S-1/A: Netcapital Amends S-1 for Share & Warrant Resale

Netcapital Inc. filed an S-1/A to register the resale of 1.88 million common shares, including 1.76 million shares from warrant exercises, by selling shareholders.

Summary

• The company filed an S-1/A to register the offer and resale of up to 1,879,090 shares of common stock by Selling Shareholders.
• This aggregate includes 118,750 shares issued in a June 2025 private placement and up to 1,760,340 shares issuable upon the exercise of various common stock purchase warrants.
• The company will not receive any proceeds from the sale of shares by the Selling Shareholders, but could receive approximately $9.21 million if all 1,760,340 warrants are exercised for cash.
• The common stock is listed on the Nasdaq Capital Market under the symbol NCPL, with a last reported sale price of $2.40 on September 30, 2025.
• Netcapital Inc. is a fintech company operating an SEC-registered funding portal (www.netcapital.com) for Regulation Crowdfunding (Reg CF) offerings and a broker-dealer subsidiary (Netcapital Securities Inc.) for Regulation A (Reg A) offerings.
• Revenues for the year ended April 30, 2025, were $869,460, a significant decrease from $4,951,435 in fiscal 2024.
• Net losses dramatically increased to $28,301,325 in fiscal 2025, compared to $4,986,317 in fiscal 2024.
• The decline in revenue is primarily attributed to not providing consulting services for equity in fiscal 2025, which generated approximately $3.5 million in fiscal 2024.
• Portal fees revenue decreased by 33% to $589,074 in fiscal 2025, due to a 29% decrease in total capital invested through the portal ($10.6 million in fiscal 2025 vs. $14.8 million in fiscal 2024).
• Listing fees revenue decreased by 53% to $207,500 in fiscal 2025, due to a 54% decrease in new offerings launched (38 in fiscal 2025 vs. 82 in fiscal 2024).
• The average amount raised per offering on the funding portal decreased to $215,745 in fiscal 2025 from $280,978 in fiscal 2024.
• 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.
• Recognized total impairment expenses of approximately $19.9 million in the year ended April 30, 2025, for equity investments in portfolio companies.
• The company had $2,820,191 in cash and cash equivalents as of September 30, 2025.
• Development and roll-out of the proposed Alternative Trading System (ATS) relationship with Templum Markets LLC have been paused to reevaluate evolving market conditions and customer expectations.
• Settled two promissory notes in September 2025 with Ivan Seidenberg and Daniel R. Hesse Revocable Trust, involving cash payments and the issuance of 46,258 and 92,428 shares of common stock, respectively.
• Issued 500,000 shares of common stock to Horizon Globex GmbH on June 26, 2025, in consideration for a royalty-free, perpetual software license.
• Sold 229,404 shares through an At-The-Market (ATM) offering from June 23-25, 2025, generating approximately $944,067 in net proceeds.
• Amended the 2023 Omnibus Equity Incentive Plan to increase the share reserve to 3,500,000 and modify the evergreen provision, subject to stockholder approval.
• Formed Crypto Advisory Board and Game Advisory Board on June 6, 2025, and issued 783,722 non-qualified stock options to advisors, subject to shareholder approval.
• Prepaid two convertible promissory notes from 1800 Diagonal Lending LLC in July 2025.
• Completed a private financing transaction in May 2025, issuing an unsecured, non-convertible promissory note with a principal amount of $400,000 at a 50% Original Issue Discount (OID), resulting in gross proceeds of $200,000.

Sentiment

Score: 3

Explanation: The company faces severe financial challenges, including a dramatic increase in net losses, a substantial decline in revenue, and an auditor's 'going concern' warning. While it has secured some capital through offerings and warrants, and expanded its broker-dealer capabilities, the core funding portal business is shrinking, and a key strategic initiative (ATS) is delayed. The overall financial health and operational performance are concerning.

