Netcapital Inc.

Good morning, ladies and gentlemen, and welcome to the NetCapital Fiscal 2023 Second Quarter Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Corrine Krasner, CFO of NetCapital. Corrine, the floor is yours. Thank you, Jenny. Thank you, Jenny. Good morning, everybody, and thank you for joining NetCapital's financial results conference call for the second quarter of fiscal 2023, ended October 31, 2022. This is Corrine Kreisler, CFO of NetCapital, Inc. I will begin with a review of our financial results. Jason Frischman, CEO of NetCapital Funding Portal, will follow with an update on our platform. and Cecilia Link, CEO of NetCapital, Inc., will discuss the recent addition to our board of directors. Before we begin, I'd like to call your attention to the customary safe harbor disclosure regarding forward-looking information. Management discussion may include forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Any forward-looking statements reflect management's current views with respect to operations, results of operations, growth strategy, liquidity, and future events. NetCapital assumes no obligation to publicly update or revise these forward-looking statements for any reason. or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. I'll begin now with a review of our financial results for the second quarter of fiscal 2023. We had a particularly strong quarter for our consulting services for equity securities. Led by this revenue expansion, total revenues increased 48% year-over-year to $1.8 million, compared to $1.2 million in the year-ago quarter, and we generated positive operating income for the second quarter compared to an operating loss of $325,000 in the year-ago quarter. Net income for the second quarter was $183,000 compared to a net loss of $274,000 in the second quarter of fiscal 2022. Diluted earnings per share for the second quarter were $0.04 per share, compared to a loss per share of 10 cents in the year-ago quarter. For the six months of fiscal year 2023, revenue increased 71% year-over-year to $3.1 million. Net capital generated positive operating income compared to an operating loss of $1.4 million in the first six months of fiscal year 2022. Diluted earnings per share of 7 cents compared to a loss per share of 47 cents in the first six months of fiscal year 2022. At October 31, 2022, we had cash and cash equivalents of $1.6 million, as compared to $474,000 at April 30, 2022. As of October 31, 2022, equity securities at fair value totaled $15.1 million, compared to $12.9 million at April 30, 2022. I'll now turn the call over to Jason Fritchman, CEO of the NetCapital Funding Portal. Jason?

Thank you, Colleen. We have hosted many exciting offerings this year, and we've featured a number of them in press releases over the past six months. Some examples include Lithium startup EnergyX, which completed two rounds of financing with us and recently received a $450 million investment commitment from private equity firm Global Emerging Markets Group, or GEM. Phantom Global, a startup that was among the first clients of NetCapital Advisors, completed a round of financing through NetCapital Funding Portal. Phantom Global is now backed by Bill Gates' energy fund, Breakthrough Energy Ventures. Multiple offerings raised more than $1 million in the past six months, including KMX Technologies and Avidane. And we previously discussed MagFast, a developer of premium wireless magnetic chargers. MagFast has previously sold out two offerings on the NetCapital platform and has relaunched a new offering in the last few months. These are some of the success stories we are privileged to support through our digital private market ecosystem. One of our missions as a business is to mentor and support entrepreneurs in their journeys, and it's truly rewarding to see the startups on our platform that succeed in attracting subsequent funding as they build, expand, and prosper. We continue to see our business grow stronger during even tough economic climates. I will now turn the call over to Dr. Cecilia Link, Chairman of the Board and CEO of NetCapital, Inc.

Thank you, Corrine and Jason. It is with great pleasure that we recently welcomed Arne Scott to our board of directors. Arne has been involved in NetCapital as an investor and advisor since our inception. He is an accomplished business leader and corporate governance expert with 15 years of experience as a director and chair on various corporate and advisory boards. He is deeply skilled in startup businesses, venture capital, business strategy, executive management, and entrepreneurship, all of which are fundamental to the services we provide in private capital markets and strategic advisory. As an active participant in the angel investing community of Greater Boston for more than 10 years, Mr. Scott currently serves as a founding member of the Private Directors Association. Previously, he has served as a member of the Board of Trustees for Alderson Broaddus University and is Vice Chairman of First Commons Bank, Chairman of AssetLink International, and Director for Civo Nutraceuticals, Neuron Corp., and Hub Management Company. He has also served on a number of advisory boards, including Bestmark, Success Emo, AI Resources, and the Capital Network. Mr. Scott served for over 30 years at MFF Investment Management and retiring as Senior Executive Vice President in 2001. Arnie, we are so delighted to have you join us. We are very pleased with our company's performance to date and strong first half of fiscal year 2023. We thank you for your interest in investment in net capital. and look forward to delivering continuing growth in the future. Operator, we are now ready to take questions.

Thank you very much. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while uploading your question, you please pick up your handset, everything on the speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Your first question is coming from Mark Nelson of Nelson Incorporated. Mark, your line is live.

Hello. How are you doing today? Thank you for taking the time. I have two questions today. What are some of the primary factors that have led to your ability to become profitable so far in this work?

Do you want to ask your second question as well?

Sure. The second question will be, can you provide a progress update on providing a secondary market for the securities that you've already raised on the platform?

Sure. I will take the first question, and I will let Jason take the second question. So we had a good quarter in the consulting business, and we had a large contract with an equity portfolio company. and that led to the profitability in the quarter. Jason, do you want to take the second question?

Yeah, I'm happy to. Hi, Mark. Thanks for the questions. I can't provide a specific comment at this time, but I can tell you that it is very important to us to solve for the problem with respect to providing liquidity through an ATS, an Alternative trading system that is something that is important to us and something that we view as important on our path to growth, but I can't provide a specific comment at this time.

So I will just follow up with that by saying that it's very high up on our radar screen.

Great. Thank you very much.

Thank you. Next question, operator. Thank you so much.

I think Mark kind of asked the other question I had. I guess the only other question I have is the equity that you guys hold. Do you have the facility to turn that into cash if you needed to?

So I assume that you're talking about the investment portfolio that we hold, which are equity securities and private companies. And we do intend to monetize those over time. And there are several ways that we can do that. One is by selling specific portions. subset portions of those or total portions to other private investors. And we have had interest from time to time expressed in some of those companies that we own. And another path to monetization would be IPO-ing those companies, which is certainly also on our radar screen as well.

Okay. Thank you so much.

Thank you very much. Ladies and gentlemen, just a reminder, if you do have any questions, please check star one on your phone. We don't appear to have any further questions. I want to hand back over to Corrine for any closing remarks. All right. Thank you very much. Thank you, everyone, so much for joining us today. We're very pleased with the results that we have demonstrated so far, and we appreciate your interest in NetCapital, and we wish you all a very happy and healthy holiday season. Thank you. Ladies and gentlemen, thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Can he feel positive?