S-1/A: Netcapital Amends S-1 for Resale, Faces Nasdaq Delisting Risk

Netcapital Inc. filed an S-1/A to register the resale of up to 1.88 million shares, while also disclosing a Nasdaq non-compliance notice due to its stock price falling below $1.00.

Summary

• The filing registers 1,879,090 shares of common stock for resale by Selling Shareholders, comprising 118,750 June 2025 Shares and 1,760,340 shares issuable upon warrant exercise.
• The company will not receive any proceeds from the sale of shares by Selling Shareholders, but could receive up to approximately $9.21 million if all warrants are exercised for cash.
• Netcapital Inc. received a Nasdaq non-compliance notice on February 4, 2026, as its common stock bid price had been below $1.00 for 30 consecutive business days; the last reported sale price on February 23, 2026, was $0.5363.
• The company has 180 calendar days, until August 3, 2026, to regain compliance with Nasdaq's minimum bid price requirement.
• Net losses were substantial, totaling $28,301,325 for the year ended April 30, 2025, and $5,771,541 for the six months ended October 31, 2025.
• Revenues significantly decreased by 82.5% from $4,951,435 in fiscal year 2024 to $869,460 in fiscal year 2025.
• An impairment expense of approximately $19.9 million was recognized in fiscal year 2025 for portfolio company investments.
• The independent registered public accounting firm included an explanatory paragraph in its opinion for the year ended April 30, 2025, expressing substantial doubt about the company's ability to continue as a going concern.
• The company plans to expand its platform to support offerings of tokenized securities, including fractionalized real-world assets (RWAs), in partnership with Horizon Globex GmbH.
• The Alternative Trading System (ATS) agreement with Templum was terminated in September 2025, and the company is exploring other secondary trading options.
• Rich Wheeless was appointed Chief Executive Officer and Kevin Kilduff as General Counsel on December 7, 2025.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this as highly negative due to severe financial deterioration, including massive net losses, plummeting revenue, a going concern warning, and a Nasdaq delisting notice, which significantly overshadow any strategic initiatives.

Positives

• Potential for up to $9.21 million in gross proceeds if all outstanding warrants are exercised for cash, which would be used for working capital and general corporate purposes.
• Strategic plans to expand the platform to support tokenized securities and real-world assets (RWAs), leveraging blockchain technology, in partnership with Horizon Globex GmbH.
• Acquisition of Rivetz Corp.'s assets in December 2025 to enhance capabilities for supporting tokenized securities.
• Acquisition of Iverson Designs' assets in January 2026 to integrate digital design and AI-driven methods.
• The wholly-owned subsidiary, Netcapital Securities Inc., received FINRA approval in November 2024 to become a broker-dealer, potentially expanding revenue streams through Reg A and Reg D offerings.
• The Netcapital platform has over 100,000 users and has demonstrated scalability, processing over 2,000 investments totaling more than $2 million in less than two hours in November 2021.
• Holds minority equity positions in 10 Portfolio Companies valued at approximately $6 million, representing potential upside for shareholders.

Negatives

• Received a Nasdaq non-compliance notice on February 4, 2026, for failing to maintain a minimum bid price of $1.00, with the stock trading at $0.5363 on February 23, 2026.
• Reported significant net losses of $28,301,325 for the year ended April 30, 2025, and $5,771,541 for the six months ended October 31, 2025.
• Revenue declined dramatically by 82.5% from $4,951,435 in fiscal year 2024 to $869,460 in fiscal year 2025, with gross profit also falling sharply.
• The number of new issuers launching crowdfunding campaigns decreased significantly, from 37 in the six months ended October 31, 2024, to 10 in the same period in 2025.
• An impairment expense of approximately $19.9 million was recognized in fiscal year 2025 due to the declining value of portfolio company investments.
• The independent registered public accounting firm expressed 'substantial doubt' about the company's ability to continue as a going concern.
• The company stopped taking equity positions in select portfolio clients, losing a significant revenue source that generated $3.44 million in fiscal year 2024.
• The termination of the Alternative Trading System (ATS) agreement with Templum in September 2025 indicates a failure to establish a formal secondary trading market for its securities.
• High customer concentration, with one customer constituting 58% of revenues for the six months ended October 31, 2025.
• Cash and cash equivalents were low at $792,771 as of January 15, 2026, which is concerning given ongoing operating losses.
• The resale of 1,879,090 shares by Selling Shareholders and potential future equity offerings pose a significant risk of dilution to existing shareholders.
• Many warrant exercise prices ($2.07, $2.25, $2.03, $6.88, $4.55, $8.75, $5.8438) are substantially above the current market price of $0.5363, making cash exercise unlikely and limiting potential capital infusion from this source.

