Prepared remarks
Good day, and welcome to the Netcapital Inc. Earnings Call. It is now my pleasure to turn the floor over to your host, Coreen Kraysler. Ma'am, the floor is yours.
Thank you, everyone, and thank you for joining Netcapital's Second Quarter Fiscal 2026 Financial Results Conference Call. I'm Coreen Kraysler, CFO of Netcapital Inc. I will begin by reviewing our financial results and then our Chief Executive Officer, Rich Wheeless, will share his prepared remarks before we open the Q&A portion of our call. Before we begin, I'd like to remind everyone of the safe harbor disclosure regarding forward-looking information. Management's discussion may include forward-looking statements. These statements relate to future events or 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 strategies, 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. With that said, I'd like to now turn to our financial results for the second quarter fiscal 2026. We reported revenues of approximately $51,000 for the 3 months ended October 31, 2025, and as compared to approximately $170,000 during the 3 months ended October 31, 2024. The decrease in revenues was primarily attributed to a decrease in portal fees during the quarter. I'll add that our revenues can be lumpy quarter-over-quarter, as the timing of large client funding events can have an outsized impact on results. We reported an operating loss of approximately $2.1 million compared to an operating loss of approximately $2.2 million for the second quarter of fiscal year 2025. We reported a loss per share of $0.44 compared to a loss per share of $2.34 for the second quarter of fiscal year 2025. As of October 31, 2025, the company had cash and cash equivalents of approximately $1.7 million. I'll now turn the call over to our CEO, Rich Wheeless.
Thank you very much, Coreen, and thank you everyone for joining the call today. This marks my first call with investors, and I want to start by emphasizing how excited I am to join Netcapital at this pivotal moment in our evolution. Throughout my career, I've been drawn to businesses that use technology to open doors that were previously closed and Netcapital's mission to democratize access to private investments fits perfectly. I've been involved in the blockchain and crypto industry for numerous years and have had success going back to one of my prior companies, Taal, where we made the ASIC chips for cryptominers. For example, in 2018, we were able to raise $33 million and executed on our strategy, which led to a 120% increase in our share price in a 4-month time frame. Given the market size, anticipated growth in the tokenized asset market, as well as the experience of our team, I do believe that we are very well positioned to drive value for all shareholders with our new strategy. Quite simply, Netcapital has significant opportunity for revenue enhancement by helping small businesses integrate crypto and blockchain into their financing and capital market strategy. The company already has a proven regulated platform that connects entrepreneurs with investors in a simple, transparent way. I'm really looking forward to working alongside this team and with our issuer and investor communities to make Netcapital a leading digital ecosystem for founders seeking growth capital and investors looking to participate in the next generation of innovative companies. I want to spend a few minutes putting our recent results in context, walking through how our strategy has evolved and discussing where we're focused going forward in emerging market drivers that may be the wind at our backs. We are in a transition period, and our second quarter fiscal 2026 revenues continue to be impacted by our exit from a consulting-for-equity model that generated revenue but was not scalable in cash terms, making it harder for investors to see the underlying economics of our business. Against that backdrop, we made a strategic decision to reset the company around our core fintech platform and our recently licensed broker-dealer. Our funding portal is fundamentally a technology business. We have a generally fixed cost platform and a relatively small employee base. So when we add more offerings and more volume, those incremental revenues will follow with attractive incremental margins. This is the kind of operating leverage we want to see in a fintech model. In parallel, our wholly owned subsidiary Netcapital Securities allows us to participate in Reg A capital raises, which are typically larger than Reg CF offerings and potentially expand the base of issuers and investors we can serve. Looking ahead, our strategy is straightforward: grow volume on a platform that is now structurally more scalable, fully leverage our broker-dealer to unlock larger transactions and a broader product set, and position the company for emerging opportunities from digital assets and tokenization, which we view as a logical extension of our listing business. We plan to focus on where blockchain generally adds value, which can encompass how securities are recorded, how they are traded, or how liquidity mechanisms are structured. We evaluate each opportunity with a long-term lens. How does it create durable value for the company and shareholders? And can it be executed in a way that is consistent with the requisite regulatory framework? Lastly, I'll touch on the macro environment and why I'm very excited about the timeliness of our push and our position for success. There is an emerging new category for U.S.-compliant utility token sales that we believe is decentralizing token ownership and seeding long-term network growth. For example, the Coinbase MONA token sale last month demonstrated strong pent-up demand for U.S. retail participation and utility token offerings. $269 million was raised from 86,000 buyers in less than 24 hours. This was not just speculation; it was a clear market signal. With our position as a broker-dealer and deep regulatory expertise, we have a compliant bridge between global token systems and U.S. retail investors. This new category has potential for high-margin revenue streams on top of our current business. A single successful token sale may generate revenue exceeding dozens of our regular Reg CF offerings with a similar compliance lift but higher margins. With 100,000 U.S. investors in our network and over 300 companies we have successfully funded, we have the foundation and track record to succeed in this market. With that being said, we'll open the call up for Q&A.
Questions and answers
Your first question for today is from Todd Oberle with Insight Investments.
Hello. Can you hear me, Rich?
Yes.
