, donees, or other successors-in-interest, will sell the Shares through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The Selling Shareholders may sell any, all or none of the securities offered by this prospectus, and we do not know when or in what amount the Selling Shareholders may sell their Shares hereunder following the effective date of this registration statement. We provide more information about how a Selling Shareholder may sell its Shares in the section titled “Plan of Distribution” on page 21.
We are registering the Shares on behalf of the Selling Shareholders, to be offered and sold by them from time to time. While we will not receive any proceeds from the sale of our Common Stock by the Selling Shareholders in the offering described in this prospectus, we may receive up to (i) $2.07 per share upon the cash exercise of the A-5 and A-6 Inducement Warrants, (ii) 2.03 per share upon the cash exercise of the A-7 and A-8 Inducement Warrants and; (iii) $2.25 per share upon the cash exercise of the Placement Agent Warrants. Upon the exercise of the Warrants for all 721,153 Shares by payment of cash, we would receive aggregate gross proceeds of approximately $1,454,000. However, we cannot predict when and in what amounts or if the Warrants will be exercised, and it is possible that the Warrants may expire and never be exercised, in which case we would not receive any cash proceeds. We have agreed to bear all of the expenses incurred in connection with the registration of the Shares. The Selling Shareholders will pay or assume discounts, commissions, fees of underwriters, selling brokers or dealer managers and similar expenses, if any, incurred for the sale of the Shares.
The Common Stock is currently listed on the Nasdaq Capital Market under the symbol “NCPL” On April 11, 2025, the last reported sale price of our Common Stock was $1.7907
This offering will terminate on the earlier of (i) the date when all of the Securities registered hereunder have been sold pursuant to this prospectus or Rule 144 under the Securities Act, and (ii) the date on which all of such securities may be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, unless we terminate it earlier.
Investing in our Common Stock involves risks. You should carefully review the risks described under the heading “Risk Factors” beginning on page 12 and in the documents which are incorporated by reference herein before you invest in our Common Stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 15, 2025.
TABLE OF CONTENTS
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This prospectus relates to the offer and resale by certain selling shareholders named herein (each, a “Selling Shareholder: and collectively, the “Selling Shareholders” of up to an aggregate of 721,153 shares (the “Shares”) of common stock, par value $0.001 per share (“Common Stock”), of Netcapital Inc. (the “Company”, “we”, “us” or “our”), consisting of shares of Common Stock issuable upon the exercise of:
(i) the A-5 Inducement Warrants, to purchase up to 361,148 shares of Common Stock, at an exercise price of $2.07 per share; issued by us to certain accredited investors on January 13, 2025 pursuant to the January 2025 Inducement Letter;
(ii) the A-6 Inducement Warrants, to purchase up to 180,574 shares of Common Stock, at an exercise price of $2.07 per share; issued by us to certain accredited investors on January 13, 2025 pursuant to the January 2025 Inducement Letter; and
(iii) the Placement Agent Warrants to purchase up to 20,315 shares of Common Stock issued by us on January 13, 2025 to designees of Wainwright, at an exercise price of $2.25 per share pursuant to an engagement letter dated November 7, 2024 between the Company and Wainwright.
(iv) the A-7 Inducement Warrants, to purchase up to 79,558 shares of Common Stock at an exercise price of $2.03 per share; issued by us to certain accredited investors on March 5, 2025 pursuant to the March 2025 Inducement Letter; and
(v) the A-8 Inducement Warrants, to purchase up to 79,558 shares of Common Stock at an exercise price of $2.03 per share; issued by us to certain accredited investors on March 5, 2025 pursuant to the March 2025 Inducement Letter.
You should rely only on the information contained in this prospectus and the related exhibits, any prospectus supplement or amendment thereto and the documents incorporated by reference, or to which we have referred you, before making your investment decision. Neither we nor the Selling Shareholders have authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any prospectus supplement or amendments thereto do not constitute an offer to sell, or a solicitation of an offer to purchase, the shares of Common Stock offered by this prospectus, any prospectus supplement or amendments thereto in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. You should not assume that the information contained in this prospectus, any prospectus supplement or amendments thereto, as well as information we have previously filed with the U.S. Securities and Exchange Commission (the “SEC”), is accurate as of any date other than the date on the front cover of the applicable document.
If necessary, the specific manner in which the shares of our common stock may be offered and sold will be described in a supplement to this prospectus, which supplement may also add, update or change any of the information contained in this prospectus. To the extent there is a conflict between the information contained in this prospectus and any prospectus supplement, you should rely on the information in such prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date - for example, a document incorporated by reference in this prospectus or any prospectus supplement - the statement in the document having the later date modifies or supersedes the earlier statement.
Neither the delivery of this prospectus nor any distribution of shares of our common stock pursuant to this prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated by reference into this prospectus or in our affairs since the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such date.
When used herein, unless the context requires otherwise, references to “NCPL”, the “Company”, “we”, “our” or “us” refer to Netcapital Inc., a Utah corporation, and its subsidiaries on a consolidated basis.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any amendment and the information incorporated by reference into this prospectus contain various forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), which represent our expectations or beliefs concerning future events. Forward-looking statements include statements that are predictive in nature, which depend upon or refer to future events or conditions, and/or which include words such as “believes,” “plans,” “intends,” “anticipates,” “estimates,” “expects,” “may,” “will” or similar expressions. In addition, any statements concerning future financial performance, ongoing strategies or prospects, and possible future actions including any potential strategic transaction involving us, which may be provided by our management, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our company, economic and market factors, and the industry in which we do business, among other things. These statements are not guarantees of future performance, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Actual events and results may differ materially from those expressed or forecasted in forward-looking statements due to a number of factors. Factors that could cause our actual performance, future results and actions to differ materially from any forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in this prospectus and in any of our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act incorporated by reference into this prospectus. The forward-looking statements in this prospectus, and the information incorporated by reference herein represent our views as of the date such statements are made. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date such statements are made.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made based on such data and other similar sources and on our knowledge of the markets for our products. These data sources involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.
We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus and in any documents that we incorporate by reference into this prospectus and the registration statement of which this prospectus forms a part. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
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This summary highlights selected information contained elsewhere in this prospectus or incorporated by reference into this prospectus. This summary does not contain all of the information that you should consider before investing in our Common Stock. You should carefully read this entire prospectus, and our other filings with the SEC, including the following sections, which are either included herein and/or incorporated by reference herein, “Risk Factors”, “Special Note Regarding Forward-Looking Statements”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes to consolidated financial statements incorporated by reference herein, before making a decision about whether to invest in our securities.
On August 1, 2024, we effectuated a 1-for-70 reverse split of our outstanding shares of common stock. No fractional shares were issued in connection with the reverse stock split and all such fractional interests were rounded up to the nearest whole number of shares of common stock. The exercise prices of our issued and outstanding convertible securities, including shares issuable upon exercise of outstanding stock options and warrants, have been adjusted accordingly. All information presented in this prospectus has been retroactively restated to give effect to our 1-for70 reverse split of our outstanding shares of common stock and unless otherwise indicated, all such amounts and corresponding exercise price data set forth in this prospectus have been adjusted to give effect to the reverse stock split.
Company Overview
Netcapital Inc. is a fintech company with a scalable technology platform that allows private companies to raise capital online from accredited and non-accredited investors. We give all investors the opportunity to access investments in private companies. Our model is disruptive to traditional private equity investing and is based on Title III, Regulation Crowdfunding (“Reg CF”) of the Jumpstart Our Business Startups Act (“JOBS Act”). In addition, we have recently expanded our model to include Regulation A (“Reg A”) offerings. We generate fees from listing private companies on our funding portal located at www.netcapital.com. We also generate fees from advising companies with respect to their Reg A offerings posted on www.netcapital.com. Our consulting group, Netcapital Advisors Inc. (“Netcapital Advisors”), which is a wholly-owned subsidiary, provides marketing and strategic advice to companies in exchange for cash fees and/or equity positions. The Netcapital funding portal is registered with the SEC, is a member of the Financial Industry Regulatory Authority (“FINRA”), a registered national securities association, and provides investors with opportunities to invest in private companies. Beginning on November 22, 2024, Netcapital Securities Inc., a Netcapital subsidiary, is a broker- dealer, and can represent Reg A offerings on the www.netcapital.com website.
Our Business
We provide private companies with access to investments from accredited and non-accredited investors through our online portal located at www.netcapital.com, which is operated by our wholly owned subsidiary, Netcapital Funding Portal, Inc. The Netcapital funding portal charges a $5,000 listing fee and a 4.9% success fee for capital raised at closing. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors generates fees and equity stakes from consulting in select portfolio companies (“Portfolio Companies”) and non-portfolio clients. With respect to its services for Reg A offerings, Netcapital Advisors charges a monthly flat fee for each month the offering is listed on the netcapital.com website as well as a nominal administrative flat fee for each investor that is processed to cover out-of-pocket costs.
We generated revenues of $465,437, with costs of service of $37,156, in the nine months ended January 31, 2025 for a gross profit of $428,281 in the nine months ended January 31, 2025 as compared to revenues of $4,604,260, with costs of service of $97,062, in the nine months ended January 31, 2024 for a gross profit of $4,507,198 (consisting of $3,489,013 in equity securities from Portfolio Companies for payment of services and $1,115,247 in cash-based revenues, offset by $97,062 for costs of services) in the nine months ended January 31, 2024.
We generated revenues of $4,951,435, with costs of service of $108,060, in the year ended April 30, 2024 for a gross profit of $4,843,375 (consisting of $3,537,700 in equity securities for payment of services and $1,413,736 in cash-based revenues, offset by $108,060 for costs of services) as compared to revenues of $8,493,985 with costs of service of $85,038 in the year ended April 30, 2023 for a gross profit of $8,408,947 (consisting of $7,105,000 in equity securities for the payment of services and $1,388,985 in cash-based revenues, offset by $85,038 for costs of services). We provided additional services for two (2) and four (4) of our Portfolio Companies during the years ended April 30, 2024 and 2023, respectively, and our cash-based gross profits as a percentage of gross profits were approximately 1% in both fiscal years.
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In fiscal 2024 and 2023, the average amount raised in an offering on the Netcapital funding portal was $280,978 and $128,170, respectively. The total number of offerings on the Netcapital funding portal in fiscal 2024 and 2023 that closed was 70 and 63, respectively, of which 17 and 13 offerings hosted on the Netcapital funding platform in fiscal 2024 and 2023, respectively, terminated their listings without raising the required minimum dollar amount of capital. For the three- and nine-month periods ended January 31, 2025, 6 and 32 issuers have launched an offering on the portal, respectively, as compared to 27 and 64 issuers that launched an offering in the three- and nine-month periods ended January 31, 2024, respectively. As of the date of this report, we own minority equity positions in 20 Portfolio Companies that have utilized the funding portal to facilitate their offerings, for which equity was received as payment for services.
Funding Portal
Netcapital Funding Portal, Inc. is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the Netcapital funding portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies can accept an investment from virtually anyone, including friends, family, customers, and employees. Customer accounts on our platform will not be permitted to hold digital securities.
In addition to access to the funding portal, the Netcapital funding portal provides the following services:
● a fully automated onboarding process;
● automated filing of required regulatory documents;
● compliance review;
● custom-built offering page on our portal website;
● third party transfer agent and custodial services;
● email marketing to our proprietary list of investors;
● rolling closes, which provide potential access to liquidity before final close date of offering;
● assistance with annual filings; and
● direct access to our team for ongoing support.
Consulting Business
Our consulting group, Netcapital Advisors, helps companies at all stages to raise capital. Netcapital Advisors provides strategic advice, technology consulting and online marketing services to assist with fundraising campaigns on the Netcapital platform. We also act as an incubator and accelerator, taking equity stakes in select disruptive start-ups. In the instances where we take equity stakes in a company, such interests are of the same class of securities that are offered on the Netcapital platform.
Netcapital Advisors’ services include:
| ● | incubation of technology start-ups; | |
| ● | investor introductions; | |
| ● | online marketing; | |
| ● | website design, software and software development; | |
| ● | message crafting, including pitch decks, offering pages, and ad creation; | |
| ● | strategic advice; and | |
| ● | technology consulting. |
Broker-Dealer Business
In November 2024, our recently formed wholly owned subsidiary, Netcapital Securities Inc. was accepted as a broker-dealer by the Financial Industry Regulatory Authority (“FINRA”). We believe that by having a registered broker-dealer, it will create opportunities to expand revenue base by hosting and generating additional fees from Reg A+ and Reg D offerings on the Netcapital platform, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts. As of the date of this prospectus, Netcapital Securities Inc. has been engaged by one issuer seeking to raise capital via a Regulation A offering.
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Regulatory Overview
In an effort to enhance economic growth and to democratize access to private investment opportunities, Congress finalized the JOBS Act in 2016. Title III of the JOBS Act enabled early-stage companies to offer and sell securities to the general public for the first time. The SEC then adopted Reg CF, in order to implement the JOBS Act’s crowdfunding provisions.
Reg CF has several important features that changed the landscape for private capital raising and investment. For the first time, this regulation:
| ● | Allowed the general public to invest in private companies, no longer limiting early-stage investment opportunities to less than 10% of the population; | |
| ● | Enabled private companies to advertise their securities offerings to the public (general solicitation); and | |
| ● | Conditionally exempted securities sold under Section 4(a)(6) from the registration requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). |
The SEC had also adopted rules to implement Section 401 of the Jumpstart Our Business Startups (JOBS) Act by expanding Reg A into two tiers
| ● | Tier 1, for securities offerings of up to $20 million in a 12-month period; and | |
| ● | Tier 2, for securities offerings of up to $75 million in a 12-month period. |
In addition, Reg A allows companies that are subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act to use Reg A. Further, Reg A also enables issuers to raise funds from non-accredited investors and accredited investors.
We are subject, both directly and indirectly, to various laws and regulations relating to our business. If any of the laws are amended, compliance could become more expensive and directly affect our income. We intend to comply with such laws, but new restrictions may arise that could materially adversely affect our Company. Specifically, the SEC regulates our funding portal business, and our funding portal is also a member of FINRA and is regulated by FINRA. We are also subject to the USA Patriot Act of 2001, which contains anti-money laundering and financial transparency laws and mandates various regulations applicable to financial services companies, including standards for verifying client identification at account opening, and obligations to monitor client transactions and report suspicious activities. Anti-money laundering laws outside of the United States contain some similar provisions. Now that our wholly owned subsidiary, Netcapital Securities Inc., has received a broker-dealer license, we are subject to additional regulation and supervision of the SEC and FINRA, including without limitation Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). The Uniform Net Capital Rule specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers. The Uniform Net Capital Rule prohibits broker-dealers from paying cash dividends, making unsecured advances or loans or repaying subordinated loans if such payment would result in a net capital amount of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement. Our failure to comply with these requirements as applicable to us could have a material adverse effect on us.
Our Market
The traditional funding model restricts access to capital, investments and liquidity. According to Harvard Business Review, venture capital firms (“VCs”) invest in fewer than 1% of the companies they consider and only 10% of VC meetings are obtained through cold outreach. In addition, only 2% of VC funding went to women-owned firms in 2024, according to PitchBook, while Crunchbase revealed that only 0.4% of startup funding went to black-owned firms.
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Furthermore, under the traditional model, the average investor lacked access to early-stage investments. Prior to the JOBS Act, almost 90% of U.S. households were precluded from investing in private deals, per dqydj.com. Liquidity has also been an issue, as private investments are generally locked up until IPO or takeout.
The JOBS Act helped provide a solution to these issues by establishing the funding portal industry, which is currently in its infancy. Title III of the JOBS Act outlines Reg CF, which traditionally allowed private companies to raise up to $1.07 million. In March 2021, regulatory enhancements by the SEC went into effect and increased the limit to $5 million. These amendments increased the offering limits for Reg CF, Reg A and Regulation D, Rule 504 offerings as follows: Reg CF increased to $5 million; Regulation D, Rule 504 increased to $10 million from $5 million; and Reg A Tier 2 increased to $75 million from $50 million.
According to KingsCrowd, the 2021 increase in offering limits has served to boost the attractiveness of Reg CF to later stage issuers. While the previous $1 million cap on annual funding was perceived as too restrictive for capital-intensive companies, $5 million every twelve months can be a viable alternative for companies post seed stage.
Reg CF funding grew from $74.8 million in 2018 to $343.6 million in 2024, an increase of 360%, according to KingsCrowd. Although funding was down from its 2021 peak of $496.1 million, the number of Reg CF raises reached a new high in the final month of 2024 to 569 offerings, above the previous high in March 2022 of 561. The average investment size also increased by 26% in 2024 to $1,500 from $1,190 in the previous year. We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding portal.
Reg A+ offerings raised $244 million in 2024, an increase of 7.5% from the previous year, according to KingsCrowd. While 61 offerings closed during the year, 34 new offerings were launched. $2 million was the 2024 median Reg A+ raise, while the average raise was $7.7 million. We plan to support Reg A+ raises through our broker-dealer subsidiary, Netcapital Securities.
Our Technology
The Netcapital platform is a scalable, real-time, transaction-processing engine that runs 24 hours a day, seven days a week.
For companies raising capital, the technology provides fully automated onboarding with integrated regulatory filings. Funds are collected from investors and held in escrow until the offering closes. For entrepreneurs, the technology facilitates access to capital at low cost. For investors, the platform provides access to investments in private, early-stage companies that were previously unavailable to the general public. Both entrepreneurs and investors can track and view their investments through their dashboard on netcapital.com. As of the date of this prospectus, the platform currently has approximately 125,000 users.
Scalability was demonstrated in November 2021, when the platform processed more than 2,000 investments in less than two hours, totaling more than $2 million.
Our infrastructure is designed in a way that can horizontally scale to meet our capacity needs. Using Docker containers and Amazon Elastic Container Service (“Amazon ECS”), we are able to automate the creation and launch of our production web and application programming interface (“API”), endpoints in order to replicate them as needed behind Elastic Load Balancers (ELBs).
Additionally, all of our public facing endpoints live behind CloudFlare to ensure protection from large scale traffic fluctuations (including distributed denial of service (“DdoS”) attacks).
Our main database layer is built on Amazon RDS and features a Multi-AZ deployment that can also be easily scaled up or down as needed. General queries are cached in our API layer, and we monitor to optimize very complex database queries that are generated by the API. Additionally, we cache the most complex queries (such as analytics data) in our NoSQL (Mongo) data store for improved performance.
Most of our central processing unit (“CPU”), intensive data processing happens asynchronously through a worker/jobs system managed by AWS ElastiCache’s Redis endpoint. This component can be easily fine-tuned for any scale necessary.
