Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This quarterly report on Form 10-Q and other reports filed by Netcapital Inc. (the "Company") from time to time with the U.S. Securities and Exchange Commission (collectively, the "Filings") contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company's management as well as estimates and assumptions made by Company's management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words "anticipate," "believe," "estimate," "expect," "future," "intend," "plan," or the negative of these terms and similar expressions as they relate to the Company or the Company's management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Unless the context otherwise requires, references in this Quarterly Report to the "Company," "we," "us," and "our" refer to Netcapital Inc. and its subsidiaries.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Overview

We provide private company investment access to accredited and non-accredited investors through (i) our online portal (www.netcapital.com), which is operated by our wholly owned subsidiaries Netcapital Funding Portal, Inc and (ii) our broker-dealer subsidiary, Netcapital Securities. The Netcapital funding portal charges a $5,000 listing fee, a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2025, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors previously generated fees and equity stakes from consulting in select portfolio ("Portfolio Companies") and non-portfolio clients. Given our limited staff, we did not seek consulting engagements in fiscal 2025 and we do not plan to seek them in fiscal 2026. With respect to services for Reg A offerings, Netcapital Securities charges a listing fee of $25,000 and a success fee of 4.9% of the capital raised by an issuer under Reg A. Both Reg A and Reg CF offerings are made available to investors via the Company's website, www.netcapital.com.

In addition, in November 2025, we announced plans to expand its platform to include support for compliant blockchain-based digital assets, amid accelerating interest in tokenized securities and tokenized real-world assets (RWAs) like real estate.

We provide private company investment access to accredited and non-accredited investors through (i) our online portal (www.netcapital.com), which is operated by our wholly owned subsidiaries Netcapital Funding Portal, Inc and (ii) our broker-deal subsidiary, Netcapital Securities. The Netcapital funding portal typically charges a $5,000 listing fee, a 4.9% portal fee for capital raised at closing, and beginning in fiscal year 2024, a 1% success fee paid for with equity of the funding portal customer. In addition, the portal generates fees for other ancillary services, such as rolling closes. Netcapital Advisors generated fees and equity stakes from consulting in select portfolio companies ("Portfolio Companies") and non-portfolio clients. Given our limited staff, we did not seek consulting engagements in fiscal 2025 and we do not plan to seek them in fiscal 2026. With respect to services for Reg A offerings, Netcapital Securities charges a listing fee of up to $25,000 and a success fee of 4.9% of the capital raised by an issuer under Reg A.

We generated revenue of $335,481, with costs of service of $11,109, in the nine months ended January 31, 2026, for a gross profit of $324,372 as compared to revenue of $465,437, with costs of service of $37,156, in the nine months ended January 31, 2025, for a gross profit of $428,281.

The total number of offerings on the Netcapital funding portal in fiscal 2025 and 2024 that closed was 70 in each fiscal year, of which 21 and 17 offerings hosted on the Netcapital funding platform in fiscal 2025 and 2024, respectively, terminated their listings without raising the required minimum dollar amount of capital. For the three- and nine-month periods ended January 31, 2026, 8 and 18 issuers have launched an offering on the portal, respectively, as compared to 27 and 64 issuers that launched an offering in the three- and nine-month periods ended January 31, 2025, respectively. As of the date of this report, we have minority equity positions in 19 Portfolio Companies that have utilized the funding portal to facilitate their offerings, which equity was received as payment for services.

For the three months ended January 31, 2026, the Company had one customer that constituted 22% of revenue, a second customer that constituted 15% of revenue and a third customer that accounted for 14% of revenue. For the nine months ended January 31, 2026, the Company had one customer that constituted 43% of revenue. For the three months ended January 31, 2025, the Company had one customer that constituted 17% of its revenue, and for the nine months ended January 31, 2025, the Company had one customer that constituted 16% of its revenue.

Netcapital funding portal is an SEC-registered funding portal that enables private companies to raise capital online, while investors are able to invest from almost anywhere in the world, at any time, with just a few clicks. Securities offerings on the portal are accessible through individual offering pages, where companies include product or service details, market size, competitive advantages, and financial documents. Companies can accept investment from virtually anyone, including friends, family, customers, employees, etc.

In addition to access to the funding portal, Netcapital provides the following services:

●	a fully automated onboarding process;
●	automated filing of required regulatory documents;
●	compliance review;
●	a custom-built offering page on our portal website;
●	third party transfer agent and custodial services;
●	email marketing to our proprietary list of investors;
●	rolling closes, which provide potential access to liquidity before the final close date of an offering;
●	assistance with annual filings; and
●	direct access to our team for ongoing support.

