S-1/A: Netcapital Faces Nasdaq Delisting, SEC Probe Amid Revenue Decline

Netcapital Inc. is registering shares for resale and seeking up to $9.21 million from warrant exercises while grappling with a Nasdaq minimum bid price deficiency and an ongoing SEC enforcement investigation.

Summary

• Netcapital Inc. is registering up to 1,879,090 shares of common stock for resale by existing shareholders, including 1,760,340 shares issuable upon warrant exercise.
• The company will not receive proceeds from the resale of shares by selling shareholders but could receive up to $9.21 million from cash exercises of warrants, which would be used for working capital and general corporate purposes.
• Netcapital received a Wells Notice from the SEC on March 4, 2026, indicating a preliminary determination to recommend enforcement action against the company and certain current/former officers for alleged securities law violations.
• The company is not in compliance with Nasdaq's minimum bid price rule ($1.00 per share), with its stock trading at $0.4730 on March 23, 2026, and has until August 3, 2026, to regain compliance to avoid potential delisting.
• Net losses were $28.3 million for the year ended April 30, 2025, and $5.77 million for the six months ended October 31, 2025.
• Revenue decreased by 38% to $94,347 for the three months ended January 31, 2026, and by 28% to $335,481 for the nine months ended January 31, 2026, primarily due to a significant decline in new issuers launching crowdfunding campaigns.
• The company's independent auditors expressed "substantial doubt" about its ability to continue as a going concern as of April 30, 2025, citing negative working capital, operating losses, and negative cash flows.
• Significant impairment expenses of approximately $19.9 million were recognized in the year ended April 30, 2025, related to portfolio company investments, including full write-offs of Deuce Drone LLC and ChipBrain, LLC.
• Netcapital plans to expand its platform to support tokenized securities, including fractionalized real-world assets, and has partnered with Horizon Globex GmbH for a blockchain-based platform.
• The company terminated its agreement with Templum Markets LLC in September 2025 for an Alternative Trading System (ATS) due to an inability to establish a formal ATS, but continues to explore secondary trading features.
• Recent acquisitions include Rivetz Corp.'s blockchain-related cybersecurity assets in December 2025 for 950,000 shares and Iverson Design's digital design studio assets in January 2026 for 980,000 shares ($645,526 value).
• Rich Wheeless was appointed CEO and Kevin Kilduff as General Counsel on December 7, 2025, following Martin Kay's resignation as CEO on December 3, 2025.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with significant concern due to severe financial deterioration, an ongoing SEC investigation, and imminent Nasdaq delisting risk, overshadowing any strategic growth initiatives.

Positives

• Broker-dealer subsidiary, Netcapital Securities Inc., received FINRA approval in November 2024, creating opportunities for Reg A and Reg D offerings and expanded distribution.
• Strategic plans to expand into tokenized securities and real-world assets, leveraging partnerships and recent acquisitions (Rivetz, Iverson Design) to enhance platform capabilities and potentially attract new investors.
• The company holds minority equity positions in 10 Portfolio Companies valued at approximately $6 million, representing potential future upside.
• The Netcapital platform is a scalable, real-time, transaction-processing engine with demonstrated capacity to handle high investment volumes.
• The company believes it offers the lowest cost solution for online capital raising compared to its peer group and superior client onboarding due to facilitated technology platforms.

Negatives

• Significant net losses of $28.3 million in fiscal year ended April 30, 2025, and $5.77 million for the six months ended October 31, 2025.
• Substantial doubt about the company's ability to continue as a going concern, as noted by independent auditors.
• Revenue decline: 38% decrease in Q3 FY2026 and 28% decrease in YTD Q3 FY2026, primarily due to a significant drop in new issuers launching crowdfunding campaigns (from 64 to 18 year-over-year).
• Total dollars invested through the portal decreased by 29% from $14.8 million in FY2024 to $10.6 million in FY2025.
• Impairment expenses of approximately $19.9 million in FY2025 due to write-offs of investments in portfolio companies like Deuce Drone LLC and ChipBrain, LLC.
• Cessation of consulting services for equity in FY22025 resulted in a $3.5 million revenue decline compared to FY2024.
• Current cash and cash equivalents are low at $409,319 as of February 28, 2026.