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The technology necessary to operate our funding portal is licensed from Netcapital Systems LLC, a Delaware limited liability company (“Netcapital DE LLC”), of which Jason Frishman, Founder and former CEO of Netcapital Funding Portal Inc., owns a 29% interest, under a license agreement with Netcapital Funding Portal, Inc., for an annual license fee of $380,000, payable in quarterly installments.
Proposed Alternative Trading (“ATS”) Relationship
We believe that lack of liquidity is a key issue for investors in private companies in our targeted market. We also recognize that secondary trading of securities in private companies is subject to extensive regulation and oversight. Such regulation and oversight includes, but is not limited to, the need to be a registered broker-dealer that is licensed to operate an ATS, or to partner with an entity that is licensed to do so. In order to try to address what we believe is a large, unmet need, our wholly-owned subsidiary, Netcapital Systems LLC, a Utah limited liability company (“Netcapital UT LLC”), entered into a software license and services agreement on January 2, 2023 (the “Templum License Agreement”) with Templum Markets LLC (“Templum”), to provide issuers and investors on the Netcapital platform with the potential for greater distribution and liquidity. Templum is a company that provides capital markets infrastructure for trading private equity securities and operates an ATS with approval in 53 U.S. states and territories for the trading of unregistered or private securities. We are currently working with Templum to design the software required to allow issuers and investors on the Netcapital platform to access the Templum ATS in order to engage in secondary trading of securities in a regulatorily compliant manner. The operation of the Templum ATS, however, remains subject to extensive regulation and oversight. Accordingly, any regulatory delays or objections will result in delays in our ability to launch the proposed platform. While we are currently working with Templum on the design of the required software to enable the access to secondary trading on the Templum ATS, no assurance can be given as to when, or if, we will be able to successfully complete this project in order to enable access to a secondary trading feature beta (testing) version to a closed group of users for testing before any final launch is made to the public, and Templum’s approval. Milestones required to launch the platform include, but are not limited to, plug-in of Templum’s KYC and AML requirements to enable interested users to directly send to the Templum ATS any KYC/AML information required by Templum for review and approval, as well as the launch of a beta version to a closed group of users. In July 2024, we announced the launch of our beta version for this secondary trading platform and our goal 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 2024 subject to compliance with all regulatory requirements, however, we do not know when, or if, this feature will be fully completed and launched, as there are many details that remain to be completed.
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 platform. In addition, because we cannot easily switch between operators of secondary trading platforms of this nature, any disruption of or interference, whether due to regulatory issues or natural disasters, cyber-attacks, terrorist attacks, power losses, telecommunications failures, or other similar events, would impact our operations and may adversely affect the ability of issuers and investors to utilize this platform. There is no obligation for Templum to renew its agreements with us on commercially reasonable terms or at all.
Institutions and individual investors may face significant risk when buying securities on our proposed secondary trading platform. These risks include the following:
| ● | private companies are not required to make periodic public filings, and therefore certain capitalization, operational and financial information may not be available for evaluation; | |
| ● | an investment may only be appropriate for investors with a long-term investment horizon and a capacity to absorb a loss of some or all of their investment; | |
| ● | the securities, when purchased, are generally highly illiquid, are often subject to further transfer restrictions, and no public market exists for such securities; and | |
| ● | transactions may fail to settle, which could harm our reputation. |
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Further, we may become involved in disputes and litigation matters between customers with respect to transactions on our proposed secondary trading platform. There is a risk that clients may increasingly look to us to make them whole for delayed and/or broken trades. Customers may litigate over a failure of sellers to deliver securities or over the untimely deliveries of securities. Any litigation to which we are a party could be expensive and time consuming, regardless of the ultimate outcome, and the potential costs and risks of such litigation may incentivize us to settle, which could harm our reputation or have a material adverse effect on our business or results or operations.
We estimate that the cost for developing this platform will not exceed $1.0 million, most of which has already been incurred and consists of salaries or fees paid to engineers and consultants. We have and continue to pay these expenses from our working capital. We do not currently have a revenue model associated with the sales of securities on the proposed ATS. However, we may seek to incorporate this revenue model in the future, provided that we determine any such revenue model is in strict compliance with all regulatory guidelines.
We currently anticipate that we will also be able to sell our interests in any portfolio company using the Templum ATS provided such sales are made in a regulatorily compliant matter. We expect to place a restriction on any sales during any period in which an issuer is offering its securities for sale on the Netcapital funding platform. In addition, securities issued in a Reg CF transaction generally cannot be resold for a period of one year, unless the securities are transferred: (1) to the issuer of the securities; (2) to an “accredited investor”; (3) as part of an offering registered with the SEC; or (4) to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.. Accordingly, any shares owned by us would also be subject to these restrictions. Additional restrictions may be implemented, and there can be no assurance that we will ever sell any of our interests in any portfolio company using the Templum ATS. Further, our insider trading policy prohibits all of our employees, officers, consultants and directors from buying or selling securities while in possession of material non-public information and all such parties are also required to maintain strict confidentiality of all such information. In addition, in order to maintain compliance with our insider trading policies, any affiliate or employee seeking to trade securities in any issuer listed on the funding portal must receive prior approval and clearance from our Chief Financial Officer and all such requests for clearance will be documented and maintained with our compliance department.
Our Netcapital funding portal is currently registered with the SEC and is a member of FINRA. For so long as we continue to operate our Netcapital platform solely for primary offerings by issuers under Reg CF, we believe that we are not required to register under Regulation ATS.
Competitive Advantages
Based upon publicly available information either published on the websites of our peer group (StartEngine Crowdfunding, Inc., Wefunder Inc. and Republic Core LLC) or included in offering statements of issuers hosted on such offering platforms, we believe that we provide a low-cost solution for online capital raising. We also believe, based upon our facilitated technology platforms, our strong emphasis on customer support, and feedback received from clients that have onboarded to our platform, that our access and onboarding of new clients are superior due to our facilitated technology platforms. Our network continues to rapidly expand as a result of our enhanced marketing and broad distribution to reach new investors.
Our competitors include StartEngine Crowdfunding, Inc., Wefunder Inc. and Republic Core LLC. Given the rapid growth in the industry and its potential to disrupt the multi-billion dollar private capital market, we believe there is sufficient room for multiple players.
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Our Strategy
Two major tailwinds are driving accelerated growth in the shift to the use of online funding portals: (i) the COVID-19 pandemic and (ii) the increase in funding limits under Reg CF. The pandemic drove a rapid need to bring as many processes as possible online. With travel restrictions in place and most people in lockdown, entrepreneurs were no longer able to fundraise in person and have increasingly turned to online capital raising through funding portals.
There are numerous industry drivers and tailwinds that complement investor demand for access to investments in private companies. To capitalize on these, our strategy is to:
| ● | Generate New Investor Accounts. Growing the number of investor accounts on our platform is a top priority. Investment dollars that continue to flow through our platform are the key revenue driver. When issuers advertise their offerings, they are generating new investor accounts for the Netcapital funding platform at no cost to us. We plan to supplement our issuers’ spend on advertising by increasing our online marketing spend as well, which may include virtual conferences going forward. | |
| ● | Hire Additional Business Development Staff. We seek to hire additional business development staff that are technology advanced and financially passionate about capital markets to handle our growing backlog of potential customers. | |
| ● | Increase the Number of Companies on Our Platform via Marketing. When a new company lists on our platform, they bring their customers, supporters, and brand ambassadors as new investors to Netcapital. We plan to increase our marketing budget to help grow our portal and advisory clients. | |
| ● | Invest in Technology. Technology is critical to everything that we do. We plan to invest in developing innovative technologies that enhance our platform and allow us to pursue additional service offerings. | |
| ● | Incubate and accelerate our advisory clients. The advisory clients and our equity interests in select advisory clients represent potential upside for our shareholders. We seek to grow this model of advisory clients. | |
| ● | Expand Internationally. We believe there is a significant opportunity to expand the marketing of Netcapital funding platform and the services we offer into Europe and Asia as an appetite abroad grows for U.S. stocks. | |
| ● | Provide a secondary trading feature. We believe that lack of liquidity is a key issue for investors in private companies in our targeted market. Accordingly, we are exploring ways in which we can provide our clients with the ability to access a secondary trading feature. In January 2023, we entered into the Templum License Agreement to provide issuers and investors on the Netcapital platform with the potential for greater distribution and liquidity. Templum is an operator of an ATS with approval in 53 U.S. states and territories for the trading of unregistered or private securities to provide issuers and investors on the Netcapital platform with the potential for greater distribution and liquidity. We are currently working with Templum on the design of the required software to enable issuers and investors on the Netcapital platform to access the Templum ATS in order to engage in secondary trading of securities. In July 2024, we announced the launch of our beta version for this secondary trading platform and our goal is to offer such secondary trading platform through the Templum ATS to all issuers and investors on the Netcapital funding portal before the end of 2025 subject to compliance with all regulatory requirements, however, we do not know when, or if, this feature will be fully completed and launched, as there are many details that remain to be completed. | |
| ● | New Verticals Represent a Significant Opportunity. We operate in a regulated market supported by the JOBS Act. We are pursuing expanding our model to include Reg A and Regulation D offerings. | |
| ● | Secure Broker-Dealer License. In November 2024, we announced that our wholly-owned subsidiary, Netcapital Securities Inc. received its broker-dealer registration with the Financial Industry Regulatory Authority (“FINRA”). We believe that by having a registered broker-dealer, it could create opportunities to expand revenue base by hosting and generating additional fees from Reg A+ and Reg D offerings on the Netcapital platform; earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts. |
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Our Management
Our management team is experienced in finance, technology, entrepreneurship, and marketing.
Martin Kay is our Chief Executive Officer (“CEO”) and a director. He previously served as Managing Director at Accenture Strategy, from October 2015 to December 2022 and holds a BA in physics from Oxford University and an MBA from Stanford University Graduate School of Business. Mr. Kay is an experienced C-suite advisor and digital media entrepreneur, working at the intersection of business and technology. His experience includes oversight of our funding portal when he served on the board of managers of Netcapital DE LLC from 2017 to 2021.
Coreen Kraysler, CFA, is our Chief Financial Officer (“CFO”). With over 30 years of investment experience, she was formerly a Senior Vice President and Principal at Independence Investments, where she managed several 5-star rated mutual funds and served on the Investment Committee. She also worked at Eaton Vance as a Vice President, Equity Analyst on the Large and Midcap Value teams. She received a B.A. in Economics and French, cum laude from Wellesley College and a Master of Science in Management from MIT Sloan.
Jason Frishman is our Founder and former chief executive officer of our funding portal subsidiary, Netcapital Funding Portal Inc. Mr. Frishman founded Netcapital Funding Portal Inc. to help reduce the systemic inefficiencies that early-stage companies face in securing capital. He currently holds advisory positions at leading organizations in the financial technology ecosystem and has spoken as an external expert at Morgan Stanley, University of Michigan, Young Presidents’ Organization (YPO), and others. Mr. Frishman has a background in the life sciences and previously conducted research in medical oncology at the Dana Farber Cancer Institute and cognitive neuroscience at the University of Miami, where he graduated summa cum laude with a B.S. in Neuroscience.
Corporate Information
The Company was incorporated in Utah in 1984 as DBS Investments, Inc. (“DBS”). DBS merged with Valuesetters L.L.C. in December 2003 and changed its name to Valuesetters, Inc. In November 2020, the Company purchased Netcapital Funding Portal Inc. from Netcapital DE LLC and changed the name of the Company from Valuesetters, Inc. to Netcapital Inc. In November 2021, the Company purchased MSG Development Corp.
Attached below is an organization chart for the Company as of the date of this prospectus:
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Implications of Being a Smaller Reporting Company
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than what you might receive from other public reporting companies in which you hold equity interests.
We are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. As a smaller reporting company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recent Developments
March 2025 Note Financing
On March 26, 2025, we entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC (the “Lender”), and issued a promissory note to Lender in the principal amount of $181,540 (the “March 2025 Note”). The March 2025 Note was issued with an original issue discount of $25,040, and we received net proceeds of $150,000, after legal and due diligence fees.
The March 2025 Note bears a one-time interest charge of 12% and matures on January 30, 2026. The Note is repayable in five scheduled monthly payments beginning on September 30, 2025, with a total repayment amount of $203,324. We may prepay the Note under certain conditions and at a discount of (i) 4% if the March 2025 Note is prepaid within 90 days of the issuance date; (ii) 3% if the March 2025 Note is repaid during the period beginning ninety-one (91) days following the issuance date and ending on the date which is one hundred fifty (150) days following the issuance date and (iii) 2% during the period beginning one hundred fifty one (151) days following the issuance date and ending on the date which is one hundred eighty (180) days following the issuance date .
Upon the occurrence and during the continuation of any Event of Default (as defined in the March 2025 Note), the March 2025 Note shall become immediately due and payable and we are required to pay Lender, in full satisfaction of its obligations hereunder, an amount equal to 150% (“Default Percentage”) times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this March 2025 Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Lender pursuant to Article IV of the March 2025 Note (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Lender shall be entitled to exercise all other rights and remedies available at law or in equity. Notwithstanding anything to the contrary contained herein, in the event that following an Event of Default (other than Section 3.2), a default pursuant to Section 3.2 of the March 2025 Note related to Conversion and the Shares occurs, the Default Percentage shall be immediately adjusted to 200%.
Following an event of default, the March 2025 Note becomes convertible into shares of our common stock at the then existing conversion price (the “March 2025 Note Conversion Price”), a discount to the trading price, subject to limitations. During the period beginning on the issuance date of the March 2025 Note and ending on the date which is one hundred eighty (180) days following the issuance date of this Note (the “Initial Period”), the March 2025 Note Conversion Price will be $1.00; and; following the Initial Period, the March 2025 Note Conversion Price shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%). “Market Price” means the lowest trading price for our common stock during the ten (10) trading day period ending on the latest complete trading day prior to the a conversion date. The Mach 2025 Note includes customary default provisions, including for non-payment, failure to deliver shares upon conversion, and cessation of operations.
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Articles of Amendment to Articles of Incorporation
On March 25, 2025, 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 authorize 10,000,000 shares of “blank check” preferred stock. Following the filing of the Articles of Amendment, we have the authority to issue 910,000,000 shares of capital stock, such total shares consisting of (i) 900,000,000 shares of common stock and (ii) 10,000,000 shares of preferred stock.
March 2025 Warrant Inducement
On March 5, 2025, the Company entered into inducement offer letter agreements with certain warrant holders to exercise 79,558 outstanding warrants for cash at a reduced exercise price of $1.80 per share (previously $8.74 per share). In consideration, the Company issued Series A-7 and Series A-8 Common Stock Purchase Warrants to purchase an aggregate of 159,116 shares of common stock at an exercise price of $2.03. The Series A-7 Warrants expire five years from their initial exercise date of September 5, 2025, and the Series A-8 Warrants expire eighteen months from the same date. The transaction closed on March 6, 2025, generating gross proceeds of approximately $143,000, before deducting fees and expenses.
January 2025 Warrant Inducement
On January 9, 2025, the Company entered into inducement offer letter agreements with certain investors that held certain outstanding warrants to purchase up to an aggregate of 270,861 shares of the Company’s common stock, that were originally issued to the warrant holders in December 2023 and May 2024 (the “Existing Warrants”). The Existing Warrants had an exercise price of $10.85 per share. Pursuant to the inducement letter agreements, the warrant holders agreed to exercise for cash the Existing Warrants at a reduced exercise price of $1.80 per share in partial consideration for the Company’s agreement to issue in a private placement (x) new Series A-5 Common Stock purchase warrants (the “Series A-5 Warrants”) to purchase up to 361,148 shares of our common stock and (y) new Series A-6 Common Stock Purchase Warrants (the “Series A-6 Warrants” and, together with the Series A-5 Warrants, the “New Warrants”) to purchase up to 180,574 shares of common stock. The New Warrants are exercisable beginning on July 13, 2025 (the “Initial Exercise Date”), with such warrants expiring on (i) the five year anniversary of the Initial Exercise Date for the Series A-5 Warrants and (ii) the eighteen month anniversary of the Initial Exercise Date for the Series A-6 Warrants.
The closing of the transactions contemplated by the inducement letters agreements occurred on January 13, 2025. The Company received aggregate gross proceeds of approximately $487,000 from the exercise of the Existing Warrants by the warrant holders, before deducting placement agent fees and other expenses payable by the Company. The Company also issued warrants, that expire on July 15, 2030, to designees of Wainwright to purchase up to 20,315 shares of our common stock at an exercise price of $2.25 per share.
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This prospectus relates to the offer and resale by the Selling Shareholders of up to 721,153 shares of Common Stock issuable upon the exercise of the Warrants. All of the Shares, if and when sold, will be sold by the Selling Shareholders. The Selling Shareholders may sell the Shares from time to time at prevailing market prices or at privately negotiated prices.
| Shares offered by the Selling Shareholders: | Up to 721,153 shares of Common Stock consisting of: (i) 361,148 shares of Common Stock upon exercise of the A-5 Inducement Warrants; (ii) 180,574 shares of Common Stock issuable upon exercise of the A-6 Inducement Warrants; (iii) 79,558 shares of Common Stock upon exercise of the A-7 Inducement Warrants; (iv) 79,558 shares of Common Stock issuable upon exercise of the A-8 Inducement Warrants; and (iii) 20,315 shares of Common Stock issuable upon exercise of the Placement Agent Warrants. | |
| Shares of Common Stock outstanding after completion of this offering (assuming full exercise of the Warrants that are exercisable for the Warrant Shares offered hereby): | 2,913,169 shares(1) | |
| Use of proceeds: | We will not receive any proceeds from any sale of the Shares by the Selling Shareholders. We will receive proceeds in the event that any of the Warrants are exercised at the exercise prices per share for cash which would result in gross proceeds of approximately $1,454,000 if all such Warrants are exercised for cash. Any proceeds that we receive from the exercise of the Warrants will be used for working capital, capital expenditures, product development, and other general corporate purposes, including investments in sales and marketing in the United States and internationally. See “Use of Proceeds.” | |
| Risk factors: | An investment in the shares of Common Stock offered under this prospectus is highly speculative and involves substantial risk. Please carefully consider the “Risk Factors” section on page 12, other information in this prospectus and in the documents incorporated by reference herein for a discussion of risks. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial may also impair our business and operations | |
| NASDAQ symbol: | NCPL |
(1) The number of shares of Common Stock to be outstanding after this offering is based on 2,192,046 shares of our Common Stock outstanding as of April 15, 2025, and excludes:
| ● | 49,322 shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan and our 2023 Omnibus Equity Incentive Plan; |
| ● | 28,594 shares of common stock issuable upon exercise of outstanding options with a weighted average exercise price of $154.48 per share; |
| ● | 1,257,880, of common stock issuable upon the exercise of stock warrants outstanding at a weighted average exercise price of $11.85 per share; and |
| ● | 180 shares of common stock to be issued in connection with our acquisition of MSG Development Corp., which will be issued by October 31, 2025. |
Unless otherwise indicated, all information in this prospectus assumes no exercise of the outstanding options or warrants, described above.
