Netcapital's Q2 2026 Earnings Call: Contradictions Emerge on Strategic Shifts, Rivetz Acquisition, and Regulatory Alignment

Date of Call: December 16, 2025

Financials Results

• Revenue: $51,000 for Q2 FY2026 (3 months ended Oct 31, 2025), down from $170,000 in Q2 FY2025; decrease primarily due to lower portal fees and timing of large client funding events
• EPS: Loss per share $0.44 in Q2 FY2026 versus loss per share $2.34 in Q2 FY2025; reported operating loss approximately $2.1M vs $2.2M prior-year

Guidance:

• Expect potential revenue from the newly licensed broker-dealer in the next quarter
• Pivot to a scalable fintech platform and leverage broker-dealer to pursue larger Reg A and tokenized transactions
• Prioritizing tokenized asset opportunities where blockchain adds regulatory-compliant, durable value and higher margins
• Focused on growing volume, operating leverage and moving toward profitability; updates due next call in March 2026

Business Commentary:

• Revenue Decline and Strategic Pivot:
• Netcapital Inc. reported revenues of $51,000 for the 3 months ended October 31, 2025, a significant decrease from $170,000 in the same period the previous year.

• The decline was primarily attributed to a decrease in portal fees and the company's strategic decision to exit the consorting for equity model, which was not scalable.

• Operating Loss and Cash Position:

• The company reported an operating loss of $2.1 million for the second quarter of fiscal 2026, with a loss per share of $0.44.
• As of October 31, 2025, Netcapital had cash and cash equivalents of approximately $1.7 million.

• The operating loss and cash position reflect the company's focus on repositioning and investment in its core fintech platform and broker-dealer subsidiary.

• Emphasis on Tokenized Assets and Broker-Dealer License:

• Netcapital's new CEO, Rich Wheeless, emphasized the company's focus on integrating crypto and blockchain into small business financing and capital market strategies.
• The company's wholly owned subsidiary, Netcapital Securities, obtained a broker-dealer license approximately a year prior to the call, aiming to participate in larger Reg A capital raises.

• Expansion into Digital Assets and Tokenization:
• The company is positioning itself for emerging opportunities in digital assets and tokenization, viewing it as a logical extension of its listing business.
• This expansion is driven by the potential for high-margin revenue streams from compliant token sales and the company's regulatory expertise.

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management described the company as 'in a transition period' and 'very excited' about a pivot to tokenized assets and broker-dealer opportunities, while reporting weak Q2 results (revenues $51k vs $170k prior year) and limited cash ($1.7M), balancing optimism with near-term financial constraints.

Q&A:

• Question from Todd Oberle (Insight Investments): Regarding $51,000 in revenues across ~20-something employees, what is the right employee count given near-zero revenues and cash burn? Also, has the broker-dealer produced any revenue to date?
  Response: Management said they are focused on the strategic pivot rather than past headcount, gave no specific headcount guidance, and CFO indicated it wouldn't be surprising to see broker-dealer revenue in the next quarter (implying none reported to date).

• Question from Emily McAllen (Private Investor): How is it justified to give away ~20% of outstanding shares for a defunct software business (Rivetz/Horizon)?
  Response: Management said the acquisitions (Rivetz and Horizon) provide critical technology, code and expertise for the tokenization strategy; the large equity consideration reflects the company's market cap and strategic need, and the cash paid was modest.

• Question from John Davis (Unknown): How did auditors/NASDAQ justify valuing a defunct 2021 company for the acquisition; shouldn't it have been inexpensive and how is this defensible under GAAP/NASDAQ review?
  Response: Management reiterated the purchases fit the company strategy, the technology is critical, the cash consideration was small, and said the transactions were paid for to secure valuable tech—they did not provide detailed auditor/NASDAQ validation on the call.

Contradiction Point 1

Revenue Generation and Strategic Focus

It involves differing explanations regarding the focus of the company, revenue generation, and strategic direction, which are crucial aspects for investors to consider.

Can you explain the employee count and the company's justification given the near-zero revenue? Has any revenue been generated from Reg A offerings since the broker-dealer license was issued a year ago? - Todd Oberle (Insight Investments)

2026Q2: We're focused on executing our new strategy rather than dwelling on past performance. The regulatory environment is positive, and we're optimistic about our future prospects. - Rich Wheeless(CEO)

Can you provide details on Q3 revenue growth in the North American market compared to the previous quarter? - Martin Kay (Netcapital)

2026Q1: On our recent fiscal 2025 year-end call, we emphasized the strategic shift in our business model moving away from equity-based consulting revenue to focus on building a stronger, more scalable business. - Martin Kay(CEO)

Contradiction Point 2

Acquisition of Rivetz and Strategic Alignment

It highlights differing justifications for the acquisition of Rivetz and its strategic value, which could impact investors' understanding of the company's direction and financial decisions.

Why was giving away 20% of outstanding shares for a defunct software business justified? - Emily McAllen (Private Investor)

2026Q2: This move aligns with our strategy to focus on the tokenized asset market. We believe it is necessary for our overall plan, and we appreciate everyone's patience as we execute. - Rich Wheeless(CEO)

Not explicitly stated, as there were no direct questions from participants in the call transcript provided. - Martin Kay (Netcapital)

2026Q1: On our recent fiscal 2025 year-end call, we emphasized the strategic shift in our business model moving away from equity-based consulting revenue to focus on building a stronger, more scalable business. - Martin Kay(CEO)

Contradiction Point 3

Justification of Rivetz Acquisition and Regulatory Environment

It involves differing explanations of the acquisition's value and its connection to the regulatory environment, which could affect shareholder understanding and confidence.

How did auditors justify acquiring a 2021 defunct company? Why was there a purchase despite its defunct status and lack of bidders? - John Davis (Private Investor)

2026Q2: It wasn't an expensive acquisition in terms of total dollars paid. - Rich Wheeless(CEO)

Were there any direct questions from participants in the call transcript provided? - Martin Kay (Netcapital)

2026Q1: As Coreen mentioned earlier, we began the new fiscal year with encouraging results, revenue and portal fee growth of more than 30% highlights the solid performance of our core business. - Martin Kay(CEO)