Risks

• The company and certain officers received Wells Notices from the SEC on March 4, 2026, indicating a preliminary determination to recommend enforcement action for alleged violations of federal securities laws, which could result in substantial expenses, reputational damage, and adverse impact on financial condition.
• The company is not in compliance with Nasdaq's minimum bid price rule ($1.00 per share) and faces potential delisting if it cannot regain compliance by August 3, 2026, which would negatively impact stock liquidity and market price.
• Independent auditors expressed substantial doubt about the company's ability to continue as a going concern due to negative working capital, operating losses, and negative cash flows.
• Continued net losses and declining revenues, particularly from a decrease in new issuers on the funding portal, pose a significant risk to financial stability and future profitability.
• Further impairments to the remaining $6 million equity interests in portfolio companies could materially adversely affect financial condition and results of operations.
• Operating in a highly regulated industry exposes the company to litigation, regulatory proceedings, fines, censures, and potential loss of funding portal or broker-dealer registrations.
• The company may be liable for misstatements made by issuers utilizing its funding portal or broker-dealer services, even with due diligence defenses.
• Failure to maintain required net capital levels for its broker-dealer subsidiary could lead to suspension of activities, fines, or liquidation of the broker-dealer business.
• The market for tokenized securities and real-world assets is nascent, highly competitive, fragmented, and subject to rapid changes in regulation, technology, and liquidity, posing significant operational and cybersecurity risks.
• Future equity offerings, warrant exercises, and stock incentive programs could lead to significant dilution for existing shareholders and adversely affect the common stock price.
• Selling shareholders may sell a large number of shares, potentially depressing the market price of the common stock.
• The ongoing SEC investigation involving key management (Coreen Kraysler, Cecilia Lenk, John Fanning Sr., Paul Riss) could lead to loss of their services, adversely impacting company objectives.

Future Outlook

Netcapital plans to expand its platform to support tokenized securities, including fractionalized real-world assets, leveraging a partnership with Horizon Globex GmbH for a blockchain-based platform. The company aims to generate new investor accounts, hire business development staff, increase the number of companies on its platform through marketing, and invest in innovative technologies. It also seeks to accelerate its advisory portfolio clients and explore international expansion. The company continues to explore alternatives for providing a secondary trading feature for its clients' securities, following the termination of its previous ATS agreement.

Management Comments

• "We intend to defend ourselves vigorously should the SEC authorize any legal action that does not comport with our view of the facts."
• "We intend to actively monitor the closing bid price of our common stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price under the Nasdaq Listing Rules."
• "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 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."
• "We believe that lack of liquidity is a key issue for investors in private companies in our targeted market."

Industry Context

StockSavvy.ai notes that Netcapital operates in the evolving fintech sector, specifically within online capital raising platforms enabled by the JOBS Act (Reg CF, Reg A, Reg D). The industry has seen significant growth in Reg CF funding, increasing 360% from $74.8 million in 2018 to $343.6 million in 2024, with regulatory enhancements in March 2021 increasing offering limits to $5 million for Reg CF and $75 million for Reg A Tier 2. The company's move into tokenized securities aligns with a broader industry trend towards digital assets and fractionalized real-world assets, which could address liquidity issues in private markets. However, this nascent market faces significant regulatory and technological uncertainties. Netcapital's competitive landscape includes established players like StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC, with the company claiming a low-cost solution and superior onboarding.

Comparison to Industry Standards

• Netcapital claims to provide the lowest cost solution for online capital raising compared to its peer group (StartEngine Crowdfunding, Inc., Wefunder Inc., and Republic Core LLC).
• The company believes its facilitated technology platforms offer superior access and onboarding for new clients compared to competitors.
• The average amount raised in an offering on the Netcapital funding portal decreased from $280,978 in fiscal 2024 to $215,745 in fiscal 2025, which may indicate a struggle to attract larger offerings or a shift in issuer profile compared to industry averages.
• Reg CF funding grew from $74.8 million in 2018 to $343.6 million in 2024 (360% increase) across the industry, while Netcapital's total dollars invested through its portal decreased by 29% from $14.8 million in fiscal 2024 to $10.6 million in fiscal 2025, indicating underperformance relative to the overall market growth trend.