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An investment in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully the risks described below, together with other information in this prospectus, the accompanying prospectus and the information and documents incorporated by reference. You should also consider the risks, uncertainties and assumptions discussed under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K and the subsequent reports that we file with the SEC which are on file with the SEC and are incorporated herein by reference, and which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. If any of these risks actually occur, our business, financial condition, results of operations or cash flow could be adversely effected. This could cause the trading price of our common stock to decline, resulting in a loss of all or part of your investment. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. Please also read carefully the section above entitled “Special Note Regarding Forward-Looking Statements.”
Risks Related to the Resale of the Shares
The Selling Shareholders may choose to sell the Shares at prices below the current market price.
The Selling Shareholders are not restricted as to the prices at which they may sell or otherwise dispose of the Shares covered by this prospectus. Sales or other dispositions of the Shares below the then-current market prices could adversely affect the market price of our Common Stock.
A large number of shares of Common Stock may be sold in the market following this offering, which may significantly depress the market price of our Common Stock.
The Shares sold in the offering will be freely tradable without restriction or further registration under the Securities Act. As a result, a substantial number of shares of Common Stock may be sold in the public market following this offering. If there are significantly more shares of Common Stock offered for sale than buyers are willing to purchase, then the market price of our Common Stock may decline to a market price at which buyers are willing to purchase the offered Common Stock and sellers remain willing to sell Common Stock.
Neither we nor the Selling Shareholders have authorized any other party to provide you with information concerning us or this offering.
You should carefully evaluate all of the information in this prospectus, including the documents incorporated by reference herein and therein. We may receive media coverage regarding our Company, including coverage that is not directly attributable to statements made by our officers, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. Neither we nor the Selling Shareholders have authorized any other party to provide you with information concerning us or this offering, and recipients should not rely on this information.
You may experience future dilution as a result of issuance of the Shares, future equity offerings by us and other issuances of our Common Stock or other securities. In addition, the issuance of the Shares and future equity offerings and other issuances of our Common Stock or other securities may adversely affect our Common Stock price.
In order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that may not be the same as the price per share as prior issuances of Common Stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share previously paid by investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our Common Stock or securities convertible into Common Stock in future transactions may be higher or lower than the prices per share. ln addition, the exercise price of the Warrants for the Warrant Shares may be greater than the price per share previously paid by certain investors. You will incur dilution upon exercise of any outstanding stock options, warrants or upon the issuance of shares of Common Stock under our stock incentive programs. In addition, the issuance of the Shares and any future sales of a substantial number of shares of our Common Stock in the public market, or the perception that such sales may occur, 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 for sale will have on the market price of our Common Stock.
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Our 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.
Our obligations to the U.S. Small Business Administration (“SBA”) is secured by security interests in our assets. As of the March 31, 2025. 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.
The loan and security documents encompassing our secured obligations to the SBA contain restrictive covenants which limit management’s discretion to operate our business
In 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.
In the event we pursue bankruptcy protection, we will be subject to the risks and uncertainties associated with such proceedings.
In the event we file for relief under the United States Bankruptcy Code, our operations, our ability to develop and execute our business plan and our continuation as a going concern will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others: our ability to execute, confirm and consummate a plan of reorganization; the additional, significant costs of bankruptcy proceedings and related fees; our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence, and our ability to comply with terms and conditions of that financing; our ability to continue our operations in the ordinary course; our ability to maintain our relationships with our consumers, business partners, counterparties, employees and other third parties; our ability to obtain, maintain or renew contracts that are critical to our operations on reasonably acceptable terms and conditions; our ability to attract, motivate and retain key employees; the ability of third parties to use certain limited safe harbor provisions of the United States Bankruptcy Code to terminate contracts without first seeking Bankruptcy Court approval; the ability of third parties to force us to into Chapter 7 proceedings rather than Chapter 11 proceedings and the actions and decisions of our stakeholders and other third parties who have interests in our bankruptcy proceedings that may be inconsistent with our operational and strategic plans. Any delays in our bankruptcy proceedings would increase the risks of our being unable to reorganize our business and emerge from bankruptcy proceedings and may increase our costs associated with the bankruptcy process or result in prolonged operational disruption for us. Also, we would need the prior approval of the bankruptcy court for transactions outside the ordinary course of business during the course of any bankruptcy proceedings, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with any bankruptcy proceedings, we cannot accurately predict or quantify the ultimate impact of events that could occur during any such proceedings. There can be no guarantees that if we seek bankruptcy protection we will emerge from Bankruptcy Protection as a going concern or that holders of our common stock will receive any recovery from any bankruptcy proceedings.
In the event we are unable to pursue bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our businesses.
In the event we are unable to pursue bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary for us to pursue bankruptcy protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our businesses. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the United States Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11 primarily because of the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern.
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The shares of Common Stock being registered for resale in this prospectus include shares issuable upon the exercise of the following warrants:
| (i) | The January Inducement Warrants: On January 9, 2025, we entered into inducement offer letter agreements with certain investors that held certain outstanding Series A-1, A-3, and A-4 warrants to purchase up to an aggregate of 270,861 shares of our common stock with an exercise price of $8.74 per share, originally issued in December 2023 and May 2024 at a reduced exercise price of $1.80 per share in partial consideration for the Company’s agreement to issue in a private placement (i) new Series A-5 common stock purchase warrants to purchase up to 361,148 shares of our common stock at an exercise price of $2.07 per share and (ii) new Series A-6 common stock purchase warrants to purchase up to 180,574 shares of our common stock at an exercise price of $2.07 per share. Issued on January 13, 2025, these warrants were provided to certain accredited investors as part of an inducement arrangement. The Company received aggregate gross proceeds of approximately $487,000 from the exercise of the existing warrants, before deducting placement agent fees and other expenses payable by the Company |
| (ii) | Placement Agent Warrants: Also issued on January 13, 2025, these warrants were granted to designees of Wainwright, which acted as the exclusive placement agent for the January 2025 inducement transaction. The Placement Agent Warrants permit the purchase of up to 20,315 shares of Common Stock at an exercise price of $2.25 per share, expiring on July 15, 2030.
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| (iii) | The March Inducement Warrants: On March 5, 2025, the Company entered into inducement offer letter agreements with certain warrant holders to exercise 79,558 outstanding warrants for cash at a reduced exercise price of $1.80 per share (previously $8.74 per share). In consideration, the Company issued Series A-7 and Series A-8 Common Stock Purchase Warrants to purchase an aggregate of 159,116 shares of common stock at an exercise price of $2.03. The Series A-7 Warrants expire five years from their initial exercise date of September 5, 2025, and the Series A-8 Warrants expire eighteen months from the same date. Issued on March 5, 2025, these warrants were provided to certain accredited investors as part of an inducement arrangement. The Company received aggregate gross proceeds of approximately $143,000, before deducting fees and expenses. |
The A-5 Inducement Warrants, A-6 Inducement Warrants and Placement Agent Warrants are exercisable on July 13, 2025. The expiration date for the A-6 Inducement Warrants is January 13, 2027. The expiration date for the A-5 Inducement warrants and the Placement Agent Warrants is July 15, 2030. The A-7 Inducement Warrants and A-8 Inducement Warrants are exercisable on September 5, 2025. The expiration date for the A-7 Inducement Warrants is September 5, 2030. The expiration date for the A-8 Inducement warrants is March 5, 2027.
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The Shares being offered by the Selling Shareholders are those issuable upon the exercise of the Warrants. For additional information regarding the issuance of these securities, see “Issuance of Warrants” beginning on page 14 of this prospectus. We are registering the Warrant Shares issuable upon exercise of the Warrants in order to permit the Selling Shareholders to offer such shares for resale from time to time. Except for the ownership of the Warrants, none of the Selling Shareholders have had any material relationship with us within the past three (3) years except as set forth below.
The following table sets forth certain information with respect to each Selling Shareholder, including (i) the shares of Common Stock beneficially owned by the Selling Shareholder prior to this offering, (ii) the number of Shares, being offered by the Selling Shareholder pursuant to this prospectus and (iii) the Selling Shareholder’s beneficial ownership after completion of this offering. The second column lists the number of shares of Common Stock beneficially owned by each selling stockholder, based on its ownership of the shares of our securities, as of April 15, 2025, assuming full exercise of all Warrants held by the selling stockholders on that date, without regard to any limitations on exercise. The registration of the Shares issuable to the Selling Shareholders upon the exercise of the Warrants, does not necessarily mean that the Selling Shareholders will sell all or any of such shares, but the number of shares of Common Stock and percentages set forth in the final two columns below assume that all shares of Common Stock being offered by the Selling Shareholders are sold. The final two columns also assume the exercise of all of the Warrants held by the Selling Shareholders as of April 15, 2025, without regard to any limitations on exercise described in this prospectus or in the Warrants. See “Plan of Distribution.”
The table is based on information supplied to us by the Selling Shareholders, with beneficial ownership and percentage ownership determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares of Common Stock. This information does not necessarily indicate beneficial ownership for any other purpose. In computing the number of shares of Common Stock beneficially owned by a Selling Shareholder and the percentage ownership of that Selling Shareholder, shares of Common Stock subject to warrants held by that Selling Shareholder that are exercisable for shares of Common Stock within 60 days after April 15, 2025, are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other stockholder.
This prospectus covers the resale of up to an aggregate of 721,153 shares of Common Stock, consisting of:: (i) 361,148 shares of Common Stock upon exercise of the A-5 Inducement Warrants; (ii) 180,574 shares of Common Stock issuable upon exercise of the A-6 Inducement Warrants; (iii) 79,558 shares of Common Stock issuable upon exercise of the A-7 Inducement Warrants; (iv) 79,558 shares of Common Stock upon exercise of the A-8 Inducement Warrants; (v) 20,315 shares of Common Stock upon exercise of the Placement Agent Warrants. See “Issuance of Warrants” beginning on page 14 of this prospectus for further details relating to the Warrant Shares and the Warrants.
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| Name of Selling Shareholder | Number of Shares of Common
Stock | Maximum
Number of to be Sold Pursuant to this Prospectus(2) | Number
of Shares | Percentage Beneficially Owned After Offering(3) | ||||||||||||
| Lind Global Fund II LP(4) | 638,412 | (5) | 638,412 | - | * | |||||||||||
| Intracoastal Capital LLC(6) | 62,426 | (7) | 62,426 | - | * | |||||||||||
| Michael Vasinkevich(8) | 38,888 | (9) | 13,027 | - | * | |||||||||||
| Noam Rubinstein(8) | 19,103 | (10) | 6,399 | - | * | |||||||||||
| Craig Schwabe(8) | 2,048 | (11) | 686 | - | * | |||||||||||
| Charles Worthman(8) | 607 | (12) | 203 | - | * | |||||||||||
| * | Less than 1% |
| (1) | All of the Warrants that are exercisable for the Warrant Shares offered hereby contain certain beneficial ownership limitations, which provide that a holder of the Warrants will not have the right to exercise any portion of its Warrants if such holder, together with its affiliates, would beneficially own in excess of 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to such exercise, provided that upon at least 61 days’ prior notice to us, a holder may increase or decrease such limitation up to a maximum of 9.99% of the number of shares of Common Stock outstanding (each such limitation, a “Beneficial Ownership Limitation”). As a result, the number of shares of Common Stock reflected in this column as beneficially owned by each Selling Shareholder includes (i) any outstanding shares of Common Stock held by such Selling Shareholder, and (ii) if any, the number of shares of Common Stock subject to the Warrants exercisable for the Warrant Shares offered hereby and any other warrants that may be held by such Selling Shareholder, in each case which such Selling Shareholder has the right to acquire as of April 15, 2025 or within 60 days thereafter and without it or any of its affiliates beneficially owning more than 4.99% or 9.99%, as applicable, of the number of outstanding shares of Common Stock as of April 15, 2025. |
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| (2) | Represents shares of Common Stock owned by the Selling Shareholders upon full exercise of the Warrants offered hereby. |
| (3) | The number of shares owned and the percentage of beneficial ownership after this offering set forth in these columns are based on 2,913,199 shares of Common Stock, which includes 2,192,046 shares of Common Stock outstanding as of April 15, 2025 and assumes full exercise of the Warrants that are exercisable for the 721,153 Warrant Shares offered hereby. The calculation of beneficial ownership reported in such columns takes into account the effect of the Beneficial Ownership Limitations in any warrants held by the Selling Shareholders after this offering. We do not know when or in what amounts a Selling Shareholder may offer shares for sale. The Selling Shareholders may choose not to sell any or all of the shares offered by this prospectus. Because the Selling Shareholders may offer all or some of the Shares pursuant to this offering, we cannot estimate the number of the Shares that will be held by the Selling Shareholders after completion of the offering. However, for purposes of this table, we have assumed that, after completion of the offering, all of the Shares covered by this prospectus will be sold by the Selling Shareholders and that the Selling Stockholders do not acquire beneficial ownership of any additional shares. |
| (4) | Jeff Easton, the managing member of Lind Global Partners II LLC, may be deemed to have sole voting and dispositive power with respect to the shares held by Lind Global Fund II LP. The address of Lind Global Fund II LP is 444 Madison Ave, Floor 41 New York, NY 10022 |
| (5) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus and underlying the (i) A-5 Inducement Warrants to purchase 342,860 shares of common stock, (ii) A-6 Inducement Warrants to purchase 171,430 shares of common stock, (iii) A-7 Inducement Warrants to purchase 62,061 shares of common stock, and (iv) A-8 Warrants to purchase 62,061 shares of common stock. |
| (6) | Mitchell P. Kopin (“Mr. Kopin”) and Daniel B. Asher (“Mr. Asher”), each of whom are managers of Intracoastal Capital LLC (“Intracoastal”), have shared voting control and investment discretion over the securities reported herein that are held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of the securities reported herein that are held by Intracoastal. The address of Intracoastal is 245 palm Trail, Delray Beach, FL 33483. |
| (7) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus and underlying the (i) A-5 Inducement Warrants to purchase 18,288 shares of common stock, (ii) A-6 Inducement Warrants to purchase 9,144 shares of common stock, (iii) A-7 Inducement Warrants to purchase 17,497 shares of common stock, and (iv) A-8 Warrants to purchase 17,497 shares of common stock. |
| (8) | Each of the selling shareholders is affiliated with H.C. Wainwright & Co., LLC, a registered broker dealer with a registered address of c/o H.C. Wainwright & Co., 430 Park Ave, 3rd Floor, New York, NY 10022, and has sole voting and dispositive power over the securities held. The number of shares to be sold in this offering consists of shares of common stock issuable upon exercise of May 2024 Placement Agent Warrants, which were received as compensation for our warrant inducement transaction. The selling shareholder acquired the May 2024 Placement Agent Warrants in the ordinary course of business and, at the time such warrants were acquired, the selling shareholder had no agreement or understanding, directly or indirectly, with any person to distribute such securities. |
| (9) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus an underlying the Placement Agent Warrants to purchase 13,027 shares of common stock, in addition to common stock purchase warrants issued in May 2024 to purchase 12,214 shares of common stock and common stock purchase warrants issued in December 2023 to purchase 13,647 shares of common stock. |
| (10) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus an underlying the Placement Agent Warrants to purchase 6,399 shares of common stock, in addition to common stock purchase warrants issued in May 2024 to purchase 6,000 shares of common stock and common stock purchase warrants issued in December 2023 to purchase 6,704 shares of common stock.
|
| (11) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus an underlying the Placement Agent Warrants to purchase 686 shares of common stock, in addition to common stock purchase warrants issued in May 2024 to purchase 643 shares of common stock and common stock purchase warrants issued in December 2023 to purchase 719 shares of common stock.
|
| (12) | Common stock beneficially owned prior to this offering consists of common stock being offered by the selling shareholder pursuant to this prospectus an underlying the Placement Agent Warrants to purchase 203 shares of common stock, in addition to common stock purchase warrants issued in May 2024 to purchase 191 shares of common stock and common stock purchase warrants issued in December 2023 to purchase 213 shares of common stock. |
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We will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders pursuant to this prospectus. We may receive up to approximately $1,167,000 in aggregate gross proceeds from cash exercises of the Warrants, based on the per share exercise price of the Warrants. We intend to use any net proceeds we receive for working capital, capital expenditures, product development, and other general corporate purposes, including investments in sales and marketing in the United States and internationally. We have not allocated specific amounts of net proceeds for any of these purposes.
The Selling Shareholders will pay any agent’s commissions and expenses they incur for brokerage, accounting, tax or legal services or any other expenses that they incur in disposing of the shares of Common Stock. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares of Common Stock covered by this prospectus and any prospectus supplement. These may include, without limitation, all registration and filing fees, SEC filing fees and expenses of compliance with state securities or “blue sky” laws.
We cannot predict when or if the Warrants will be exercised, and it is possible that the Warrants may expire and never be exercised. In addition, the Warrants are exercisable on a cashless basis after six (6) months from the date of issuance if at the time of exercise there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Shares. As a result, we may never receive meaningful, or any, cash proceeds from the exercise of the Warrants, and we cannot plan on any specific uses of any proceeds we may receive beyond the purposes described herein.
See “Plan of Distribution” elsewhere in this prospectus for more information.
We have never declared or paid any dividends on our Common Stock. We currently intend to retain all available funds and any future earnings for the operation and expansion of our business and, therefore, we do not anticipate declaring or paying dividends in the foreseeable future. The payment of dividends will be at the discretion of our Board and will depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends present in our future debt agreements, and other factors that our Board may deem relevant.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial ownership of shares of our common stock as of April 15, 2025 by (i) each person known to beneficially own more than 5% of our outstanding common stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all of our directors and named executive officers as a group.