Positives

• Received FINRA approval for Netcapital Securities Inc. as a broker-dealer in November 2024, which may create opportunities to expand revenue from Reg A and Reg D offerings.
• The technology platform is scalable, demonstrated by processing over 2,000 investments totaling more than $2 million in less than two hours in November 2021.
• Believes it provides the lowest cost solution for online capital raising compared to its peer group (StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC).
• Regulatory enhancements under the JOBS Act increased offering limits for Reg CF (to $5 million) and Reg A Tier 2 (to $75 million), potentially boosting platform attractiveness.
• Reg CF funding grew 360% from $74.8 million in 2018 to $343.6 million in 2024, indicating a growing market.
• Successfully raised approximately $944,067 in net proceeds from an At-The-Market (ATM) offering in June 2025.
• Prepaid two convertible promissory notes in July 2025, reducing debt obligations.
• Secured a royalty-free, paid-up, non-exclusive, perpetual, irrevocable, unrestricted software license from Horizon Globex GmbH by issuing 500,000 shares.

Negatives

• Experienced a dramatic increase in net losses to $28,301,325 in fiscal 2025, up from $4,986,317 in fiscal 2024.
• Revenues significantly declined to $869,460 in fiscal 2025 from $4,951,435 in fiscal 2024, primarily due to ceasing equity-for-services consulting.
• Gross profit decreased substantially to $829,116 in fiscal 2025 from $4,843,375 in fiscal 2024.
• The independent registered public accounting firm expressed "substantial doubt" about the company's ability to continue as a going concern.
• Recognized approximately $19.9 million in impairment expenses for equity investments in portfolio companies in fiscal 2025.
• Portal fees revenue decreased by 33% and listing fees revenue decreased by 53% in fiscal 2025, indicating a slowdown in core funding portal business.
• Total capital invested through the portal decreased by 29% and the average amount raised per offering decreased by 23% in fiscal 2025.
• Paused the development and roll-out of the secondary trading platform (ATS) with Templum, citing evolving market conditions and customer expectations.
• Will not receive direct proceeds from the resale of shares by selling shareholders, and cash proceeds from warrant exercises are uncertain.
• Issued a non-convertible promissory note in May 2025 with a 50% Original Issue Discount (OID), suggesting potentially unfavorable financing terms.
• Issued 59,147 adjustment shares in September 2025 to June 2025 private placement investors due to subsequent share issuances at a lower price, causing further dilution.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern, as noted by independent auditors.
• Risk of further impairment of portfolio company investments could materially adversely affect financial condition and results of operations.
• Inability to replace revenues previously generated by taking equity in select portfolio clients could materially adversely affect financial position and results of operations.
• Regulatory and legal uncertainties, including potential litigation or regulatory proceedings, increased legal and compliance costs, and potential sanctions, could harm the business.
• The securities industry is highly regulated, and compliance problems can lead to arbitration, disciplinary action, fines, censures, suspension, expulsion, or revocation of licenses.
• Selling Shareholders may choose to sell the registered shares at prices below the current market price, which could adversely affect the market price of common stock.
• A large number of shares (1,879,090) may be sold in the public market following this offering, which could significantly depress the market price of common stock.
• Future dilution may occur as a result of the issuance of the registered shares, future equity offerings, and the exercise of outstanding stock options and warrants.
• The company cannot predict when or if warrants will be exercised, meaning it may not receive anticipated cash proceeds from warrant exercises, and warrants may expire unexercised.
• Lack of liquidity is a key issue for investors in private companies in the targeted market, and the proposed secondary trading platform is currently paused.
• Risks associated with buying securities on a proposed secondary trading platform include lack of public filings for private companies, high illiquidity, transfer restrictions, and potential transaction settlement failures.
• Potential involvement in disputes and litigation matters between customers with respect to transactions on a proposed secondary trading platform could be expensive, time-consuming, and harm the company's reputation.
• Regulatory delays or objections could delay the full launch of the proposed Alternative Trading System (ATS) platform.
• Disruption of or interference with the ATS operator (Templum) due to regulatory issues, natural disasters, cyber-attacks, or other events could impact operations.
• There is no obligation for Templum to renew its agreements with the company on commercially reasonable terms or at all.

