Netcapital Inc. (NCPL) - Q2 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended October 31, 2025. Netcapital Inc. operates as a fintech company providing a funding portal for private companies to raise capital via Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) offerings. The company also operates a broker-dealer subsidiary, Netcapital Securities Inc. As of the reporting date, the company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Six Months Ended Oct 31, 2025 | Six Months Ended Oct 31, 2024 |
|---|---|---|
| Revenue | $241,134 | $312,755 |
| Gross Profit | $231,848 | $282,754 |
| Operating Loss | $(5,405,105) | $(4,710,668) |
| Net Loss | $(5,771,541) | $(4,747,671) |
| Cash and Equivalents (Oct 31, 2025) | $1,684,188 | $289,428 (Apr 30, 2025) |
| Working Capital | $(1,500,153) | $(5,096,155) (Apr 30, 2025) |
| Total Debt | $2,420,124 | $2,683,561 (Apr 30, 2025) |
| Net Cash Used in Operating Activities | $(6,792,561) | $(3,451,087) |
| Net Cash Provided by Financing Activities | $8,187,321 | $3,934,644 |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by approximately 23% ($71,621) compared to the prior six-month period. This was driven by a significant drop in new issuers launching offerings (10 issuers in the current period vs. 37 in the prior period).
- Expense Increases: Payroll and payroll-related expenses increased by 41% ($763,589) due to salary increases and bonuses for key positions. Interest expense surged 141% ($28,206) due to short-term borrowings in April and May 2025, which included significant accretion on original issue discounts.
- Capital Raising: The company raised approximately $8.5 million in net proceeds from the sale of common stock and warrant exercises during the six-month period, significantly improving cash balances from $289,428 to $1,684,188.
- Asset Acquisition: The company acquired a perpetual software license from Horizon Globex GmbH valued at $2.84 million, paid for via the issuance of 500,000 shares of common stock.
Outlook, Risks, and Management Commentary
- Going Concern Warning: Management has concluded that there is substantial doubt about the company's ability to continue as a going concern within one year of the report date. This is due to negative working capital, significant operating losses, and a history of negative cash flow from operations.
- Customer Concentration: The company faces high concentration risk. For the six months ended October 31, 2025, one customer accounted for 58% of total revenues.
- Strategic Shifts: The company is focusing on its funding portal and broker-dealer business. It announced plans to expand into blockchain-based digital assets and tokenized real-world assets (RWAs), though this has not yet occurred.
- Leadership Changes: Subsequent to the period end, Martin Kay resigned as CEO on December 3, 2025. Rich Wheeless was appointed CEO on December 7, 2025. Kevin Kilduff was appointed General Counsel and granted 1,000,000 shares of restricted stock contingent on revenue targets.
- Acquisition: On December 3, 2025, the company acquired assets related to the Rivetz Network (hardware-based cybersecurity) for 950,000 shares of common stock.
Investor Verification Checklist
- Cash Burn Rate: Verify the sustainability of operations given the $6.8 million cash burn from operations over six months despite recent capital raises.
- Revenue Concentration: Assess the risk associated with a single customer generating 58% of revenue for the six-month period.
- Debt Obligations: Review the terms of the SBA loans and the recent settlement of short-term notes involving stock issuance to understand future cash outflows.
- Equity Dilution: Monitor the impact of recent stock issuances for debt settlement, software licenses, and executive compensation on shareholder value.
- Going Concern Status: Evaluate the likelihood of the company securing additional financing on acceptable terms to meet working capital requirements.