The percentage ownership information is based upon 2,192,488 common shares outstanding as of April 15, 2025. The percentage ownership information shown in the table after this offering is based upon 2,913,199 shares of Common Stock (assuming full exercise of the Warrants to purchase 721,153 Warrant Shares). Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules attribute beneficial ownership of securities as of a particular date to persons who hold convertible preferred stock, options or warrants to purchase shares of common stock and that are exercisable within 60 days of such date. These shares are deemed to be outstanding and beneficially owned by the person holding those convertible preferred stock, options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws, where applicable.
| Name and Address of Beneficial Owner (1) | Number of Shares | Percentage of Common Stock | Percentage of Common Stock Beneficially Owned After this Offering (2) | |||||||||
| Officers and Directors | ||||||||||||
| Jason Frishman | 26,345 | (3) | 1.42 | % | * | |||||||
| Martin Kay | 8,334 | (4) | * | * | ||||||||
| Steven Geary | 3,774 | (5) | * | * | ||||||||
| Arnold Scott | 1,439 | (6) | * | * | ||||||||
| Coreen Kraysler | 2,221 | (7) | * | * | ||||||||
| Cecilia Lenk | 632 | (8) | ||||||||||
| Avi Liss | 365 | (9) | ||||||||||
| All directors and executive officers as a group (7 persons) | 43,110 | 1.96 | % | 1.40 | % | |||||||
| * | Represents beneficial ownership of less than 1% of the outstanding shares of our common stock. |
| (1) | Unless otherwise noted, the business address of each member of our Board is c/o Netcapital Inc. 1 Lincoln Street, Boston Massachusetts 02111. |
| (2) | Assumes all shares underlying the Inducement Warrants are sold in the offering. |
| (3) | Includes (i) 1,899 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after the April 15, 2025, and (ii) 24,447 shares of common stock held by Netcapital Systems LLC, an entity that Jason Frishman is the President of and in such capacity has the right to vote and dispose of the securities held by such entity. | |
| (4) | Includes 8,334 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. | |
| (5) | Includes 207 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. | |
| (6) | Includes 149 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. | |
| (7) | Includes 1,899 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. | |
| (8) | Includes 265 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. | |
| (9) | Includes 207 shares of common stock subject to stock options that are presently exercisable or exercisable within 60 days after April 15, 2025. |
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DESCRIPTION OF SECURITIES THAT THE SELLING SHAREHOLDERS ARE OFFERING
The Selling Shareholders are offering for resale up to an aggregate of 721,153 shares of Common Stock consisting of: (i) 361,148 shares of Common Stock upon exercise of the A-5 Inducement Warrants; (ii) 180,574 shares of Common Stock issuable upon exercise of the A-6 Inducement Warrants; 79,558 shares of Common Stock upon exercise of the A-7 Inducement Warrants; 79,558 shares of Common Stock upon exercise of the A-8 Inducement Warrants; and (iii) 20,315 shares of Common Stock issuable upon exercise of the Placement Agent Warrants. The following summary of the terms of our shares of Common Stock is based upon our Articles of Incorporation and our Bylaws. The summary is not complete and is qualified by reference to our Articles of Incorporation and our Bylaws, which were filed as exhibits to our Annual Report on Form 10-K for the fiscal year ended April 30, 2024.
Our Articles of Incorporation authorize the issuance of up to 900,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000 shares of preferred stock, par value $0.001 per share.
Common Stock
The holders of shares of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds; however, the current policy of our Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock will have no preemptive rights.
Preferred Stock
Our board of directors is authorized, subject to limitations prescribed by Utah law, to issue up to 10,000,000 shares of our preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our shareholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our shareholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock.
Articles of Incorporation and Bylaw Provisions
Our articles of incorporation and our bylaws include several provisions that could deter hostile takeovers or delay or prevent changes in control of our management team, including the following:
| ● | Authorized but unissued shares. Our authorized but unissued shares of common stock and preferred stock are available for future issuance without shareholder approval and may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise. | |
| ● | Board of directors’ vacancies. Our articles of incorporation and bylaws provide that newly created directorships resulting from an increase in the number of directors and vacancies occurring in the board for any reason except the removal of directors without cause may be filled by a vote of the majority of directors then in office, although less than a quorum exists. Vacancies occurring by reason of the removal of directors without cause shall be filled by vote of the stockholders. A director elected to fill a vacancy caused by resignation, death or removal shall be elected to hold office for the unexpired term of his predecessor. In addition, the number of directors constituting our Board is permitted to be set only by a resolution adopted by our Board. These provisions prevent a stockholder from increasing the size of our Board and then gaining control of our Board by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our Board but promotes continuity of management. | |
| ● | Special meeting of stockholders. Our bylaws provide that special meetings of our stockholders may be called only by our president or any two directors, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors. | |
| ● | No cumulative voting. The Utah Business Corporation Act provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s articles of incorporation provide otherwise. Our articles of incorporation do not provide for cumulative voting. |
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The Selling Shareholders and any of their respective pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on any trading market, stock exchange or other trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Shareholders may use any one or more of the following methods when selling securities:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | settlement of short sales; |
| ● | in transactions through broker-dealers that agree with the Selling Shareholders to sell a specified number of such securities at a stipulated price per security; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
The Selling Shareholders may also sell securities under Rule 144 under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the securities covered hereby, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in tum engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in tum may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
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The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are requesting that each Selling Shareholder inform us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities. We will pay certain fees and expenses incurred by us incident to the registration of the securities.
Because the Selling Shareholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. We are requesting that each Selling Shareholder confirm that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities by the Selling Shareholder.
We intend to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information requirement under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Common Stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and are informing the Selling Shareholders of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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The validity of the issuance of the securities offered hereby will be passed upon for us by Parr Brown Gee & Loveless.
The consolidated financial statements of Netcapital, Inc. as of April 30, 2024 and 2023 and for each of the two years in the period ended April 30, 2024, incorporated into this prospectus and the Registration Statement on Form S-1 of which it forms a part by reference to the Annual Report on Form 10-K for the year ended April 30, 2024, have been so incorporated in reliance on the report of Fruci & Associates II, PLLC, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form S-1 filed under the Securities Act. As permitted by the SEC’s rules, this prospectus and any prospectus supplement, which form a part of the registration statement, do not contain all the information that is included in the registration statement. You will find additional information about us in the registration statement and its exhibits. Any statements made in this prospectus or any prospectus supplement concerning legal documents are not necessarily complete and you should read the documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding of the document or matter.
You can read our electronic SEC filings, including such registration statement, on the internet at the SEC’s website at www.sec.gov. We are subject to the information reporting requirements of the Exchange Act, and we file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available at the website of the SEC referred to above. We also maintain a website at www.netcapitalinc.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. However, the information contained in or accessible through our website is not part of this prospectus or the registration statement of which this prospectus forms a part, and investors should not rely on such information in making a decision to purchase our securities in this offering.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This prospectus is part of the registration statement but the registration statement includes and incorporates by reference additional information and exhibits. The SEC permits us to “incorporate by reference” the information contained in documents we file with the SEC, which means that we can disclose important information to you by referring you to those documents rather than by including them in this prospectus. Information that is incorporated by reference is considered to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file later with the SEC will automatically update and supersede the information that is either contained, or incorporated by reference, in this prospectus, and will be considered to be a part of this prospectus from the date those documents are filed. We have filed with the SEC, and incorporate by reference in this prospectus:
| ● | Our Annual Report on Form 10-K for the year ended April 30, 2024, filed with the SEC on July 29, 2024; | |
| ● | Our Quarterly Report on Form 10-Q for the period ended July 31, 2024, filed with the SEC on September 16, 2024; | |
| ● | Our Quarterly Report on Form 10-Q for the period ended October 31, 2024, filed with the SEC on December 16, 2024; | |
| ● | Our Quarterly Report on Form 10-Q for the period ended January 31, 2025, filed with the SEC on March 17, 2025; | |
| ● | Our Current Reports on Form 8-K filed with the SEC on May 28, 2024; May 29, 2024; July 24, 2024; August 2, 2024, August 19, 2024; August 23, 2024; September 26, 2024, November 27, 2024, January 15, 2024, March 10, 2025, March 28, 2025 and March 31, 2025 (other than any portions thereof deemed furnished and not filed); | |
| ● | Our Definitive Proxy Statement on Schedule 14A, filed with the SEC on August 12, 2024; and | |
| ● | The description of our common stock, par value $0.001 per share, contained in Exhibit 4.16 to our Annual Report on Form 10-K for the year ended April 30, 2024 filed with the SEC on July 29, 2024, including any amendment or report filed for the purpose of updating such description. |
ln addition, all filed information contained in reports and documents filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and before the termination or completion of this offering, shall be deemed to be incorporated by reference in this prospectus. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes hereof to the extent that a statement contained herein or in any other subsequently filed document which is also incorporated or deemed to be incorporated herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We will provide, without charge, to each person to whom a copy of this prospectus is delivered, including any beneficial owner, upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference herein, including exhibits. Requests should be directed to:
Netcapital Inc.
1 Lincoln Street
Boston, MA 02111
Attn.: Secretary
In addition, you may obtain a copy of these filings from the SEC as described in the section entitled “Where You Can Find More Information.” We do not incorporate the information on our website into this prospectus or any supplement to this prospectus and you should not consider any information on, or that can be accessed through, our website as part of this prospectus or any supplement to this prospectus (other than those filings with the SEC that we specifically incorporate by reference into this prospectus or any supplement to this prospectus).
| 24 |
Netcapital Inc.
Up to 721,153 Shares of Upon Exercise of Certain Common Stock Purchase Warrants
PROSPECTUS
April 15, 2025.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate of the fees and expenses relating to the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions, all of which shall be borne by the registrant. All of such fees and expenses, except for the SEC registration fee, are estimated:
| SEC registration fee | $ | 188.00 | ||
| Transfer agent and registrar fees and expenses | $ | 1,000.00 | ||
| Legal fees and expenses | $ | 5,000.00 | ||
| Printing fees and expenses | $ | 2,000.00 | ||
| Accounting fees and expenses | $ | 4,000.00 | ||
| Miscellaneous fees and expenses | $ | 1,500.00 | ||
| Total | $ | 13,688.00 |
Item 14. Indemnification of Officers and Directors.
The registrant is incorporated under the laws of the State of Utah. Section 16-10a-902 of the Utah Business Corporation Act (“UBCA”) provides that a Utah corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. may indemnify. Section 15-10-902 of the UBCA provides that a corporation may indemnify an individual who is a party to a proceeding because the individual is a director against liability incurred in the proceeding if:(i) the director conducted himself or herself in good faith; and, (ii) he or she reasonably believed that his or her conduct was in or at least not opposed to the corporation’s best interests; and (iii) In the case of any criminal proceeding, the director had no reasonable cause to believe his or her conduct was unlawful. In addition, a corporation may indemnify and advance expenses to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation: (i) to the same extent as a director; and (ii) if he or she is an officer but not a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors or contract, except for: (A) liability in connection with a proceeding by or in the right of the corporation other than for expenses incurred in connection with the proceeding; or (B) liability arising out of conduct that constitutes: (I) receipt by the officer of a financial benefit to which he is not entitled; (II) an intentional infliction of harm on the corporation or the shareholders; or (III) An intentional violation of criminal law.
The registrant’s articles of incorporation and bylaws include provisions requiring the registrant to indemnify, to the fullest extent permitted by law, any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative, or investigative, by reason that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation.
See “Item 17. Undertakings” for a description of the SEC’s position regarding such indemnification provisions.
| II-1 |
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding shares of capital stock issued by us within the past three years. Also included is the consideration received by us for such shares and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
The following is a list of unregistered sales of our equity securities during the prior three years.
On January 31, 2022, we issued 318 shares of common stock to an accredited investor for gross proceeds of $200,000.
On February 9, 2022, we completed a private placement of $300,000 of unsecured convertible promissory notes. These notes bear interest at a rate of 8% per annum and have a maturity date of February 9, 2023.
On April 28, 2022, we issued 536 shares of common stock, in conjunction with an agreement to purchase a 10% equity interest in Caesar Media Group, Inc.
On July 15, 2022, we issued 1,335 shares of our common stock upon the conversion of $300,000 of unsecured convertible promissory notes issued on February 9, 2022, plus conversion of accrued interest on such notes. We also issued warrants to purchase 93,432 shares of our common stock to these noteholders upon conversion.
On July 15, 2022, we also issued 570 shares of our common stock to Netcapital DE LLC as supplemental consideration pursuant to the agreement for the acquisition of Netcapital Funding Portal Inc.
On September 1, 2022, we issued 358 shares of our common stock in conjunction with the purchase a 10% interest in Caesar Media Group, Inc.
On October 26, 2022, we issued 179 shares of our common stock in conjunction with the purchase a 10% interest in Caesar Media Group, Inc. We did not receive any proceeds from this issuance. The issuance was exempt under Section 4(a)(2) of the Securities Act.
On October 26, 2022, we issued 38 shares of common stock to two accredited investors for gross proceeds of $23,400. We used the proceeds for working capital and general corporate purposes.
On November 28, 2022, we issued 90 shares of our common stock in conjunction with the purchase of a 100% interest in MSG Development Corp. We did not receive any proceeds from this issuance.
On December 9, 2022, we issued 4,286 shares of our common stock in conjunction with an Asset Purchase Agreement with Nantascot, LLC.
On December 16, 2022, we issued ThinkEquity LLC and its designees warrants to purchase 1,116 shares of our common stock at an exercise price of $98.68 as compensation for their services as underwriter in our public offering.
On January 3, 2023, we granted Martin Kay non-qualified stock options under the 2023 Plan to purchase one-million (1,000,000) shares of our common stock at an exercise price of $1.43 per share. The options vest and become exercisable in 48 equal monthly installments.
| II-2 |
On January 3, 2023, we granted non-qualified stock options to purchase 2,858 Shares of the Company’s common stock to each of Jason Frishman, Coreen Kraysler and Paul Riss (8,574 Shares total), under the 2023 Plan at an exercise price of $100.10 per Share. These options vest and become exercisable in 48 equal monthly installments.
On January 5, 2023, we issued ThinkEquity LLC and its designees warrants to purchase 176 shares of our common stock at an exercise price of $98.68 as compensation for its services as underwriter in the over-allotment exercise of our public offering.
On January 31, 2023, we issued 268 shares of our common stock in conjunction with the purchase of a 10% interest in Caesar Media Group Inc.
On April 27, 2023, we issued 5,000 shares of our common stock for business advisory services.
On April 27, 2023, we issued 268 shares of our common stock in conjunction with the purchase of a 10% interest in Caesar Media Group, Inc.
On May 10, 2023, we issued 1,429 shares of our common stock for consulting services.
On May 25, 2023, we issued ThinkEquity LLC and its designees warrants to purchase 983 shares of our common stock at an exercise price of $109.40 as compensation for its services as placement agent in our registered direct offering.
On July 14, 2023, we issued 141 shares of common stock to an unrelated third party, in consideration of a release from such third party related to settlement of an outstanding debt between such third-party and Netcapital DE LLC.
On July 24, 2023, we issued ThinkEquity LLC and its designees warrants to purchase 1,537 shares of our common stock at an exercise price of $49.34 as compensation for its services as underwriter in our public offering.
On July 31, 2023, we issued 268 shares of our common stock in conjunction with the purchase of a 10% interest in Caesar Media Group, Inc.
On October 26, 2023, we issued 268 shares of our common stock in conjunction with the purchase of a 10% interest in Caesar Media Group, Inc.
On October 26, 2023, we issued 90 shares of our common stock in conjunction with the purchase of a 100% interest in MSG Development Corp.
On April 24, 2024, we issued an aggregate of 9,734 shares of our common stock at a price per share of $9.268 to Steven Geary, a member of the Company’s board of directors, and Paul Riss, a member of the board of directors of Netcapital Funding Portal Inc. our wholly-owned subsidiary, in consideration of the cancellation of $90,204 in outstanding indebtedness owed to Mr. Geary and Mr. Riss by us.
On May 29, 2024, we issued warrants to purchase 507,894 shares of our common stock at an exercise price of $8.74 to certain institutional investors in connection with our warrant inducement transaction.
On May 29, 2024, we issued H.C. Wainwright & Co., LLC and its designees warrants to purchase 19,037 shares of our common stock at an exercise price of $10.93 as compensation for its services as placement agent in our warrant inducement transaction.
On January 13, 2025, we issued warrants to purchase 541,722 shares of our common stock at an exercise price of $2.07 to certain institutional investors in connection with our warrant inducement transaction.
On January 13, 2025, we issued H.C. Wainwright & Co., LLC and its designees warrants to purchase 20,315 shares of our common stock at an exercise price of $2.25 as compensation for its services as placement agent in our warrant inducement transaction.
On March 5, 2025, we issued warrants to purchase 159,116 shares of our common stock at an exercise price of $2.03 to certain institutional investors in connection with our warrant inducement transaction.
Unless otherwise indicated, the foregoing securities were offered and issued in reliance on the exemption from registration requirements under the Securities Act afforded by Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.
Item 16. Exhibits.
The list of exhibits in the Exhibit Index to this registration statement is incorporated herein by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| II-3 |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; |
provided, however, that the undertakings set forth in paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated by reference in this registration statement or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement;
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser: |
| (i) | Each prospectus filed by the registrant pursuant to Rule 424 (b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and |
| (ii) | Each prospectus required to be filed pursuant to Rule 424 (b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(l)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933, as amended, shall be deemed to be part of and included in the registration statement as of the earlier of the date such prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| II-4 |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser; |
| (6) | That, for purposes of determining any liability under the Securities Act of 1933, as amended, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
| (7) | Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. |
| II-5 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, State of Massachusetts, on April 15, 2025.
| NETCAPITAL INC. | ||
| By: | /s/ Martin Kay | |
| Martin Kay | ||
| Chief Executive Officer | ||
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Martin Kay, his/her true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for him/her and in his/her name, place and stead, in any and all capacities to sign any or all amendments (including, without limitation, post-effective amendments) to this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorney-in-fact and agent, or any substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated below.
| Signature | Title | Date | ||
| /s/ Martin Kay | Chief Executive Officer and director | April 15, 2025 | ||
| Martin Kay | (Principal Executive Officer) | |||
| /s/ Coreen Kraysler | Chief Financial Officer | April 15, 2025 | ||
| Coreen Kraysler | (Principal Financial and Accounting Officer) | |||
| /s/ Cecilia Lenk | Director | April 15, 2025 | ||
| Cecilia Lenk | ||||
| /s/ Steven Geary | Director | April 15, 2025 | ||
| Steven Geary | ||||
| /s/ Avi Liss | Director | April 15, 2025 | ||
| Avi Liss | ||||
| /s/ Arnold Scott | Director | April 15, 2025 | ||
| Arnold Scott |
| II-6 |
EXHIBIT INDEX
| II-7 |
| * | Filed herewith |
| + | Indicates a management contract or any compensatory plan, contract or arrangement. |
| II-8 |
Exhibit 5.1
April 15, 2025
Netcapital Inc.