Risks

• Future impairment of portfolio company investments could materially adversely affect financial condition and results of operations.
• Fluctuations in the fair value of portfolio company investments could cause significant volatility in financial results and may not be indicative of operating performance.
• Inability to replace revenues generated by taking equity in select portfolio clients could have a material adverse effect on financial position and results of operations.
• Continued net losses and inability to operate profitably would depress value and impair ability to raise capital, expand, or continue operations.
• The independent registered public accounting firm expressed substantial doubt about the company's ability to continue as a going concern.
• Regulatory and legal uncertainties, including potential litigation or regulatory proceedings, could harm the business.
• Heavy regulation by state and federal agencies, SEC, Nasdaq, and FINRA, leading to increased legal and compliance costs and potential fines or disciplinary actions.
• Failure to comply with SEC Uniform Net Capital Rule could result in suspension of securities activities, expulsion, restrictions, or liquidation of broker-dealer business.
• Potential liability for misstatements made by issuers on the funding portal or through broker-dealer services.
• The market and regulatory framework for tokenized securities and RWAs are nascent, highly competitive, fragmented, and subject to rapid change, creating regulatory, compliance, technological, operational, and cybersecurity risks.
• Tokenization of securities and RWAs involves novel technological, operational, and cybersecurity risks, including blockchain network failures, smart contract errors, malicious attacks, and valuation/volatility risks.
• Failure to regain or maintain compliance with Nasdaq listing criteria (specifically the minimum bid price) could lead to delisting, adversely affecting liquidity, market price, and ability to obtain financing.
• Selling Shareholders may sell shares at prices below the current market price, adversely affecting the market price.
• A large number of shares sold in the market following this offering may significantly depress the market price due to increased supply.
• Future dilution from issuance of shares, future equity offerings, and exercise of outstanding options/warrants could adversely affect common stock price.

Future Outlook

The company plans to expand its platform to support offerings of tokenized securities, including fractionalized real-world assets (RWAs) like real estate, in partnership with Horizon Globex GmbH. It intends to comply with all applicable federal and state laws for these new offerings. The company is also exploring various alternatives to provide a secondary trading feature for securities on its funding portal, including engaging a broker-dealer that operates an Alternative Trading System (ATS). Strategic initiatives include generating new investor accounts, hiring additional business development staff, increasing marketing to attract more companies, investing in innovative technologies, accelerating advisory portfolio clients, and expanding internationally into Europe and Asia.

Management Comments

• We believe that by having a registered broker-dealer, it may create opportunities to expand the Company's revenue base by hosting and generating additional fees from Reg A and Reg D offerings on the Netcapital platform.
• We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding portal.
• We believe that lack of liquidity is a key issue for investors in private companies in our targeted market.
• We believe our recent expansion to allow tokenized securities to be offering by issuers on our funding portal could increase investor interest in offerings on our funding portal.

Industry Context

StockSavvy.ai notes that Netcapital operates within the evolving fintech landscape, specifically leveraging the JOBS Act (Regulation Crowdfunding and Regulation A) to democratize private investment access. The industry has seen significant growth in Reg CF funding, increasing by 360% from 2018 to 2024, and a rise in Reg A+ offerings, indicating a strong market tailwind for online funding portals. The company's strategic move into tokenized securities and real-world assets (RWAs) aligns with a broader industry trend towards digital asset innovation, although this market is nascent and subject to considerable regulatory uncertainty. The competitive environment includes established players like StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC.

Comparison to Industry Standards

• Claims to provide the lowest cost solution for online capital raising compared to its peer group, which includes StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC.
• Believes its facilitated technology platforms and strong emphasis on customer support offer superior access and onboarding for new clients compared to competitors.
• The average amount raised in an offering on the Netcapital funding portal was $215,745 in fiscal 2025, a decrease from $280,978 in fiscal 2024. This is significantly lower than the 2024 median Reg A+ raise of $2 million and average raise of $7.7 million reported by KingsCrowd, indicating a focus on smaller, earlier-stage offerings, primarily under Reg CF.

Management Changes

Corporate Governance

Legal Proceedings

• Routinely subject to regulatory inquiries on topics including anti-money laundering, compliance, registration, record-keeping, and disclosure.
• Expects to be subject to regulatory fines on various topics on an ongoing basis.
• Potential for litigation or regulatory proceedings material to the business, including class action suits seeking substantial damages.
• Compliance problems reported by dissatisfied customers can lead to arbitration or disciplinary action.
• Periodic regulatory audits and inspections could require significant management time, diversion of operational resources, changes in business practices, or result in sanctions (fines, censures, suspension, expulsion, or license revocation).
• Adverse proceedings or settlements could impact compliance with SEC Uniform Net Capital Rule, potentially leading to immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions on business expansion, or ultimately the liquidation of the broker-dealer entity.
• Adverse proceedings or settlements could result in the loss of funding portal registration, materially adversely affecting the business.