Broker-Dealer Business

In November 2024, our wholly owned subsidiary, Netcapital Securities Inc. received approval from FINRA to become a FINRA-member broker dealer. 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, earning additional fees in connection with offerings that may result from the introduction of clients to other FINRA broker-dealers and expanding our distribution capabilities by leveraging strategic partnerships with other broker-dealers to distribute offerings of issuers that utilize the Netcapital platform to a wider range of investors in order to maximize market penetration and optimize capital raising efforts. As of the date of this report, Netcapital Securities has been engaged by five issuers seeking to raise capital via a Regulation D offering and one issuer seeking to raise capital via a Regulation A offering.

Our limited operating history and the uncertain nature of our future operations and the markets we address or intend to address make predictions of our future results of operations difficult. Our operations may never generate significant revenue, and we may not consistently achieve profitable operations.

Recent Developments

Rivetz Asset Purchase

On December 3, 2025, we purchased substantially all of Rivetz Corp.'s ("Rivetz") assets related to its "Rivetz Network" which develops technology combining hardware-based cybersecurity with blockchain services for mobile and other computing devices pursuant to an asset purchase agreement for 950,000 shares of our common stock, par value $0.001 per share.

While we believe the Rivetz Network assets and related technology may enhance our ability to support offerings of tokenized securities under existing registration exemptions, we expect that generating revenue from these capabilities will require additional development, integration, compliance and commercialization efforts. These efforts may require additional financial resources, including funding for personnel, technology development, third-party service providers, and legal and regulatory compliance. We may seek additional capital to fund these efforts and there can be no assurance that such financing will be available on acceptable terms, or at all, or that we will generate revenue from these capabilities.

Kay Resignation and Separation Agreement

On December 3, 2025, Martin Kay resigned as our Chief Executive Officer, director and all other officer, director, board and committee positions with us.

Appointment of Chief Executive Officer and General Counsel

On December 7, 2025, we appointed Rich Wheeless as our Chief Executive Officer and Kevin Kilduff as our General Counsel.

Iverson Design Asset Purchase

In January 2026, we acquired substantially all assets from Iverson Design that primarily relate to its digital design studio business, including assets which facilitate providing creative services including graphic design, motion graphics, 2D/3D animation, visual effects, and related design and visualization services that incorporate AI-driven design methods. As consideration for the purchased assets, the Company issued 980,000 shares of our common stock, par value $0.001 per share.

Results of Operations

Comparison of the Three Months Ended January 31, 2026 and 2025

Our revenue for the three months ended January 31, 2026, decreased by $58,335, or approximately 38%, to $94,347, as compared to $152,682 during the three months ended January 31, 2025. The decrease in revenue was attributed to the lack of new issuers signing up for funding portal services. Only eight new issuers launched a crowdfunding campaign in the three months ended January 31, 2026, as compared to 28 offerings launched in the three months ended January 31, 2026.

In the three months ended January 31, 2026, we recorded $84,137 in funding portal revenue, consisting of portal fees of $34,582, listing fees of $45,809, and equity fees of $3,746, as compared to funding portal revenue of $152,406 in the three months ended January 31, 2025, consisting of portal fees of $100,087, listing fees of $37,500 and equity fees of $14,819. Five issuers successfully closed offerings in the three months ended January 31, 2026, as compared to eight issuers in the three months ended January 31, 2025. The components of revenue were as follows:

		Jan. 31, 2026				Jan. 31, 2025
Portal fees		$	34,582			$	100,087
Listing fees			45,809				37,500
Portal 1% equity fee			3,746				14,819
Broker-Dealer fees			10,000				-
Game site revenue			210				276
Total		$	94,347			$	152,682

Cost of revenue decreased by $5,332 to $1,823, or approximately 75% for the three months ended January 31, 2026, from $7,155 during the three months ended January 31, 2025. The decrease was attributed to lower revenue.

Payroll and payroll related expenses increased by $282,974, or approximately 35%, to $1,097,998 for the three months ended January 31, 2026, as compared to $815,024 during the three months ended January 31, 2025. The increase was attributed to the hiring of an AI specialist and a general counsel, in addition to salary increases for certain key positions, to assist with employee retention.