1 Lincoln Street
Boston, MA 02111
| Re: | Registration Statement on Form S-1 |
Ladies and Gentlemen:
We have acted as counsel to Netcapital Inc., a Utah corporation (the “Company”), in connection with the issuance of this opinion which relates to a Registration Statement on Form S-1 (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement covers the resale of 721,153 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), consisting of shares of Common Stock issuable upon the exercise of: (i) Common Stock purchase warrants (the “A-5 Inducement Warrants”), to purchase up to 361,148 shares of Common Stock (the “A-5 Inducement Warrant Shares”), at an exercise price of $2.07 per share, and issued by the Company to certain accredited investors on January 13, 2025, pursuant to an inducement offer letter agreement, dated as of January 9, 2025 (the “January 2025 Inducement Letter”); (ii) Common Stock purchase warrants (the “A-6 Inducement Warrants,” together with the A-5 Inducement Warrants, the “Inducement Warrants”), to purchase up to 180,574 shares of Common Stock (the “A-6 Inducement Warrant Shares,”), at an exercise price of $2.07 per share, and issued by the Company to certain accredited investors on January 13, 2025, pursuant to the January 2025 Inducement Letter); (iii) Common Stock purchase warrants (the “Placement Agent Warrants”) to purchase up to 20,315 shares of Common Stock (the “Placement Agent Warrant Shares”), at an exercise price of $2.25 per share, and issued by the Company on January 13, 2025 to designees of Wainwright, as exclusive placement agent, pursuant to an engagement letter dated November 7, 2024 between the Company and Wainwright; (iv) Common Stock purchase warrants (the “A-7 Inducement Warrants”), to purchase up to 79,558 shares of Common Stock (the “A-7 Inducement Warrant Shares”), at an exercise price of $2.03 per share, and issued by the Company to certain accredited investors on March 5, 2025, pursuant to an inducement offer letter agreement, dated as of March 5, 2025 (the “March 2025 Inducement Letter”); (v) Common Stock purchase warrants (the “A-8 Inducement Warrants” and, together with the A-5 Inducement Warrants, the A-6 Inducement Warrants, the Placement Agent Warrants, and the A-7 Inducement Warrants, the “Warrants”), to purchase up to 79,558 shares of Common Stock (the “A-8 Inducement Warrant Shares” and, together with the A-5 Inducement Warrant Shares, the A-6 Inducement Warrant Shares, the Placement Agent Warrant Shares, and the A-7 Inducement Warrant Shares, the “Warrant Shares”), at an exercise price of $2.03 per share, and issued by the Company to certain accredited investors on March 5, 2025, pursuant to the March 2025 Inducement Letter.
In reaching the opinions set forth herein, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of such documents and records of the Company and such statutes, regulations and other instruments as we deemed necessary or advisable for purposes of this opinion, including (i) the Registration Statement, (ii) certain resolutions adopted by, and meetings of minutes of, the board of directors of the Company, (iii) the charter documents of the Company and (iv) such other certificates, instruments, and documents as we have considered necessary for purposes of this opinion. As to any facts material to our opinions, we have made no independent investigation or verification of such facts and have relied, to the extent that we deem such reliance proper, upon certificates of public officials and officers or other representatives of the Company.
We have assumed (i) the legal capacity of all natural persons, (ii) the genuineness of all signatures, (iii) the authority of all persons signing all documents submitted to us on behalf of the parties to such documents, (iv) the authenticity of all documents submitted to us as originals, (v) the conformity to authentic original documents of all documents submitted to us as copies, (vi) that all information contained in all documents reviewed by us is true, correct and complete, and (vii) that the Shares will be issued in accordance with the terms of the Warrants.
Based on the foregoing and subject to the limitations set forth herein, we are of the opinion that the Warrant Shares have been duly authorized by all requisite corporate action on the part of the Company under the Utah Revised Business Corporation Act (“URBCA”) and, when the Shares are delivered and paid for in accordance with the terms of the Warrants and when evidence of the issuance thereof is duly recorded in the Company’s books and records, the Warrants Shares will be validly issued, fully paid and nonassessable.
The opinion set forth above is limited in all respects to the federal laws of the United States and the UBRCA, including all applicable provisions of the Utah Constitution and reported judicial decisions interpreting the URBCA, in each case, as such laws exist on the date hereof. We express no opinion as to any other law or any matter other than as expressly set forth above, and no opinion as to any other law or matter may be inferred or implied herefrom. The opinions expressed herein are rendered as of the date hereof, and we expressly disclaim any obligation to update this letter or advise you of any change in any matter after the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the reference to this firm therein. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.
| Very truly yours, | |
| /s/ PARR BROWN GEE & LOVELESS | |
| Parr Brown Gee & Loveless |
Exhibit 10.22
U.S. Small Business Administration
Economic Injury Disaster Loan
LOAN AUTHORIZATION AND AGREEMENT
Date: 06.17.2020 (Effective Date)
On the above date, this Administration (SBA) authorized (under Section 7(b) of the Small Business Act, as amended) a Loan (SBA Loan #7211697908) to Valuesetters Inc. (Borrower) of 745 Atlantic Ave. Boston Massachusetts 02111 in the amount of five hundred thousand and 00/100 Dollars ($500,000.00), upon the following conditions:
PAYMENT
| ● | Installment payments, including principal and interest, of $2,437.00 Monthly, will begin Twelve (12) months from the date of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory Note. |
INTEREST
| ● | Interest will accrue at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of each advance. |
PAYMENT TERMS
| ● | Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to principal. | |
| ● | Each payment will be made when due even if at that time the full amount of the Loan has not yet been advanced or the authorized amount of the Loan has been reduced. |
COLLATERAL
| ● | Borrower hereby grants to SBA, the secured party hereunder, a continuing security interest in and to any and all “Collateral” as described herein to secure payment and performance of all debts, liabilities and obligations of Borrower to SBA hereunder without limitation, including but not limited to all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a) inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and electronic chattel paper, (e) documents, (t) letter of credit rights, (g) accounts, including health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j) general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto. |
GUARANTEE
| ● | Borrower will provide the following guarantee(s): | |
| ● | Guarantee on SBA Form 2128 of: Coreen Kraysler (2 Summit Ave, Hull, MA) |
| -1- |
REQUIREMENTS RELATIVE TO COLLATERAL
| ● | Borrower will not sell or transfer any collateral (except normal inventory turnover in the ordinary course of business) described in the “Collateral” paragraph hereof without the prior written consent of SBA. | |
| ● | Borrower will neither seek nor accept future advances under any superior liens on the collateral securing this Loan without the prior written consent of SBA. |
USE OF LOAN PROCEEDS
| ● | Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter and to pay Uniform Commercial Code (UCC) lien filing fees and a third-party UCC handling charge of $100 which will be deducted from the Loan amount stated above. |
REQUIREMENTS FOR USE OF LOAN PROCEEDS AND RECEIPTS
| ● | Borrower will obtain and itemize receipts (paid receipts, paid invoices or cancelled checks) and contracts for all Loan funds spent and retain these receipts for 3 years from the date of the final disbursement. Prior to each subsequent disbursement (if any) and whenever requested by SBA, Borrower will submit to SBA such itemization together with copies of the receipts. | |
| ● | Borrower will not use, directly or indirectly, any portion of the proceeds of this Loan to relocate without the prior written permission of SBA. The law prohibits the use of any portion of the proceeds of this Loan for voluntary relocation from the business area in which the disaster occurred. To request SBA’s prior written permission to relocate, Borrower will present to SBA the reasons therefore and a description or address of the relocation site. Determinations of (1) whether a relocation is voluntary or otherwise, and (2) whether any site other than the disaster-affected location is within the business area in which the disaster occurred, will be made solely by SBA. | |
| ● | Borrower will, to the extent feasible, purchase only American-made equipment and products with the proceeds of this Loan. | |
| ● | Borrower will make any request for a loan increase for additional disaster-related damages as soon as possible after the need for a loan increase is discovered. The SBA will not consider a request for a loan increase received more than two (2) years from the date of loan approval unless, in the sole discretion of the SBA, there are extraordinary and unforeseeable circumstances beyond the control of the borrower. |
DEADLINE FOR RETURN OF LOAN CLOSING DOCUMENTS
| ● | Borrower will sign and return the loan closing documents to SBA within 2 months of the date of this Loan Authorization and Agreement. By notifying the Borrower in writing, SBA may cancel this Loan if the Borrower fails to meet this requirement. The Borrower may submit and the SBA may, in its sole discretion, accept documents after 2 months of the date of this Loan Authorization and Agreement. |
COMPENSATION FROM OTHER SOURCES
| ● | Eligibility for this disaster Loan is limited to disaster losses that are not compensated by other sources. Other sources include but are not limited to: (1) proceeds of policies of insurance or other indemnifications, (2) grants or other reimbursement (including loans) from government agencies or private organizations, (3) claims for civil liability against other individuals, organizations or governmental entities, and (4) salvage (including any sale or re-use) of items of damaged property. |
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| ● | Borrower will promptly notify SBA of the existence and status of any claim or application for such other compensation, and of the receipt of any such compensation, and Borrower will promptly submit the proceeds of same (not exceeding the outstanding balance of this Loan) to SBA. | |
| ● | Borrower hereby assigns to SBA the proceeds of any such compensation from other sources and authorizes the payor of same to deliver said proceeds to SBA at such time and place as SBA shall designate. | |
| ● | SBA will in its sole discretion determine whether any such compensation from other sources is a duplication of benefits. SBA will use the proceeds of any such duplication to reduce the outstanding balance of this Loan, and Borrower agrees that such proceeds will not be applied in lieu of scheduled payments. |
TO MAINTAIN HAZARD INSURANCE
| ● | Within 12 months from the date of this Loan Authorization and Agreement the Borrower will provide proof of an active and in effect hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan. BORROWER MAY NOT BE ELIGIBLE FOR EITHER ANY FUTURE DISASTER ASSISTANCE OR SBA FINANCIAL ASSISTANCE IF THIS INSURANCE IS NOT MAINTAINED AS STIPULATED HEREIN THROUGHOUT THE ENTIRE TERM OF THIS LOAN. Please submit proof of insurance to: U.S. Small Business Administration, Office of Disaster Assistance, 14925 Kingsport Rd, Fort Worth, TX. 76155. |
BOOKS AND RECORDS
| ● | Borrower will maintain current and proper books of account in a manner satisfactory to SBA for the most recent 5 years until 3 years after the date of maturity, including extensions, or the date this Loan is paid in full, whichever occurs first. Such books will include Borrower’s financial and operating statements, insurance policies, tax returns and related filings, records of earnings distributed and dividends paid and records of compensation to officers, directors, holders of 10% or more of Borrower’s capital stock, members, partners and proprietors. | |
| ● | Borrower authorizes SBA to make or cause to be made, at Borrower’s expense and in such a manner and at such times as SBA may require: (1) inspections and audits of any books, records and paper in the custody or control of Borrower or others relating to Borrower’s financial or business conditions, including the making of copies thereof and extracts therefrom, and (2) inspections and appraisals of any of Borrower’s assets. | |
| ● | Borrower will furnish to SBA, not later than 3 months following the expiration of Borrower’s fiscal year and in such form as SBA may require, Borrower’s financial statements. | |
| ● | Upon written request of SBA, Borrower will accompany such statements with an ‘Accountant’s Review Report’ prepared by an independent public accountant at Borrower’s expense. | |
| ● | Borrower authorizes all Federal, State and municipal authorities to furnish reports of examination, records and other information relating to the conditions and affairs of Borrower and any desired information from such reports, returns, files, and records of such authorities upon request of SBA. |
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LIMITS ON DISTRIBUTION OF ASSETS
| ● | Borrower will not, without the prior written consent of SBA, make any distribution of Borrower’s assets, or give any preferential treatment, make any advance, directly or indirectly, by way of loan, gift, bonus, or otherwise, to any owner or partner or any of its employees, or to any company directly or indirectly controlling or affiliated with or controlled by Borrower, or any other company. |
EQUAL OPPORTUNITY REQUIREMENT
| ● | If Borrower has or intends to have employees, Borrower will post SBA Form 722, Equal Opportunity Poster (copy attached), in Borrower’s place of business where it will be clearly visible to employees, applicants for employment, and the general public. |
DISCLOSURE OF LOBBYING ACTIVITIES
| ● | Borrower agrees to the attached Certification Regarding Lobbying Activities |
BORROWERS CERTIFICATIONS
Borrower certifies that:
| ● | There has been no substantial adverse change in Borrower’s financial condition (and organization, in case of a business borrower) since the date of the application for this Loan. (Adverse changes include, but are not limited to: judgment liens, tax liens, mechanic’s liens, bankruptcy, financial reverses, arrest or conviction of felony, etc.) | |
| ● | No fees have been paid, directly or indirectly, to any representative (attorney, accountant, etc.) for services provided or to be provided in connection with applying for or closing this Loan, other than those reported on SBA Form 5 Business Disaster Loan Application’; SBA Form 3501 COVID-19 Economic Injury Disaster Loan Application; or SBA Form 159, ‘Compensation Agreement’. All fees not approved by SBA are prohibited. | |
| ● | All representations in the Borrower’s Loan application (including all supplementary submissions) are true, correct and complete and are offered to induce SBA to make this Loan. | |
| ● | No claim or application for any other compensation for disaster losses has been submitted to or requested of any source, and no such other compensation has been received, other than that which Borrower has fully disclosed to SBA. | |
| ● | Neither the Borrower nor, if the Borrower is a business, any principal who owns at least 50% of the Borrower, is delinquent more than 60 days under the terms of any: (a) administrative order; (b) court order; or (c) repayment agreement that requires payment of child support. | |
| ● | Borrower certifies that no fees have been paid, directly or indirectly, to any representative (attorney, accountant, etc.) for services provided or to be provided in connection with applying for or closing this Loan, other than those reported on the Loan Application. All fees not approved by SBA are prohibited. If an Applicant chooses to employ an Agent, the compensation an Agent charges to and that is paid by the Applicant must bear a necessary and reasonable relationship to the services actually performed and must be comparable to those charged by other Agents in the geographical area. Compensation cannot be contingent on loan approval. In addition, compensation must not include any expenses which are deemed by SBA to be unreasonable for services actually performed or expenses actually incurred. Compensation must not include charges prohibited in 13 CFR 103 or SOP 50-30, Appendix 1. If the compensation exceeds $500 for a disaster home loan or $2,500 for a disaster business loan, Borrower must fill out the Compensation Agreement Form 159D which will be provided for Borrower upon request or can be found on the SBA website. | |
| ● | Borrower certifies, to the best of its, his or her knowledge and belief, that the certifications and representations in the attached Certification Regarding Lobbying are true, correct and complete and are offered to induce SBA to make this Loan. |
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CIVIL AND CRIMINAL PENALTIES
| ● | Whoever wrongfully misapplies the proceeds of an SBA disaster loan shall be civilly liable to the Administrator in an amount equal to one-and-one halftimes the original principal amount of the loan under 15 U.S.C. 636(b). In addition, any false statement or misrepresentation to SBA may result in criminal, civil or administrative sanctions including, but not limited to: 1) fines, imprisonment or both, under 15 U.S.C. 645, 18 U.S.C. 1001, 18 U.S.C. 1014, 18 U.S.C. 1040, 18 U.S.C. 3571, and any other applicable laws; 2) treble damages and civil penalties under the False Claims Act, 31 U.S.C. 3729; 3) double damages and civil penalties under the Program Fraud Civil Remedies Act, 31 U.S.C. 3802; and 4) suspension and/or debarment from all Federal procurement and non-procurement transactions. Statutory fines may increase if amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. |
RESULT OF VIOLATION OF THIS LOAN AUTHORIZATION AND AGREEMENT
| ● | If Borrower violates any of the terms or conditions of this Loan Authorization and Agreement, the Loan will be in default and SBA may declare all or any part of the indebtedness immediately due and payable. SBA’s failure to exercise its rights under this paragraph will not constitute a waiver. | |
| ● | A default (or any violation of any of the terms and conditions) of any SBA Loan(s) to Borrower and/or its affiliates will be considered a default of all such Loan(s). |
DISBURSEMENT OF THE LOAN
| ● | Disbursements will be made by and at the discretion of SBA Counsel, in accordance with this Loan Authorization and Agreement and the general requirements of SBA. | |
| ● | Disbursements may be made in increments as needed. | |
| ● | Other conditions may be imposed by SBA pursuant to general requirements of SBA. | |
| ● | Disbursement may be withheld if, in SBA’s sole discretion, there has been an adverse change in Borrower’s financial condition or in any other material fact represented in the Loan application, or if Borrower fails to meet any of the terms or conditions of this Loan Authorization and Agreement. | |
| ● | NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS SOLE DISCRETION, EXTENDS THIS DISBURSEMENT PERIOD. |
PARTIES AFFECTED
| ● | This Loan Authorization and Agreement will be binding upon Borrower and Borrower’s successors and assigns and will inure to the benefit of SBA and its successors and assigns. |
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RESOLUTION OF BOARD OF DIRECTORS
| ● | Borrower shall, within 180 days of receiving any disbursement of this Loan, submit the appropriate SBA Certificate and/or Resolution to the U.S. Small Business Administration, Office of Disaster Assistance, 14925 Kingsport Rd, Fort Worth, TX. 76155. |
ENFORCEABILITY
| ● | This Loan Authorization and Agreement is legally binding, enforceable and approved upon Borrower’s signature, the SBA’s approval and the Loan Proceeds being issued to Borrower by a government issued check or by electronic debit of the Loan Proceeds to Borrower’ banking account provided by Borrower in application for this Loan. |
| /s/ James E. Rivera | |
| James E. Rivera | |
| Associate Administrator | |
| U.S. Small Business Administration |
The undersigned agree(s) to be bound by the terms and conditions herein during the term of this Loan, and further agree(s) that no provision stated herein will be waived without prior written consent of SBA. Under penalty of perjury of the United States of America, I hereby certify that I am authorized to apply for and obtain a disaster loan on behalf of Borrower, in connection with the effects of the COVID-19 emergency.
| Valuesetters Inc. | |||
| Date: | 06.17.2020 | ||
| /s/ Coreen Kraysler | |||
| Coreen Kraysler, Owner/Officer |
Note: Corporate Borrowers must execute Loan Authorization and Agreement in corporate name, by a duly authorized officer. Partnership Borrowers must execute in firm name, together with signature of a general partner. Limited Liability entities must execute in the entity name by the signature of the authorized managing person.