Management Changes

Corporate Governance

Legal Proceedings

• The company and certain current/former officers (Coreen Kraysler, John Fanning Sr., Cecilia Lenk, Paul Riss) received Wells Notices from the SEC on March 4, 2026, indicating a preliminary determination to recommend enforcement action for alleged violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(3)(B) of the Exchange Act and related rules.
• The company is involved in an ongoing SEC investigation, which could divert management's focus, result in substantial investigation expenses, and have an adverse impact on reputation, financial condition, results of operations, and cash flows.
• The company is obligated to indemnify the individuals for costs associated with the investigation and any resulting litigation.
• The company is routinely subject to regulatory inquiries regarding anti-money laundering, compliance, registration, record-keeping, and disclosure, which can incur significant legal and compliance costs.
• An adverse proceeding or settlement could result in non-compliance with SEC Uniform Net Capital Rule, leading to suspension of securities activities, expulsion, or liquidation of the broker-dealer business, or loss of funding portal registration.

Related Party Transactions

• License agreement with Netcapital Systems LLC (Jason Frishman, Founder, owns 29% interest) for website software: $95,000 paid in FY2025, $175,000 in FY2024. Owed $285,000 in unpaid invoices as of April 20, 2025.
• Cecilia Lenk (Director, CEO of Netcapital Advisors) is a board member of KingsCrowd Inc. and Deuce Drone LLC, entities in which the company held equity interests. The investment in Deuce Drone LLC was fully impaired ($2,350,000) as of April 30, 2025, and notes receivable of $152,000 from Deuce Drone LLC were fully reserved.
• John Fanning Jr. (son of CFO Coreen Kraysler) received cash compensation of $44,991 in FY2025 and $54,880 in FY2024 as a consultant. He is also the controlling shareholder of Zelgor Inc., from which the company recognized $0 revenue in FY2025 (down from $33,000 in FY2024).
• 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/advisor and received compensation of $50,783 in FY2024. He also provides advice to companies in which the company owns equity or that used its funding portal.
• Steven Geary (Director) and Paul Riss (Director of Netcapital Funding Portal Inc.) were issued 9,734 shares of common stock in April 2024 to settle $90,204 in outstanding indebtedness.
• Stock options were granted to various officers and directors, including Martin Kay, Coreen Kraysler, Jason Frishman, Paul Riss, Cecilia Lenk, Avi Liss, Steven Geary, and Arnold Scott, with various exercise prices and vesting schedules.

Stakeholder Impact

• Shareholders face significant dilution risk from warrant exercises and future equity offerings. Potential for substantial loss of investment due to Nasdaq delisting risk, ongoing SEC investigation, and severe financial losses. The value of their holdings is directly impacted by the declining stock price ($0.4730).
• Employees: The ongoing SEC investigation and financial distress could impact job security and morale.
• Customers (Issuers): The decline in new issuers suggests a potential loss of confidence or attractiveness of the platform. Regulatory issues and financial instability could deter future clients.
• Creditors: The "going concern" doubt and negative financial performance increase credit risk. The personal guarantee by the CFO on a $500,000 note highlights potential exposure.
• Regulatory Authorities (SEC, FINRA, Nasdaq): The company is under scrutiny from these bodies due to alleged securities law violations and listing rule non-compliance, indicating a strained relationship and potential for further enforcement actions.

Next Steps

• Regain compliance with Nasdaq's minimum bid price requirement by August 3, 2026, potentially through a reverse stock split.
• Respond to the SEC Wells Notice with a submission to persuade the SEC against enforcement action.
• Continue development, integration, compliance, and commercialization efforts for tokenized securities platform.
• Explore alternatives for providing a secondary trading feature for securities.
• Generate new investor accounts and increase marketing spend.
• Hire additional business development staff.
• Invest in innovative technologies.
• Conduct quarterly reviews of equity investments in accordance with ASC 321.
• Explore international expansion into Europe and Asia.

Key Dates

Recommendation

The company faces severe headwinds including an ongoing SEC enforcement investigation, imminent Nasdaq delisting risk due to a sub-$1.00 stock price, and significant financial deterioration with substantial net losses and declining revenues. The independent auditor's 'going concern' doubt further underscores the precarious financial position. While strategic initiatives like tokenized securities are planned, their success is highly uncertain given the current operational and regulatory challenges. The combination of these factors presents an extremely high risk profile with a strong likelihood of further share price decline.

Keywords

Fintech, Crowdfunding, SEC Filing, Nasdaq Delisting, Warrants, Private Placement, Tokenized Securities, Real-World Assets, Broker-Dealer, Reg CF, Reg A, Reg D, Equity Crowdfunding, Investment Platform, Financial Technology, Capital Raise, SEC Investigation, Going Concern, NCPL