Rent expense increased by $1,122, or approximately 6%, to $21,300 for the three months ended January 31, 2026, as compared to $20,178 during the three months ended January 31, 2025. The increase was primarily attributed to a new office-space agreement.

General and administrative expenses decreased by $47,030, or approximately 5%, to $874,545 for the three months ended January 31, 2026, from $921,575 during the three months ended January 31, 2025. The decrease was partially attributable to lower legal fees in fiscal 2026. We incurred approximately $412,000 in legal costs in the three months ended January 31, 2026, of which approximately 86% were related to legal fees responding to ongoing investigations by the U.S. Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA"), including subpoenas and testimony requests issued to the Company and certain current and former officers and employees as compared to approximately $428,000 in legal costs in the three months ended January 31, 2025 of which approximately 65% were related to legal fees responding to the ongoing investigations by the SEC and FINRA discussed above. The Company anticipates that its legal fees will increase in future periods in response to the Wells Notice received on March 4, 2025. See "Part II-Item 1A. Risk Factors - We are involved in an ongoing SEC investigation, which could divert management's focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows" for additional information.

Consulting expense increased by $204,477, or approximately 322%, to $268,032 for the three months ended January 31, 2026, from $63,555 during the three months ended January 31, 2025. The increase was primarily attributed to a new consultant hired for the tokenization of real world assets, and payments to our former CEO, who is consulting for us over a one-year period.

Interest expense increased by $13,700 to $24,076, or approximately 132%, for the three months ended January 31, 2026, as compared to $10,376 during the three months ended January 31, 2025, due to default interest on retired notes.

During the three months ended January 31, 2026, the Company recorded no impairment expense, compared to $1,300,000 during the three months ended January 31, 2025. The impairment recorded in the prior-year period related to the Company's investment in Netwire LLC, which management determined was impaired following significant changes in the investee's management and operating outlook.

During the three months ended January 31, 2026, the Company recognized $500,000 of insurance recovery proceeds, compared to none in the three months ended January 31, 2025. The proceeds relate to the partial resolution of an insurance claim.

Comparison of the Nine Months Ended January 31, 2026 and 2025

Our revenue for the nine months ended January 31, 2026, decreased by $129,956, or approximately 28%, to $335,481, as compared to $465,437 during the nine months ended January 31, 2025.

In the nine months ended January 31, 2026, we recorded $335,481 in funding portal revenue, consisting of portal fees of $171,771, listing fees of $95,809, and equity fees of $67,451, as compared to funding portal revenue of $465,437 in the nine months ended January 31, 2025, consisting of portal fees of $297,627, listing fees of $127,500 and equity fees of $39,694. The decrease in revenue was primarily attributed to a decrease in the number of issuers raising capital on the funding portal's platform. New offerings launched amounted to 18 issuers in the nine months ended January 31, 2026, as compared to 64 issuers in the nine months ended January 31, 2025. 10 issuers successfully closed offerings in the nine months ended January 31, 2026, as compared to 25 issuers in the nine months ended January 31, 2025.The components of revenue were as follows:

The components of revenue were as follows:

		Jan. 31, 2026				Jan. 31, 2025
Portal fees		$	171,771			$	297,627
Listing fees			95,809				127,500
Portal 1% equity fee			67,451				39,694
Game site revenue			450				616
Total		$	335,481			$	465,437

Cost of revenue decreased by $26,047 to $11,109 or approximately 70%, for the nine months ended January 31, 2026 from $37,156 during the nine months ended January 31, 2025. The decrease was primarily attributed to lower revenue.

Payroll and payroll related expenses increased by $1,046,563, or approximately 35%, to $3,747,881 for the nine months ended January 31, 2026, as compared to $2,701,318 during the nine months ended January 31, 2025. The increase was attributed to the hiring of an AI specialist and a general counsel, in addition to salary increases for certain key positions, to assist with employee retention.

Rent expense increased by $6,716, or approximately 11%, to $65,452 for the nine months ended January 31, 2026, as compared to $58,78 during the nine months ended January 31, 2025. The increase was primarily attributed to a new office-space agreement.