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CERTIFICATION REGARDING LOBBYING
For loans over $150,000, Congress requires recipients to agree to the following:
| 1. | Appropriated funds may NOT be used for lobbying. | |
| 2. | Payment of non-federal funds for lobbying must be reported on Form SF-LLL. | |
| 3. | Language of this certification must be incorporated into all contracts and subcontracts exceeding $100,000. | |
| 4. | All contractors and subcontractors with contracts exceeding $100,000 are required to certify and disclose accordingly. |
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CERTIFICATION
REGARDING
LOBBYING
Certification
for Contracts, Grants, Loans, and Cooperative
Agreements
Borrower and all Guarantors certify, to the best of its, his or her knowledge and belief, that:
(1) No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, or modification of any Federal contract, grant, loan, or cooperative agreement.
(2) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal loan, the undersigned shall complete and submit Standard Form LLL, “Disclosure Form to Report Lobbying,” in accordance with its instructions.
(3) The undersigned shall require that the language of this certification be included in the award documents for all sub-awards at all tiers (including subcontracts, sub-grants, and contracts under grants, loans, and co-operative agreements) and that all sub-recipients shall certify and disclose accordingly.
This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000.00 and not more than $100,000.00 for each such failure.
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 |
This Statement of Policy is Posted
In Accordance with Regulations of the
Small Business Administration
This Organization Practices |
|
Equal Employment Opportunity
We do not discriminate on the ground of race, color, religion, sex, age, disability or national origin in the hiring, retention, or promotion of employees; nor in determining their rank, or the compensation or fringe benefits paid them.
This Organization Practices
Equal Treatment of Clients
We do not discriminate on the basis of race, color, religion, sex, marital status, disability, age or national origin in services or accommodations offered or provided to our employees, clients or guests.
These policies and this notice comply with regulations of the United States Government.
Please report violations of this policy to:
| Administrator | |
| Small Business Administration | |
| Washington, D.C. 20416 |
In order for the public and your employees to know their rights under 13 C.F.R Parts 112, 113, and 117, Small Business Administration Regulations, and to conform with the directions of the Administrator of SBA, this poster must be displayed where it is clearly visible to employees, applicants for employment, and the public.
Failure to display the poster as required in accordance with SBA Regulations may be considered evidence of noncompliance and subject you to the penalties contained in those Regulations.
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|
Esta Declaracion De Principios Se Publica
De Acuerdo Con Los Reglamentos De La
Agencia Federal Para el Desarrollo de la Pequena Empresa
Esta Organizacion Practica |
lgual Oportunidad De Empleo
No discriminamos por razon de raza, color, religion, sexo, edad, discapacidad o nacionalidad en el empleo, retencion o ascenso de personal ni en la determinacion de sus posiciones, salarios o beneficios marginales.
Esta Organizacion Practica
lgualdad En El Trato A Su Clientela
No discriminamos por razon de raza, color, religion, sexo, estado civil, edad, discapacidad o nacionalidad en los servicios o facilidades provistos para nuestros empleados, clientes o visitantes.
Estos principios y este aviso cumplen con los reglamentos del Gobierno de
los Estados Unidos de America.
Favor de informar violaciones a lo aqui indicado a:
| Administrador | |
| Agencia Federal Para el Desarrollo dela Pequeiia Empresa | |
| Washington, D.C. 20416 |
A fin de que el publico y sus empleados conozcan sus derechos segun lo expresado en las Secciones 112, 113 y 117 del C6digo de Regulaciaones Federales No. 13, de los Reglamentos de la Agencja Federal Para el Desarrollo de la Pequena Empresa y de acuerdo con las instrucciones del Administrador de dicha agencia,
esta notificaci6n debe fijarse en un lugar claramente visible para los empleados, solicitantes de empleo y publico en general. No fijar esta notificaci6n segun lo requerido por los reglamentos de la Agencia Federal Para el Desarrollo de la Pequeiia Empresa, puede ser interpretado como evidencia de falta de cumplimiento de los mismos y conllevara la ejecuci6n de los castigos impuestos en estos reglamentos.
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Exhibit 10.23
 |
U.S. Small Business Administration
NOTE
(SECURED DISASTER LOANS) |
Date: 06.17.2020
Loan Amount: $500,000.00
Annual Interest Rate: 3.75% |
| SBA Loan# 7211697908 | Application #3301561063 |
| 1. | PROMISE TO PAY: In return for a loan, Borrower promises to pay to the order of SBA the amount of five hundred thousand and 00/100 Dollars ($500,000.00), interest on the unpaid principal balance, and all other amounts required by this Note. |
| 2. | DEFINITIONS: A) “Collateral” means any property taken as security for payment of this Note or any guarantee of this Note. B) “Guarantor” means each person or entity that signs a guarantee of payment of this Note. C) “Loan Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral. |
| 3. | PAYMENT TERMS: Borrower must make all payments at the place SBA designates. Borrower may prepay this Note in part or in full at any time, without notice or penalty. Borrower must pay principal and interest payments of $2,437.00 every month beginning Twelve (12) months from the date of the Note. SBA will apply each installment payment first to pay interest accrued to the day SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining principal and accrued interest is due and payable Thirty (30) years from the date of the Note. |
| 4. | DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower: A) Fails to comply with any provision of this Note, the Loan Authorization and Agreement, or other Loan Documents; B) Defaults on any other SBA loan; C) Sells or otherwise transfers, or does not preserve or account to SBA’s satisfaction for, any of the Collateral or its proceeds; D) Does not disclose, or anyone acting on their behalf does not disclose, any material fact to SBA; E) Makes, or anyone acting on their behalf makes, a materially false or misleading representation to SBA; F) Defaults on any loan or agreement with another creditor, if SBA believes the default may materially affect Borrower’s ability to pay this Note; G) Fails to pay any taxes when due; H) Becomes the subject of a proceeding under any bankruptcy or insolvency law; I) Has a receiver or liquidator appointed for any part of their business or property; J) Makes an assignment for the benefit of creditors; K) Has any adverse change in financial condition or business operation that SBA believes may materially affect Borrower’s ability to pay this Note; L) Dies; M) Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without SBA’s prior written consent; or, N) Becomes the subject of a civil or criminal action that SBA believes may materially affect Borrower’s ability to pay this Note. |
| 5. | SBA’S RIGHTS IF THERE IS A DEFAULT: Without notice or demand and without giving up any of its rights, SBA may: A) Require immediate payment of all amounts owing under this Note; B) Have recourse to collect all amounts owing from any Borrower or Guarantor (if any); C) File suit and obtain judgment; D) Take possession of any Collateral; or E) Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement. |
| 6. | SBA’S GENERAL POWERS: Without notice and without Borrower’s consent, SBA may: A) Bid on or buy the Collateral at its sale or the sale of another lienholder, at any price it chooses; B) Collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney’s fees and costs. If SBA incurs such expenses, it may demand immediate reimbursement from Borrower or add the expenses to the principal balance; C) Release anyone obligated to pay this Note; D) Compromise, release, renew, extend or substitute any of the Collateral; and E) Take any action necessary to protect the Collateral or collect amounts owing on this Note. |
| Page 1 of 2 |
| 7. | FEDERAL LAW APPLIES: When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. |
| 8. | GENERAL PROVISIONS: A) All individuals and entities signing this Note are jointly and severally liable. B) Borrower waives all suretyship defenses. C) Borrower must sign all documents required at any time to comply with the Loan Documents and to enable SBA to acquire, perfect, or maintain SBA ‘s liens on Collateral. D) SBA may exercise any of its rights separately or together, as many times and in any order it chooses. SBA may delay or forgo enforcing any of its rights without giving up any of them. E) Borrower may not use an oral statement of SBA to contradict or alter the written terms of this Note. F) If any part of this Note is unenforceable, all other parts remain in effect. G) To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that SBA did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale. H) SBA may sell or otherwise transfer this Note. |
| 9. | MISUSE OF LOAN FUNDS: Anyone who wrongfully misapplies any proceeds of the loan will be civilly liable to SBA for one and one- halftimes the proceeds disbursed, in addition to other remedies allowed by law. |
| 10. | BORROWER’S NAME(S) AND SIGNATURE(S): By signing below, each individual or entity acknowledges and accepts personal obligation and full liability under the Note as Borrower. |
| Valuesetters Inc. | |
| /s/ Coreen Kraysler | |
| Coreen Kraysler, Owner/Officer |
| Page 2 of 2 |
Exhibit 10.24
|
U.S. Small Business Administration SECURITY AGREEMENT |
| SBA Loan#: | 7211697908 |
| Borrower: | Valuesetters Inc. |
| Secured Party: | The Small Business Administration, an Agency of the U.S. Government |
| Date: | 06.17.2020 |
| Note Amount: | $500,000.00 |
| 1. | DEFINITIONS. |
Unless otherwise specified, all terms used in this Agreement will have the meanings ascribed to them under the Official Text of the Uniform Commercial Code, as it may be amended from time to time, (“UCC”). “SBA” means the Small Business Administration, an Agency of the U.S. Government.
| 2. | GRANT OF SECURITY INTEREST. |
For value received, the Borrower grants to the Secured Party a security interest in the property described below in paragraph 4 (the “Collateral”).
| 3. | OBLIGATIONS SECURED. |
This Agreement secures the payment and performance of: (a) all obligations under a Note dated 06.17.2020, made by Valuesetters Inc., made payable to Secured Lender, in the amount of $500,000.00 (“Note”), including all costs and expenses (including reasonable attorney’s fees), incurred by Secured Party in the disbursement, administration and collection of the loan evidenced by the Note; (b) all costs and expenses (including reasonable attorney’s fees), incurred by Secured Party in the protection, maintenance and enforcement of the security interest hereby granted; (c) all obligations of the Borrower in any other agreement relating to the Note; and (d) any modifications, renewals, refinancings, or extensions of the foregoing obligations.
| -1- |
| 4. | COLLATERAL DESCRIPTION. |
The Collateral in which this security interest is granted includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a) inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j) general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto.
| 5. | RESTRICTIONS ON COLLATERAL TRANSFER. |
Borrower will not sell, lease, license or otherwise transfer (including by granting security interests, liens, or other encumbrances in) all or any part of the Collateral or Borrower’s interest in the Collateral without Secured Party’s written or electronically communicated approval, except that Borrower may sell inventory in the ordinary course of business on customary terms. Borrower may collect and use amounts due on accounts and other rights to payment arising or created in the ordinary course of business, until notified otherwise by Secured Party in writing or by electronic communication.
| 6. | MAINTENANCE AND LOCATION OF COLLATERAL; INSPECTION; INSURANCE. |
Borrower must promptly notify Secured Party by written or electronic communication of any change in location of the Collateral, specifying the new location. Borrower hereby grants to Secured Party the right to inspect the Collateral at all reasonable times and upon reasonable notice. Borrower must: (a) maintain the Collateral in good condition; (b) pay promptly all taxes, judgments, or charges of any kind levied or assessed thereon; (c) keep current all rent or mortgage payments due, if any, on premises where the Collateral is located; and (d) maintain hazard insurance on the Collateral, with an insurance company and in an amount approved by Secured Party (but in no event less than the replacement cost of that Collateral), and including such terms as Secured Party may require including a Lender’s Loss Payable Clause in favor of Secured Party. Borrower hereby assigns to Secured Party any proceeds of such policies and all unearned premiums thereon and authorizes and empowers Secured Party to collect such sums and to execute and endorse in Borrower’s name all proofs of loss, drafts, checks and any other documents necessary for Secured Party to obtain such payments.
| 7. | CHANGES TO BORROWER’S LEGAL STRUCTURE, PLACE OF BUSINESS, JURISDICTION OF ORGANIZATION, OR NAME. |
Borrower must notify Secured Party by written or electronic communication not less than 30 days before taking any of the following actions: (a) changing or reorganizing the type of organization or form under which it does business; (b) moving, changing its place of business or adding a place of business; (c) changing its jurisdiction of organization; or (d) changing its name. Borrower will pay for the preparation and filing of all documents Secured Party deems necessary to maintain, perfect and continue the perfection of Secured Party’s security interest in the event of any such change.
| 8. | PERFECTION OF SECURITY INTEREST. |
Borrower consents, without further notice, to Secured Party’s filing or recording of any documents necessary to perfect, continue, amend or terminate its security interest. Upon request of Secured Party, Borrower must sign or otherwise authenticate all documents that Secured Party deems necessary at any time to allow Secured Party to acquire, perfect, continue or amend its security interest in the Collateral. Borrower will pay the filing and recording costs of any documents relating to Secured Party’s security interest. Borrower ratifies all previous filings and recordings, including financing statements and notations on certificates of title. Borrower will cooperate with Secured Party in obtaining a Control Agreement satisfactory to Secured Party with respect to any Deposit Accounts or Investment Property, or in otherwise obtaining control or possession of that or any other Collateral.
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| 9. | DEFAULT. |
Borrower is in default under this Agreement if: (a) Borrower fails to pay, perform or otherwise comply with any provision of this Agreement; (b) Borrower makes any materially false representation, warranty or certification in, or in connection with, this Agreement, the Note, or any other agreement related to the Note or this Agreement; (c) another secured party or judgment creditor exercises its rights against the Collateral; or (d) an event defined as a “default” under the Obligations occurs. In the event of default and if Secured Party requests, Borrower must assemble and make available all Collateral at a place and time designated by Secured Party. Upon default and at any time thereafter, Secured Party may declare all Obligations secured hereby immediately due and payable, and, in its sole discretion, may proceed to enforce payment of same and exercise any of the rights and remedies available to a secured party by law including those available to it under Article 9 of the UCC that is in effect in the jurisdiction where Borrower or the Collateral is located. Unless otherwise required under applicable law, Secured Party has no obligation to clean or otherwise prepare the Collateral for sale or other disposition and Borrower waives any right it may have to require Secured Party to enforce the security interest or payment or performance of the Obligations against any other person.
| 10. | FEDERAL RIGHTS. |
When SBA is the holder of the Note, this Agreement will be construed and enforced under federal law, including SBA regulations. Secured Party or SBA may use state or local procedures for filing papers, recording documents, giving notice, enforcing security interests or liens, and for any other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax or liability. As to this Agreement, Borrower may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
| 11. | GOVERNING LAW. |
Unless SBA is the holder of the Note, in which case federal law will govern, Borrower and Secured Party agree that this Agreement will be governed by the laws of the jurisdiction where the Borrower is located, including the UCC as in effect in such jurisdiction and without reference to its conflicts of laws principles.
| 12. | SECURED PARTY RIGHTS. |
All rights conferred in this Agreement on Secured Party are in addition to those granted to it by law, and all rights are cumulative and may be exercised simultaneously. Failure of Secured Party to enforce any rights or remedies will not constitute an estoppel or waiver of Secured Party’s ability to exercise such rights or remedies. Unless otherwise required under applicable law, Secured Party is not liable for any loss or damage to Collateral in its possession or under its control, nor will such loss or damage reduce or discharge the Obligations that are due, even if Secured Party’s actions or inactions caused or in any way contributed to such loss or damage.
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| 13. | SEVERABILITY. |
If any provision of this Agreement is unenforceable, all other provisions remain in effect.
| 14. | BORROWER CERTIFICATIONS. |
Borrower certifies that: (a) its Name (or Names) as stated above is correct; (b) all Collateral is owned or titled in the Borrower’s name and not in the name of any other organization or individual; (c) Borrower has the legal authority to grant the security interest in the Collateral; (d) Borrower’s ownership in or title to the Collateral is free of all adverse claims, liens, or security interests (unless expressly permitted by Secured Party); (e) none of the Obligations are or will be primarily for personal, family or household purposes; (f) none of the Collateral is or will be used, or has been or will be bought primarily for personal, family or household purposes; (g) Borrower has read and understands the meaning and effect of all terms of this Agreement.
| 15. | BORROWER NAME(S) AND SIGNATURE(S). |
By signing or otherwise authenticating below, each individual and each organization becomes jointly and severally obligated as a Borrower under this Agreement.
| Valuesetters Inc. | |
| /s/ Coreen Kraysler | |
| Coreen Kraysler, Owner/Officer |
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| Date: | |
| 06.17.2020 | |
GUARANTEE
The Guarantee is to be signed by the person(s) who is to guarantee your loan.
This document is pre-dated. DO NOT CHANGE THE DATE ON THIS DOCUMENT.
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|
U.S. Small Business Administration Unconditional Guarantee (Disaster Loans) |
| SBA Loan# | 7211697908 |
| Application # | 3301561063 |
| Guarantor(s) | Coreen Kraysler |
| Borrower | Valuesetters Inc. |
| Date | 06.17.2020 |
| Note Amount | $500,000.00 |
| 1. | GUARANTEE. |
Guarantor(s) unconditionally guarantee(s) payment to SBA of all amounts owing under the Note. This Guarantee remains in effect until the Note is paid in full. Guarantor(s) must pay all amounts due under the Note when SBA makes written demand upon Guarantor(s). SBA is not required to seek payment from any other source before demanding payment from Guarantor(s).
| 2. | NOTE. |
The “Note” is the promissory note dated 06.17.2020 in the principal amount of five hundred thousand and 00/100 Dollars ($500,000.00) from Borrower to SBA. It includes any assumption, renewal, substitution, or replacement of the Note.
| 3. | DEFINITIONS. |
“Collateral” means property, if any, taken as security for payment of the Note or any guarantee of the Note. “Loan” means the loan evidenced by the Note.
“Loan Documents” means the documents related to the Loan signed by Borrower, Guarantor(s) or any other guarantor, or anyone who pledges Collateral.
“SBA” means the Small Business Administration, an Agency of the United States of America.