So regarding this past quarter, I know you're the newly hired CEO, but there were $51,000 in revenues with what I believe is around 20 employees. I've seen this mention of 20 employees before. Can you provide your outlook on the appropriate employee count considering the nearly zero revenues in this company? I'm struggling to understand how so many employees were justified for so long with such minimal revenue being generated. Also, has there been any revenue from the broker-dealer license that was issued about a year ago, particularly from Reg A offerings up to this point?
Yes, I can. Regarding the first question, we are focused on our new direction. The regulatory market is currently very favorable, and we plan to implement our new strategy. I am not overly concerned about past events. The company is now in a strong position, and I am very optimistic about our future potential. Therefore, I am not too worried about our previous circumstances.
I'm going to jump in here. This is Coreen Kraysler, I'm the CFO. Regarding your question about the broker-dealer, I think you should look at the quarter that we will report next and it wouldn't surprise me if you saw revenues from the broker-dealer in that quarter.
Okay. So there's been no revenues to this point? Is that how I can take it from a broker dealer?
I'm going to reiterate the answer that I just gave you.
And then I guess in terms of the employee count, so I guess the takeaway is employee count is going to stay the same? I know that past is in the past, but going forward, what is the right number considering the size of the company, the cash balance, the cash burn?
I want to emphasize what Rich mentioned about our commitment to our new revenue-generating strategy. Growth cannot be achieved solely through cost-cutting. We are genuinely enthusiastic about the new model. Additionally, the current regulatory landscape for tokenized assets seems to be quite favorable, which is encouraging for us. We also request that those in the queue for questions limit themselves to one question and one follow-up. Operator, could we proceed to the next person in the queue, please?
Certainly. Your next question is from Emily McAllen, a private investor.
I would like this question to the new CEO, Rich. I'm just curious how it's justified to give away 20% of the outstanding share count for a defunct software business. I'm just a little puzzled here. I'd like Rich to answer that.
In short, look, it helps. I appreciate the question. This helps along with our new strategy with the tokenized asset model to help us to be able to execute on that strategy. We would not have done this if it did not make sense for our overall plan. So I would ask for a little bit of time and appreciate everyone's patience on this. There is a plan and path forward that we plan on executing, and I look forward to executing.
What is the plan? Please elaborate. That was pretty vague.
Yes, we're going to get more in the coming days, but there is a strategy laid out that we are doubling down on the tokenized asset market, which I had mentioned and alluded to earlier in the call, utilizing our existing platform with the crowdfunding platform and our broker-dealer as well. We continue to look for existing technologies and pieces that fit in place to execute on that strategy.
So giving away 100% of the shares is justified for a defunct business?
Excuse me, Emily, I'm going to answer your question for you and follow on to what Rich said. So I'm assuming that you're referring to Rivetz and what Rivetz brings to the table...
Correct.
So what Rivetz brings to the table is both expertise and code along with the system platform and technology stack to produce tokenized assets in a safe and secure manner. That is why we bought Rivetz. We feel that it's very key to our ability to execute our strategy shift to tokenized assets moving forward.
So what was the Horizon purchase for then? Because I thought that was the purpose of Horizon, and you guys gave away 20% of the outstanding shares at that time back in June.
I'm sorry, I couldn't hear your question.
I said, so what was the Horizon software purchase for? Because I thought that was the purpose of Horizon and you guys gave away 20% of the outstanding shares at that time back in June.
Jason, do you have a response to that?
Yes. My understanding is that both Horizon and Rivetz will work together as part of this pivot, but I would defer to Rich on that. I would also point out that I understand that roughly 20% of the stock is a large number but when you understand the market cap of the company and the company has identified acquisitions that the company believes are critical to the future. The market cap of the company makes it difficult to do those transactions without a larger percent of the company.
There are no further questions in queue. We do have a question from John Davis.
I am curious about how the auditors will justify this acquisition, especially considering that the 2021 company has been defunct since then, which should have made it very inexpensive. There didn’t seem to be any bidders for it. How did the auditors justify this acquisition from a GAAP accounting perspective to present it to NASDAQ to prove its value?
Let me add that this aligns with our overall strategy. I am excited about the direction of the company and have a personal appreciation for the technology. I am informed about how this fits into our larger plan. Sometimes, investing a bit more is necessary for high-quality technology, and this aligns with our goals. That's about all I can provide in response to the auditors on that matter.
I would add that this technology is quite critical to our strategy moving forward. In terms of total dollars paid, it was not that much money.
There are no further questions in queue.
Rich, do you want to sum up, please?
Yes, sure. To sum it up, based on our mission has not changed. We're here to democratize access to private capital markets for issuers seeking growth capital and for investors who want access to opportunities that have historically been hard to reach. Everything that we're doing from product innovation to selective blockchain integration to the pursuit of larger Reg A transactions is aimed at building a more open, efficient, and scalable private market ecosystem. We have made investments in the vital infrastructure and team to execute a strong growth plan in calendar year 2026 and beyond. We have already repositioned that capital around a more scalable combination of a funding portal and a broker-dealer, we are laser-focused on leveraging these advantages towards profitability. I look forward to working with investors, clients, employees, and government to create value, and drive the company's future direction and updating you on our progress in the coming months and on our next call in March. Thank you to everyone who joined today. We appreciate your continued interest and support of Netcapital. Have an amazing day.
Thank you. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.