General and administrative expenses decreased by $147,091, or approximately 4%, to $3,646,761 for the nine months ended January 31, 2026, from $3,794,013 during the nine months ended January 31, 2025. The decrease was primarily attributable to lower professional fees in fiscal 2026, which amounted to $543,282 in the nine months ended January 31, 2026 as compared to $1,157,939 in the nine months ended January 31, 2025. This decrease was offset by an increase in legal fees. We incurred approximately $2,161,000 in legal costs in the nine months ended January 31, 2026, of which approximately 91% were related to legal fees responding to ongoing investigations by the SEC and FINRA, including subpoenas and testimony requests issued to the Company and certain current and former officers and employees as compared to approximately $1,442,000 in legal costs in the nine months ended January 31, 2025 of which approximately 83% were related to legal fees responding to ongoing investigations by the SEC and FINRA discussed above. The Company anticipates that its legal fees will increase in future periods in response to the Wells Notice received on March 4, 2025. See "Part II-Item 1A. Risk Factors - We are involved in an ongoing SEC investigation, which could divert management's focus, result in substantial investigation expenses and have an adverse impact on our reputation, financial condition, results of operations and cash flows" for additional information.

Consulting expenses increased by $188,137, or approximately 78%, to $428,718 for the nine months ended January 31, 2026 from $240,581 during the nine months ended January 31, 2025. The increase was primarily attributed to a new consultant hired for the tokenization of real world assets, and payments to our former CEO, who is consulting for us over a one-year period.

Interest expense increased by $41,906 to $72,347, or approximately 138%, for the nine months ended January 31, 2026, as compared to $30,441 during the nine months ended January 31, 2025. The increase resulted from short-term borrowings in April and May 2025 that were paid off in September 2025.

The Company owned 8,989 shares of a funding portal issuer at a cost of $5.00 per share. On May 30, 2025, the issuer closed an offering at a price of $10.00 per share. As a result, the Company marked its investment to market and recorded an unrealized gain of $44,945 in the nine-month period ended January 31, 2026. This gain was netted against an unrealized loss of $49,050 from a mark-to-market adjustment of equity securities held by the Company, resulting in a net unrealized loss of equity securities of $5,005 for the nine months ended January 31, 2026.

During the nine months ended January 31, 2026, the Company recorded no impairment expense, compared to $1,300,000 during the nine months ended January 31, 2025. The impairment recorded in the prior-year period related to the Company's investment in Netwire LLC, which management determined was impaired following significant changes in the investee's management and operating outlook.

During the nine months ended January 31, 2026, the Company recognized $500,000 of insurance recovery proceeds, compared to none in the nine months ended January 31, 2025. The proceeds relate to the partial resolution of an insurance claim, and the Company expects to recognize additional proceeds in the fourth quarter of fiscal 2026 as the claim continues to be resolved.

Accretion on short-term notes increased to $356,413 for the nine months ended January 31, 2026. There was no accretion on short-term notes recorded during the nine months ended January 31, 2025. During 2025, the Company sold 4 notes, and each note contained an original issuance discount that was accreted during the nine months ended January 31, 2026.

Liquidity and Capital Resources

As of January 31, 2026, we had cash and cash equivalents of $715,443 and negative working capital of $2,922,843 as compared to cash and cash equivalents of $289,428 and negative working capital of $5,096,155 as of April 30, 2025.

We have been successful in raising capital by completing offerings of our common stock.

On July 16, 2025, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to sell 641,712 shares of our common stock, at a purchase price of $4.675 per share for gross proceeds of approximately $3 million, prior to deducting placement agent's fees and other offering expenses payable by us. Each share of common stock was also sold with a warrant to purchase one share of common stock with an exercise price of $4.55 per share. The shares were offered pursuant to our shelf registration statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities Exchange Commission on October 26, 2022. This offering closed on July 17, 2025.

On July 2, 2025, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we agreed to sell 714,286 shares of our common stock, at a purchase price of $7.00 per share for gross proceeds of approximately $5 million, prior to deducting placement agent's fees and other offering expenses payable by us. Each share of common stock was also sold with a warrant to purchase one share of common stock with an exercise price of $6.88 per share. We used approximately $320,000 of the net proceeds for repayment of outstanding promissory notes and intend to use the remainder for working capital and other general corporate purposes. The shares were offered pursuant to our shelf registration statement on Form S-3 (File No. 333-267921), which was declared effective by the Securities Exchange Commission on October 26, 2022. The offering closed on July 7, 2025.

On June 23, 2025, the Company filed a prospectus supplement with respect to our At-The-Market-Offering Agreement with Wainwright for an aggregate of $975,000 of additional shares of our common stock. From June 23, 2025 to June 25, 2025, we sold 229,404 shares of our common stock through Wainwright at an average price of approximately $4.25 per share, resulting in aggregate gross proceeds of approximately $974,747, for which it paid Wainwright approximately $29,242 in commissions and other issuance costs of $1,438, resulting in net proceeds to the Company of approximately $944,067. No additional shares will be sold under this ATM Agreement unless an additional prospectus supplement is filed.