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| 4. | SBA’S GENERAL POWERS. |
SBA may take any of the following actions at any time, without notice, without Guarantor(s)’ consent, and without making demand upon Guarantor(s):
| A. | Modify the terms of the Note or any other Loan Document except to increase the amounts due under the Note; | |
| B. | Refrain from taking any action on the Note, the Collateral, or any guarantee; | |
| C. | Release any Borrower or any guarantor of the Note; | |
| D. | Compromise or settle with the Borrower or any guarantor of the Note; | |
| E. | Substitute or release any of the Collateral, whether or not SBA receives anything in return; | |
| F. | Foreclose upon or otherwise obtain, and dispose of, any Collateral at public or private sale, with or without advertisement; | |
| G. | Bid or buy at any sale of Collateral by SBA or any other lienholder, at any price SBA chooses; and | |
| H. | Exercise any rights it has, including those in the Note and other Loan Documents. These actions will not release or reduce the obligations of Guarantor(s) or create any rights or claims against SBA. |
| 5. | FEDERAL LAW. |
When SBA is the holder, the Note and this Guarantee will be construed and enforced under federal law, including SBA regulations. SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Guarantee, Guarantor(s) may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
| 6. | RIGHTS, NOTICES, AND DEFENSES THAT GUARANTOR(S) WAIVE(S). |
To the extent permitted by law,
| I. | Guarantor(s) waive(s) all rights to: |
| 1) | Require presentment, protest, or demand upon Borrower; | ||
| 2) | Redeem any Collateral before or after SBA disposes of it; | ||
| 3) | Have any disposition of Collateral advertised; and | ||
| 4) | Require a valuation of Collateral before or after SBA disposes of it. |
| J. | Guarantor(s) waive(s) any notice of: |
| 1) | Any default under the Note; | ||
| 2) | Presentment, dishonor, protest, or demand; | ||
| 3) | Execution of the Note; | ||
| 4) | Any action or inaction on the Note or Collateral, such as disbursements, payment, nonpayment, acceleration, intent to accelerate, assignment, collection activity, and incurring enforcement expenses; | ||
| 5) | Any change in the financial condition or business operations of Borrower or any guarantor(s); | ||
| 6) | Any changes in the terms of the Note or other Loan Documents, except increases in the amounts due under the Note; and | ||
| 7) | The time or place of any sale or other disposition of Collateral. |
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| K. | Guarantor(s) waive(s) defenses based upon any claim that |
| 1) | SBA failed to obtain any guarantee; | ||
| 2) | SBA failed to obtain, perfect, or maintain a security interest in any property offered or taken as Collateral; | ||
| 3) | SBA or others improperly valued or inspected the Collateral; | ||
| 4) | The Collateral changed in value, or was neglected, lost, destroyed, or underinsured; | ||
| 5) | SBA impaired the Collateral; | ||
| 6) | SBA did not dispose of any of the Collateral; | ||
| 7) | SBA did not conduct a commercially reasonable sale; | ||
| 8) | SBA did not obtain the fair market value of the Collateral; | ||
| 9) | SBA did not make or perfect a claim upon the death or disability of Borrower or any guarantor of the Note; | ||
| 10) | The financial condition of Borrower or any guarantor was overstated or has adversely changed; | ||
| 11) | SBA made errors or omissions in Loan Documents or administration of the Loan; | ||
| 12) | SBA did not seek payment from the Borrower, any other guarantor(s), or any Collateral before demanding payment from Guarantor(s); | ||
| 13) | SBA impaired Guarantor(s)’ suretyship rights; | ||
| 14) | SBA modified the Note terms, other than to increase amounts due under the Note. If SBA modifies the Note to increase the amounts due under the Note without Guarantor(s)’ consent, Guarantor(s) will not be liable for the increased amounts and related interest and expenses, but remains liable for all other amounts; | ||
| 15) | Borrower has avoided liability on the Note; or | ||
| 16) | SBA has taken an action allowed under the Note, this Guarantee, or other Loan Documents. |
| 7. | DUTIES AS TO COLLATERAL. |
Guarantor(s) will preserve the Collateral, if any, pledged by Guarantor(s) to secure this Guarantee. SBA has no duty to preserve or dispose of any Collateral.
| 8. | SUCCESSORS AND ASSIGNS. |
Under this Guarantee, Guarantor(s) include(s) successors, and SBA includes successors and assigns.
| 9. | GENERAL PROVISIONS. |
| L. | ENFORCEMENT EXPENSES. Guarantor(s) promise(s) to pay all expenses SBA incurs to enforce this Guarantee, including, but not limited to, attorney’s fees and costs. | |
| M. | SUBROGATION RIGHT. Guarantor(s) has/have no subrogation rights as to the Note or the Collateral until the Note is paid in full. | |
| N. | JOINT AND SEVERAL LIABILITY. All individuals and entities signing as Guarantor(s) is/are jointly and severally liable. | |
| O. | DOCUMENT SIGNING. Guarantor(s) must sign all documents necessary at any time to comply with the Loan Documents and to enable SBA to acquire, perfect, or maintain SBA’s liens on Collateral. | |
| P. | FINANCIAL STATEMENTS. Guarantor(s) must give SBA financial statements as SBA requires. | |
| Q. | SBA’S RIGHTS CUMULATIVE, NOT WAIVED. SBA may exercise any of its rights separately or together, as many times as it chooses. SBA may delay or forgo enforcing any of its rights without losing or impairing any of them. |
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| R. | ORAL STATEMENTS NOT BINDING. Guarantor(s) may not use an oral statement to contradict or alter the written terms of the Note or this Guarantee, or to raise a defense to this Guarantee. | |
| S. | SEVERABILITY. If any part of this Guarantee is found to be unenforceable, all other parts will remain in effect. | |
| T. | CONSIDERATION. The consideration for this Guarantee is the Loan or any accommodation by SBA as to the Loan. |
| 10. | GUARANTOR(S) ACKNOWLEDGMENT OF TERMS. |
Guarantor(s) acknowledge(s) that Guarantor(s) has/have read and understands the significance of all terms of the Loan Authorization Agreement, Note, this Guarantee, including all waivers, and certifies, to the best of its, his or her knowledge and belief, that the certifications and representations in the attached Certification Regarding Lobbying are true, correct and complete and are offered to induce SBA to make this Loan.
| 11. | GUARANTOR(S) NAME(S) AND SIGNATURE(S). |
By signing below, each individual or entity becomes obligated as Guarantor under this Guarantee.
| GUARANTOR: | ||
| /s/ Coreen Kraysler | ||
| Coreen Kraysler | ||
| By: | Coreen Kraysler, Owner/Officer | |
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Exhibit 10.25
Paycheck Protection Note
VIRGINIA BORROWERS: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT FURTHER NOTICE.
| SBA Loan # | 6627858304 |
| SBA Loan Name | VALUESETTERS INC. |
| Date | 1/31/2021 |
| Loan Amount | $1,885,800.00 |
| Fixed Interest Rate | 1.0% |
| Borrower | VALUESETTERS INC. |
| Lender | Citizens Bank N.A. 1 Citizens Plaza |
| 1. | PROMISE TO PAY: |
In return for the Loan, Borrower promises to pay to the order of Lender the amount of 1,885,800.00 Dollars, interest on the unpaid principal balance, and all other amounts required by this Note.
| 2. | DEFINITIONS: |
“Forgiveness Amount” means the amount of loan forgiveness as calculated (and reduced) in accordance with the requirements of the Program.
“Forgiveness Period” means the period beginning on the date of origination of the Loan and ending the earlier of (1) a date selected by the Borrower that occurs during the period beginning on the date that is 8 weeks after the date of origination of the Loan and ending on the date that is 24 weeks after the date of origination of the Loan or (2) September 30, 2021.
“Loan” means the loan evidenced by this Note.
“Loan Documents” means the documents related to this Loan signed by Borrower.
“Program” means the Paycheck Protection Program created by the Coronavirus Aid, Relief, and Economic Security Act, as amended from time to time and also known as the “CARES Act” (P.L. 116- 136; 134 Stat. 281).
“SBA” means the Small Business Administration, an Agency of the United States of America.
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| 3. | LOAN FORGIVENESS; PAYMENT TERMS: |
| A. | Loan Forgiveness: Borrower may apply to Lender for forgiveness of the amount due on the Loan in an amount equal to the sum of the following costs incurred by Borrower during the Forgiveness Period: |
| (i) | Payroll costs |
| (ii) | Any payment of interest on a covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation |
| (iii) | Any covered operations expenditure |
| (iv) | Any covered property damage cost |
| (v) | Any payment on a covered rent obligation |
| (vi) | Any covered utility payment |
| (vii) | Any covered supplier cost |
| (viii) | Any covered worker protection expenditure |
Not more than 40% of the Forgiveness Amount can be attributable to non-payroll costs.
Forgiveness will be subject to Borrower’s submission to Lender of information and documentation as required by the SBA and Lender.
| B. | Submission of Information and Documents: Forgiveness will be subject to Borrower’s submission to Lender of information and documentation as required by the SBA and Lender. At any time as required by the Lender, Borrower shall provide Lender with information, in form and substance acceptable to Lender, specifying the amount of forgiveness Borrower requests, together with all documentation required by the CARES Act, as amended, rules and regulations issued by the SBA and/or Lender to evidence and/or verify such information. Required information may include, without limitation: |
| (i) | the total dollar amount of payroll costs during the Forgiveness Period and the dollar amounts of covered mortgage interest payments, covered operations expenditures, covered property damage costs, covered rent payments, covered utilities, covered supplier costs and covered worker protection expenditures for the Forgiveness Period to the extent Borrower seeks forgiveness for these costs; |
| (ii) | the average number of full-time equivalent employees of Borrower per month from time to time as may be required by the SBA to make a determination on the Forgiveness Amount; |
| (iii) | the total amount of salary and wages for any owners and employees of Borrower from time to time as may be required by the SBA to make a determination on the Forgiveness Amount; and |
| (iv) | such further information and documents as Lender or the SBA shall require. |
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| C. | Initial Deferment Period: (i) No payments are due on the Loan until the SBA remits the Forgiveness Amount to Lender (or when the Lender or the SBA issues a determination that there will be no forgiveness of the Loan) so long as Borrower applies for forgiveness of the Loan within 10 months of the last day of the Forgiveness Period. (ii) If Borrower does not apply for forgiveness of the Loan within 10 months of the last day of the Forgiveness Period (which may in no event exceed 24 weeks following the date of origination of the loan), payments of principal, interest and fees on the Loan will be due beginning on the day that is not earlier than 10 months after the last day of such Forgiveness Period. (The term “Deferment Period” means the date required by 3.C(i) or 3.C(ii), as applicable.) Interest will continue to accrue during the Deferment Period. |
| D. | Maturity: This Note will mature five years from date of first disbursement of the Loan. |
| E. | Payments from End of Deferment Period through Maturity Date: To the extent the Loan is not forgiven (in whole or in part) during the Deferment Period, the outstanding balance of the Loan, and interest thereon, shall be repaid in substantially equal monthly payments of principal and interest, commencing on the first business day after the end of the Deferment Period. |
| F. | Payment Authorization: Borrower hereby authorizes Lender to initiate payments from Borrower’s bank account, by wire or ACH transfer, for each monthly or other payment required hereunder. In the event any such payment is unsuccessful, Borrower shall remain liable for such payment and shall take all steps required to make such payment. |
| G. | Interest Computation; Repayment Terms: The interest rate on this Note is one percent per year. The interest rate is fixed and will not be changed during the life of the Loan. Interest will be calculated based upon actual days over a 365-day year. |
| H. | Payment Allocation: Lender will apply each installment payment first to pay interest accrued to the day Lender received the payment, then to bring principal current, and will apply any remaining balance to reduce principal. |
| I. | Loan Prepayment: Notwithstanding any provision in this Note to the contrary, Borrower may prepay this Note at any time without penalty. Borrower may prepay 20 percent or less of the unpaid principal balance at any time without notice. If Borrower prepays more than 20 percent and the Loan has been sold on the secondary market, Borrower must: (i) give Lender written notice; (ii) pay all accrued interest; and (iii) if the prepayment is received less than 21 days from the date Lender received the notice, pay an amount equal to 21 days interest from the date Lender received the notice, less any interest accrued during the 21 days and paid under (ii) of this paragraph. If Borrower does not prepay within 30 days from the date Lender received the notice, Borrower must give Lender a new notice. |
| 4. | NON-RECOURSE: Lender and SBA shall have no recourse against any individual shareholder, member or partner of Borrower for non-payment of the Loan, except to the extent that such shareholder, member or partner uses the loan proceeds for an unauthorized purpose. |
| 5. | USE OF PROCEEDS: |
Borrower represents and warrants that all proceeds of the Loan will be used for the following eligible business purposes, as required by the Program: (I) payroll costs; (II) costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; (III) employee salaries, commissions, or similar compensations; (IV) payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation); (V) operations expenditures; (VI) property damage costs; (VII) rent (including rent under a lease agreement); (VIII) utilities; (IX) supplier costs; (X) worker protection expenditures and (XI) interest on any other debt obligations that were incurred before February 15, 2020.
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| 6. | DEFAULT: |
Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower:
| A. | Fails to do anything required by this Note and other Loan Documents; |
| B. | Defaults on any other loan with Lender; |
| C. | Does not disclose, or anyone acting on its behalf does not disclose, any material fact to Lender or SBA; |
| D. | Makes, or anyone acting on its behalf makes, a materially false or misleading representation to Lender or SBA; |
| E. | Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower’s ability to pay this Note; |
| F. | Fails to pay any taxes when due; |
| G. | Becomes the subject of a proceeding under any bankruptcy or insolvency law; |
| H. | Has a receiver or liquidator appointed for any part of their business or property; |
| I. | Makes an assignment for the benefit of creditors; |
| J. | Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower’s ability to pay this Note; |
| K. | Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior written consent; or |
| L. | Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this Note. |
| 7. | LENDER’S RIGHTS IF THERE IS A DEFAULT: |
Upon a default by Borrower, without notice or demand and without giving up any of its rights, Lender may:
| A. | Require immediate payment of all amounts owing under this Note; |
| B. | Collect all amounts owing from Borrower; or |
| C. | File suit and obtain judgment. |
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| 8. | LENDER’S GENERAL POWERS: |
Without notice and without Borrower’s consent, Lender may:
| A. | Incur expenses to collect amounts due under this Note and enforce the terms of this Note or any other Loan Document. Among other things, the expenses may include reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance; and |
| B. | Take any action necessary to collect amounts owing on this Note. |
| 9. | WHEN FEDERAL LAW APPLIES: |
When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA or preempt federal law.
| 10. | SUCCESSORS AND ASSIGNS: |
Under this Note, Borrower includes the original Borrower’s successors, and Lender includes the original Lender’s successors and assigns.
| 11. | GENERAL PROVISIONS: |
| A. | Borrower waives all suretyship defenses. |
| B. | Borrower must sign all documents necessary at any time to comply with the Loan Documents. |
| C. | Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. |
| D. | Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. |
| E. | If any part of this Note is unenforceable, all other parts remain in effect. |
| F. | To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that Lender did not obtain any guarantee or collateral. |
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| 12. | STATE-SPECIFIC PROVISIONS: |
| A. | If Borrower’s principal place of business is in Delaware, the following provision applies: |
CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY-AT-LAW, AFTER THE OCCURRENCE OF A DEFAULT, TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS JUDGMENT AGAINST BORROWER FOR THE UNPAID AMOUNT OF THIS NOTE, AND TO RELEASE ALL ERRORS, AND WAIVE ALL RIGHTS OF APPEAL. IF A COPY OF THIS NOTE, VERIFIED BY AN AFFIDAVIT, SHALL HAVE BEEN FILED IN THE PROCEEDING, IT WILL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY. BORROWER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT. NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID; BUT THE POWER WILL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS LENDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL.
| B. | If Borrower’s principal place of business is in Maryland, the following provision applies: |
POWER TO CONFESS JUDGMENT. BORROWER HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD, AFTER THE OCCURRENCE OF A DEFAULT HEREUNDER, TO APPEAR FOR BORROWER AND, WITH OR WITHOUT COMPLAINT FILED, CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, AGAINST BORROWER IN FAVOR OF LENDER OR ANY HOLDER HEREOF FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE, ALL ACCRUED INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER, AND FOR DOING SO, THIS NOTE OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. BORROWER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED. BORROWER ACKNOWLEDGES AND AGREES THAT, PURSUANT TO THE FOREGOING POWER TO CONFESS JUDGMENT GRANTED TO LENDER, BORROWER IS VOLUNTARILY AND KNOWINGLY WAIVING ITS RIGHT TO NOTICE AND A HEARING PRIOR TO THE ENTRY OF A JUDGMENT BY LENDER AGAINST BORROWER. NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS LENDER SHALL ELECT UNTIL SUCH TIME AS LENDER SHALL HAVE RECEIVED PAYMENT UNTIL ALL AMOUNTS OWING ON THIS NOTE HAVE BEEN PAID IN FULL.
| C. | If Borrower’s principal place of business is in Missouri, the following provision applies: |
Oral or unexecuted agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable, regardless of the legal theory upon which it is based that is in any way related to the credit agreement. To protect you (Borrowers(s)) and us (Creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.
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| D. | If Borrower’s principal place of business is in Oregon, the following provision applies: |
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY [BENEFICIARY]/US CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY GRANTOR’S/BORROWER’S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY [AN AUTHORIZED REPRESENTATIVE OF BENEFICIARY]/US TO BE ENFORCEABLE.
| E. | If Borrower’s principal place of business is in Pennsylvania, the following provision applies: |
CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME FOR BORROWER AFTER A DEFAULT UNDER THIS NOTE AND WITH OR WITHOUT COMPLAINT FILED, CONFESS OR ENTER JUDGMENT AGAINST BORROWER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS NOTE AND ALL ACCRUED INTEREST, ON WHICH JUDGMENT OR JUDGMENTS ONE OR MORE EXECUTIONS MAY ISSUE IMMEDIATELY; AND FOR SO DOING, THIS NOTE OR A COPY OF THIS NOTE VERIFIED BY AFFIDAVIT SHALL BE SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO CONFESS JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ANY EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER THIS NOTE. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE TO NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF JUDGMENT AND STATES THAT EITHER A REPRESENTATIVE OF LENDER SPECIFICALLY CALLED THIS CONFESSION OF JUDGMENT PROVISION TO BORROWER’S ATTENTION OR BORROWER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL.
| F. | If Borrower’s principal place of business is in Virginia, the following provision applies: |
Upon any default under this Note Borrower authorizes the clerk of any court and any attorney admitted to practice before any court of record in the United States, on behalf of Borrower, to then confess judgment against the Borrower in favor of Lender in the full amount due on this Note. For the purpose of allowing the Lender to file a confession of judgment in the Commonwealth of Virginia, the Borrower hereby duly constitutes and appoints its true and lawful attorney-in-fact, to confess judgment against it in any court of record in the Commonwealth of Virginia, and Borrower further consents to the jurisdiction of and agrees that venue shall be proper in the Circuit Court of any county or city of the Commonwealth of Virginia and/or in any other court of record in the Commonwealth of Virginia. Borrower waives all errors, defects and imperfections in the entry of judgment as aforesaid or in any proceeding pursuant thereto and the benefit of any and every statute, ordinance or rule of court which may be lawfully waived conferring upon Borrower any right or privilege of exemption, stay of execution, or supplementary proceedings, or other relief from the enforcement or immediate enforcement of a judgment or related proceedings on a judgment. The authority and power to appear for and to enter judgment against Borrower shall not be extinguished by any judgment entered pursuant thereto; such authority and power may be exercised on one or more occasions from time to time, in the same or different courts or jurisdictions, as often as Lender shall deem necessary or advisable until all sums due under this Note have been paid in full.
| -7- |
| G. | If Borrower’s principal place of business is in Washington, the following provision applies: |
Oral agreements or oral commitments to loan money, extend credit, or to forbear from enforcing repayment of a debt are not enforceable under Washington law.
| H. | If Borrower is an individual residing in Wisconsin, the following provision applies: |
Each Borrower who is married represents that this obligation is incurred in the interest of his or her marriage or family.
| 13. | ELECTRONIC SIGNATURES: The parties agree to conduct business electronically, that the federal Electronic Signatures in Global and National Commerce Act applies to this Note, and that delivery of an executed counterpart of this Note electronically shall be effective as delivery of a manually signed original. |
| 14. | ARBITRATION CLAUSE: |
Borrower agrees to the Arbitration Clause attached as Exhibit A. Lender also agrees to the Arbitration Clause.
| 15. | BORROWER’S NAME AND SIGNATURE: |
By signing below, each individual or entity becomes obligated under this Note as Borrower.
| BORROWER: | VALUESETTERS INC. | |
| Authorized Signer: | ||
| COREEN KRAYSLER |
| -8- |
ARBITRATION CLAUSE (EXHIBIT A).