Related Party Transactions

• Netcapital Systems LLC (Jason Frishman, Founder, owns 29% interest) was paid $95,000 in FY2025 and $175,000 in FY2024 for software use, and was owed $285,000 in unpaid invoices as of April 20, 2025.
• Jason Frishman received cash compensation of $184,808 in FY2023 and $96,000 in FY2022, and stock-based compensation of $25,927 in FY2023.
• Cecilia Lenk (Director, CEO of Netcapital Advisors Inc.) is a board member of KingsCrowd Inc., in which the company owned 3,209,685 shares valued at $577,743 as of April 30, 2025, after recognizing an unrealized loss of approximately $2.7 million in the period ended January 31, 2024.
• Cecilia Lenk is also a board member of Deuce Drone LLC, in which the company impaired the full $2,350,000 value of its investment and recorded a full credit loss reserve of $152,000 against notes receivable in FY2025.
• John Fanning Jr. (son of CFO Coreen Kraysler), a consultant, received cash compensation of $44,991 in FY2025 and $54,880 in FY2024. He is also the controlling shareholder of Zelgor Inc., from which the company recognized $0 revenue in FY2025 and $33,000 in FY2024, and holds 1,400,000 shares valued at $1,400,000.
• Steven Geary (Director) was owed $31,680 as of April 30, 2023, which was paid in full by issuing 3,419 shares on April 24, 2024.
• Paul Riss (Director of Netcapital Funding Portal Inc.) was owed $58,524 as of April 30, 2023, paid in full by issuing 6,315 shares on April 24, 2024, and received $12,019 to retire a note payable and expenses in FY2023.
• Coreen Kraysler (CFO) personally guaranteed a $500,000 promissory note from the U.S. Small Business Administration.
• John Fanning (husband of CFO Coreen Kraysler), a former employee and current advisor, was paid approximately $96,000 in FY2022, $114,500 in FY2023, and $50,783 in FY2024, and provides advice to portfolio companies including Kingscrowd, Deuce Drone, ChipBrain, and Zelgor.
• The company impaired the full value of its investment in ChipBrain LLC ($3,266,348) as of April 30, 2025.

Stakeholder Impact

• Shareholders face significant dilution risk from the resale of 1.88 million shares and potential future equity offerings. The Nasdaq delisting risk could severely impact liquidity and the market price of their investment. Continued net losses and the going concern doubt pose substantial risk to the value of their holdings.
• Employees may face uncertainty regarding job security if the company's severe financial performance does not improve or if it encounters significant regulatory sanctions.
• Customers, particularly issuers seeking capital, are impacted by the decreased number of new offerings on the platform and the termination of the ATS agreement, which limits potential secondary market liquidity for their securities.
• Creditors face increased risk due to the company's negative working capital, operating losses, and the independent auditor's expression of substantial doubt about its ability to continue as a going concern.
• Regulatory authorities are actively engaged, with ongoing inquiries and potential fines indicating a need for heightened scrutiny and compliance efforts from the company.

Next Steps

• Regain compliance with Nasdaq's minimum bid price requirement by August 3, 2026, potentially by effecting a reverse stock split if necessary.
• Continue efforts to develop and integrate the platform for tokenized securities and real-world assets (RWAs).
• Explore various alternatives to provide a secondary trading feature for securities on the funding portal, including engaging a broker-dealer that operates an ATS.
• Generate new investor accounts and increase online marketing spend, potentially including virtual conferences.
• Hire additional business development staff to attract new crowdfunding clients and other issuers.
• Invest in developing innovative technologies to enhance the platform and pursue additional service offerings.
• Conduct quarterly reviews of equity investments in accordance with ASC 321, which may lead to further impairments.
• Seek to assist advisory clients to accelerate their growth and realize value from existing equity interests.
• Expand internationally into Europe and Asia, capitalizing on growing appetite for U.S. stocks.

Key Dates

Recommendation

The company is in a precarious financial position, marked by massive net losses, a dramatic decline in revenue, and an explicit 'going concern' warning from its auditors. The Nasdaq non-compliance notice and the current stock price significantly below $1.00 indicate severe market distress and a high probability of delisting, which would further erode liquidity and investor confidence. While strategic initiatives in tokenized securities are noted, their revenue generation is uncertain and long-term, failing to offset immediate and critical financial and operational challenges. The high exercise prices of outstanding warrants relative to the current stock price make cash exercise unlikely, limiting potential capital infusion. Given the severe financial deterioration and significant operational risks, a strong sell recommendation is warranted.

Keywords

Fintech, Crowdfunding, Regulation Crowdfunding, Reg CF, Regulation A, Reg A, Broker-Dealer, Tokenized Securities, Real-World Assets, RWA, Nasdaq Delisting, Warrant Exercise, Private Placement, SEC Filing, S-1/A, Capital Raise, Financial Losses, Going Concern, Equity Impairment, Netcapital, NCPL