On June 10, 2025, we entered into subscription agreements with ten accredited investors to issue an aggregate of 118,750 shares of common stock at a purchase price of $4.00 per share (the "Purchase Price") in a private placement, for gross proceeds of $475,000. The Company agreed to file a registration statement providing for the resale of the Shares within 60 calendar days of the initial closing of the private placement (the "Filing Date") and to use reasonable best efforts to cause the resale registration statement to be declared effective by the SEC within 90 calendar days following the final closing of the private placement date of the Filing Date. The resale registration statement is not yet effective. The subscription agreements include a price adjustment provision whereby if the Company issues additional shares at a price lower than the Purchase Price during the period beginning on the date of the subscription agreements and prior to April 19, 2026, investors will receive additional shares to reflect the lower price, subject to the minimum price as defined under Nasdaq Rule 5635(d) on the date the subscription agreements were signed, which was $2.56. On September 16, 2025, the Company issued a total of 59,147 shares of common stock to the investors in the June 10, 2025 private placement in consideration of the adjustment provision contained in their subscription agreements The Company used the net proceeds from the offering for general corporate purposes.

We believe that our existing cash investment balances, our anticipated cash flows from operations and liquidity sources including offering of equity and/or debt securities and/or the sale of equity positions in certain Portfolio Companies for which we provide marketing and strategic advice may not be sufficient to meet our working capital and expenditure requirements for the next 12 months. Our management has determined, based on its recent history and the negative cash flow from operations, that it is unlikely that its plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. To the extent that funds generated from any private placements, public offerings and/or bank financing, if available, are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. Accordingly, the Company's management has concluded that these conditions raise substantial doubt about our ability to continue as a going concern. There can be no assurance that we will be able to achieve our business plan objectives or be able to achieve or maintain cash-flow-positive operating results. If we are unable to generate adequate funds from operations or raise sufficient additional funds, we may not be able to repay our existing debt, continue to operate our business network, respond to competitive pressures or fund our operations. As a result, we may be required to significantly reduce, reorganize, discontinue or shut down our operations.

Year over Year Changes

Net cash used in operating activities amounted to $7,661,306 and $4,614,630 for the nine months ended January 31, 2026 and 2025, respectively. The principal source of cash used in operating activities in the nine months ended January 31, 2026 was a decrease in accounts payable and accrued expenses of $1,281,568 and an increase in prepaid expenses of $282,041. The principal sources of cash from operating activities in the nine months ended January 31, 2026 were non-cash items, including stock-based compensation of $1,023,967 and accretion of short-term notes of $356,413. These amounts were offset by a loss of $7,584,385.

The principal sources of cash from operating activities in the nine months ended January 31, 2025 were non-cash items, including stock-based compensation of $418,113 and an increase in accounts payable and accrued expenses of $1,308,085. These amounts were offset by a loss of $7,754,208.

Net cash used in investing activities amounted to $100,000 for the nine months ended January 31, 2026. The cash used in investing activities consisted of a $100,000 cash payment related to the acquisition of assets associated with the Rivetz Network. The total purchase price for the Rivetz assets was $1,040,000, consisting of $100,000 in cash and $940,000 in shares of the Company's common stock. The issuance of common stock was a non-cash investing activity and therefore did not impact the statement of cash flows. There were no investing activities during the nine months ended January 31, 2025.

For the nine months ended January 31, 2026, net cash provided by financing activities amounted to $8,187,321, which consisted primarily of proceeds from the sale of common stock of $8,507,171 and proceeds from short-term notes of $300,000. These amounts were partially offset by repayments of short-term notes of $619,850. For the nine months ended January 31, 2025, net cash provided by financing activities amounted to $4,365,752, which consisted of proceeds from the sale of common stock of $1,979,000 and proceeds from the exercise of warrants of $2,386,752.

In the nine months ended January 31, 2026 and 2025, there were no expenditures for capital assets. The Company does not anticipate any capital expenditures in fiscal 2026.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. For a discussion of our critical accounting estimates, please read Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended April 30, 2025 filed with the SEC on August 12, 2025. There have been no material changes to the critical accounting estimates previously disclosed in such report.

Recently Issued Accounting Standards Not Yet Effective or Adopted

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying unaudited condensed consolidated financial statements.