Future Outlook

The company intends to use any net proceeds from warrant exercises for working capital and general corporate purposes, including investments in sales and marketing in the United States and internationally. It plans to generate new investor accounts, hire additional business development staff, increase marketing to attract more companies, and invest in developing innovative technologies. The company seeks to assist its advisory clients and is exploring expansion into Europe and Asia. While a secondary trading feature is being explored, its development and roll-out are currently paused for reevaluation. The company is also working on expanding its model to include Regulation A and Regulation D offerings through its broker-dealer subsidiary. No dividends are anticipated in the foreseeable future, as funds will be retained for business operations and expansion.

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 that lack of liquidity is a key issue for investors in private companies in our targeted market."
• "We believe a significant opportunity exists to disrupt private capital markets via the Netcapital funding portal."
• "We believe that we provide the lowest cost solution for online capital raising."
• "Our access and onboarding of new clients are superior due to our facilitated technology platforms."
• "We believe there is sufficient room for multiple players [in the industry] given the rapid growth in the industry and its potential to disrupt the multi-billion dollar private capital market."
• "As of the date of this prospectus, we have paused further development and roll-out [of the ATS] while we reevaluate evolving market conditions and customer expectations."

Industry Context

The company operates in the fintech sector, specifically in online private capital raising, which is influenced by the JOBS Act (Regulation Crowdfunding and Regulation A). The industry is experiencing accelerated growth, driven by the COVID-19 pandemic pushing processes online and regulatory enhancements that increased funding limits for Reg CF (to $5 million) and Reg A Tier 2 (to $75 million). Traditional funding models are noted for restricting access to capital, investments, and liquidity, with venture capital firms investing in a small fraction of companies and disproportionately funding certain demographics. Reg CF funding grew 360% from $74.8 million in 2018 to $343.6 million in 2024, and Reg A+ offerings raised $244 million in 2024, indicating a growing market. The company identifies its competitors as StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC.

Comparison to Industry Standards

• The company claims to provide the lowest cost solution for online capital raising compared to its peer group, including StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC.
• The company believes its access and onboarding of new clients are superior due to its facilitated technology platforms.
• While the Reg CF funding market grew 360% from $74.8 million in 2018 to $343.6 million in 2024, the company's portal fees revenue decreased by 33% and total capital invested through its portal decreased by 29% in fiscal 2025, indicating underperformance relative to broader industry growth.
• Reg A+ offerings raised $244 million in 2024, an increase of 7.5% from the previous year, suggesting a growing market segment that the company aims to tap into with its new broker-dealer subsidiary.

Corporate Governance

Legal Proceedings

• The company may become involved in litigation or regulatory proceedings in the ordinary course of business, which could be material.
• The securities industry is highly regulated, and the company is subject to periodic regulatory audits and inspections for various federal, self-regulatory, and state regulators.
• Routinely subject to regulatory inquiries regarding anti-money laundering, compliance, registration, record-keeping, disclosure, and other topics of recent regulatory interest.
• Expects that it may, from time to time, be subject to regulatory fines on various topics on an ongoing basis, similar to other regulated financial services businesses.