Lender (together with its “Related Parties,” as defined below, “we,” “us” and “our”) has put this Clause in question and answer form to make it easier to understand. However, this Clause is part of this Agreement and is legally binding on Borrower (“you” and “your”).
| Question. | Short Answer. | Further Detail. | ||
| Background and Scope. | ||||
| What is arbitration? | An alternative to a court case. | In arbitration, a third party arbitrator (“TPA”) solves Claims in a hearing. It is less formal than a court case. | ||
| Is it different from court and jury trials? | Yes. | The hearing is private. There is no jury. It is usually less formal, faster and less expensive than a lawsuit. Pre-hearing fact finding (called “discovery”) is limited. Appeals are limited. Courts rarely overturn arbitration awards. | ||
| What is this Clause about? | The parties’ agreement to arbitrate Claims. | You and we agree that any party may elect to arbitrate or require arbitration of any “Claim” as defined below. | ||
| Who does the Clause cover? | You and us, including certain “Related Parties”. | This Clause governs you and us, including our “Related Parties”: (1) any parent, subsidiary or affiliate of ours; (2) our employees, directors, officers, shareholders, members and representatives; and (3) any person or company (but not the SBA) that is involved in a Claim you pursue at the same time you pursue a related Claim with us. | ||
| What Claims does the Clause cover? | All Claims (except certain Claims about this Clause). | This Clause governs all “Claims” that would usually be decided in court and are between you and us. In this Clause, the word “Claims” has the broadest reasonable meaning. It includes contract and tort (including intentional tort) claims and claims under constitutions, statutes, ordinances, rules and regulations. It includes all claims even indirectly related to your application and/or supplemental application for the Loan, this Note, the Loan or our relationship with you. It includes claims related to any decisions we have made or subsequently make concerning your Loan, including decisions regarding the Loan forgiveness to which you are or are not entitled. It includes claims related to collections, privacy and customer information. It includes claims related to the validity in general of this Note. However, it does not include disputes about the validity, coverage or scope of this Clause or any part of this Clause. All such disputes are for a court and not the TPA to decide. | ||
| -9- |
| Question. | Short Answer. | Further Detail. | ||
| Who handles the arbitration? | Usually AAA or JAMS. | Arbitrations are conducted under this Clause and the rules of the arbitration administrator in effect at the time the arbitration is commenced. However, arbitration rules that conflict with this Clause do not apply. The arbitration administrator will be either: |
| ● | The American Arbitration Association (“AAA”), 1633 Broadway, 10th Floor, New York, NY 10019, www.adr.org. | ||||
| ● | JAMS, 620 Eighth Avenue, 34th Floor, New York, NY 10018, www.jamsadr.org | ||||
| ● | Any other company picked by agreement of the parties. |
| If all the above options are unavailable, a court will pick the administrator. No arbitration brought on a class basis may be administered without our consent by any administrator that would permit class arbitration under this Clause. | ||||
| The TPA will be selected under the administrator’s rules. However, the TPA must be a lawyer with at least ten years of experience or a retired judge unless you and we otherwise agree. | ||||
| Can Claims be brought in court? | Sometimes. | Either party may bring a lawsuit if the other party does not demand arbitration. We will not demand arbitration of any lawsuit you bring as an individual action in small claims court. However, we may demand arbitration of any appeal of a small-claims decision or any small-claims action brought on a class basis. | ||
| Are you giving up any rights? | Yes. | For Claims subject to this Clause, you give up your right to: |
| 1. | Have juries decide Claims. | ||||
| 2. | Have courts, other than small-claims courts, decide Claims. | ||||
| 3. | Serve as a private attorney general or in a representative capacity. | ||||
| 4. | Join a Claim you have with a dispute by other consumers. | ||||
| 5. | Bring or be a class member in a class action or class arbitration. |
| -10- |
| Question. | Short Answer. | Further Detail. | ||
| We also give up the right to a jury trial and to have courts decide Claims you wish to arbitrate. | ||||
| Can you or another business start class arbitration? | No. | The TPA is not allowed to handle any Claim on a class or representative basis. All Claims subject to this Clause must be decided in an individual arbitration or an individual small-claims action. This Clause will be void if a court rules that the TPA can decide a Claim on a class basis and the court’s ruling is not reversed on appeal. | ||
| What happens if part of this Clause cannot be enforced? | It depends. | If any portion of this Clause cannot be enforced, the rest of this Clause will continue to apply, except that:
(A) If a court rules that the TPA can decide a Claim on a class or other representative basis and the court’s ruling is not reversed on appeal, only this sentence will apply and the remainder of this Clause will be void. AND
(B) If a party brings a Claim seeking public injunctive relief and a court determines that the restrictions in this Clause prohibiting the TPA from awarding relief on behalf of third parties are unenforceable with respect to such Claim (and that determination becomes final after all appeals have been exhausted), the Claim for public injunctive relief will be determined in court and any individual Claims seeking monetary relief will be arbitrated. In such a case the parties agree to request that the court stay the Claim for public injunctive relief until the arbitration award pertaining to individual relief has been entered in court.
In no event will a Claim for class relief or public injunctive relief be arbitrated. | ||
| What law applies? | The Federal Arbitration Act (“FAA”). | This Agreement and related sale involve interstate commerce. Thus, the FAA governs this Clause. The TPA must apply substantive law consistent with the FAA. The TPA must honor statutes of limitation and privilege rights. Punitive damages are governed by the constitutional standards that apply in judicial proceedings. | ||
| Will anything I do make this Clause ineffective? | No. | This Clause stays in force even if you: (1) cancel this Note; (2) default, renew, prepay or pay the Loan in full; or (3) go into or through bankruptcy. |
| -11- |
| Question. | Short Answer. | Further Detail. | ||
| PROCESS | ||||
| What must a party do before starting a lawsuit or arbitration? | Send a written Claim notice and work to resolve the Claim. | Before starting a lawsuit or arbitration, the complaining party must give the other party written notice of the Claim. The notice must explain in reasonable detail the nature of the Claim and any supporting facts. If you are the complaining party, you must send the notice in writing (and not electronically) to our Legal Department, at our normal notice address. You or an attorney you have personally hired must sign the notice and must provide your full name and a phone number where you (or your attorney) can be reached.
Once a Claim notice is sent, the complaining party must give the other party a reasonable opportunity over the next 30 days to resolve the Claim on an individual basis. | ||
| How does arbitration start? | Mailing a notice. | If the parties do not reach an agreement to resolve the Claim within 30 days after notice of the Claim is received, the complaining party may commence a lawsuit or arbitration, subject to the terms of this Clause. To start arbitration, the complaining party picks the administrator and follows the administrator’s rules. If one party begins or threatens a lawsuit, the other party can demand arbitration. This demand can be made in court papers. It can be made if a party begins a lawsuit on an individual basis and then tries to pursue a class action. Once an arbitration demand is made, no lawsuit may be brought and any existing lawsuit must stop. | ||
| Will any hearing be held nearby? | Yes. | The TPA may decide that an in-person hearing is unnecessary and that he or she can resolve a Claim based on written filings and/or a conference call.
However, any in-person arbitration hearing must be held at a place reasonably convenient to you. | ||
| What about appeals? | Very limited. | Appeal rights under the FAA are very limited. Except for FAA appeal rights and except for Claims involving more than $50,000 (including Claims involving requests for injunctive relief that could cost more than $50,000), the TPA’s award will be final and binding. For Claims involving more than $50,000, any party may appeal the award to a three-TPA panel appointed by the administrator, which will reconsider from the start anything in the initial award that is appealed. The panel’s decision will be final and binding, except for any FAA appeal right. Any appropriate court may enter judgment upon the TPA’s award. | ||
| -12- |
| Question. | Short Answer. | Further Detail. | ||
| Do arbitration awards affect other disputes? | No. | No arbitration award involving the parties will have any impact as to issues or claims in any dispute involving anyone who is not a party to the arbitration, nor will an arbitration award in prior disputes involving other parties have any impact in an arbitration between the parties to this Clause. | ||
| Arbitration Fees and Awards. | ||||
| Who bears arbitration fees? | Usually, we do. | We will pay all filing, administrative, hearing and TPA’s fees if you act in good faith, cannot get a waiver of such fees and ask us to pay. | ||
| When will we cover your legal fees and costs? | If you win. | If you win an arbitration, we will pay your reasonable fees and costs for attorneys, experts and witnesses. We will also pay these amounts if required under applicable law or the administrator’s rules or if payment is required to enforce this Clause. The TPA shall not limit his or her award of these amounts because your Claim is for a small amount. | ||
| Will you ever owe us for arbitration or attorneys’ fees? | Only for bad faith. | The TPA can require you to pay our fees if (and only if): (1) the TPA finds that you have acted in bad faith (as measured by the standards set forth in Federal Rule of Civil Procedure 11(b)); and (2) this power does not make this Clause invalid. | ||
| Can an award be explained? | Yes. | A party may request details from the TPA, within 14 days of the ruling. Upon such request, the TPA will explain the ruling in writing. | ||
By signing below, we agree to this Arbitration Clause.
| LENDER: CITIZENS BANK, N.A. | ||
| By | ||
| -13- |
OMB Approval No.: 3245-0200
Expiration Date: 04/30/2022
SBA FORM 1050, SETTLEMENT SHEET
Purpose: The purpose of this form is to document and verify that loan proceeds have been disbursed in accordance with the Authorization and to document that the Borrower’s contribution has been injected into the business prior to the Lender disbursing any loan proceeds.
General Instructions: This form may be used for all 7(a) loans and for all disbursements. It must be used for the first disbursement on all standard 7(a) loans over $350,000.
This form is to be completed by the Lender and signed by the Lender and the Borrower at the time of the initial loan disbursement. The Lender must retain a copy of the signed form in its loan file. For all disbursements, the Lender must also retain documentation that is acceptable to SBA (such as joint payee checks, cancelled checks, paid receipts or invoices, wire transfer account records, etc.) and that evidences compliance with the Use of Proceeds section of the Authorization.
The Lender must submit the completed form and all supporting documentation to SBA upon request, or, in the event of a loan default, with the Lender’s request for guaranty purchase.
Providing this information is required to comply with program requirements; failure to provide it when required may impair the Lender’s ability to collect on the SBA loan guaranty.
If additional space is required to complete the form or provide additional details please attach a separate sheet.
Specific Instructions for Completing the Form:
| 1) | In the first section, fill in all identifying information. For “Loan Type,” check the box to indicate whether the loan is a term loan or a revolving line of credit. |
| 2) | Complete the “Use of Proceeds” section with information related to the initial disbursement. |
| a) | On the line associated with each applicable use of proceeds, indicate: |
| i) | The name of the payee (must identify the ultimate recipient, not an intermediary such as a title company); |
| ii) | Amount disbursed; and |
| iii) | Remaining amount to be disbursed, in accordance with the Authorization. |
| b) | For the “Settlement charges/out of pocket costs” line, insert total amount of settlement charges and other out of pocket costs in the appropriate field within the grid. Attach an itemized list of all charges and costs, including the name of payee and amount paid foreach charge or cost. Reminder: SBA Form 159is required for all fees paid or to be paid by the Lender (except Lender Service Provider fees) and for all fees paid or to be paid by the Applicant to any agent in connection with the SBA loan application.) |
| c) | For “Other (Explain),” enter any other use of proceeds authorized in the Authorization that is not already listed in the grid, if applicable. |
| 3) | Complete the “Borrower’s Injection” section. |
| a) | For each type of injection, indicate the source. |
| b) | If the Seller contributed toward required equity, attach a copy of the Note and evidence of full standby for the life of the loan. |
| c) | Note: The Borrower’s Injection must be in the business bank account prior to any disbursement of loan proceeds. |
| 4) | The Lender and the Borrower must review the certification and execute the form in the space provided. |
| Page 1 of 2 |
U.S. Small Business Settlement Sheet |
OMB APPROVAL NO. 3245-0200 EXPIRATION DATE 04/30/2022 | ||||||
SBA Loan Number 6627858304 |
Lender Name Citizens Bank N.A. |
Lender FIRS Number 7060330 | |||||
SBA Loan Name VALUESETTERS INC.
|
Note Amount $1,885,800.00 | ||||||
| Loan Type | Term Loan | Line of Credit | Disbursement Type | First Disbursement | Subsequent Disbursement | Full Disbursement | |
| Authorized Use of Proceeds: | Name of Payee: | Amount Disbursed: | Authorized Amount Remaining: | |||||||||
| Land Acquisition: ☐ Raw ☐ Improved | $ | - | $ | - | ||||||||
| Construction: ☐ New ☐ Expansion/ Renovation | $ | - | $ | - | ||||||||
| Leasehold Improvements to property owner by others | $ | - | $ | - | ||||||||
| Machinery & Equipment | $ | - | $ | - | ||||||||
| Furniture & Fixtures | $ | - | $ | - | ||||||||
| Inventory Purchase | $ | - | $ | - | ||||||||
| Working Capital VALUESETTERS INC. Deposit to 1325814323 | $ | 1,885,000.00 | $ | - | ||||||||
| Acquire Business (Change of Ownership) | $ | - | $ | - | ||||||||
| SBA Guarantee Fee | $ | - | $ | - | ||||||||
| Settlement Charges/Out of Pocket Costs | $ | - | $ | - | ||||||||
| Other (Explain) | $ | - | $ | - | ||||||||
| Total: | $ | 1,885,000.00 | $ | - | ||||||||
| Borrower’s Injection (including any deposit or earnest money): | ||||
| Cash Source: | $ | - | ||
| Assets Source: | $ | - | ||
| Seller contribution toward required equity (on full standby for life of loan) | $ | - | ||
| Other (Explain): | $ | - | ||
| Total Borrower Injection: | $ | - |
At the time of completion of this form, the Lender and the Borrower certify that:
1. The loan proceeds were disbursed and received and will be used in accordance with the Use of Proceeds section of the Authorization, including any and all SBA/Lender approved modifications, and that all required equity or Borrower injections have been made in accordance with the Authorization and any approved modifications; and
2. There has been no unremedied adverse change in the Borrower’s or Operating Company’s financial condition, organization, management, operations or assets since the date of application that would warrant withholding or not making this disbursement or any further disbursement.
At the time of each subsequent disbursement on this loan, the Lender, by disbursing the loan proceeds, and the Borrower by receiving them, are deemed to certify that the above certifications are true with respect to each and every disbursement made.
WARNING:By signing below you are certifying that the above statements are accurate to the best of your knowledge.Submitting false information to the Government may result in criminal prosecution and fines up to $250,000 and/or imprisonment for up to 5 years under 18 USC § 1001. Submitting false statements to a Federally insured institution may result in fines up to $1,000,000 and/or imprisonment for up to 30 years under 18 USC § 1014, penalties under 15 USC § 645, and/or civil fraud liability.
| Authorized Lender Official | Borrower | |||||||
| Signature: | Signature: | Signature: | Signature: | Signature: | ||||
| Print Name: Shannon L. Moniz | Print Name:COREEN KRAYSLER | Print Name: N/A | Print Name: N/A | Print Name: N/A | ||||
| Title: Vice President and Loan Operations Manager | Title: Authorized Signer | Title: N/A | Title: N/A | Title: N/A | ||||
| Date: 1/31/2021 | Date: 01-31-2021 | Date: | Date: | Date: | ||||
NOTE: According to the Paperwork Reduction Act, you are not required to respond to this collection of information unless it displays a currently valid OMB Control Number. The estimated burden for completing this form, including time for reviewing instructions, and gathering data needed, is 30 minutes. Comments or questions on the burden estimates or other aspects of this information collection should be sent to U.S. Small Business Administration, Director, RMC, 409 3rd St., SW, Washington DC 20416 and/or SBA Desk Officer, Office of Management and Budget, New Executive Office Building, Rm. 10202, Washington, DC 20503. PLEASE DO NOT SEND THE COMPLETED FORM TO THESE ADDRESSES.
| Page 2 of 2 |
Borrower Name: VALUESETTERS INC.
Loan: SBA PPP VALUESETTERS INC. (the “Loan”)
Checking Account # : 1325814323 (the “Checking Account”)
The undersigned hereby authorizes Citizens Bank to debit their Checking Account in the amount (each a “Payment Amount”) of any payment due respecting the Loan. The undersigned hereby acknowledges and agrees that if a scheduled due date respecting the Loan is not a day on which the Bank is open for processing loans, the debit will be initiated on the next business day on which the Bank is open for processing loans.
This authorization may be terminated by the undersigned upon 30 days prior written notice to the Bank.
By your signature below, you authorize and agree to the terms of this Automatic Payment Authorization.
| Authorized Signer: | 01-31-2021 | |||
| COREEN KRAYSLER |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement to Form S-1 of our audit report dated July 29, 2024, with respect to the consolidated balance sheets of Netcapital Inc. as of April 30, 2024 and 2023, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended April 30, 2024.
Our report relating to those financial statements includes an emphasis of matter paragraph regarding substantial doubt as to the Company’s ability to continue as a going concern.
We also consent to the reference to us under the heading “Experts” in such Registration Statement.
Spokane, Washington
April 15, 2025