Earnings Call Transcript - NCPL Q2 2026

Operator, Operator

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.

Coreen Kraysler, CFO

Thank you, Holly. Good morning, 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, even if new information becomes available in the future. 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, 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.

Rich Wheeless, CEO

Thank you very much, Coreen, and thank you, everybody, 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 crypto miners. For example, in 2018, we were able to raise $33 million and execute on our strategy, leading to a 120% increase in our share price over 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 believe that we are very well positioned to be successful with our new strategy and drive value for all shareholders. Netcapital has a 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 see this as a tremendous opportunity for us to build upon that foundation as we expand into new asset classes and blockchain enablement solutions. I'm really looking forward to working alongside this team and with our issuers 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 talking about where we are focused going forward regarding the 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 the fact that we've exited a consorting for equity model that, while it generated revenue, was not scalable in cash terms, making it harder for investors to see the underlying economics of our business. Against that backdrop, we made the 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. When we add more offerings to more volume, those incremental revenues will follow with attractive incremental margins. That 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. As we look ahead, the 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 always evaluate each opportunity with a long-term lens: how does it create durable value for the company and for shareholders, and can it be executed in a way that is consistent within the requisite regulatory framework? Lastly, I'll touch on the macro environment and why I'm 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 in November demonstrated strong pent-up demand from U.S. retail investors, with $269 million 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 discount to dozens of our traditional Reg CF offerings with a similar compliance lift but higher margins. Additionally, with 100,000 U.S. investors in our network and over 300 companies that we have successfully funded, we have the foundation and track record to succeed in this market. With all that being said, we'll open the call up for Q&A.

Operator, Operator

Your first question for today is from Todd Oberle with Insight Investments.

Todd Oberle, Analyst

Hello. Can you hear me, Rich?

Rich Wheeless, CEO

Yes.

Todd Oberle, Analyst

Regarding the past quarter, I understand you are the newly appointed CEO, but there was $51,000 in revenue with what I believe is over 20 employees. I have seen this mentioned previously, so could you share your perspective on the appropriate employee count given that the company has generated almost no revenue? I am puzzled by how so many employees have been maintained for such an extended period with no revenue coming in. Additionally, has there been any revenue from Reg A offerings up to this point?

Rich Wheeless, CEO

Yes, I can. So regarding the first point, we're focused on the pivot we have. The regulatory market is very positive right now, and we will look to execute this new strategy that we've laid out. I'm not too concerned about what has happened in the past; the company is now in a strong position, and I'm very excited for where we can go. I'm not focused on our previous situation, as we've made a shift, and in the short term, revenue will face some challenges.

Coreen Kraysler, CFO

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.

Todd Oberle, Analyst

Okay. So there's been no revenues to this point? Is that how I can take it from a broker-dealer?

Coreen Kraysler, CFO

I'm going to reiterate the answer that I just gave you.

Todd Oberle, Analyst

And then I guess in terms of the employee count, so I guess the takeaway is that employee count is going to stay the same? I know that the past is in the past, but going forward, what is the right number considering the size of the company, the cash balance, and the cash burn?

Coreen Kraysler, CFO

So I want to emphasize what Rich mentioned, which is that we are very focused on our new strategy to generate revenues. You cannot achieve growth solely through cost-cutting. Therefore, we are very excited about the new model. As Rich pointed out, the current regulatory environment for tokenized assets seems to be favorable, and we are looking forward to that. I would also like to remind those in the queue for questions to please limit your inquiry to one question and one follow-up. Operator, could we please move to the next person in the queue?

Operator, Operator

Certainly. Your next question is from Emily McAllen, a private investor.

Unknown Attendee, Investor

I would like to direct this question to the new CEO, Rich. I am just curious how it is 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.

Rich Wheeless, CEO

In short, look, it helps. I appreciate the question. This helps align with our new strategy with the tokenized asset model to help us 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 patience, as there is a plan and path forward that we plan on executing, and I look forward to executing.

Unknown Attendee, Investor

What is the plan? Please elaborate. That was pretty vague.

Rich Wheeless, CEO

Yes, we're going to get more in the coming days, but there is a strategy laid out. We are doubling down on the tokenized asset market, which I had mentioned and alluded to earlier in the call, and utilizing our existing platforms, including the crowdfunding platform and our broker-dealer. We continue to look for existing technologies and pieces that fit in place to execute that strategy.

Unknown Attendee, Investor

So giving away 100% of the shares is justified for a defunct business?

Coreen Kraysler, CFO

Excuse me, Emily, I'm going to answer your question for you and follow on to what Rich said. I'm assuming that you're referring to Rivetz and what Rivetz brings to the table…

Unknown Attendee, Investor

Correct.

Coreen Kraysler, CFO

Yes. Rivetz brings expertise and code, plus 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.

Unknown Attendee, Investor

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.

Coreen Kraysler, CFO

I'm sorry, I couldn't hear your question.

Unknown Attendee, Investor

I said, so what was the Horizon software purchase for then? I thought that was for the same purpose.

Coreen Kraysler, CFO

Jason, do you have a response to that?

Jason Frishman, Unknown Title

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 are critical to the future, the market cap of the company makes it difficult to do those transactions without a larger percentage of the company.

Operator, Operator

There are no further questions in queue. We do have a question from John Davis.

Unknown Attendee, Investor

I am curious about how the auditors justify this acquisition, especially since NASDAQ flags it. You also need to provide justification, and others will have to do the same. Can you explain how you justify the acquisition of a defunct company from 2021? It should have been very inexpensive since there were clearly no bidders. How did the auditors justify this under GAAP accounting so you can present to NASDAQ that it was worth its value?

Rich Wheeless, CEO

Let me add that this aligns with our overall strategy. I am excited about the direction we are taking as a company, and I personally appreciate the technology. I am informed about how this integrates into our broader plan. Sometimes, investing a bit more is necessary for exceptional technology, and this aligns with our goals. That’s the best explanation I can provide.

Coreen Kraysler, CFO

I would just add that this technology is quite critical to our strategy moving forward. In terms of total dollars paid, it was not that much money.

Operator, Operator

There are no further questions in queue. Rich, do you want to sum up, please?

Rich Wheeless, CEO

Thank you, operator. To sum it up, our mission remains unchanged. We aim to democratize access to private capital markets for issuers seeking growth capital and for investors looking for opportunities that have traditionally been difficult to access. Everything we do, from product innovation to selective blockchain integration and pursuing larger Reg A transactions, is geared towards creating a more open, efficient, and scalable private market ecosystem. We have invested in essential infrastructure and our team to implement a robust growth strategy for 2026 and beyond. We have already restructured our capital to combine a funding portal and a broker-dealer in a more scalable way. We are committed to leveraging these advantages to achieve profitability. I look forward to collaborating with investors, clients, employees, and government to generate value and shape the company’s future direction, keeping you updated on our progress in the coming months and during our next call in March. Thank you to everyone who joined today. We appreciate your continued interest and support of Netcapital. Have a great day.

Operator, Operator

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.