Related Party Transactions

• Netcapital Systems LLC (Jason Frishman, Founder, owns 29%) licensed technology to the company, with payments of $95,000 in FY2025 and $175,000 in FY2024. The company owed Systems DE $285,000 in unpaid invoices as of April 20, 2025.
• Cecilia Lenk (CEO of Netcapital Advisors, Board Director) is on the board of KingsCrowd Inc. The company owns 3,209,685 shares of KingsCrowd Inc., valued at $577,743 as of April 30, 2025. An unrealized loss of approximately $2.7 million on KingsCrowd shares was recognized in the period ended January 31, 2024.
• Cecilia Lenk is also on the board of Deuce Drone LLC. The company impaired the full value of its $2,350,000 investment in Deuce Drone as of April 30, 2025, and recorded a full credit loss reserve of $152,000 against notes receivable from Deuce Drone.
• John Fanning Jr. (son of CFO Coreen Kraysler) is a related party consultant, receiving cash compensation of $44,991 in FY2025 and $54,880 in FY2024.
• John Fanning Jr. is the controlling shareholder of Zelgor Inc. The company owns 1,400,000 shares of Zelgor Inc., valued at $1,400,000 as of April 30, 2025 and 2024.
• Coreen Kraysler (CFO) personally guaranteed a $500,000 promissory note from the U.S. Small Business Administration.
• John Fanning (husband of CFO Coreen Kraysler) was an employee and continues as an advisor, receiving cash compensation of $50,783 in FY2024.
• The company impaired the full value of its investment in ChipBrain, LLC as of April 30, 2025.
• Stock options were granted to Martin Kay (CEO), Coreen Kraysler (CFO), Jason Frishman (Founder), Paul Riss (director of subsidiary), Cecilia Lenk (director), Avi Liss (director), Steven Geary (director), and Arnold Scott (director).

Stakeholder Impact

• Shareholders face potential significant dilution from the resale of 1.88 million shares and future warrant exercises. The 'going concern' doubt and substantial losses pose a high risk to investment value.
• Existing shareholders may experience further dilution due to price adjustment provisions in private placements if the company issues shares at lower prices.
• Investors on the platform are offered access to private investments, but the pause in ATS development means a key liquidity feature is delayed, and illiquidity risks of private securities remain.
• Employees and management who received stock options are impacted by the requirement for shareholder approval for these options to become exercisable.
• Creditors face elevated risk due to the company's 'going concern' warning, despite some recent debt prepayments.
• Placement agents like H.C. Wainwright & Co., LLC have received substantial fees and warrants, indicating significant costs associated with capital raising efforts.

Next Steps

• Selling Shareholders may offer and sell the registered shares from time to time.
• The company intends to use any net proceeds received from warrant exercises for working capital and general corporate purposes, including investments in sales and marketing in the United States and internationally.
• Plans to generate new investor accounts, hire additional business development staff, and increase marketing to grow portal clients.
• Plans to invest in developing innovative technologies that enhance the platform and allow for additional service offerings.
• Seeks to assist advisory clients to accelerate their portfolio companies.
• Exploring expansion into Europe and Asia.
• Reevaluating evolving market conditions and customer expectations for the secondary trading feature (ATS).
• Working on expanding the model to include Regulation A and Regulation D offerings through its broker-dealer subsidiary.
• Stock options granted to advisory boards and management are subject to shareholder approval.

Key Dates

Recommendation

The company's financial performance is severely deteriorating, marked by a dramatic increase in net losses to over $28 million and a significant revenue decline of over 80% in fiscal 2025. The independent auditor's 'substantial doubt' about the company's ability to continue as a going concern is a critical red flag. Core business metrics, such as portal fees, listing fees, and total capital raised, are all in decline. While the company has raised capital through various offerings, these often involve significant dilution and unfavorable terms (e.g., 50% OID on a promissory note, price adjustment provisions for private placements). The pause in the development of a key strategic initiative (ATS) further adds to uncertainty. Given the severe financial distress, operational decline, and high risk of continued dilution, a seasoned investor would likely recommend a strong sell.

Keywords

Fintech, Crowdfunding, Regulation Crowdfunding, Regulation A, SEC filing, S-1/A, Equity offering, Warrants, Private placement, Broker-dealer, Alternative Trading System, Netcapital Inc., NCPL, Investment platform, Early-stage companies, Capital raising, Financial reporting, Going concern, Impairment losses, Dilution, Nasdaq Capital Market